When I first started budgeting, I wanted to do everything electronically. I tried Mint, but wasn't a big fan because it didn't capture the envelope budgeting method well (see here for a quick explanation of the envelope budgeting method). I also tried a couple other applications, but finally found GoodBudget. Honestly, GoodBudget could be a lot better than it is. I would recommend it, but mostly because I haven't been able to find something better to use.
Something I didn't like about GoodBudget at first is that I had to manually record every transaction. If I got behind on my budget, it would sometimes take over an hour to get things aligned again. For a new budgeter, this is enough to get them to quit all together. For me, I just got frustrated. I constantly looked for different applications that I could use. I wanted one that I could link my bank accounts to sync the transactions automatically, but I never found one that I was happy with.
My search for a better application has led me to begin to develop my own, based on my budgeting methodology. But, I wasn't sure if I wanted it to be connected to bank accounts. Setting aside privacy and security concerns, only recently did I think this might not be the best route. Only within the last week, did my opinion change on budgeting apps being connected to accounts to sync transactions automatically.
I think there's a lot of value to manually maintaining the transactions of a budget. For instance, you have to know exactly what you bought for every transaction. What did I buy at Walmart? Why did I get charged twice for that? Where did my money go? These are just a few things that you could miss if things were done all automatically for you. I also consider that it creates conversations with my wife. When I ask her what a purchase was for, we're both doing the finances now, instead of just me.
It also causes you to keep a closer eye on your finances. You're responsible for your budget to align with your accounts. So, if it doesn't align, it means you missed something. What I found is that something I missed is often just a couple dollar transaction, but because I was trying not to miss anything, I had a higher quality budget. It's true, it's very annoying to keep up with a budget sometimes. But, it literally has a financial reward. The better you are with your budget, the more money you will have. It's indirectly paying you when you closely manage your budget.
Maybe you found a better way to manage your budget. If so, let me know. I think manually doing it is the best way for now. If you do it often, you can get your budget done in 15 minutes every couple days. That's about how often I do it. Sometimes I do it daily, but it's rare it takes me more than 15 minutes to do. If it takes you longer, that could also indicate you have too many transactions and you're spending too much. Again, this is something you would only pick up on if you were manually managing your transactions and keeping your budget and accounts in sync.
As always, thanks for reading the Better Budget Blog! I hope you enjoyed and this makes your personal finances even better. If you have any questions at all, don't hesitate to ask. I really want to help you with your budget and personal finances. Lastly, please subscribe to the right (or below if you're on mobile) to not miss a post!
I listen to many financial podcasts. A topic that comes up often is term life insurance and why I need it. Honestly, I never even thought to get any sort of life insurance. I think it stemmed from me not fully understanding the purpose of it, or that it was just something I needed once I'm older. It was also a hard topic to think about.
Life insurance is money paid out after you die. So, you have to face your own mortality to understand it. Hopefully, you'll have a long life, but inevitably it will happen some day. Consider who would get affected the most financially when you die. For me, it's my wife and it's very difficult to think about. I want her to be okay if I passed. I don't want her to worry about anything. Life insurance is a way I can take care of her, even when I'm not around anymore. Taking finances off the table would give her once less thing to worry about. She would be able to focus on healing and getting past the pain and grief.
After thinking about it in this way, I was pretty convinced that I needed life insurance. First, the recommendation given by many is to get term life insurance. Never get whole life. It's financially a really bad deal and you'll get more for your money if you do term life insurance. I recommend doing a term for about 10 years at 10 times your income. For me, that's only about $35 dollars a month, but that's more than worth it knowing my wife would be taken care of amidst a tragedy.
Doing term life insurance every 10 years allows you to readjust the 10 times your income rule. Most likely, your income will go up 10 years from now, so you don't want the same term life policy. You would want to increase your coverage based on your new salary. Or maybe, you paid off some debt and you took a lower paying job. Again, now you would want to adjust your coverage lower.
I would also say the 10 times your income is a soft rule, but your coverage should be close to it. I think of it in this way. If I passed, I want my house to be paid off and my wife to be able to live in it for as long as she is comfortable with. I want her to be able to do whatever she wants, without having to worry about the finances. If you have a full family, you might want enough to cover your kids college, weddings, first cars, etc. If you have grand-kids, you might want enough life insurance that you could pass some money down to them.
Life insurance is a tough topic, but important. It's most important for families, as there is a reliance on your income or you rely on someone else's income. You want to ask the hard question, "How will I be financially if you die tomorrow?" That question will help you determine your life insurance needs.
If you're single with no dependents, you probably don't need life insurance, but if you want to get ahead on things, start setting aside $30 a month. It gives you a nice buffer in your bank accounts, would cover funeral costs in the worst case scenario, and get you used to paying "life insurance". Then, when you're actually paying for it, it becomes an easy transition. You could go ahead and get term life insurance, but remember to determine who it would take care of, if you passed. For example, make sure that it would go to your parents or guardians, which can be done with the help of a lawyer.
Thanks for reading this post! I hope it helped you get a better understanding of term life insurance and why you should get it. If you have any questions at all, please ask! I'll be more than happy to answer. As always, I hope you get a better budget every day and continue in a successful personal finance journey.
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A couple months ago, my budget was set up on a bi-monthly schedule, which was aligned with my paychecks. It was easy to budget each bi-month and I could allocate leftover money easily. However, I never had much leftover money. Actually, most bi-months, I was negative. To understand how I was negative, you first need to know my wife and I use the envelope budgeting method. For those of you who already know what the envelope budgeting method is, skip the next paragraph. Otherwise, read on!
The envelope budget system derives from the way grandma used to do her budget. She would get $100 every bi-month. Then, allocate $20 for groceries, $40 for bills, $30 for savings, and $10 for tithing. Each dollar is physically placed in four different envelopes: groceries, bills, savings, and tithing. Then, when it came time to pay for something, she would take the envelope with her. For example, she would take the grocery envelope with her to the grocery store and leave the rest at home. That's essentially the envelope budgeting method. I follow the same method, but instead of physical cash, I do everything electronically.
With us being negative quite often in our envelopes, I had to find a solution, because it made things stressful. If we overspent even $5, then we felt defeated. It wasn't us being hard on ourselves, because we knew that $5 adds up quickly. I have hundreds of virtual envelopes. If I overspend $5 in even 20% my envelopes, then we're hurting financially that bi-month. It's hard to be perfect every month with our budget and I had to figure out a way that I could give my wife and I a little bit of a buffer.
When my wife got a new job, this was the opportunity I needed to implement my new idea to help us with overspending in envelopes. I called this the "disposable income" envelope and it has been the solution to our problems. Every budget cycle, I put $50 in this disposable income envelope. What this does for us, is give us a little bit of a buffer from cycle to cycle.
For example, this cycle we drove a little more than normal and had to fill up on gas twice. Typically, this would hurt us and we would have to pull money from our savings (thus, our savings never grew). But now, this doesn't hurt us. We use some our disposable income to set our gas envelope back to full during the next budget cycle.
Another advantage to having a disposable income envelope is that it gives a fresh start every cycle. Now, we're still strict with it. If we overspent in our spending envelopes, we don't use the disposable income for a fresh start. I have a soft rule that if I can get it refilled over the next couple cycles, then I won't use my disposable income for it. For example, if my gas envelope was negative, I probably won't be able to refill it over the next couple cycles, because we're constantly driving to and from work, needing gas. However, if my spending envelope was negative, I could go a couple cycles until it was refilled. Plus, I need to learn from overspending, so it would be good if I didn't spend for a little bit.
The amount of disposable income you need each cycle is dependent on your budget. If you implement a disposable income folder and find yourself constantly using all, if not more, of what you have, that indicates that something is wrong with your budget. You need to reevaluate your numbers and adjust where needed. I also think it takes a good bit of self discipline to not overspend, knowing that the disposable income is there to catch you. That will defeat the purpose of a disposable income.
Last night, I was uploading the final documentation for my home mortgage, which I'm refinancing from a 30 year to a 15 year. Two pieces of documentation they requested was that I show proof my two credit cards are paid off. It got me thinking about my stance on credit cards. I think there's only one reason you should get a credit card and it's not to build credit.
The only reason that a credit card should ever be obtained is if it gives a true financial advantage for your situation. For example, my wife and I probably do 75% of our shopping through Amazon. We get everything on there. So, I opened an Amazon Store Card (which is their fancy credit card that's only usable at Amazon). But, the advantage of this card is that you get 5% off ever order. If my wife and I spent $5000 in a given year, we would have saved $250.
I think the general rule would be to get a credit card for places you shop at often, again if it's truly financially advantageous. Some good ideas might be your grocery store, a gas station near home or on your way home from work, or a store with a broad range of goods. I would not get a credit card for department stores, as they're too specific and often don't offer a good enough deal. Plus, they tie you down to a single store, where most people like to shop around at many different department stores.
Another rule to go by is that a credit card balance is always paid in full before it's due. You'll never use the credit card for it's actual purpose, which is to lend you money. Credit cards have the highest interest rate out of an type of loan. Under no circumstances, should you ever use your credit card without paying it off in full. I would also say in 99% of cases, emergencies should not be put on a credit card either and that 1% that does put an emergency on a credit card, has it paid in full before it's due.
If it wasn't for the 5% off, I wouldn't have any credit card. I would truly be credit-less. I don't think it would be bad for anyone to just go that route, because even the benefits sometimes aren't worth it. There's probably a lot of day's that the 5% off isn't worth it for my Amazon credit card. You need to analyze your situation and know if it's right for you to have a credit card. If you struggle with debt, cut your credit cards up immediately. Don't wait. They'll do nothing good for you and the benefits aren't worth it.
Often people argue that you need a credit card to build credit, but this just isn't true. If you're paying rent, this could build your credit. If you have a mortgage, this could build your credit. Another note on mortgages, it is possible to get a mortgage without credit, but you typically need about 2 years of consistent W2 work.
If you need help figuring out whether a credit card is right for you, or if you should stop using your credit cards all together, please message me!
Thanks for reading Better Budget! My goal is to make your personal finance situation better every day, including your budget, investments, savings, and more. If you have any question at all, please ask! And don't forget to subscribe so to not miss a post! Have a great Thursday!
I'm in the process of getting my mortgage refinanced from a 30 year into a 15 year. I'm doing this because I'm trying to pay off my mortgage in 10 years. I set this goal because an average millionaire pays off his or her mortgage off in 10.2 years. I want to be better than the average millionaire and pay it off in 10 years flat (or sooner). There's a lot steps to reaching this goal, but refinancing is the first. I'm actually not sure what the next steps will be yet, but I'm okay with that. I'll figure out the next steps after I'm done this one. I know at some point I'll need to increase my income, but you get a lot more done if you focus on one step at a time.
Another reason I want to pay it off as early as I can is to gain more financial freedom. An enormous part of my monthly income goes straight toward my mortgage. After the refinancing is done, about 55% of my monthly income will go toward my mortgage. I'm not happy about this. I'd rather it be closer to 25%, but the home is expensive and I made some mistakes as a first time home buyer. Regardless, switching to a 15 year will help fix some of those mistakes. I'll end up paying my home off sooner too. Once my home is paid off, I will gain an enormous amount of financial freedom.
The way I look at the mortgage payment is in two parts: the investing part and the rent. Any principle is investing. The interest, taxes, and insurance are the rent. Looking at it this way helped me make the decision to switch to a 15 (and I would have switch to a 10 if I could afford it). On a 30 year, my mortgage payment is about $3170. Breaking that down, about $2651 is the rent (taxes, interest, and insurance) and $519 is how much I'm investing every month. I could get a lot nicer apartment for $2651 per month than what my house is (not as large, but nicer for sure).
On a 15 year mortgage, my payment would be about $3825 per month. However, my rent would decrease to $1995 per month, almost $700 less than what it is on a 30 year! Also, I'm now investing $1830 per month, about $1200 more!! This difference is huge and one of the biggest reasons I refinanced into a 15 year.
Please do these two things!
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My name is Corey and I have a passion for budgets and personal financing. I can talk about it for days (weirdly enough). Hope you enjoy the blog!
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