MONEY Budgeting

5 Bad Money Habits You Can Break Today

Locked up credit card
Corbis—Alamy

When it comes to bad financial habits, there are some serious ones that can cost you thousands of dollars. Which habits are you guilty of committing?

Bad habits. They’re pesky, aren’t they?

Every once in awhile I catch myself in a bad habit. They almost seem inevitable. But I’m always determined to squash them as soon as I recognize them. I’m sure you’re in the same boat.

When it comes to bad financial habits, there are some serious ones that can cost you thousands of dollars. Which of these habits are you guilty of committing?

1. Spending With Credit Cards When You Can’t Afford It

Credit card interest rates are regularly well above 10%. That translates into a lot of interest charges if you don’t pay off your credit card every month. Worse yet, many people get stuck in a cycle of credit card debt – a habit that seems to just not go away.

Many people make what they consider to be “educated” guesses as to whether they can afford to put new clothes or high-tech gadgets on their credit cards. The problem is that those who do often don’t really know their future expenses.

If you’re living paycheck to paycheck, even small emergency expenses can be enough to make you late on your credit card payments. And if you’re late once, it’s so easy to push off paying your credit card debt until you’re really hurting. Furthermore, late payments can hurt your credit, and if your credit score drops low enough it can mean higher interest rates for you in the future. (You can see how your credit card debt is affecting your credit by getting your credit scores for free on Credit.com.)

Unless you’re entirely sure you can pay off your credit cards every month, you may want to seriously consider not using them.

You may be asking, “Hey Jeff, I’m not sure how to stop using credit cards – I can’t afford to live without them!”

That’s a difficult situation, no doubt. In that case, you’re going to have to look at both your income and expenses to determine where you can make improvements so you don’t have to depend on credit to make ends meet.

2. Not Tracking Your Transactions With a Budget

One of the best advantages of tracking your transactions is that you can see very clearly where you spent your money over time.

Try tracking your spending for a month (there are free budgeting software programs that can help with that, too). If you haven’t ever given a second thought to spending, this exercise will certainly help you do that.

When the month is over, categorize and add up your expenses. Many people overspend on the following categories:

  • Groceries
  • Clothing
  • Entertainment
  • Eating Out

These are categories you should monitor carefully.

Once you know how much you’re spending in your categories, make a few goals. Try lowering how much you’re allowed to spend in your problem categories incrementally, month by month.

Over time, because you’ve been tracking your categories and paying attention to your spending habits, you’ll find you can lower your budget category allocations – saving you thousands of dollars.

3. Waking Up Late

I’m convinced that waking up late affects your finances. Allow me to explain.

All of us are pressed for time. If you’re like many out there, you dread the alarm clock and reach for the snooze button too many times (that is, more than zero times).

But I bet there’s something you’d love to do if only you had more hours in the day. Maybe you’d exercise, start a side business, or take some online classes. These are all activities that can either directly or indirectly result in more income.

For example, if you take some online classes, you can learn a useful and marketable skill that can earn you a raise, promotion or a better job.

Personally, I found that by waking up early I can have a few morning routines that get me pumped for my day ahead. The later I wake up, the less productive I feel, and the less productive I am.

You can also fill those early morning hours with some of those activities you always wanted to get to but never could. You just might find that even if you don’t consider yourself to be a morning person, you could become one.

Instead of focusing on ways to improve your finances through just financial means, look at your entire life – it’s not as compartmentalized as it may seem and can have profound consequences on your money.

4. Consuming to Hopefully Find Contentment

Something deep down in me cringes when I hear businesses call people “consumers.” Sure, people consume, but that’s not all they do. But maybe businesses sometimes refer to people as consumers because that’s what so many do too often: they consume.

Ask yourself if you consume more than you produce. Is your goal in the morning to wake up and say, “I wonder how I can please myself today?” Or, is your goal to serve others?

Albert Einstein was quoted in the June 20, 1932 New York Times as saying: “Only a life lived for others is the life worth while.” There’s so much wisdom to that.

But there are other benefits to serving others above ourselves, as well. Have you noticed that when you’re busy serving others and making money, you spend less? Perhaps you’ve noticed the reverse.

Don’t consume to seek contentment. Contentment isn’t found in consumption, it’s found in servanthood. Follow this advice, and you’ll likely keep more cash in your wallet, too.

5. Using Investment Accounts as Emergency Funds

It happens from time to time. I’ve seen a few of my clients raid their investment accounts to pay for emergencies. Sometimes, it even becomes habitual. I understand why they do it, but the tax penalties can be high.

Also, if you use your investment accounts as emergency funds, you’ll lose all that potential earning power when you have to dip into it for emergencies.

A better plan is to have a high-yield savings account nicknamed “emergency fund” and not touch it unless there’s a true emergency. And don’t fool yourself, you really do need an emergency fund.

There are a whole host of emergencies that can crop up when you least expect it: lawsuits, medical bills, job loss, the list goes on and on.

Here’s one habit you should get into: taking extra money you’ve earned every month and pouring it into your emergency fund. You may even put monetary gifts you’ve received into your emergency fund until you’ve filled it up (I recommend three to eight months’ worth of expenses).

Say Hello to More Money

Bad financial habits aren’t always easy to correct. I’ll be honest with you, it’s often very difficult. It requires a shift in the way you think about money.

You might have some bad financial habits right now you don’t know about. Brainstorm! Find every last one if you can. You can break a bad habit in less than a month if you stay focused.

Do it. It’s worth it.

More from Credit.com

This article originally appeared on Credit.com.

MONEY Student Loans

Help! The Government Seized My Tax Refund to Pay My Student Loan Debt

Tax Refund check on dark background
Getty Image

If you are in default on your federal student loans, the government can take your tax refund. Here's what you can do about it.

Many people have already filed their taxes this year — particularly those owed refunds. Because of rising taxpayer identity theft, it’s a smart idea for anyone to file quickly. However, some taxpayers are discovering the refund they thought was coming has instead has been taken to pay their student loan debt. Here’s a sample of questions recently sent to Credit.com:

  • From Amber: Is there anything i can do to stop my whole federal refund from going to my student loans? … I’ve just set up a payment plan, but I really need my refund this year.
  • From Peggy: I was looking forward to my tax refund as it will help with bills and much needed things for the baby. It was accepted and … now after digging around I found out they are sending it to the U.S. Dept. of Ed. for my student loans which I thought were in deferment. Now this is causing me and my kids a hardship but they refuse to send me the refund… What can I do to get my refund owed to me?
  • From Luis: I heard that if your student loan is in default and they are intercepting your taxes, It goes towards interest of the loan. Getting your loan out of default you can then get the intercepted (money) back. Is this true? Is there some info on this?

First, some background: If you are in default on your federal student loans (which by definition means you are behind by 270 days or more), the Department of Education can take your tax refund using the Treasury Offset Program. This program authorizes federal payments such as tax refunds or Social Security income to be intercepted in whole or in part to pay debts owed to other federal agencies. There are some limited consumer protections, but debtors aren’t always aware of them.

What Can You Do if Your Refund Was Seized?

We spoke with Jay Fleischman, a student loan and bankruptcy attorney, about what people can do. First, he said that by federal law, people who have student loans in default get a notice in advance warning that they are at risk of having any potential tax refund seized for student loan repayment. That notice contains instructions for a review of your loan information and how to avoid the offset.

If your refund is taken, you can still request a hearing. If it was taken in error, the money will be refunded. However, be aware that an error does not generally include not getting a notice; it typically would require that you be able to prove your student loan was not in default. (There is a case where you will likely get a refund; more about that in a moment.)

Fleischman said it’s a good idea to adjust your withholdings whether you’re subject to a tax refund offset of not. A large tax refund means you overpaid your taxes during the year, he notes. If you are in default on your federal student loans you probably need that money. But at this point, there is nothing you can do to change the overwithholding from last year. Still, revisiting how much you’re having withheld for taxes is a smart move for anyone who got a large refund.

The bigger problem is how you are going to deal with the default on your student loans from now on. You’ll want to get out of default and stay that way. Fortunately, there are many payment options; you should be able to make one work for you. In some cases, income-based repayment payments can be set as low as $0. And “if your circumstances are dire and expected to remain so,” bankruptcy and the discharge of student loans might be options, Fleischman said.

The one case in which you are likely to be able to recover the money is if you filed jointly with a spouse, and it was his or her student loan that was in default. “You may be able to make an injured spouse claim,” said Fleischman.

For most, what is done is done. The best thing you can do is to look ahead. And if you haven’t filed your tax return and expect a large refund, you may want to see what options you have to get out of default first. Being in default on a student loan can not only squeeze your budget, it can hurt your credit and cost you thousands of dollars in higher debt costs over a lifetime. You can get two of your credit scores for free, updated every month, on Credit.com to track your standing.

More from Credit.com

This article originally appeared on Credit.com.

MONEY money makeover

How to Save More While Earning Less

150306_POV_1
Leah Overstreet "Lately we're living from paycheck to paycheck," says Lonnie Roberts Jr. (right).

It sounds like a tall order, but these 4 fixes put one maxed-out family on the way to a more secure financial future—and they can help you, too.

As a navigation officer on boats carrying supplies to oil rigs in the Gulf of Mexico, Lonnie Roberts Jr. is experiencing the downside of falling fuel prices. As oil companies look to preserve profit margins, Lonnie’s employer cut back his pay 9% and eliminated the 4% match on his 401(k) in January.

Even before that, Lonnie, 47, and wife Shawn, 45, felt behind on retirement. Now the Cedar Park, Texas, couple are especially anxious, knowing they need to find a way to live on less while building up their $245,000 nest egg.

With Lonnie on a boat for weeks at a time, Shawn gave up her job as an aesthetician to be home with Adison, 13, and Aiden, 11. So the family lives on Lonnie’s now $127,000 salary, 7% of which goes into his 401(k) and 7% to buying company stock. After expenses, they don’t have much left over, and their credit card balances have grown to $9,700. Something has to give. “To retire in 20 years,” says Lonnie, “we know we need to make the right moves now.”

150306_POV_2

 

Here are four fixes that can help get them on the right track:

Free up cash. Chase Mouchet and Bryan Lee of Strategic Financial Planning of Plano, Texas, say the Robertses can trim $1,300 a month by eliminating impulse buys, putting off college savings, and being more economical. Also, Lonnie should sell his $3,700 in company stock, but keep buying at a 15% discount and selling right away (triggering almost no taxes) to generate $1,300 a year. Directing all this to the credit card, they should pay it off in five months.

Build in a cushion. Next priority: an emergency fund of five to seven months’ expenses. Shawn is considering returning to work part-time. If she does, the added income ($1,600 a month after tax) would help them hit the goal in another eight months.

Return to retirement. Lonnie and Shawn can then max out his 401(k) and two Roth IRAs. Mouchet and Lee also advise putting $500 a month in taxable investments. (College savings will have to wait until their pay rises.)

Boost returns. The Robertses have 80% of their nest egg in a variable annuity that’s grown just 2% total in 10 years, partly due to fees of 3% a year. Instead, the planners suggest transferring the money to a new IRA invested in low-cost index funds, with 70% in stocks, 20% in bonds, 10% in real estate. In sum, these steps should allow Shawn and Lonnie to retire at 65 and 67. Says Shawn, “It’s a relief to know we can do this.”

 

MONEY Wealth

These Are the World’s Most Expensive Cities

No, New York isn't among the top 10. Nor is Tokyo. Hint about the most expensive city: Don't take any chewing gum when you visit.

MONEY Saving & Budgeting

3 Ways to Cut the Fat From Your Budget—and Save More

male athlete drinking 100% Mega Wealth fitness shake
Gregory Reid

Nowadays technology makes it easier to whip your spending into shape.

Welcome to Day 6 of MONEY’s 10-day Financial Fitness program. You’ve already seen what shape you’re in and started to track your spending. Today, look for ways to free up cash.

Even if you hit the gym regularly, you can probably still pinch an inch here and there.

Your spending, too, is bound to have a little flab. But here’s the good news: If you haven’t combed through your budget in a while, you may be surprised to discover how new technologies, shifting business models, and other recent developments can help you find more money to save.

1. Join the Sharing Economy

Are there any big-ticket items you could get away with renting rather than buying? For instance, maybe now that the kids are in college or you’ve retired you could do without that second car, which, according to AAA, costs almost $9,000 a year to own and operate. Consultancy Alix-Partners found that by 2020 more than 1 million families will use carsharing services to avoid buying a second ride. In some areas, Zipcar and Enterprise Car Share charge less than $50 a day for fully insured cars with gas, while a one-way car-pooled ride with Uber or Lyft can cost as little as $2.25.

For vacations, how about trying a home-swapping service such as Intervac or HomeExchange.com to chop that hefty hotel bill? Then there’s the pricey item you need only once or twice. Rent that fancy camera from BorrowLenses.com or see if your area has a tool-lending library where you can borrow a rototiller or other item for free.

2. Take a “Financial Health” Day

To cut regular expenses such as cable, phone, or insurance bills, set aside a few hours to compare rates from different firms or to ask your current provider for a discount, says Joe Ridout of advocacy group Consumer Action: “A lot of companies rely on your inertia to keep business they no longer deserve.”

To really dig in, take a day off to devote to haggling with insurers, banks, and more. Robert Brokamp, a financial planner and writer for Motley Fool, persuaded his firm to set aside a day for employees to deal with finances. “A lot of these things have to be done during work hours,” he says.

3. Tap Technology

Sites and apps that monitor your spending are great for catching expenses that could fall through the cracks. BillGuard, for one, flags mistaken or duplicate charges and allows you to challenge them right from the app.

Technology can also help rein in impulse purchases and find deals on the things you do buy. These top shopping apps and browser add-ons help you pay the lowest price every time you shop online. To avoid the daily deluge of online shopping temptations, use Unroll.me to pull all retailer emails into a single message. Out in the real world, try the GroceryIQ app before you hit the market. Create a shopping list using the app and it will search for coupons for those specific items. Finally, gas may be cheap, but don’t just fuel up willy-nilly; use an app like GasBuddy to get the best price possible.

Previous:

Next:

  • Day 7: Find Ways to Save More
  • Day 8: Boost Your Earning Power
  • Day 9: Learn How Better Health Can Help Your Finances
  • Day 10: Shore Up Your Safety Net

 

MONEY Budgeting

How to Start Tracking Your Spending in 7 Minutes Flat

stopwatch with money/dollar on it
George Diebold—Getty Images

If you want to save more or get out of debt, knowing where your money goes now is an essential first step.

As part of our 10-day series on Total Financial Fitness, we’ve developed six quick workouts, inspired by the popular exercise plan that takes just seven minutes a day. Each will help kick your finances into shape in no time at all. Today: The 7-Minute Spending Tracker

Seven minutes is a little tight to create a budget, but it’s enough to tackle the first step: pulling together all your spending info using a budgeting tool such as Mint. You’ll need your credit and debit cards to get started.

0:00 Surf to Mint.com and register for a free account.

0:42 Mint asks for your credit card providers and bank. As you type in each one, a list of possible matches will pop up. Select the right one and enter the online login and password you use for that account. (Mint is a secure site and cannot get to your money.)

3:02 Mint will need a minute to pull in all of your transactions, which it automatically slots into categories like “Cellphone” and “Groceries.” Problem is, the app doesn’t always get it right. To fix that, click the “Transactions” tab.

3:34 See those “uncategorized” charges? You can select them to choose a correct label. This is pretty tedious, so tick the box that says “always re-categorize X as Y.” That way, Mint will put all future transactions from that retailer in the right place.

5:02 When you did that, you probably also noticed some charges Mint tried to identify but placed into the wrong bucket. Scroll through those and correct them the same way.

6:30 Grab your phone and download the Mint app. Having the program handy will help you keep on top of charges.

7:00 Now you’re ready to click the “Budgets” tab and create a spending plan. For more help with that, check out our Money 101 stories on creating a budget you can stick to and setting financial priorities.

Previous:

Next:

  • Day 6: Cut the Fat From Your Budget
  • Day 7: Find Ways to Save More
  • Day 8: Boost Your Earning Power
  • Day 9: Learn How Better Health Can Help Your Finances
  • Day 10: Shore Up Your Safety Net
MONEY Financial Planning

10 Days to Total Financial Fitness

Bench press with gold painted weights
Gregory Reid

Presenting MONEY's 10-day program designed to pump up your finances for 2015. 

When you think about what kind of shape your finances are in nowadays, you may be feeling downright buff. Retirement plan balances are at record highs, home prices are back to pre-recession levels in most parts of the U.S., and the job market is the strongest it’s been since 2006.

No wonder Americans are more optimistic about their finances.

Given that, it’s understandable that some bad habits may be creeping back into your routine. Americans, overall, are slipping into a few: Household debt is at a record high, fueled by an uptick in borrowing for cars and college and more credit card spending. Vanguard reports that investors are taking risks last seen in the pre-crash years of 1999 and 2007.

What’s more, the financial regimen that’s been working well for you of late may not cut it anymore. In this slow-growth, low-interest-rate environment, both stock and bond returns are expected to be below average for several years to come.

To pump up your finances in 2015, you need to shake up your routine. The plan that follows can help you do just that. Every day for the next two weeks, we’ll target-train you for a different financial strength. This program includes seven quick workouts, inspired by the popular exercise plan that takes just seven minutes a day, that will push you to raise your game in no time at all. What are you waiting for?

See What Shape You’re In

Even if you’re a dedicated exerciser, you could be ignoring whole muscle groups, leaving yourself susceptible to injury. For example, 39% of people earning more than $75,000 a year wouldn’t be able to cover a $1,000 unexpected expense from savings, according to a 2014 Bankrate survey. So the first step is to establish your baseline by asking yourself these questions.

How are my vital signs? Tick off the basics: Check your credit, tally up your emergency fund (aim for six months of living expenses), look at how much you are contributing to your retirement plans, and get a handle on how you’re splitting up your savings between stocks and bonds.

Less than half of workers have tried to calculate how much money they’ll need for retirement, EBRI’s 2014 Retirement Confidence Survey found. Take five minutes to use an online tool that will show you if you’re on track, such as the T. Rowe Price Retirement Income Calculator.

What’s my day-to-day routine? The very first thing Rochester, N.Y., CPA David Young does with his clients is go over their spending. Budgeting apps, he notes, “make the invisible credit card charges visible.” As important as the “how much” is the “on what,” says Fred Taylor, president of Northstar Investment Advisors in Denver. Divide your expenses into the essential costs of living, investments in your future (savings, education, a home), and the discretionary spending you have the flexibility to cut.

Am I juicing my finances too much? In other words, how toxic is your borrowing? Your total debt matters. But the kinds of debts you have and the implications for your future are crucial too, says Charles Farrell, author of Your Money Ratios and CEO of Northstar. As a young saver, you shouldn’t be worried about high debts due to a house and education, Farrell says, as long as you can handle the payment, will be debt-free by your sixties, and are using debt only to fund investments in a low-cost or high-earning future, such as a low-maintenance home or new job skills. Farrell suggests in your twenties and thirties you should limit total mortgage debt to less than twice your family income. In your fifties, you should have a mortgage no higher than what you make. At any age, total education debt should not exceed 75% of your pay.

What’s my biggest weak spot? You need to guard against familiar risks, like insufficient insurance. But David Blanchett, head of retirement research for Morning-star, says you should also think about less obvious threats. Will new technology put your livelihood at risk? Are you counting on a pension from a financially shaky firm? Do you live in an area, such as Northern California, where home values hinge on the success of one industry?

Once you know how much progress you’ve made so far and what areas need the most work, you’re ready to get going on your financial fitness plan.

Next:

MONEY Love and Money

10 Over-the-Top Ways to Propose—and What they Cost

Creative ways to propose
Andrew Burton—Getty Images Tom Schwab, 37, proposes to his girlfriend of 18 months, Mary Nubla, 35, in Times Square on February 14, 2014 in New York City. (She said yes.)

Want to pop the question via Jumbotron? Hire a flash mob? Put on a real fireworks display? Get ready to open your wallet

In a building with sweeping views of New York’s Hudson River, pictures of a couple hang from “cherry blossom trees” that were handmade for the occasion from branches and petals. A harpist strums softly in the background as a woman makes her way down an aisle of rose petals towards a table with an elaborate ice sculpture. Petals spell her name on the floor.

Her family and friends are there too, waiting on another floor to celebrate with a catered dinner followed by a night of dancing.

This isn’t a wedding; it is a real-life marriage proposal event. And it cost $43,000.

These days, the traditional “will you marry me?” move—that is, a groom-to-be down on one knee in a restaurant or other romantic location—simply doesn’t cut it for many couples. “Everyone is trying to make their proposal unique,” says Michele Velazquez, co-founder of The Heart Bandits, a proposal and romantic event planning service that arranged the event in New York. “You don’t want to have your girlfriend Google a proposal and see that it’s been done a bunch of times.”

While $43,000 is an extreme example (the average wedding costs $30,000), Velazquez says the typical proposal planned by her firm ranges from $3,000 and $5,000. That’s still a hefty sum, especially when you consider that the proposer also has to buy a ring—$5,600 on average, according to a 2013 survey of grooms by The Knot.

Despite those costs, The Heart Bandits have never suffered from a lack of demand. Velazquez says her business has grown 100% every year since it launched in 2010.

Looking for a really phenomenal way to pop the question? Below you’ll find costs for other over-the-top-proposals.

But keep in mind the top tip that Velazquez offers her clients: “It’s not about the money you spend, it’s about the personalization.” In other words, look for a way that reflects something about your relationship or your future spouse’s interests.

What it Costs to Propose With…

A hot-air balloon: About $200 to $400 per person for a 60-minute private ride

The jumbotron at an MLB game: $50 to $2,500, based on data compiled by Swimmingly.com

A skywriter: $1,500 to $2,000, according to nationwide aerial advertising firm FlySigns

An airplane banner: Starting around $500, according to nationwide aerial advertising firm FlySigns

Musicians:$150 to $300 per hour for a soloist hired via a website like gigmasters.com

A glass slipper at Walt Disney World: $375 on top of the cost of admission. Other Disney proposal events and locations range from $15 (“Will You Marry Me?” chocolate slipper dessert) to $500+ (Fireworks boat cruise on private yacht)

Fireworks: $2,500 to $6,000, according to pyrotech.com

A flash mob: upwards of $2,000, as reported by The New York Times

A mock movie trailer: can be around $5,000, according to Drywater Productions in Janesville, Wisc., but the price varies based on video specifics

A professional photographer or videographer: $25 to more than $1,000

 

More from Money.com:

The Rising Toll of Inequality on Social Security

The Career Mistake You Don’t Realize You’re Making

25 Ways to Get Smarter About Money Right Now

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