Food Shopping: The Blindspot in our Spending Plan

Woman pushing a shopping cart down a supermarket isleYour relationship with food is probably pretty complex. In addition to sustenance, you may use food for comfort, gathering with others, distraction or pleasure. When you really commit to tracking your food expenses as part of putting together a spending and savings plan, you realize food can be a complicated part of your financial life too. While meals are of course a necessity, take a look at your food-buying habits. Odds are that there’s room to save.

Eliminating “extra” expenses like dining out or buying pricey steaks is a good place to start. But also keep in mind that a successful food-purchasing plan isn’t just about cutting things out. It’s also about understanding your habits.

Going out to lunch at work
You may grab “a quick bite” at work because it’s easy. But it might actually take you less time at home to put together the same meal. Then you get to spend more of your lunch period at work relaxing, going for a walk or reading a book. Or you could just spend the time thinking about the hundreds of dollars you will save this year by brown-bagging.

Convenience store or check-out aisle buys
If you actually look at the prices, you realize that the mark-ups on the quick-grab items near store cash registers are incredibly high. But that’s just the thing. Stores realize you don’t stop to examine and consider prices in those situations. If you find yourself reaching for a pack of gum or some candy as you are about to check out, instead, make a commitment to stock up ahead of time and keep these items in your car or your purse or your desk. By buying them online or at a bulk retailer, you could pocket a bunch of extra dough.

Fast food
The fast burger or taco for $0.99 sounds like the perfect recipe for our modern sensibilities; we want food in a hurry and we don’t want to pay a lot. While the speed of delivery may be enticing, the end price may not be all that great. Consider: how many times have you gone to a fast food restaurant and ordered just one thing? The advertised item may be under a dollar, but when you add on a drink and fries or another side order, the costs add up.

Shopping when you are hungry
It’s silly to think that you are always going to shop on a full stomach. So instead of feeling like you need to plan all your grocery shopping excursions in tandem with meals, just be aware of why you are putting each item into your cart. Are you reaching for that plastic canister of candy rope because it’s a part of your spending plan or because your blood sugar is a little low?

“High end” grocery stores
You may like to go to the more expensive grocery in your area because they have a few specialty items that you can’t find at other stores. That is certainly understandable. But make sure those items aren’t available for a lower price at your regular grocery first. They may be tucked away in a place you hadn’t thought to look. Also, even though you might go to the more expensive grocery store for a few specialty items, doesn’t mean you have to pay a higher price on the regular items; try to just purchase the specialty items there.

Buying prepared items
Any financial coach worth their salt will tell you that cooking your own meals instead of buying prepared meals saves you mounds of cash. But also think about the fruits and vegetables you buy. Fruit medleys or even individual chopped fruit packages can cost much, much more than just buying the fruit in its whole form. Same goes for salad mixes. Is it really worth the extra money to have someone cut up your fruit or mix up some greens for you?

Failing to plan
If you are one of those people who wander around the grocery store until they find some things that look yummy, you are probably paying more than the list makers of the world. In a perfect world you would plan out your meals for a couple weeks and create a shopping list based on that. But at the very least, try to formulate a list of necessities. Allow yourself one impulse buy if that helps you stick to the plan. Remember that “if you fail to plan, you plan to fail”.

Meat-centric meals
If you plan your dining experience with meat as the centerpiece, you are not alone. It’s a common tactic. But it doesn’t have to be an all-the-time way of looking at meal construction. By sometimes substituting in tofu, beans or legumes as your protein source, you can save significantly at checkout time.

Brand name insistence
There are certain consumer items for which you can make an argument that brand name goods are a better choice. But that isn’t generally the case with food. Lima beans are lima beans, whether the name on the can is the one you heard on TV or it is completely new to you.

Making money-smart choices about your food purchases doesn’t have to mean denying yourself the things you love. Instead, think of using these tips to get all the food you like, while giving yourself extra money to spend on things you enjoy.

Used with Permission. Published by BALANCE Includes copyrighted material of BALANCE.

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Smart Ways to Save on College Textbooks

Don’t overpay for your next semester’s college textbooks
piggy bank next to a stack of textbooksPurchasing textbooks is one of the highest recurring costs of attending college, with prices consistently rising. Consumer Reports contributor Beth Braverman cites a report from the Student Public Interest Research Group published in 2016, which showed a 78 percent increase in the cost of college textbooks over the last 10 years.

However, there are a few good ways to avoid the high expense at the start of each semester.

Avoid the bookstore
The first place that a student would be tempted to go for their books is certainly the university bookstore. But from a financial point of view, consumer expert Clark Howard says that the bookstore is the last place they should go, as even used books are typically sold at a high markup thanks to the store’s convenience.

Clark Howard does, however, point out that there is an exception if the professor requires the use of a custom-printed and -bound companion book for their class, which won’t be available anywhere else.

Shop around
As with many other items, the best way to find the best price on college textbooks is to do research. According to Braverman, most often the best price for a new book can be found online, although there are other options to consider. If a book won’t be needed after the end of the class and isn’t likely to be marked or damaged, then renting the book may be a good option. Alternatively, e-books are often offered at prices similar to paperback copies, though are often limited in the number of devices they can be accessed on.

Braverman also encourages buyers to consider what may happen once the class ends. If a new edition will be coming next year, then the value of the current version will drop considerably when it comes time to sell it.

Wait to buy
Clark Howard advises students to wait until after the first class to buy a book, stating: “Some college professors are just as fed up with the rising cost of textbooks as their students.” Some professors may only be using certain parts of the text and are willing to offer other, less expensive options.

This may seem to be a risk, but typically first days in class are devoted to syllabi and course expectations, which would give the student information which may be crucial to the textbook shopping problem. For example, it is possible that an older edition of the text could be perfectly sufficient for the class, and available for a much-discounted price.

Check the library
Finally, both Clark Howard and Beth Braverman agree on one other option: checking to see if the required book is available at the library. This does have one caveat, though—this method will probably only work for more common texts. Clark Howard adds that this method favors texts for liberal arts courses, particularly literature classes that use classic novels in their course materials. Beyond that, Braverman suggests that students could make copies of important pages and chapters, and if the book is unavailable, the student could ask the professor to put one on reserve in the library for that purpose.

Using this variety of methods, the steep recurring cost of college textbooks can be greatly reduced and, in some cases, eliminated entirely.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

When to Use Credit (and When to Avoid It)

person holding credit card and using a laptopIf used carefully, credit can be a helpful financial tool. For example, using credit to purchase a home now, rather than trying to save up the whole purchase price, makes financial sense. The home provides a place to live that will perhaps increase in value and the mortgage interest offers a tax deduction. Credit may also help you deal promptly with costly emergencies.

Many consumers turn to credit when faced with unexpected home or auto repairs, as well as medical emergencies. And credit offers convenience, enabling you to rent a car or hotel room or buy airline tickets over the phone or online. In many situations, credit offers peace of mind; there is no need to carry large amounts of cash when shopping or traveling.

Despite all the advantages and conveniences credit can provide, there are some pitfalls associated with credit use. Credit can be expensive. Interest rates (often ranging from 14% to 22%), finance charges, annual fees, and penalties can dramatically increase the cost of any purchase made on credit. Then, there is a tendency to overspend on credit. It is much easier to spend more than you can afford when all you have to do is pull out the plastic. Over-extension gets thousands of consumers into financial trouble every year.

It is possible to have the best of both worlds, though. Designing a realistic spending and savings plan so you are aware of how much credit you can afford, as well as comparing the cost of credit and shopping around for the best deals, will help you avoid credit trouble.

Here are a few more tips:
Keep your charge receipts in an envelope with a running total on the outside. If the total exceeds an amount you consider appropriate, you know it’s time to curtail your spending.
Save monthly for expenses such as auto maintenance, holiday gifts, and the kids’ school clothes. That way you don’t need to use credit to cover these expenses, or, if you do charge them, you can pay the balance in full when the bill arrives.
Monitor interest rates. Choose lower-rate financing options whenever possible.
Limit the number of open credit card accounts you have. You don’t need more than one or two credit cards, and it’s much easier to keep track of your total outstanding debt with just a couple of accounts.

How Much Debt Is OK?
As a rule, no more than 15% of your net (take home) income should be committed to consumer debt payments each month. Another way to determine how much debt is appropriate for you to carry is to first complete a family budget. The amount remaining after you deduct your monthly savings and living expenses from your net income is the most you should have going to debt repayment. If you’re sending more than that to your creditors each month, you may want to consider credit coaching to help you reduce your debt load.

Shopping for Credit
When shopping for a credit card, you should first decide how you plan to use it so you can compare the features that are important for you. It is important to understand the difference between a charge card and a credit card. The balance on a charge card must be paid in full every month. Paying only a portion of the bill will cause your account to be delinquent. A credit card allows you to carry a balance for as long as you want, provided you make at least the minimum monthly payment due.

If you will pay your credit card bill off every month, a low annual fee is important. If you usually carry a balance, look for the lowest interest rate. Shop for a grace period, the amount of time after your purchase during which finance charges are not assessed. Some banks and finance companies give you up to 30 “free” days, but it has to be at least 21 days. However, interest starts accruing immediately on cash advances; there is no grace period and the interest rate is higher than that applied to regular purchases.

Depending on your payment and credit use habits, you may also be affected by late and, possibly, over-limit fees.

If you have no credit or a bad credit history, you may be able to obtain a secured credit card. A secured card works just like a regular credit card except that you must leave a deposit—usually between $250 and $500—with the issuing bank as collateral. If you default on your payments, the bank takes the money owed out of your deposit.

The interest rate and annual fee on a secured card are often a bit higher than on a regular card. But a secured card can offer you the convenience of a regular credit card and the opportunity to improve your credit record. When comparing cards, try to find one that does not charge an application or processing fee and confirm with the issuing bank that they will report your payment performance to at least one of the three major credit reporting bureaus, Experian, Trans Union, and Equifax. Make the most of this chance to build an unblemished credit report!

Used with Permission. Published by BALANCE Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Cut These Costs TODAY

Man buying groceriesHave you ever unexpectedly found out you’re quickly going to have less income? It’s enough to throw you into a panic. But the best way to get through hard times is to take a few deep breaths and put a plan together. Check out these common targets for quick and effective expense cuts.

Food
You might find it obvious that evenings dining out at fancy restaurants probably aren’t the best idea when experiencing a budget crunch. But think about your groceries too. Consider avoiding the higher-priced stores and stocking up on the basics at the more reasonably priced spots. You might find that cooking at home and taking your lunch to work saves you lots of money and ends up being healthier too.

Cable/Movies/Rentals
If you’re like most people, your visual entertainment comes from multiple sources. You may watch movies on cable, in the theater, via rental or online. In crisis situations, it’s best to focus on watching movies at home and using one particular way to do it. In other words, if you have both Netflix and premium movie channels, it’s probably time to go with one or the other.

Phone plans
It’s nice to use a smart phone to be able to look up information on the go, but you could probably make do without the data plan if you had to. Did you know that you could also be on a prepaid smart phone plan? Call your service provider to ask them to perform an analysis on which plan is best for you. You might be paying for more than you actually need. Also consider eliminating your house phone if you have one.

Gym
It’s important to get some stress-relieving exercise during this trying time, but there’s no reason why you should have to spend money to do it. Brainstorm ways to be active without having to fork over a big chunk of your paycheck. The main thing is to just get moving!

Shopping as entertainment
One activity that could put you in the trouble zone is shopping for fun or to ease tension. “I won’t buy anything, I’ll just browse” too often can lead you down the path of unnecessary spending. Eliminate leisure shopping or other activities that put you in temptation.

Gas
Is it an option to work from home more? Can you carpool or combine your errands into fewer trips? If your family has multiple vehicles, can you sell one and share the remaining?

Insurance
With the ease of using the Internet to compare rates, the insurance business is much more competitive than it used to be. Shop around for the best deals on any type of insurance you have—auto, home, life, etc. Check into bundling these with one company to save even more. How is your credit score? This might affect the cost of certain insurances. Also be sure to ask about discounts you might apply for, and the option of raising your deductible in exchange for a lower monthly payment.

Utilities
Think of ways to stay warm or cool more efficiently. Put on more layers in the colder months and spend more time outside during the warmer times. Be conscious of turning everything off and even unplugging electrical items when you leave a room.

Habitual items
When you have a comfortable financial situation, it’s easy to buy coffee, cigarettes, alcohol and convenience store snacks without thinking too much about it. But in these tighter times, think about what you are really getting out of these purchases and if there are expenses that are more important.

Taxes
If you have more money taken out of each of your paychecks than is necessary in order to get a large income tax refund check in the spring, you are over-paying the government each month. Cut this expense by using the IRS withholding calculator to determine the appropriate amount to have withheld from each paycheck.

None of these cost-cutting measures alone is guaranteed to immediately solve all cash flow issues, but in concert they can potentially save you hundreds of dollars per month.

Used with Permission. Published by BALANCE Includes copyrighted material of BALANCE.

How Is Your Credit Score Determined?

The importance of understanding what influences your credit score
When it comes to buying a house, purchasing a new vehicle or applying for a credit card, your credit score is bound to come into play. As an influential factor in a financial institute’s decision whether to loan you money or not, your success often rests on this mysterious number. What is this important score and how is it determined? Learning this will help you take steps to raising your score over time.

Your credit score is calculated by a combination of five different factors, each contributing a different ratio of influence. According to Stacy Smith, Senior Publish Education Specialist for Experian, it involves your payment history, utilization, length of credit history, recent activity and overall capacity.

Payment history
Certainly the most persuasive factor in determining your current credit score, your payment history tells creditors about your likelihood of paying back any loans for which you’re currently applying. Amy Fontinelle, personal financial expert writing for Investopedia, explains that consistently paying your credit card, utility bills, student loan and other bills on time month after month will produce a higher credit score that reflects your financial reliability. On the other hand, a track record of late or below-minimum payments will bring your credit score down.

Utilization
Having a credit card and consistently using it will be reflected positively on your credit score over time, but using it too much could actually harm it. According to Dana Dratch, contributor at Bankrate.com, it’s important to keep your balance below 30 percent of your limit on every credit card—both individually and total. For example, if you have a $7,500 credit limit, you don’t want the balance to exceed $1,500.

So, if you’re maxing out your credit card every month for the bonus points—even if you’re paying the bill in full each month—that probably won’t look good to creditors who may see you as constantly spending in excess or charging everything to live paycheck to paycheck. If it reaches 30 percent, proactively pay the balance on the account before continuing to charge to it.

Length of credit history
This factor is not as influential as the first two and it covers multiple territories: how long has each account been open? Are all accounts still actively used or are some being neglected? Does the applicant have a variety of accounts—credit cards, auto loans, mortgages etc? This category is tricky because it is improved over time; suddenly opening a variety of accounts and using them religiously will only hurt your score, explains Smith.

Recent activity
While a healthy credit history is important, so is the current state. If you’ve taken on a loan or opened a new line of credit in the last 6 – 12 months and are applying to do so again, you are more likely to struggle with payments than you would be to excel. This is why you should not open multiple credit accounts around the same time, advises Smith.

Overall capacity
To a minor degree, your credit card reflects how much outstanding debt you have and how that impacts your overall financial situation. If you have a low amount of outstanding debt and a healthy, steady income, you don’t have to worry about this being an issue.

How to read your credit score
Your credit score actually consists of three scores calculated by major credit bureaus Equifax, Experian and Transunion. Each number generally ranges between 300 (low end) and 850 (high end). The higher the three-digit number, the healthier your credit is.

If your credit score is lower than you need it to be, worry not. The number is recalculated often, and healthy financial habits will steadily raise it over time.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

The True Value of a College Education

Is higher education worth the cost?
As tuition at universities and both public and private colleges rises, so does student debt—this begs the question: is a college education valuable enough to make it worthwhile?

The second edition of the Gallup-Purdue Index from 2015 found that 50 percent of college graduates surveyed nationwide strongly agreed that college was worth the investment; however, the answers varied based on the type of institution they attended, when they graduated, and how much undergraduate debt they accumulated. But do the statistics support this overall opinion? In general, the answer is yes.

A 2016 study from Jaison R. Abel and Richard Deitz via the National Bureau of Economic Research found that since the Great Recession, only about 9 percent of recent college graduates have begun their careers in a low-skilled service job. Furthermore, Brittany Hackett of the National Association of Student Financial Aid Advisors summarized report findings that about 40 percent of recent college graduates were employed in the two highest-paid tiers of jobs, compared with only 18 percent of those without degrees. Additionally, more than half of those in the workforce without a college degree are working within the lowest paying and skill categories of jobs—double the amount of college-degree holders.

That same study from Abel and Dietz found that even the underemployed college graduates are making more than those without a degree in the same fields. Almost a quarter of them hold positions in fields making more than $55,000 per year, in contrast to the 9.8 percent of workers without a college degree that make the same. Making those numbers even more significant is that 59% percent of student loan borrowers owe less than $20,000 in debt, so the average debt-to-income ratio is very manageable, according to Jason Furman, chairman of the White House’s Council of Economic Advisors.

More research, this time from Georgetown University’s Center on Education and the Workforce, showed that a staggering 97 percent of all 2.9 million “good jobs” (defined as those paying more than $53,000 annually for a full-time, full-year worker) that were added since the economic downturn in 2010 went to college graduates. Significantly, “good jobs” made up nearly half of the total jobs added during that time of recovery. Additionally, researchers Anthony P. Carnevale, Tamara Jayasundera and Artem Gulish also found that middle- and low-wage jobs were much more likely to be filled by workers with some college or an associate degree.

“The numbers are clear: postsecondary education is important for gaining access to job opportunities in the current economy, and job seekers with Bachelor’s degrees or higher have the best odds of securing good jobs,” their report stated.

What’s more, the return on investment increases in the long term. According to researchers at the Federal Reserve Bank of San Francisco, new college graduates begin with earnings only slightly higher than high school graduates–about $5,000 to $6,000 more–but over time the gap increases.

“Higher education is one of the most important investments individuals can make for themselves and for our economy with bachelor’s degree recipients typically earning $500,000 more in present value over their lifetimes compared to high school graduates,” Furman said, solidifying the point.

Despite the studies, reports and evidence, the bottom line, and as much of the above has suggested, is that the true value of a college education is always dependent upon your unique outlook and circumstances.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Useful Apps for Managing Your Expenses

Using your smartphone to be smarter about budgeting
Creating and sticking to a budget is essential if you want to get out of debt and achieve financial security, but it’s easier said than done. The proper amount of money to spend on various expenses can be difficult to calculate, and summoning the willpower required to stay true to those set amounts can prove even harder. Fortunately, there are many apps designed to keep you honest—and in the black. Here are some of the best apps available for managing your finances.

Mint
The most popular app for managing your money is Mint, a free app from Intuit, the company behind TurboTax and QuickBooks. Mint allows users to connect all of their bank and credit card accounts, as well as their monthly bill statements, into one convenient, all-in-one application for managing spending. Bill payment reminders, specific advice based on your unique spending habits and free credit scores are among the other services that Mint has to offer.

YNAB
You Need a Budget, or YNAB for short, doesn’t just document your spending—it seeks to actively improve your purchasing habits and behaviors. For $5 a month or $50 per year, this app is best for those struggling to escape from the burden of debt. In addition to designing a budget that will help you achieve solvency, YNAB also provides helpful advice and community support in the form of an online forum made up of others suffering from the constraints of living paycheck to paycheck.

Level Money
Many consumers get into the bad habit of checking their bank account, seeing a healthy balance and then spending with carefree abandon. But there’s a difference between how much you can spend and how much you should spend, and Level Money is designed to illustrate that divide. This free app factors in essential monthly costs like rent, utilities and grocery bills to show the “spendable” amount of money in your bank account. You can also program it to take into account your saving goals, which helps you better prepare for the future.

Digit
When managing your expenses, it can be hard to remember to save money; fortunately, Digit does it for you. This free app makes an analysis of your spending and income and then automatically takes small amounts from your checking account, often anywhere from $5 to $50, and banks them in an account managed by the company. The app is fee-free and comes with a no-overdraft guarantee, so there is little risk involved. No interest is earned on your savings, since Digit is not a bank, but there is a “Savings Bonus” of five cents for every $100 saved over a three-month period.

Whether you are racked by debt and searching for a way out or simply looking for a convenient way to keep track of expenses and improve your saving habits, there are many free and affordable apps that can have a positive impact on your finances.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.