Budgeting for Some Fun

Author: Lindsey

Whenever I talk to people about budgeting their money and ‘cutting spending’ they sometimes think I am saying to never spend their money and only buy those things you absolutely need, don’t ever do anything and basically, live under a rock. This is not the case! We all have our vices, our activities and those items we love to spend money on. For me, I love to travel, go out to eat and shop. Guess what, I put money aside for all these every single month! Surprising? It shouldn’t be. Life is meant to be enjoyed and you work hard for your money…so spend a little on the things you love. Here are some reasons your fun money should be put into your budget. 

You will spend it anyway. Not spending money on the things you love is like going on a diet and cutting out all foods expect sprouts. Eventually, I am sad to say, you are going to crack. When that happens most of us will go all out and eat a whole pizza (or something to that effect) because we have been denying ourselves those foods we love. A successful diet is done when you also allow yourself to have controlled portions of your favorite terrible foods. Same goes for your budget. Cutting everything ‘extra’ out is something 99.9% of us won’t be able to stick to and when we do give in, a $20 shopping trip can turn into $200. Do yourself a favor. Figure out what you want to spend your money on for fun and then budget for it! Your wallet will thank you.

You learn what you really want and don’t want. It takes practices, but when you are truly sticking to your fun money budget, you will learn what you really want and don’t want to spend your money on. For example, this month I had some shopping money available. When I was at the store, I found that had selected enough items that I would have spent my whole budget for that month if I got everything. I knew I didn’t want to do that sense it was still early in the month so I went through every clothing item in my cart, thought about whether or not I really wanted them and what sort of outfits I could use them for and lo and behold, I got rid of almost everything! It wasn’t that hard either! The items I got were good choices and I still have money for another trip.

It will reduce stress. Have you ever had that moment of panic while using your debit or credit card at a restaurant or store? For many people, it is because they know they really can’t afford whatever it is that they are doing. When you budget for eating out or shopping then you will help reduce that stress!

Internet Scams

Have you ever been on the internet and felt you have seen something a little strange? The internet is an incredible thing, but if you’re not careful, you may fall into an internet scam and lose your money, identity or both. Here are some of the most common internet scams, but certainly not limited too! Remember to be careful and do research before ever giving anyone your personal information!

The Nigerian Scam

 This scam as been around since the 1920s, there are several variations but the end request is all the same  - will you help a wealthy individual get a large amount of money out of their respective country and help cover legal fees. As ridiculous as it sounds, people will send money for these legal fees and such to countries in Africa believing they will receive a small fortune for their help. How to avoid it? Never send money to an unknown person, especially outside the US!

Pre-approved loans or credit card scams.

If you’re thinking about applying for a pre-approved credit card or loan, stop and ask yourself, "Why would a bank give this to me by only charging me a fee?" The answer: they would not. Legitimate lenders will charge you an annual fee that will be applied to the balance of the card and will always run your credit before letting you know what you are approved!

Phishing emails and phony web sites.

These will show up in your inbox from common sites you may use such as PayPal or Citibank. They will state you MUST confirm your identity in order to keep your account active and ask for personal information such as your password, full name, social security number, etc. A legitimate company will never send you emails or send you to websites asking for this information! Remember, if you have an account with them, they already have it!

Disaster relief scams.

Unfortunately, people like to take advantage of people in bad situations. During natural disasters, such as Hurricane Katrina, people set up fake charities online for people to donate to. They will have fake websites and emails asking for donations to help the victims. This can be slightly harder to avoid, but remember, do your research before ever donating or go through an organization you know is real, such as the Salvation Army or Red Cross.

Reality Check

For today’s blog I wanted to play a game. First, imagine that you were a billionaire. What were some of the things you would do or buy? Would you still save or would you spend it on outrages things? Here are some things you could spend your money on.

1. Super Bowl Commercials. It was reported that during the 2013 game the average cost of a 30 second spot was around 4 million dollars.
2. Lamborghini Aventador. This Italian sports car will start around $387,000.
3. Private celebrity booking.  A cameo appearance at a private event will start at a couple thousand to a million depending on who you want.
4. A room at the Royal Penthouse Suite, Hotel President in Geneva. This unbelievable location will cost you $65,000 per night.
5. Harry Winston’s Ruby Slippers. These fancy shoes will cost you 3 million dollars to own.

Now, let’s pretend you’re the average American. You work, make an average living and try to balance between spending your money on fun and bills. Here are some things you could spend your money on.

1.  Check cashing and money order fees. The average cost to cash a check is around 1.75%. Let’s say it cost you $10 to cash your check and you do this twice a month. You will end up spending $240 a year on cashing your check plus around a $1 every money order you use.
2. Eating out. In 2009 it was reported the average American family spent over $2, 600 a year on eating out, be it fast food or a nice dinner.
3. CNBC reported that the average monthly payment on a car was $452 in 2012…for many people this could make up over a third of their paycheck.
4. Like shoes but can’t afford Harry Winston’s? No problem, the average person will buy a $150 pair of Jordan’s or a $230 pair of leather boots.
5. In 2009 the average American household spent over $628 in entertainment, this included concerts, movies and sporting events.

Now stop and think about the two scenarios. The first one seems outrages, how could someone ever spend $65,000 for a one night stay in a hotel? But look at the second scenario. How could someone spend $240 to cash their checks each year? For most of us, we need our money to pay bills and we also want to have nice things and do fun stuff. However, how much of your money is going to things that you would call outrageous? Maybe it’s time to give your budget a reality check!

Debt Payoff: The Snowball Method

Author: Brittany

As the Financial Education Team Leader here at FSWP, I do a lot of research on different blogs about how to deal with debt and various other financial topics. If you’ve ever researched debt payoff, you’ve probably run into Dave Ramsey at some point or another. I know I have. Dave Ramsey's snowball method is one of the most popular debt payoff methods out there.

The Snowball Method is just one way you can pay back your mounting debt. The idea is fairly basic: Pay off your higher interest debt first. The higher the interest rate, the more money the debt carrier makes. If you concentrate on the highest interest rates first, you’ll ultimately be paying less in the end.

For example, say you have the following debts:

Car Loan: $21,000 @ 4.99%

Bank of America Credit Card: $26,000 @ 17.99%

Zales Card: $5,000 @ 20.9%

Student Loans: $35,000 @3.99%

You would concentrate on the highest rates first: B of A Credit Card and the Zales card. Throw as much money as you can at those debts first, while still continuing to pay AT LEAST the minimum on the other debts. After you have paid the first off, then you choose the next highest: the car loan. This continues so on and so forth until your debt is paid off.

Have any of you used the snowball method? How has it worked for you?

Tax Resources

As January draws to a close, many of us have taxes on our minds. They say nothing is certain in life except death and taxes and April will be here before you know it!  Here are some helpful resources and tips for navigating tax season!

Call 211 for assistance. 211 is the United Way’s hotline and they have connections to many different tax help options. Simply dial the number, tell them what you need and where you are and they can set you in the right direction.

For Pennsylvania residents, www.picpa.org can be a great resource. The Pennsylvania Institute of Certified Public Accounts offers information on tax preparation, deadlines and extensions as well as contact for local accounts.

The IRS website is also a wonderful resource: www.irs.gov offers free tax help and well as all documents you could possibly need to complete your taxes.

Turbo Tax and Quicken offer self-directed tax preparation software as well as answers to any questions.

What are some resources you use to get your taxes done?