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I Am 37 Years Old And I Live Paycheck To Paycheck

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My heart raced as I scrolled through the “recent activity” shown on my online banking app.

I was alternating between the deposits that had been made into our account and the Excel spreadsheet I use to balance our household budget. Our family of four usually gets up close and personal with the zero balance in our checking account toward the end of the month, so I go over these figures every week before we head out to buy groceries.

Only this week, something wasn’t adding up. There was a $200 hole where the remainder of our grocery budget should have been.

It didn’t take me long to figure out what happened. My husband’s regular paychecks had been deposited like normal, but a large chunk of my income was missing. I am self-employed as a writer, which has many perks for our family. It allows us to save on child care expenses while still giving me the ability to earn a living. It also works with our schedules, since my husband works second shift. I can put in a few hours in the morning before he leaves and then again at night once he is home and everyone is asleep.

The obvious downside is that my paychecks aren’t as reliable, and if a client is late (or doesn’t pay at all), it throws off our entire budget ― sometimes to the point that we don’t have any money left.

Despite the fact that my husband and I are both gainfully employed, our family lives paycheck to paycheck. We earn enough to put food on the table, and our two small children have everything they need, but some months we barely scrape by. We’re always just one emergency expense away from being completely wiped out. And emergencies do happen. It’s how we got here in the first place.

Two years ago, we had a very healthy savings account and little credit card debt to speak of. Then we had a run of bad luck ―  a pipe burst in our boiler right before Christmas, then we had an unrelated plumbing issue with our kitchen sink. In the past two years, we’ve needed to make two separate after-hours calls to electricians. And last year, my husband had a medical emergency that required him to take time off work and eventually undergo dental surgery. Our savings dissolved and our credit card debt quickly mounted.

We adjusted our spending as we went, but we had passed the point of no return, and we couldn’t seem to get back on track. We canceled our cable and whittled down our expenses to just the basics. We stopped shopping at name-brand retailers and began buying our food at discount grocery stores, trading our daughters’ boxes of Cheerios for “toasted oat circles.”

With these habits, we’ve managed to scrape by each month, but now, with a portion of my income missing, we were going to need to get extra creative. 

I made some hard decisions and decided our best bet was going to be making our credit card payments a few days late during the “grace period” when it wouldn’t impact our credit score. This would give me the wiggle room I needed to keep the lights on and make sure we had enough left for groceries. I combined the remaining available balances on our credit cards, used that to pay the electric bill, and then I crossed my fingers that nothing else would come up that month. Fortunately, nothing else did, and we managed to get by until the next direct deposit hit our bank account.

Then, we started the same cycle all over again ― except we were starting even further in the hole than we had the month before. One thing we don’t talk about enough is how expensive it is to be broke. Our credit card payments all had late fees added onto them. And when one of my client’s handwritten checks didn’t clear before some of the checks I had written to cover our expenses did, our bank account was suddenly overdrawn. Before I knew it, we had accrued over $300 worth of fees and penalties.

Like so many Americans, we struggle to get by each and every month. The compounding interest we rack up by always being a breath away from being broke plays a large role in that. We pay interest on purchases that we can’t afford to pay out of pocket in the moment (like our electric bill when my pay was short last month), and then we pay late fees when we have to take advantage of that grace period. Our monthly payments never go down because we can’t get out in front of any of it.

All of this has a psychological and emotional impact. I’m constantly running our budget through my mind, trying to reassure myself that the numbers will work out this month. I’m never not thinking about money. I dread going to the store or having to buy gas because each purchase moves us closer back down to that zero balance. The anxiety over our finances never goes away.

We’re trying to get back on our feet, though. We account for every dollar we make, and we don’t make any purchases without carefully considering our finances. It is just impossible to get ahead when every month seems to bring us a new setback ― a sewage backup in our basement, a visit to urgent care, our growing children who need new shoes. Every step we take forward is followed by two steps backward and it’s exhausting. There’s no catching up when you’re behind; you just struggle to maintain.

These setbacks also prevent us from staying on top of the things that will eventually turn into more emergencies if we don’t manage them now ― the dental work that I’m putting off until we are more financially stable, the routine maintenance on our boiler that we had to forgo this year. Being unable to stay on top of even these small things just cause our expenses to snowball down the line. Our financial situation also makes me extra aware of the moments that I feel like most other families take for granted ― a night out to eat, renting a movie, an impulse candy bar purchase in the checkout line.

The upcoming holidays are only complicating our situation. While most of the people we know spent Black Friday perusing retail sales or waiting in long lines to buy discounted items, I spent it looking over our budget again to try to see whether we’ll be able to swing a Christmas tree this year. Will there be enough in our account to splurge and hang Christmas lights outside? While I am confident that we will be able to put gifts under the tree for our daughters, I’m less confident about what situation we’ll find ourselves in come January, and every month after that.

Back when life was simpler (and cheaper), and I could rely on the baby gate to keep them out of everything -- my husband incl


Courtesy of Lauren Wellbank

Back when life was simpler (and cheaper), and I could rely on the baby gate to keep them out of everything — my husband included.

I worry about our finances all the time, but the thought that keeps me up at night is, What’s going to happen when the month comes that we can’t make it all work? The month when we can’t pay all of our bills and our credit takes a hit? What if we default on our mortgage? What if I get sick and can’t work? What if my husband loses his job, which provides our health insurance?

What if, what if, what if?

I spent a decade working in the finance industry, so I know exactly what we should be doing to fix our situation. I used to be that person brimming with advice on how to make the “easy fixes” to get back on track. It is so much easier to present solutions when you are on the outside looking in. Unfortunately, what most people don’t understand, what I didn’t understand back then, is that what we should be doing and what we can actually do are two very different things.

I never thought at 37 years old I’d be stretching every dollar each month. I never thought we would have to work this hard to struggle to get by. 

I feel frustrated and embarrassed, but I also feel extremely lucky, because we do have a safety net. I have parents who are willing and able to help me out on those months where I just can’t stretch our money any further. We have resources. Our credit cards may be maxed out, but our bills are paid every month.

There are so many people out there who don’t actually know where their next meal will come from, who don’t know where they will sleep tonight, and I am lucky enough to be worrying about whether we’ll be able to afford a Christmas tree. I know how privileged we are. Even in these moments when it feels like we have nothing, I know there are people out there who dream of a day that they can have everything that we do.

I just wish it was a little bit easier for all of us.

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4 things kids need to know about money

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(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity

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Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from CreditCards.com. That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to CreditCards.com industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard

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Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of taxvanta.com, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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