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.

Want to build your Credit but don’t want a Credit Card? Here’s How

Oftentimes one of the first suggestions offered if a person needs to either build or rebuild their credit is to get a secured credit card or, if that’s not possible, to become an authorized user on another person’s credit card.

But what if you want to build your credit but also stay away from credit cards the same time, what options do you have then? For answers to this question, read the tips and advice below. Enjoy.

The first thing to keep in mind when beginning the process of building your credit without using credit cards is that, since your credit score is partially determined by the number and diversity of credit cards that you have, it will hurt your score to actually not have a credit card. In fact, 10% of your credit score is made up of this factor, and frankly consumers with the best credit scores are usually the ones that have some type of revolving credit.

10% isn’t a lot but, if you have no or low credit to begin with, it can make a difference.

Also, if this is your first time building up credit, a non-revolving credit account such as a mortgage or car loan might be a bit more difficult to obtain without any type of credit score. If you do manage to get a car loan without having revolving credit, it is absolutely vital that you make your payments on time every single month so that, little by little, your credit score improves. It’s also possible to get what banks and credit unions call a “credit builder” loan, so definitely check to see if you qualify for those.

If you are trying to rebuild your credit and already have a credit score, even though it might not be a good one, it might be easier for you to get a non-revolving credit account than if you had no credit score at all. More than likely you’ll be forced to pay a higher rate because of your bad credit score, but just like a person with first-time credit, if you make sure you pay off your new non-revolving credit account on time, every month, your credit score will slowly improve.

No matter which type of consumer you happen to be, either a first timer or someone with already established credit, tracking your credit as you go is important. On websites like Credit.com and others you can see your credit data, most of the time for free, and some have personalized guides that will help you to improve your score.

Most of these guides will also recommend that you apply for a credit card but, if you’re still not keen on doing that, ignore their advice and focus on other types of credit that you might qualify for and that will help you to build your score.

The point is that, although it might be a bit more difficult to get a high credit score without using the type of revolving credit that a credit card offers, it’s certainly not impossible.

The Educator Expense Deduction – Things to Consider

As an educator, you are no doubt aware that you can claim the money you spend on classroom supplies as a deduction on your taxes. On the surface, it may seem quite simple–you buy the stuff throughout the year and, at tax time, and you claim that amount when it’s time to file.

Unfortunately, there are some limitations to the deductions you can take and, if you’re not aware of what those are, they can come back to haunt you later. Before you go shopping for any more supplies, here are some things you should know about the Educator Expense Deduction.

Who Qualifies for the Deduction?

You will only qualify for the deduction for that tax year if:

·  You are a teacher, instructor, teacher aide, counselor or principal in grades K-12, and

·  You accrue at least 900 hours during the school year.

If you are full-time you should have no trouble qualifying. However, if you are a substitute teacher, or part-time, you should double-check your hours before you try to apply the deduction.

What Expenses Qualify?

The IRS allows you to deduct ordinary and necessary expenses which include:

·  Books

·  Supplies

·  Equipment, including computer equipment, services, and software, and

·  Supplementary classroom materials.

You cannot deduct for home-schooling or for non-athletic supplies in physical education classes. This means that the notebooks and pencils you supply for scorekeeping in your basketball class might not qualify.

Additionally, if you provide snacks for students who might not otherwise have food during the school day, that also might not qualify. If you are unsure as to whether an item counts as a deduction, you can consult the school administration, your accountant, or tax professionals like the people at Authority Tax Service.

How Much Can You Deduct?

Here’s where things get sticky. Although you are allowed to take deductions, you are not allowed to deduct everything. In fact, for 2013, you are only allowed to deduct $250. This means that if you spend $500 on an iPad for the classroom, and then another $100 on pencils, notebooks, paper and binders, you’ll only be able to recoup less than half of what you spent.

However, if you and your spouse are both educators, and you are filing jointly, you can each deduct up $500. Which means you could recoup most of $600 you spent, so long as your spouse does not have his own education deductions.

Deduction Reductions

While most educators are allowed a maximum of $250, there are some situations that can actually reduce your educator expense reduction, or render you completely ineligible:

  • If you have received any nontaxable interest on U.S.      series EE and I savings bonds,
  • If you have received any nontaxable qualified state      tuition program earnings,
  • If you have received any nontaxable earnings from      Coverdell education savings accounts, and
  • If you have received any reimbursements for expenses      that were not reported to you on your Form W-2, box 1.

Applying the deduction when any of the above applies could result in your tax return garnering closer scrutiny from the IRS. Professional tax help like Authority Tax Service can highlight these potential pitfalls, as well as other things that can trip you up.

Alternatives to the Educator Expense Deduction

If you don’t qualify for the educator deduction, or if you have more than $250 in qualified expenses, you may be able to deduct them as an unreimbursed employee expense.  However, because this is considered a miscellaneous itemized deduction, you can only use it if the expenses exceed two percent of your adjusted gross income.

This means that if you have an adjusted gross income of $50,000, your expenses must exceed $1,000 to qualify.

For example, if you spent $500 on a mini iPad, $100 on pencils and other stationery, and $1,000 on miscellaneous expenses, you will have a total of $1,600 in expenses. If you deduct $250 as an educator expense, that leaves $1,350, but can only deduct $350 – the amount over $1,000. Or you can deduct the full $600 in education expenses as a miscellaneous expense, but only if you have not claimed any of it as an educator expense deduction.

As you can see, the educator expense deduction is not as simple as it appears on the surface. Additionally, tax codes change each year including the limits and qualifications for this deduction. This is why you should think carefully, or consult a professional, before applying this deduction to your taxes.