Personal Finance Blog For The Laymen

General Finance

Fine Tune Your Money Management

Are you satisfied with the way you handle your finances? Even if you’re pretty good about keeping your spending and saving on track, you probably know areas that could use improvement. Use these do’s and don’ts to help fine tune your habits.  

DO Keep a Budget 

It’s hard to know if you’ve gone off track if you don’t know what your goals and limits were in the first place. In a budget you ask: 

  • How much do I make each month from my salary or other sources?  
  • What are my regular monthly cash needs? That includes rent or mortgage, utilities, payments on outstanding debt, groceries, daily spending money, commuting and other regular costs, as well as savings. Be sure to include everything you can think of so that there are no unpleasant surprises at the end of the month. And if you’re self-employed or don’t have taxes withheld from your income, don’t forget the amount you need to set aside each month to cover quarterly estimated tax payments.  

Subtract your needs from your income and what’s left is your disposable income, aka money you can use for special purchases—or consider adding to your savings or retirement account.  

DON’T Buy in Haste 

Are you hankering for new shoes, a new phone, or some other splurge? Hold off for a few days before you act. Whatever seemed so exciting at first may lose its appeal after a cooling off period. Unable to resist? Get in the habit of leaving your credit cards at home. Handing over cash can make the impact feel more real. The key here is giving yourself time to consider how you can fit the purchase into your budget and whether you’ll be better able to afford it if you save a little longer. With a little research, online or at other stores, you may find, too, that you can find your splurge item for less.  

DO Plan Ahead 

Are you hoping to buy a house, send your kids to great colleges or have a secure retirement? Begin as soon as possible to estimate what you might need to reach your goal and set aside savings to achieve it. Even if you start with a couple of dollars a week, you’ll be glad when you see it build up over time.  

DO Have Fun 

Good money management is not just about following rules and setting limits, it’s about allowing you to benefit from your money to the fullest. In other words, save wisely so you can spend happily. That means you should allow yourself a small splurge now and then. Don’t worry if you spend what seems like a lot on a family activity, hobby or big purchase that you love, as long as you can afford it. In the end, your goal is to feel fulfilled in your life. A positive attitude is also more likely to keep you focused on good money management habits.  

General Finance

Planning for a Career Change

A higher salary. More job security. Doing what you love. Fewer hours. More travel. Changing careers can be rewarding for many reasons, but career transitions don’t always go smoothly. Your career shift may take longer than expected, or you may find yourself temporarily out of work if you need to go back to school or can’t immediately find a job. Planning for the financial impact can make the transition easier.

Do your homework

First, make sure that you clearly understand the steps involved in a career move, including the financial and personal consequences. For example, how long will it take you to transition from one career to the next? What are the job prospects in your new field? How will changing careers affect your income and expenses in the short and long term? Will you need additional education or training? Will your new career require more or fewer hours? Will you need to move to a different city or state? Is your spouse/partner on board?

Next, prepare a realistic budget and timeline for achieving your career goals. If you haven’t already done so, save up an emergency cash reserve that you can rely on, if necessary, during your career transition. It’s also a good time to reduce outstanding debt by paying off credit cards and loans.

And here’s another suggestion. Assuming it’s possible to do so, keep working in your current job while you’re taking steps to prepare for your new career. Having a stable source of income and benefits can make the planning process much less stressful.

Hands off your retirement savings

Planning ahead can also help protect your retirement savings. When confronted with new expenses or a temporary need for cash, many people tend to look at their retirement savings as an easy source of funds. But raiding your retirement savings, whether for the sake of convenience, to raise capital for a business you’re starting, or to satisfy a short-term cash crunch, may substantially limit your options in the future. Although you may think you’ll be able to make up the difference in your retirement account later–especially if your new career offers a higher salary–that may be easier said than done. In addition, you may owe income taxes and penalties for accessing your retirement funds early.

Consult others for advice

When planning a career move, consider talking to people who will understand some of the hurdles you’ll face when changing professions or shifting to a new industry or job. This may include a career counselor, a small business representative, a graduate school professor, or an individual who currently holds a job in your desired field. A financial professional can also help you work through the economics of a career move and recommend steps to protect your finances.

Going back to school

Before you start applying to graduate school, ask yourself whether your investment will be worthwhile. Will you be more marketable after getting your degree? Will you need to take out substantial loans?

In your search for tuition money, look first to your current employer. The first $5,250 of employer-provided education assistance is exempt from federal income tax. But read the fine print: some employers may require you to choose a course of study related to your current position, maintain a minimum grade point average, and/or continue to work at the company for a certain period of time after you graduate. Also, investigate whether you can continue to work at your company while you attend school part-time.

Students attending graduate school on at least a half-time basis are eligible for Uncle Sam’s three major student loans–the Stafford Loan, Perkins Loan, and graduate PLUS Loan. Also, at tax time, you might qualify for certain tax benefits, such as the Lifetime Learning credit–see IRS Publication 970 for more information.