Is Staying Home to Raise the Kids Costing you More than you Think?

Not long ago we wrote a blog about how the number of stay-at-home moms in America is on the rise. As a matter fact, in 2012 nearly 30% of all US mothers stayed home to raise their kids, up 23% from 1999. Take a trip to any park on most weekdays and you’ll even see dads there also, having swapped their desk chair for a high chair.

Of course some of these parents are at home because of the lack of jobs but many are there by choice, saying that there’s no way to put a price on time spent with children before they grow up. While that might be true, it’s also true that anyone considering staying home to raise their children should look at the costs involved in swapping out a career in the working world for a career taking care of the kids.

The simple fact is that any retirement nest egg can be quite devastated by a lapse in retirement savings. For example, 50% of a 25-year-old’s retirement income can be replaced if they’re earning $40,000 a year and start saving 13% of their salary at the age of 25, including any employer matching that they can get their hands on.

If you deduct three years from that however, that 50% replacement rate falls to 43% and, after five years, it falls even further to 39%. That extrapolates to needing to save 15% of your salary if you miss three years in the working world or 17% after missing five.

Financial experts will tell you that, even if you decide to take time off, you should still continue to put savings into a spousal IRA. Yes, this will need to be funded by the working spouse but, since it’s in the non-working partner’s name, it should be fine. If you’re married and file a joint return you can also open a traditional or Roth IRA. In some cases the lower income that you have because you’re not working will make you eligible for a Roth and you may want to consider converting a traditional IRA into a Roth as well.

Taking time to raise the kids will also impact your Social Security benefits once retirement comes. The 40 credits that you need usually require at least 10 years of paying into Social Security and, if you’re close, you might consider working a bit longer. Also keep in mind that the 35 years when you earned the most money are what the Social Security Administration considers when they figure benefits, so any years that you earned nothing will cost you. If you’re a stay-at-home parent and you don’t qualify for benefits, you may be entitled to up to 50% of the benefits that your working spouse will receive.

Since it’s highly unlikely that anyone will take over raising your kids for free, having adequate life insurance on the stay-at-home parent is a must. The breadwinner in the family should have adequate life and disability insurance as well.

Finally, in any situation where one spouse ops to stay home and raise the kids, budgeting and downscaling is absolutely necessary. Putting together a bigger emergency fund is also vitally important, especially if the breadwinner suddenly becomes unemployed and unable to work.

A good suggestion is to try living on only one income before deciding to take the stay-at-home plunge. That information should help to make the decision much easier whether pro or con.

Don’t Fall for these Hotel Scams

Summer. Time for barbecues, road trips and… hotel scams? If you’re heading out on the road this summer and will be staying at a hotel or motel along the way, the FTC recently published a list of scams and “hazards”, including some that are identity theft related, that you need to obviously avoid. Some are simply extra fees that hotels have started adding, which you obviously will want to avoid as well. Check them out below and make your summer travels a little safer and less expensive. Enjoy.

1) The “problem with your credit card” scam. The first scam comes right after you check into your hotel room. The phone rings and a person identifying themselves as someone “from the front desk” says there’s a problem with your credit card and asks for the account number. It’s a scam that’s becoming more popular because it’s quite easy to pull off and, once you give that number and its accompanying data, the scammers have access to your card and can quickly drain it. If you get a call like this at your hotel, hang up and call the front desk yourself to see if they were the ones actually calling. Even simpler, walk down there yourself and ask.

2) The “fake pizza flyer” scam. With this scam, you find a pizza or other restaurant flyer slipped under your hotel door with pictures of their delicious food and their phone number. Once you call, they take your order and your credit card information. Although it’s not extremely popular yet, simply due to all of those security cameras at most hotels, it is being seen more often.

3) The rogue Wi-Fi hotspot. This can happen in your hotel or in a coffee shop or other location along the way. Using easily set up technology, criminals offer a free Wi-Fi hotspot and collect your credit card and other information once you log on. Your best bet is to always check with the hotel or a restaurant employee to make sure that the Wi-Fi hotspot you’re using is legitimate. Even better is to use your own smart phone as a Wi-Fi hotspot, which is easily set up with a phone call to your service provider.

4)The “free” Wi-Fi trick. While this isn’t a scam set up by criminals, you certainly will feel like you’ve been ripped off. Many hotels today are offering “free” Wi-Fi in their lobby but, once you check in, you’re forced to pay a daily fee for your Wi-Fi in your hotel room. Some hotels charge between $10 and $15 per day so, before you start using that Wi-Fi, make sure it’s actually free.

5) Extra “resort” fees. Although budget websites like Expedia or Priceline help hotels fill their rooms, most hotels are not particularly fond of them. In order to make up the money lost from giving away their rooms so cheaply, many have taken to including “resort fees” like charging you for housekeeping, keeping things in a hotel safe and so forth. Some will even charge you these fees if you don’t use them, so if you see them on your bill make sure to ask for them to be removed.

6) The bouncing cancellation fee. It used to be that if you canceled a hotel reservation 24 hours ahead of time or more, you would get a full refund. These days that’s not always the case so, before you book a hotel or motel reservation, make sure you check to see what their cancellation policy is and, if you have to cancel, abide by it to avoid these extra fees.

Now that you know some of the tricks that criminals, and unfortunately hotels, are using to grab your hard-earned money, you can go on vacation this summer with a little bit less anxiety. Have fun!

2 Simple Systems to Help you Stay on Budget

The very first, most important step in creating a personal financial plan is to have a firm understanding of your income and your expenses. In order to do that you need to have as much detailed information about both as possible.

If you’ve tried tracking your expenses and haven’t had very much success, the 2 Systems below will help you to do that and give you a little bit of self-knowledge about how you handle finances. Enjoy.

System 1 – The cash system

This is one of the most simple ways to budget, using cash for every single transaction that you make. Two of the easiest ways to do this is to either cash your entire paycheck and keep that cash on hand during the week or deposit your paycheck into your bank account and take out enough cash every couple of days to cover all of your purchases. (Frankly, having all of that cash around or, even worse, carrying it on you all the time isn’t the best idea, so we would suggest option 2.)

Now, truth be told, it’s almost impossible for anyone to use cash to pay for every transaction these days. Banks, utility companies and others  don’t accept cash for certain payments. That being said, if you want to go with this method you should do your best to pay off the bulk of your transactions in cash.

Then, at the end of the month, you can simply see how much cash you have left over (if any). The simple and straightforward method will tell you whether your expenses have matched your income and, although you will get a lot of detail out of the system, it does include all of the very small transactions that you make and thus gives you a better picture of how much you’re spending.

System 2 – The envelope system

This second method, basically a variant on the cash method, requires a little bit more planning to accomplish. First, just like with the cash method, you cash your paycheck completely, but that’s where the similarities end. The next thing you do is divide your cash into specific categories and put the money you need for those categories separately into their own envelopes.

For example, if you have an $800 mortgage, you should put $800 in an envelope with the word “mortgage” on it. (If you pay rent, the envelope would say “rent”.) Do the same for your utilities, groceries, cable service, cell phone bill and so forth. You can divide your cash into as many categories as you like.

At the end of the month you simply need to take a look in each envelope to see if you stayed within budget for that particular category (i.e. there’s money left in the envelope) or you didn’t (i.e. it’s empty). If you notice that every month your “entertainment” envelope is empty, it’s a good bet that your breaking the budget on  things like restaurants, movies and other forms of entertainment. In other words, this is a great method to find out where the “holes” in your budget happen to be.

Now, truth be told, both of these systems are extremely simplistic and don’t rely on technology of any kind. If you make a lot of money and have a lot of monthly expenses they might also get a little bit burdensome.

Until you figure out how to stay on a strict budget however, they will work and are definitely better than nothing.

Top 5 Ways to Save $100.00 this week, and every week

These days $100 might not seem like a lot of money but, if you’re able to save $100 a week, at the end of the year you’d have $5200 that you could put towards paying down debt, putting towards an emergency fund or towards your 401(k) or IRA. And hey, $5200 is no small amount of spare change, so if you’re keen on saving hundred dollars a week read the Tips below to get started. Enjoy.

Tip 1 – Put your small bills the side. At the end of every day, take any bills smaller than a $20 bill and put them aside in a safe place. Saving change used to be trendy, but counting it simply takes too much time and really doesn’t amount to very much anyway. 1, 5 and 10 dollar bills add up much quicker, are easier to store, way less and are much easier to count too.

Tip 2 – Combine all of your weekly trips into one. Groceries, dry cleaners, the bank and all of those little trips you take every day should all be combined into one big outing which should save you at least $5-$10 in gas per week.

Tip 3 – Make your own food. This includes your own breakfast and coffee in the morning, brown-bagging it with your lunch and eating in for dinner. When you consider that the average cost for a “fast food” run is just under $5, and the average person makes six of them a week, that’s $30 in savings right there.

Tip 4 – Find a dollar movie theater in your town. Almost all towns have been these days, movie theaters that run “older” movies that have been replaced in the theaters by the newest, latest flicks. When you consider that the average cost of a movie ticket is just over $11 nationwide, the price of even a $2. movie ticket would save you $8. and, for two people, $16.

Tip  5 – Put $15 aside every day of the week. It doesn’t sound like much but, if you can do that seven days a week, at the end of every week you will have a $105.

Here’s the thing; it takes 21 days to start a new habit. If you get into the habit of putting small amounts of money aside every single day, spending less on going out to eat and entertainment, using cash instead of credit cards so that you can keep better track of where your money’s going and really making savings a priority, you’ll find that saving $100 a week, or $5200 a year, isn’t as difficult as you thought.

21 days. That’s all it takes to create a new habit and, if you make that new habit a money-saving habit, you’ll be amazed at how much extra money you have at the end of the year.