Tag Archives: saving money

Put your tax returns to work

Tax return time is a good time of year to take a financial step forward without an impact to your day-to-day lifestyle (if you get a return).  This is probably the only time of year I’m glad I have my townhome that is $80k under water.  Well, not glad it is under water, but glad I get to deduct the interest!

I’ve read through a few suggestions of how tax returns can best be used to improve financial situations, added my own opinion, and created this lovely flowchart of how to make the most of this annual cash infusion.  These are some of my references: Real Simple, Go Banking Rates, MSNBC Money, Kiplinger’s Personal Finance.  I especially like the “What You Shouldn’t Do” section in Real Simple.

 

Pay overdue bills & establish an emergency fund.

Both of these should be done first to “stop the bleeding”.  Getting yourself current on your bills will help improve your credit score (and stress level).  Establishing an emergency fund will prevent you from reaching for credit cards or other high interest debt options to pay for car repairs, house issues, or other emergencies that come up.  One-thousand dollars won’t cover a catastrophe, but it will cover most emergencies.

Indulge Yourself.

Most of my references had this listed last, but I chose to have it further up the list.  I think setting aside money for a personal indulgence, whether it is now or a few months from now, will prevent you from reaching for a credit card.  You should be able to enjoy a small indulgence for sanity reasons and limiting it to 10% will ensure you still have enough to make progress on other financial goals.  I plan to use mine on new clothes when my butterfly on the right toolbar hits 10 pounds lost.  🙂

Pay toward high-interest debt.

Credit cards are expensive, but they aren’t listed first because building an emergency fund and paying off bills will prevent the need to use credit cards.  The first step to paying off cards for good is to only use them if you can pay the full balance every month.  When I accumulated credit card debt, I wasn’t able to make progress until I set a fixed monthly payment and stopped using them.  Before that, I would stretch myself to make really high payments and then resort to using credit cards when I didn’t have the cash in my checking account.  In this case, slow and steady wins the race. 

Build up a healthy savings account.

Life happens.  Unfortunately, you can’t always plan for it.  I think we all felt that in some way after the economy crashed in 2008.  The recommended amount to have in savings varies from 3 months to 9 months, depending on the source.  The best advice I’ve heard is to figure out how many months it takes, on average, to find a new job in your field and strive to put that in savings.

Save for large planned expenses.

I think this one is pretty self-explanatory!

Start an IRA.

Roth IRA’s are a great retirement vehicle because the money is not taxed when you take disbursements at retirement.  This is because the money was already taxed when you put it into the IRA.  About.com has a good explanation of the difference between a Roth and Traditional IRA and the benefits of both. 

I did not mention anything about 401k here because my recommendations are focused exclusively on what to do with an annual cash infusion.  I think it is important to use part of your raise to adjust your 401k contribution, which I discussed in a previous post.

Work on your cash flow.

Good job if this is you!  It can take years to get here, so don’t beat yourself up if you aren’t.  You’ll get there with a little patience and dedication.  This is where you put extra money toward your student loans, car loan, or other debt not considered high-interest.  You might not cover the full loan in one year, but you will be glad you did this when the loan gets paid off early!

Tax returns, in general.

If you’re getting a lot back every year, you should look at your withholdings.  While it is nice to get an annual payout of cash, it is even nicer to have that money throughout the year. 

What will be your indulgence with your tax returns this year?

Feeding a family of four for $300/month + my tryst with the Do-si-dos

I am training for Tough Mudder and my first sprint triathlon.  I’ve had a hard time jump-starting my training because of fun evening activities so I decided to give morning workouts another chance.  Today was Day #1.  I woke up at 5:10am and I’d like to say I sprung out of bed ready to hit the treadmill.  Instead, it was a 40 minute negotiation with the alarm clock and myself before I finally got myself up and on the treadmill.  Best. Decision. Ever.

I felt so good I decided today was the day to showcase the Michael Kors dress I got on clearance for $18 (it was previously off-limits because it was a little too snug when I bought it).  The problem?  I couldn’t figure out the belt.  I spent a few minutes fidgeting before I enlisted Matt’s help.  We spent another 15 minutes fidgeting before we decided on this tying maneuver

(I also learned these kinds of pictures are more difficult to take than you’d think!  Maybe someday I will do a post dedicated to pictures gone wrong)

My excitement about my morning workout, the dress, and possibly signing up for a St. Patty’s Day run had me feeling pretty good when these showed up at my desk:

After lunch, this happened:

A few minutes after that, this happened:

At that point, I was just glad I didn’t eat the wrapper.  I have zero willpower against Do-si-dos.  Besides, it’s for the kids.  I didn’t feel too bad because Matt and I have been eating a lot healthier the past few months by eating at home and bringing our lunch to work more often.

Cooking at home more often has led us to coupon-clipping (normal people style, not extreme style).  While flipping through Kiplinger’s Personal Finance today, I found a nice story about Carol Scudere, an Ohio woman who started Budget-Meals.org.  Her non-profit teaches families how they can eat well inexpensively (no extreme couponing required).  Based on her experience in the food industry, she believes most families of four should be able to eat well for $300/month.  The basics that I have learned and that this organization promote are:

  • Buy what you need.  Don’t buy food just because it is on sale (unless it is a non-perishable item you know you’ll eat and you want to take advantage of the deal)
  • Look for in-season fruit and vegetables.  A good place to check is Aldi.  They carry in-season fruits and vegetables to keep their costs lower.
  • Plan your meals for the week and make a list
  • Stick to your grocery list
  • Know what is worth buying in bulk.  We know we’ll use black beans so we’ll buy those if we see them on sale, but we have a 20 year supply of pickles that was a waste of money.

Matt and I invest about 20 minutes each week into clipping coupons and another 15 minutes picking out our meals for the week.  We don’t clip coupons for unhealthy food we don’t want to eat to avoid the temptation.  Our coupons go in a file and we only take what we need for the week or really great deals that are going to expire.  This has resulted in a 15-20% savings in our grocery bill!  We know because Cub and Lunds put it right on their receipt 🙂

Additional resources for tips on how to slash your grocery bill:

  • Click here for the Kiplinger’s article.  The Budget-Meals.org website also contains links to good online coupon sources here.
  • Carrots ‘N’ Cake has a Grocery Shopping 101 series of blog posts.  Click here to see her series.

Happy saving!