I don’t have time for a great write-up of anything, as I’m still catching up from being gone for almost 2 weeks! So here’s some pics of our free vacation on credit card points :)

Held and alligator at the trade show. Why not?

Us lookin’ hawt in front of some crazy huge Disney Tree

View from the Boardwalk of our Hotel

Lobby of the Dolphin Hotel. SWANK!

In “France” at Disney’s Epcot

Selfie! (I don’t even know what ‘selfie’ means)

There would be pictures of us all over Disney and at the pool, but we were ON VACATION! Which means phones and such were put away, drinks and food were out, and we enjoyed the sun without have to DOCUMENT EVERY LAST THING! And you know what? It felt awesome. I suggest you give it a shot, maybe starting on your next date night that you have in your monthly budget. It is in your budget, RIGHT?!

See ya’ll later this week, you beautiful people, you!

Welcome back to the Ultimate Budget Series. If you haven’t have a chance to check out the rest of the series, here’s what we’ve got so far:

1. Introduction
2. Income
3. Tithing

I remember when I got my first job at Fred Meyer (a grocery store for those not on the West Coast), and I BEYOND EXCITED to earn $6.25 an hour. I was scheduled for about 20 hours per week to start, so I quickly did the math and figured out I’d be $125 richer every week. BALLIN! But when I got my first check, I about died. Not only did I have to pay union dues (the crap am I going to do with a union at 16?), but I also saw another 15% of my check disappear to things like “Social Security”, “Medicare”, and “Federal Taxes”…? I thought taxes were for old people?? Well, after chatting with my parents for a bit, I realized that I will NEVER get my full paycheck. NOOOOOOOOOOO!

Yes, we are going to talk about taxes, even though you vowed not to THINK about then until next April! Now, taxes is a pretty popular subject among those to make money, as every hour they work is usually worth at least 20% less than they were promised by their employer. It’s not their employers fault, they are just following the laws of the land. No, if you want to go on a passive aggressive tirade in the comments section about how you would rather eat a pound of dirt than have someone’s hands in your pocket, leeching off your hard work, then you can direct your delightful rage at none other than the U.S. government.

Anyways, I didn’t come here to get all political and start a petition for a flat tax rate or anything like that, I came here to talk about how to exist in our current tax structure. And since most aren’t exempt from paying their fair share, let’s break it down so that you can be better informed, and then can at least have educated dissent.

Category Description

Income taxes are a government mandated charge on a percentage of your income, whereas failure to pay is punishable by law. In the U.S., there are federal income taxes (everyone), and state, county and city income taxes (some people).

How Much You Should Budget?

There are a few ways to approach this. Each method will vary depending on your type of income, and whether you are and employee of a company, or self-employed. Let’s take a look at a few examples:

1. Income as an employee of a company. When you are employed by a company, they are required to pay taxes on your behalf before sending you the remaining money as your “net” paycheck. These are called “payroll” taxes. They withhold FICA (Social Security and Medicare) and Federal Income Taxes. The FICA portion is always the same percentage (currently 7.65%), and the Federal portion withheld is based on what you tell your employer on your W-4 form (you know, the form where you tell them a number and your paycheck gets bigger or smaller, with “0″ making it the smallest). The best way to withhold the correct amount is to use the IRS tool provided to figure out what to claim on your W-4. You can check it out here. You’ll need to know a bit of information, so go check it out and then go find what you need to pick the right number.
2. Income as a self-employed individual. When you are self-employed, you get the great privilege of paying more taxes than as an employee. WOOHOO! This is because a company pays half of the FICA taxes for an employee, and the employee pays the other half. When you are the owner AND employee, you get to pay both. Currently, that means you will effectively be paying 7.65% more in taxes than if you were an employee of a company. The amount you should budget for this category really depends on your business, your income, and the amount of projected profit for the business. My rule of thumb is to save 25% of you income for taxes, and then find a great tax professional. After reviewing your books for one year, they should be able to help you withhold the correct amount year after year and keep you out of trouble with the big, bad I.R.S.
3. Investment Income. Investment income is awesome, and you should be happy that you have some! But you also need to know how much you will be paying in taxes on this income. There is a simple rule to paying taxes on your investment income. Any investment you have held over 1 year is long term income, and you pay 15% in taxes (0% for those in the 10-15% tax bracket, and 20% for those who make over $400,000 annually). Any investment you have held for less than 1 year is short term income, and you pay your ordinary income tax rate. So, when you chat with your investment advisor, or look at your
4. Other Income. There are various other types of income, such as gifts, inheritances, and gambling winnings, and they all have their own tax treatment. If you find yourself receiving any other income outside of your job and investments, definitely connect with a tax professional to help you pay the correct amount of tax to protect you from the I.R.S., who is like friggin’ JAWS. They will eat you alive!

Common Ways People Blow This Category

Lack of understand. And I don’t blame ‘em! The U.S. tax code is RIDICULOUS, with stack after stack of 1,000+ page regulations being added regularly. There is NO WAY anyone can know it all, especially the common working folk who just want to pay their fair share and stay out of trouble. The problem is, when someone doesn’t not have a basic understand of how taxes work, they tend to not withhold enough from their paycheck, or, when self-employed, they don’t pay any taxes and wonder what they owe at the end of the year. When you don’t withhold enough, and owe over $1,000, you could get penalized. Your best bet is to play with the withholding tool I linked to above, or work with your tax advisor to ensure you are paying enough during the year. My worst client appointments are those who are self-employed and don’t pay anything all year and hope they just owe as much as last year. Unfortunately, their income is up, they don’t have any leftover losses to deduct, and they owe a TON of money on their profit for the year. Putting together a good plan at the beginning of the year should ensure a smooth tax time, and if something major change, then phone your local tax professional for advice.

Best Ways To Reduce Income Taxes

I’ve written before that tax deductions are a bad investment. And I stand by that claim. But, I also think everyone should only pay what they rightfully owe in taxes, and that means taking advantage of every possible deduction and credit they qualify for. There are a TON of them, so again, I recommend connecting with a tax professional to see which ones you qualify for. Some common ones are the child tax credit, education credits (for college classes), student loan interest deduction, property tax deduction, mortgage interest deduction, charitable contributions, and medical expenses. And don’t forget if you ever have to pay a ransom for a family member, it’s 100% deductible.

Whatever Else I Feel Like Writing

They say there are two things you can always count on; death and taxes. So, as much as we would love to never have to pay taxes again, it just ain’t gunna happen! I hope I have been helpful in breaking down income taxes a bit into something that’s more palatable, and will help you make better decisions when dealing with income taxes. As a tax pro myself, I’m always going to advocate finding a competent professional to assist you with your tax needs, especially if you own and home or business (or both!), or have any major life events that involve money.

If you’re adventurous, you can always peruse the tax code yourself, and search through the publications for answers to your tax questions (just check out www.irs.gov). Heck, I do it all the time! Just remember that you’re dealing with the U.S. government and “their money”, and if you screw it up, they’ll come after you like a jack-hammer to your frontal lobe. So yea, there’s that.

Comments: I know thinking about taxes right now makes you want to gouge your eyes out, but how did it go last year? Is there anything you’d change about your taxes? Do you “do it yourself”, or have a professional takes care of the details? I’d love to hear from those who are self-employed as well. This is the beginnings of a very LONG series, so I would LOVE to hear some feedback on what you think, and how I can help more with this series. Thanks for reading!

A free stay in the House nf Mouse. BOOMSHAKALAKA!

I feel like we just talked about this a few months ago. Oh wait, we did. Back in April, Michelle and I went to Portland and stayed in a fancy pants hotel for free, along with using our Chase Sapphire Preferred rewards card cash back bonus to pay for the meals, wine tasting and bottles of wine. We made out with $1,250 worth of free vacation, some great memories, and a half dozen bottles of wine. W00t! And less than two months later, we’re back at it again, this time it’s going to include a free flight AND hotel on credit car points.

“I’m Goin’ To Disneyworld!”

In a few weeks, I’m flying out to Orlando for a work conference, where I get to look at all the cool new gadgets in the Audio Visual industry. I geek out on this stuff, so I’m pretty excited, and even though I’ll be working, I will DEFINITELY be enjoying myself. The conference ends Friday, and I should fly back Saturday to re-join my family, and get back to regular life. But I’m a rewards junkie, and this trip was the PERFECT setup to exercise my credit card point muscles and see how we could make it an EXTREMELY CHEAP, and super fun vacation. Since Disneyworld is right where I’m going to be, I figure I’d fly the family out for a super-sweet Disney Vacation. We’ve got some free passes to the parks, so might as well enjoy some Disney time and sunshine on the cheap!

Free Flight

Having racked up over 70,000 miles on my Alaska Airlines card before I started churning, I took the opportunity to start pricing out flights to Orlando for Michelle and our little man. Since he’s under 2, he’d fly free, so BONUS! I found some super-saver flights that would only cost 40,000 miles round-trip, so I coordinated scheduled with Michelle and booked the ticket. BOOYAH! We since decided to make this a “Mommy-Daddy” trip, so the little one will be with family/friends while we enjoy our vacation away. It wouldn’t have cost more to bring him, but we wanted to see how well he does with Mommy and Daddy away for a few days, plus we wanted to have some Disney fun, and he wouldn’t care much.

Free Hotel

Since I am the proud owner of the Starwood Preferred Guest hotel rewards card (and you should be too!), I started to look at nearby Starwood properties. There were plenty to choose from (since Starwood owns Sheraton, Westin, Four Points, and a host of other hotels), and some were even as cheap at 4,000 points a night. But since we’re into high-rolling on our hotel points, I decided to check out The Dolphin and Swan Hotel, located right next door to Disney’s Epcot center.

The hotel seemed to have some decent reviews on Trip Advisor, so I called up the Starwood Preferred Guest concierge (yes, I have a 24/7 concierge with my credit card), and said, in my best “rich-guy” British Accent, “Can you spot me a cup of Earl Grey tea?.” The concierge was a bit confused, so I dropped the accent and asked about the availability of the Swan and Dolphin hotels in Disneyworld. They said the swan was sold out, but the Dolphin was available. I asked for a sweet room, and they gave me a room with a balcony and view for 21,000 points (2 nights). Done and done! I was a few points short, so I did chip in $35 to cover the gap, but the room was booked! Not to mention we can get free shuttle service to any of the parks, even a ferry ride across the water to Epcot Center.

Now, a room with a view may sound nice to everyone here, but that just doesn’t cut it for me. I know that a “view” could be anything, even a view of the side of another hotel. So I will be calling back this week to ask specifically for a view of the Epcot Center. What is flippin’ awesome about that particular view is that there is a fireworks show every night, and we would have a balcony view of the epic show. Pair that with a decadent dessert and some sparkling pear cider (because Michelle is preggy), and we have ourselves a magical romantic getaway!

What Is Your Credit Card Rewards Plan?

I’ve only been credit card churning for 6 months, and already we’ve taken 2 sweet vacations on the credit card company’s dime. We’re just getting started here, and it has paid off handsomely. So my question is; what is YOUR credit card rewards plan? If you’re rocking a wicked awesome budget and can use a credit card without getting into debt, what are you doing to maximize rewards? If you use a credit card, and your answer is simply “cash back”, good for you. But I’d recommend looking in to some of the sweet sign up bonuses out there, and take advantage of the free miles and points the credit card companies are offering. I recommend figuring out what your travel style is, pick a few destinations, and then compare travel rewards cards to pick the ones that will PAY FOR YOUR ENTIRE VACATION!

My goals when starting this was to get one free vacation per year. So far, we’re at two, and I’ve got another 7 months to go. I’m still learning all the tips and tricks in “travel hacking”, and I know I could probably get a TON more points once I really get into it. Of course, I’ll report all my findings here, but for now……..I’M GOING TO DISNEYWORLD!!!

Discloser: There are affiliate links in the post, and if you sign up for a card through them, I do receive a commission. There is absolutely no obligation to sign up, I just wanted to share the cards that have given us points for free vacations so others can take advantage as well. Thanks for reading

Join The Fun

Here’s your weekly chance to subscribe to iHeartBudgets by email. You can also subscribe via RSS, follow me on Twitter, or “like” me on Facebook! SO MANY WAYS TO STALK ME! I’ll make sure to keep the content fresh, informative, educational, and entertaining!

Giveaways

We just finished our latest giveaway (winner yet to be announced), but look for more in the future.

What Am I doing?

Well, let’s first start with a wrap-up of some of the big posts that happened this week. Last week, there was quite a frenzy over what I should do with $3,000, and then we revealed a big announcement, and then I argued for the size of my GINOURMOUS Emergency Fund. Then some people put my face up live on the Huffington Post (video included in link) to relive the agony of blowing through $100,000, and finally, I released part two of the Ultimate Budget Series, this one being about tithing. Phew, what an awesome week on the bloggity blog!

On the home front, this week was the week of selling stuff. Michelle started it off by selling her pink Huffy bicycle that she rode to college for a while when we first got married. It was a single speed, classis looking bike (think Schwinn style), with fenders and a cute basket. We bought it 5 years ago for $60, put the fenders and basket on it for another $20 – $30, and ended up selling it this week for $90! So basically we borrowed it for five years We also sold my car for what I was hoping to get, and that cash will go into the baby savings fund (as I talked about in a previous post).

Finally, we have been wanting to get rid of our wacky boxwood bushes for a while. The previous owners put them in a weird spot, and honestly, they are just ugly and in the way. They are healthy, decent sized bushes, so Michelle decided to do some research on what we could get for them. To our surprise, she found that they go for like $40 – $60 new! So we slapped them on Craigslist for $15, and had our first sale this week. A gentleman came over and bought 10 bushes for $150!! That’s crazy money for something I was thinking about tossing in the yard waste. Good thing my wife has more brains than I do

Fugly bushes = GOLDMINE!

How was YOUR week?

Mentions:

There are other, very cool blogs who have been generous enough to mention iHeartBudgets on their sites.  Anyone else who loves me as much as these people do, feel free to mention me as well to join the elite list below!

Club Thrifty, Mom and Dad Money, The Frugal Farmer, Canadian Budget Binder, Budgeting In The Fun Stuff, and Evolving PF

Woohoo! Thanks for sharing my junk!

What’ I’ve Been Reading:

Every week, I do some reading on the web. I come across articles that are entertaining, educational, or just plain awesome. I think the readers of iHeartBudgets will enjoy these articles as well.

Club Thrifty – Freelancing is Making Me Fat
Budgeting in the Fun Stuff – Estimated Quarterly Taxes Are Around the Corner Again
Evolving PF – Pulling Back the Veil on Our Daily Money Management
Frugal Portland – What Wikipedia Can’t Tell You About Buying a Condo
Modest Money - That Light Bulb Moment When You Start Paying Off Your Debt
Krantcents – Would James Bond be eligible for life insurance?
Saverocity - Drop Shipping For Manufactured Spend – An Experiment!
Mom and Dad Money – The Simple, Effective Approach to Investing (Part 4): Implementing Your Investment Plan
The College Investor – Reasons Why Investors Fail…and What To Do About It
Money Beagle - Home Improvements That Don’t Break The Bank
The Frugal Farmer – Why We Blew a Hole in Our Entertainment Budget this Month
Plunged in Debt – Excuses Are Just Going to Hurt You
Wealth Informatics - Closing costs explained: What costs are involved other than the mortgage?
Canadian Budget Binder – The Grocery Game Challenge May 27-June 2, 2013 #4:Shopping Hungry
Don’t Quit Your Dayjob – Personal Finance 101

And that’s it. Have a wondering week!

Welcome back to the Ultimate Budget Series. If you haven’t have a chance to check out the rest of the series, here’s what we’ve got so far:

1. Introduction
2. Income

Today we’re going to talk about one of the most debated and awesome line items in the budget: Tithing! Now, I know this is a hot topic for some, and for others it doesn’t even matter. But the aim of this series is to go through the most common budget items in detail, and tithing is definitely one of them. And as a tithing Christian myself, I have some experience in this area, and would like to break it down so that we are all extremely clear on what tithing is, what it isn’t, why it happens, and how to rock this line item in the budget. So let’s get to it!

Quick disclaimer: For those of you who are not Christians, thanks for reading this post. I don’t want to alienate anyone here, but just wanted to explain the idea of Christian tithing and how it fits into the monthly budget. I appreciate you stopping by

Category Description

The word “Tithe” literally means “one-tenth”, and in most modern cases is in reference to giving one-tenth of your income to your local church. Christians specifically use this term a lot to describe their giving to their local church, though they might not be giving 1/10th of their income. This money is used to support the church ministry, including employment of the pastor and other church staff.

How Much You Should Budget?

This is the fun one. There are two answers to this question. The obvious, simple one, and the much more complicated one. So let’s start with the easy one.

1. You can give 10% of your gross income. Why gross income, well, because your local church should get your money before the government And that’s it.
2. You can give what you feel led to give. Told you this one would be more complicated. This one stems from the change in religious practices when Jesus came into the picture. He wasn’t concerned with whether people were following the “law” per se, but with their hearts. If they gave but their hearts weren’t in it, that wasn’t good, so he called out the religious folk in Matthew 23:23. Following that, Christians are called to follow what the book of 2nd Corinthians calls being a “cheerful giver”. So no specific rules on amounts, but clear direction on your attitude. Those of us who are Christians are called to give to the local church to support the ministry, but the amount and timing is up to you and your conscience. This is the route we follow, and sometimes it’s 10%, sometimes it’s different.

Common Ways People Blow This Category

The excuse of “we can’t afford it”. Tithing is seen as the last thing in the budget, and the first to disappear when unexpected expenses come up. I think the most common way that this category is blown is by not writing it into the budget for every time you get paid. If you don’t do it right away, this money could get absorbed into other daily spending, and not be there when you go to write the check.

Best Ways To Rock This Category

As Christians, we are called to give, though the amount does not matter as much as your attitude. Once you put together your monthly budget, you should have a good idea of what your necessities are, and can set your tithing amount based on your personal convictions. Pray about it, write down a number, and stick to it. Heck, you can even set up an automatic payments at many churches these days, so the day after you get paid, the tithe goes out.

Whatever Else I Feel Like Writing

Tithing is commonplace in many households, and for those that do tithe, or want to, I hope you can work it into your budget as one of the most important items, not one of the least. If we see ourselves as stewards of God’s money, then we should have no problem giving back to the ministry of the church. For those who don’t have the means or barely make enough to get by, then your convictions may lead you to stop tithing until you can sort out your finances and get back on your feet. That’s totally fine as well. Remember, God cares about your heart more than your wallet, but many times your heart is reflected in how you use your wallet.

Comments: Do you tithe to your local church? How is it going? Do you stay strict on the 10% rule? I’d love to hear your take on tithing

Hey all you beautiful people out there. I hope you don’t have any plans this evening, because I’ve got an event for you to attend. So snuggle up on the couch, grab a bowl of popcorn, and enjoy watching my face ALL UP ON YOUR INTERNETS!

I’ve been invited to a fun discussion on http://live.huffingtonpost.com to talk about how I WASTED OVER $100,000 in less than 3 years. Yes, I get to recap my idiocy with an insane amount of cash, and relive the shame! OH THE JOY!

But seriously, I’m pretty excited about this, and am excited to tell my story so that others can mock me, but also learn from my mistakes. I’ve learned some hard life lessons after having a ton of money, then going broke and getting into debt. I hope I can inspire others to use their money more wisely, whether it be an inheritance or just their day job income.

So, if you’re not busy, come check out the segment, and be sure to mock me and my haircut on twitter (@iHeartBudgets) the entire time

Update: Below is the video of the segment. Of course, I have some audio issues (NEWB!), but it all worked out and was pretty fun.

Isn’t personal finance exciting? I know, I know, it really is, and sometimes I can hardly contain myself. On Friday, I wrote a fun little piece called “Question Of The Week: Should I Pay Down My Student Loans ?“, and I got some great responses and answers from my awesome readers. As I was responding to the various comments and suggestion, I saw a common thread weave throughout, which was to obviously “PAY DOWN THE FLIPPIN’ LOAN!” The other one was a bit more interesting, and I’d like to explore it a bit further.

Why Do I Have So Much Cash Saved Up?

I got a few responses from readers asking why I have so much money saved up when I am still in debt and paying 6% interest on that debt. It’s a fair question, and I think Emily from Evolving PF had a response sums up the concerns of those readers the best: “Wait wait wait are you saying $6,100 is a SMALL emergency fund? While you’re in debt? And have other cash and accessible investments? I must have been listening to too much Dave Ramsey because I have no idea why you are keeping so much cash around while you still have these student loans!”

Now, if you’re not familiar with the Dave Ramsey 7 steps to financial freedom, here they are:

1. Save up a $1,000 emergency fund
2. Pay off ALL consumer debt
3. Save up 3 – 6 months’ expenses emergency fund
4. Invest 15% gross pay into retirement accounts
5. Max out college fund accounts for kids
6. Pay off mortgage early
7. Give generously, live freely

That’s sort of a paraphrase, but you get the idea. Based on this plan, Emily is correct in saying that $6,100 is FAR TOO MUCH cash money to have on hand doing NOTHING when I am paying 6% interest on my $13,700 in student loans. Not only that, but I have another $3,000 just sitting there, waiting to pay on the loans. But, before I can tell you why $6,100 isn’t very much, I have to tell you WHY I have an emergency fund, and why I think $1,000 is totally inadequate for someone in my situation.

Why Do I Have An Emergency Fund?

When Michelle and I first got married, we were ready to kick butt. And we did, because we’re awesome like that. We paid off a bunch of debt while earning only $14 an hour, and were on our way to becoming debt free. We redirected our priorities, bought a house, had a kid, and my wife is now a stay-at-home mother to our sweet boy. That was a lot of change in just 3 years, and being the conservative saver that I am, I put away as much cash as possible to make sure we were covered in case of emergency.

Now, we’re on a tight budget, but are getting by and enjoying life. We keep it frugal, scoring awesome deals where we can, keep our food budget low, and don’t have many luxuries outside of our home. Even with all of that, if I ever lost my job, things would come to a screeching halt, and suddenly we’d have a HUGE emergency on our hands. $1,000 would not last long, and we’d have to stop paying our mortgage, among other things, and would end up in a tough place VERY QUICKLY! I like to have a MINIMUM 3 month’s saved up, and that $6,100 doesn’t even cover it, so I would say that our emergency fund is SMALL for someone in my situation.

In the Dave Ramsey plan above (which I do like a LOT), he assumes you save your emergency fund, your pay off your debt, you save 3- 6 months’ expenses, THEN you buy a home. It’s not listed there, but having listened to his radio show a TON back in the day, he would always state this to people looking to buy a home. Since the 3 – 6 month emergency fund comes BEFORE the house, I’d say it is a REQUIREMENT to have when you are a homeowner, especially in a single-income household! Job loss or anything else cutting off your income for a few months at a time would absolutely CRUSH you, causing you to borrow or just stop making payments to get by.

What Am I Going To Do?

So, we’ve establish that I have a $6,100 emergency fund in cash, and another $11,000 in a Roth IRA (that I DON’T want to touch). I also have $3,000 in a savings account leftover from tax season earnings that I COULD throw at the student loans. Also, I will be selling a car soon for another $2,000 (this is a new development). But, for those of you that didn’t read my post yesterday, I also dropped this amazing bombshell:

Yup!

So, now what? Well, here’s what I am going to do. Today, I am going to send $3,000 toward my highest interest loans (6.8%). Done and done! Next, I am going to sell the car and put $2,000 into an account for Baby #2! WOOHOO! That is for out-of-pocket medical and other baby expenses (we paid a bit less than this last time, but just in case). Then I am going to keep rocking my budget, my side hustles, and look for any extra money each month to throw at these loans. I set a VERY aggressive goal at the beginning of the year to pay off the loans, and I still want to hit it. Sure, I need to find hundreds of extra dollars each month to make this happen, but I am motivated, and thanks to ya’ll, I’m taking a HUGE chunk out of these dang loans RIGHT NOW! So thank you, and look for updates as I tackle these dang loans to the ground. They used to look like a mountain, and now are looking like a day hike. Now, let’s see how well I can plow through the rest of it!

Edit: Quick update for everyone that’s curious. I made the payment. $3,000 will VANISH from my checking account today or tomorrow. WOOOHOOO!!!

Phew! I did it!

Comments: So, what do you think? Is my emergency fund too big, just right, or too small? Do you think I should be dropping the $3,000 on the loan today? Welp, too late on that one, lol! For you homeowners out there, how big is your emergency fund? Are you still in debt? I’d love to hear your stories and why your fund is the size that you have it at. Plus, does anyone know if baseball cards count as emergency savings? I’ve got over 8,000 sitting in the garage. Maybe I’m richer that I think??

Join The Fun

Here’s your weekly chance to subscribe to iHeartBudgets by email. You can also subscribe via RSS, follow me on Twitter, or “like” me on Facebook! SO MANY WAYS TO STALK ME! I’ll make sure to keep the content fresh, informative, educational, and entertaining!

Giveaways

Only one more week to enter for your chance to win a SWEET 50″ LED Samsung TV!! If you want to win, go check it out here

What Am I doing?

What a week! As I mentioned a while ago, Michelle and I sat down and wrote out our spring “To-Do” list so we could tackle it 1 project at a time. Well, we ended up writing down 36 projects that we had to get done in the next 2 months! YIKES! But since we LOVE taking care of our home and fixing things, we have been tackling the list each weekend, and then totally forgetting to cross off the projects we had completed, getting distracted and starting new projects, and generally have a rousing good time! BUT, I’ve pulled out the old list to see how far we’ve come, and realized we’ve only crossed off 8 projects!

1. Replace timing belt/water pump on 4runner
2. Replace Radiator/hoses/other belts on 4runner
3. Replace Brake Master Cylinder on Civic
4. Rip out front yard bushes
5. Trim up remaining front yard bushes
6. Transplant boxwoods to patio area
7. Finish fence trim
8. Get rid of old fence wood/stumps/etc.

Done and done! Will looks MUCH better once the boxwoods grow in a bit.

Well, it’s a good start, and we’ve still got until July 3rd to finish the rest. The bummer is that a few of our weekends are already taken, so we’ve probably only got 3 weekends to take care of the rest of the list. We’re going to focus on the yard stuff so we can throw an epic 4th of July party, and enjoy the outdoors. The car stuff isn’t urgent, but I have the parts for the rest of it. As for the indoors, we need to finish our office project as part of our “Redecorate for Zero Dollars” series that has been on hold for like 5 months because of taxes and other stuff!

Hoping to sell the Civic soon to bulk up our savings again, but as some people have stated, maybe our savings is already too big? I’ll be writing a post on this for Tuesday, but I have gotten some interesting comments on my “Question of the Week: Should I Pay Down My Student Loans?” post. I still haven’t made the payment as of writing this post, but most likely will. I’ll address it more on Tuesday, but I’ll just leave you all with the main reason I haven’t pulled the trigger yet:

Yup!

How was YOUR week?

Mentions:

There are other, very cool blogs who have been generous enough to mention iHeartBudgets on their sites.  Anyone else who loves me as much as these people do, feel free to mention me as well to join the elite list below!

Slowly But Surely Katie and Debt Roundup

Woohoo! Thanks for sharing my junk!

What’ I’ve Been Reading:

Every week, I do some reading on the web. I come across articles that are entertaining, educational, or just plain awesome. I think the readers of iHeartBudgets will enjoy these articles as well.

My Alternate Life – Vacations While in Debt – I love this post, because technically, I have been taking vacations while in debt for a while now. But, I have the credit card companies pay for them

Club Thrifty – Marriage and Money: How We Make it Work – Super BORING post on marriage and money. Only read this if you want to NEVER fight about money again.

Debt Roundup – Out of Sight, Out of Mind: Debt Doesn’t Play That Game – Great post on how you can’t just ignore debt, but need to deal with is face to face.

Modest Money - Blogging Your Way to Wealth – I love Jeremy’s blogging tips series. He has a guest post from a blogger who’s making a living online and living in Thailand. Because, why the heck not!

Frugal Rules – Why I’ll Always be a Fan of the Dollar Store – Loved this post, as we used to frequent the dollar store a LOT our first year of marriage.

Mr. Money Mustache – Do We Need to Fire the Entire Financial Advice Industry? – All I have to day is “Thank you so much for writing this post!”

Average Joe’s Money Blog – Why People REALLY Go To College – Stacking Benjamins Podcast Episode #2 – Joe’s new podcast! Check it out.

Money, Life and More – Americans Think You Need How Much Money To Get By?!? – How much do YOU need to get by?

Budget Blonde – THE HISTORY OF BUDGET BLONDE + AN ANNOUNCEMENT! – She’s quitting her JOB to make a living online. Pretty nuts, and awesome!

Budget and the Beach -

Plunged in Debt – My Cell Phone Negotiations – Proof that you can negotiate a deal on almost ANYTHING!

Eyes on the Dollar – 9 Mistakes I’ve Made Flipping Houses – Super AWESOME tips on house flipping.

Canadian Budget Binder – Crispy Fresh Spring Rolls – Here’s the deal. Mr. CBB has it all. He cooks, budgets, and it pretty much the friendliest guy on the internet. And these pictures make me drool. Need I say more?

Consumerism Commentary – Anne and Matt, April 2013 Net Worth – I get to contribute to the awesome series tracking various people’s net worth. Anne and Matt are ROCKING IT, but the job situation kinda sucks.

And that’s it. Have a wondering week!

Happy Friday everyone! I hope you are all having a wonderful week, and ready to enjoy a sweet 3-day weekend in remembrance of the women and men who have served to protect our freedoms. Like My freedom to hope on the internet and ask everyone a question! And my big question of the week is………..drumroll…….

Well, actually, you can just read it in the title of this post. But for dramatic effect….the question is…..

Should I Pay Down My Student Loans?

Yes? No? Maybe? You don’t care?…Oh, you want more information? Ok, sure.

Our Student Loan Balance Is $13,791

Edit: Just FYI, the interest rate is an average of ~ 6%

Now, remember how I set a goal of paying off my student loans in 2013? Yea, me neither, but apparently I wrote it on the internet. Well, life circumstances and barely making enough to pay the bills has kept me from rocking the student loan payoff like I wanted to. It’s already May, and I had hoped to have already paid down about $5,000 on the loans, but no dice.

BUT!

I have an opportunity to make a decent sized payment RIGHT NOW! I could drop over $3,000 on principal with the click of a button (well, several buttons, some typing, and possibly a donut)! But I am having trouble pulling the trigger on this decision. Can you help me make the decision? Here’s why I can’t seem to say “YES!” to the student loan crushing grenade I want to drop on Sallie Mae:

Our Current Emergency Fund Is $6,100

Now, before you start throwing rocks at me because I’m a blasphemous financial writer, let me elaborate, because honestly, I’m comfortable with the number above. Here’s why:

I contributed $11,000 total to my Roth IRA when I was 18 & 19 years of age. I am now 27 (UGH! So old!). This means the $11,000 has been in there for over 5 years. And, according to the IRS Publication 590, I can withdraw any amount from my Roth IRA that is not “earnings” after having the account open for over 5 years. So, I can add the $11,000 to the $6,000 listed above as my emergency fund. Now my emergency fund is $17,100! WOOHOO! But wait, there’s more!

As I’ve probably said a BAJILLION TIMES, being a month ahead on your budget is the BEST POSSIBLE THING you can do for yourself financially. We’ve been here for over 4 years now, and we don’t stress about our cash flow. And one other perk of being a month ahead means that it can also act as an emergency fund buffer! So you can take the $17,100 and tack on another month to our emergency savings, which gives us a healthy amount as a backup in case of a serious emergency! We’ve also got our savings buckets which we could raid at any time, because haircuts and vacations can wait when we’re in emergency mode. We would also switch over to our emergency budget, which would free up additional cash flow.

Suffice to say, we’ve got our emergency situations covered. So why, then, can I not pull the trigger on this extra $3,000 (not included in the savings above) to start laying the smack down on our student loan?!

Well, because it’s $3,000 less cushion in case we need it. “But didn’t you just write a few hundred words above on why you DON’T need that extra money?” Why yes, yes I did. But I’d rather not have to dip into my Roth IRA to bail myself out. “But haven’t you been able to handle pretty much any inconvenience that has come your way so far?” Yes, that is also true. “So why are you cowering like a dog with your tail between your legs, hoarding your money for no good reason, letting someone suck interest from your account every month, and keeping your student loans protected like it was your Bieber t-shirt collection? Don’t be a spineless hoarder Jake!”

Wow. That was kinda harsh, guys. Geez.

Readers, What Should I Do?

Ok, now that you’re “In the know”, what do you think I should do? Should I pull the trigger? Or should wait and see how our cash flow situation does over the next few months? What would YOU do in this situation?

Thanks for all the helpful encouragement in advance!

Ahh, income. The one thing that no one has enough of, but everyone has. If you don’t have any income, hang up the internet right now, hop on your bike and go find a JOB! But for those of us who have some sort of income, we’ve got to do something with it. And that’s why you’re here. As the slogan goes, “Just because you make money, doesn’t mean you know what to do with it!”

Today I want to cover how to identify your income, track your income, and different ways that the “income” category fit into your budget. The focus will NOT be on how to make more money (I’ve already got a post on that), but on how to make do with the income you DO have. Too many people believe the answer to their financial problems is MORE MONEY! I call CRAP on that philosophy, and firmly believe that knowing what to do with the money you have is MUCH more beneficial in the short AND long term. So let’s get to it!

Category Description

Income is ANY money that you own during the month. This includes (but is not limited to) disability, insurance payments, investment dividends, job wages, allowance, inheritance, and any other monies that become your possession in a given month.

How Much You Should Budget?

There are a few ways to approach this. Each method will vary depending on your payment schedule, the type of work you do, and if it is a regular or a one-time payment. Let’s take a look at a few examples:

1. The Month Ahead Budget. Michelle and I have been one month ahead on our income since just after we got married. It’s a simple concept, but one that I credit as the most stress-reducing thing you could EVER do with your money. The income category in your budget would be one amount, paid on the 1st of the month. Think of it as living on a fixed income. You set your monthly income needed, transfer that amount over to your main checking account each month, and any extra goes to savings. Absolute best way to budget.
2. The Bi-Weekly Budget. Many people are on this budget for the sole reason that their employer pays out bi-weekly. Not sure who came up with this, but it seems to have stuck, and 90% of the jobs I’ve had use this pay structure. It does make it difficult to budget, as you get paid on different days each month, and you need to adjust accordingly. Your bills are usually due the SAME day each month, so you are always aiming at a moving target. For this type of budget, I usually set up two columns, one for paycheck #1 and the bills that fall under those dates, and one for paycheck #2 and the bills that fall under the second half. It gets difficult when you don’t have much margin, so again, I recommend doing everything in your power to save money and be one month ahead on your budget.
3. Irregular Income. This is common for those who are self-employed or working commission-based jobs. You may get paid a TON on the first week of the month, or get no cash money until week 4. The key to budgeting this type of income is ALWAYS having a buffer. Again (yep, here it comes) getting a month ahead will alleviate a LOT of headache if you’re in this situation, and, depending on the job, I recommend being two months ahead! For these situations, I recommend only budgeting on the bare minimum amount of income you expect to receive during the month. Anything on top of that is extra savings in your buffer, and will probably be used up the following month.
4. Other Income. When you have investment dividends, bonuses, insurance payouts, side job income, and any other source on income during the month, I try to NOT count that money as part of your regular monthly budget. You can add it in to track in and use it, but even if it’s a regular payment, don’t use it to set up your budget (I know some people HAVE to live off their “other” payments, but in that case, refer to the “Month Ahead” budget above). These payments should be used to Turbo-charge your goals, such as debt repayment, retirement savings, replacement vehicle, vacation, etc. That’s it. If you can live without this extra money, then act like it isn’t there when putting together your monthly budget

Common Ways People Blow This Category

Laziness. There, I said it. Most reading this blog do not fall into this category, but laziness can definitely kill your income, and leave you wondering why you “can’t ever get ahead”. Now, I’m not saying I’m the ideal example, but one thing I can tell you that I am not, is lazy. I work 2.5 jobs to provide for my family, along with yard, house and car maintenance, to ensure that we can keep and enjoy what we have been blessed with.

On the opposite end, there are those that won’t lift a finger to work more than 12 hours a week because they’ve been able to survive in their parent’s basement for the past 33 years, so why try? Or there are those who make “enough”, hang their hat at their mediocre job, and do just enough to get by. Work is work, we all get that. But to not try because you don’t care, that is what makes a bad employee, and is also what gets you passed up for promotion and management opportunities.

Best Ways To Increase Income

If you want your income to rock harder than AC/DC on top of Mt. Rushmore in a thunderstorm, then get yourself motivated, excel in your position, ask for more responsibility, and then ask for more money! It really is that simple (notice I said “simple”, not “easy”). I have seen several friends and family move their way up through good ole’ fashioned gumption and Git-R-Done-ness (totally a real word. Look it up). The one thing they all had in common was a drive to excel, and under that were some AWESOME goals like starting a family, getting a house, etc. Find out what motivates you, set some BIG, FAT goals, and then work like you actually want to hit those goals someday. If you’ve done everything you can and still don’t have enough income, you can find other ways to strike it rich! Or check out how we survived on very little income.

Whatever Else I Feel Like Writing

I’m going to go a little bit Mr. Money Mustache on everyone here. The American Dream is alive and well, but so is the “exploding volcano of wastefulness” that is the middle class life. You would think everyone in America would be hiring out a financial plumber the way their wallets are leaking, but the problem is that all most don’t notice the leak, so you never fix it. You have gotten used to the way things are, life is comfortable, and cutting your cable, selling your new car, and living frugally would be too intrusive to your cocoon of a lifestyle.

Why am I saying this? Because you don’t need as much money as you think! If you ask most people how much money they need, it’s always a little bit or a lotta bit more than they have now. But the truth is, what you have now is what you have, and I bet you can manage it better than you currently are. You can constantly optimize your spending, making better decisions each week, and stop blowing money on stuff you don’t really care about. So when looking at your income at the top of your budget each month, don’t sob uncontrollably like someone just broke your Justin Bieber CD. Instead, look at it with confidence, plan to use it wisely, and challenge yourself each month to kick even more booty than last month. You are effectively giving yourself a raise by getting on a budget, so don’t worry too much about increasing income, and start focusing on being a great money manager with you already have.

Comments: Are you satisfied with your income? If not, what are you doing to increase it? Also, how do you budget your income before the month begins? Are you a month ahead, or still living paycheck to paycheck? This is the first of a very LONG series, so I would LOVE to hear some feedback on what you think, and how I can help more with this series. Thanks for reading!