Frugality isn’t just about saving money—it’s about using your money efficiently. And some methods of saving cash take more time and effort than they’re worth. Worse, some habits actually encourage you to spend more.
“What’s a worthwhile money-saving strategy and what’s not depends largely on your personal circumstances,” personal finance expert Stefanie O’Connell tells mental_floss. “For example, when I was making less than $30,000 a year, I would spend hours hacking costs—couchsurfing, taking public transit, DIY-ing everything. At that time, the extra $5 a day or $20 here and there really did make a significant impact on my financial life, even if it took an extra two hours to get somewhere or get a task done.”
O’Connell says that as she started to earn more money, her time became more valuable. The frugal habits that once worked in her favor no longer made sense. “Before I could meet all my monthly expenses and financial goals, I never dreamed of conveniences like taking a cab to the airport,” she says. “I only began to consider convenience over saving once I could more than meet my monthly expenses and financial goals.”
Your own mileage will vary, too, but we asked a few personal finance experts which money-saving habits generally aren’t worth it.
1. CLIPPING COUPONS
Depending on your method, couponing can be quite a bit of work. “You’ll spend valuable time, attention, and mental bandwidth tracking and organizing your coupons,” Paula Pant of Afford Anything tells mental_floss. “But at best, you’ll save only a small amount of money, and at worst, you’ll wind up buying items you don’t need.”
Pant has a point. Coupons actually encourage consumers to spend more, and they usually succeed in doing so. A 2003 study from NYU [PDF] found that customers actually spent more money on items when they shopped with coupons. According to the study, “When coupons were not clipped, [the households surveyed] were very value conscious and paid an average of $0.51 for soups but when they purchased the category using coupons, their average spending increased to 0.66.”
Personal finance writer Victor Lim has made his own case for resisting the couponing trend: “The thought of spending time searching for coupons, clipping them, and driving around town to score a whole bunch of free toilet paper makes my head spin,” Lim tells mental_floss. “While saving a buck or two is nice, I’d rather focus on bigger and consistent savings.”
2. BUYING SECOND-HAND PRODUCTS
While buying used items can save you money, the risk might in some cases outweigh the reward. Jonas Sickler of ConsumerSafety.org says the most important thing to keep in mind when looking to buy second-hand is to consider the dangers associated with buying certain products—especially baby items like car seats, cribs, and strollers—without knowing the items’ quality or where they came from. “Frequently these items might be recalled, or simply outdated and no longer meet today’s safety standards. They may also be damaged, worn, or missing certain parts that make them unsafe for babies,” Sickler says.
You can look up recalls for all kinds of consumer products, from appliances to children’s products, on Recalls.gov.
3. BARGAIN SHOPPING
It’s fun to hop around garage sales and yard sales—just don’t fool yourself into thinking you’re saving money when do you so, says Pant. “Scavenging from sale to sale consumes hours of your precious free time, locks you into a consumer mentality, and baits you into buying items you don’t need.”
The same goes for outlet shopping. Just because you score a great deal on a bunch of stuff doesn’t mean you’re “saving” money. Before whipping out your wallet, ask yourself whether the items you’re about to purchase are ones you actually need.
4. GOING OUT OF YOUR WAY FOR GAS
“Once or twice a week, a lot of folks will ‘take the long way home’ to fill their gas tanks at an off-brand gas station that usually has the lowest prices in the area,” says Timothy G. Wiedman, a retired Associate Professor of Management & Human Resources at Doane University in Nebraska. Wiedman suggests considering a couple of factors in order to determine whether this practice is worth it.
First, you want to consider the amount of cash you’ll actually save: “If my 3500-pound SUV only gets 16 MPG in city traffic and I’m driving a total of 14 miles out of my way to tank up, is saving 9 cents a gallon when filling a 24-gallon gas tank cost-effective?”
Second, you want to consider the value of your free time. Is it worth the savings? “A lot of folks who consider themselves to be frugal, are actually penny-wise and pound foolish,” Weidman says.
There’s a case to be made for all of these habits. Maybe you like couponing or thrift store shopping—there’s certainly nothing wrong with spending money on things you enjoy. At the same time, you want to be mindful of your money habits, and that means acknowledging the time and effort involved with them.
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Have you ever gone over your budget only to find you’ve overspent on food? With food being the third-highest household expense behind housing and transportation, our food choices have a huge impact on our budget.
Learning how to budget groceries can help you save more to put toward your financial goals. Here are 28 ways to help you learn how to budget groceries.
1. Track current spending
Before you figure out what you should be spending on food, it’s important to figure out what you are spending on food. Keep grocery store receipts to get a realistic picture of your current spending habits. It might help to break down spending by category (via a spreadsheet or on paper), including beverages, produce, etc. Once you’ve done this, you can get an idea of where you need to trim down your grocery bill.
2. Allocate a percentage of your income
How much each household spends on food varies based on income and how many people need to be fed. Consider using our budget calculator if you’re not sure where to start. Try allocating 10% of your income to food as a starting point and then you can increase from there.
3. Avoid eating out
Recent data from the Bureau of Labor Statistics shows a 13% increase in food spending in the U.S. — a jump driven by rising purchases on dining out. Avoiding eating out where possible can help reduce your overall food spending. If you’re actively dating or enjoy restaurants with friends, be sure to factor eating away from home into your food budget — and stick to your limit.
4. Plan your meals
It’s much easier to stick to a budget when you have a plan. Plus, having a purpose for each grocery item you buy may help ensure nothing goes to waste or just sits in your pantry unused. Don’t be afraid of simple salads or meatless Mondays — not every meal has to be a gourmet experience.
5. Keep a fridge grocery list
Keep a magnetized grocery list on your fridge so that you can replace items as needed. This can help you buy food you know you’ll eat. Sticking to a list in the grocery store may help you stay accountable and not spend money on processed or pricey items.
6. Eat before you go to the store
If your mother gave you this advice growing up, she was onto something: according to studies, shoppers spend more when hungry. Eating before going to the grocery store may help you avoid tantalizing foods that can cause you to go overbudget.
7. Be careful with coupons
Getting 50% off ketchup is a great deal — unless you don’t need ketchup. Beware of coupons for items you don’t need. If the item isn’t on your list, you’re not saving at all, but rather spending on something you don’t truly need.
8. Embrace the bulk section
The bulk section of your grocery store may help you find inexpensive staples, discover new foods and bring variety into your diet. Take the time to compare the price of prepackaged goods versus bulk — bulk is likely cheaper.
9. Bring lunch to work
Picture this: you’re trying to stick to a food budget, and one day at work you realize it’s lunchtime but you forgot to pack a lunch. All the meal planning and smart shopping in the world won’t help if you don’t have food when you need it.
10. Love your leftovers
Instead of throwing your leftovers away, try to eat them to avoid wasting money. To keep things interesting, look for ways to repurpose foods — yesterday’s leftover taco meat can become today’s shepherd’s pie.
11. Keep an inventory
Keeping a list on your fridge of what you have on hand can help you avoid food waste and get creative when meal planning. And it’s a great way to get the most use out of grocery items that are sold larger quantities than you need for a single recipe. Not sure what to do with that giant bunch of celery or box of spinach you have left over from another recipe? Try out some online recipe blogs or sites that offer recipe ideas based off a few ingredients you input.
12. Freeze foods that are going bad
Another way to avoid wasting food is to freeze things that look like they’re about to go bad. Fruit that’s past its prime can be frozen and used in smoothies. Make double batches of soups, sauces and baked goods so you’ll have an alternative to ordering takeout when you don’t feel like cooking.
13. Use curbside pickup
About 29% of shoppers admitted that seeing an item that looked too good to pass up led to impulse purchases. Using curbside pickup can help prevent you from purchasing unplanned items.
14. Check the top and bottom shelves
Wise grocery stores know that eye level is where the most sales happen. In fact, consumers select about 80% more products at eye level than at the bottom shelf. So next time you’re out shopping, take a quick look up and down — you may find a better deal hidden out of sight.
Additional grocery saving tips
Need more ideas on how to save on your food bill? Here are some additional tips that can help.
Choose generic — One survey found that 50% of people said opting for generic products over name brand helped them save on groceries.
Drink more water — Recent data found that 17% of consumers cut back on purchasing beverages at the store due to rising inflation. Drinking more water may help you save what you would’ve otherwise spent on beverages.
Pay with cash — Try going to the grocery store with cash — and only what you’ve budgeted for. Leave your credit or debit card at home. After all, you can’t spend what you can’t pay for.
Buy what’s in season — Food prices can vary depending on whether they are in season or not. When foods are out of season, they may be scarce — and therefore more expensive. Try to stick to buying foods that are in season.
Grow your own herbs — Herbs at your local grocery store might sometimes be expensive. Growing your own is one way to cut back on your grocery bill.
Plan a meatless meal — Beef prices increased for three years straight from 2020 to 2022, and the USDA predicts other meat categories will rise in price in 2023. By planning a meatless meal every so often, you may be able to save some money on your grocery bill.
Buy cheaper cuts of meat — Not all cuts of meat cost the same. You may be able to save money by choosing chicken thighs over chicken breasts, ground chuck over sirloin and pork loin over pork chops.
Ask for a discount — This won’t always work, but if you notice your food is close to expiring, ask the cashier for a discount. You may be able to save yourself a few dollars.
Learn how to preserve food — If you have some fruit that’s going bad in your home, you may be able to preserve it by making and canning jam. Hopefully the more food you can save in your home, the less you’ll need to buy at the store.
Keep a running tally while you shop — Jotting down the prices of items you put in your cart or quickly crunching the numbers in your phone’s calculator can help you stay more aware of how much you’re spending.
Buy canned food — Canned food is often less expensive than fresh foods, so buying canned could stretch your food budget.
Shop sales — If you notice a food you often eat goes on sale, stock up if you have room in your budget. While you may spend more than you normally would up front, you’ll save yourself from having to purchase the item at full price in the future.
Use rebate apps — Some apps provide cash back on certain purchases. Check to see if the items you need to buy at your next shopping trip may qualify.
Sign up for your store’s loyalty program — Some grocery stores have points or loyalty programs that can provide you with extra discounts when you shop.
Bottom line
Sticking to a food budget can take planning and discipline. However, learning how to budget groceries by being resourceful and cooking healthily is a skill that can benefit you for years to come.
Earn cash back on select debit purchases with Credit Karma Money™ Spend.
My shower is broken. The water comes out just fine, and it doesn’t leak. But the temperature control is busted, so it only comes out at one temperature: as hot as it gets.
Here’s the embarrassing part: It’s been like this for a year.
Frugal or Lazy?
When the temperature thingy broke (and here you see that household plumbing is not my strong suit — a year after this thingy broke, I still don’t know what it’s called), I made some small adjustments. I went downstairs right away and lowered the temperature on the water heater so that the water coming out would be hot but not scalding. That means no super-hot water anywhere in the house, but since we have small children I was keeping it on the low side anyway.
I let my husband know what had happened, and he declared that he would fix it himself. Household plumbing kind of is his strong suit; he fixed a similar problem with the shower at our old house. It’s kind of a difficult job, though, so I offered to have a plumber come in just to spare him the hassle. No, he insisted, he was up for doing it. Just not right away.
Then the task kind of got lost in his chore cloud. We grit our teeth and take hot showers. Every night when the kids take their bath, they make a game of dumping a few buckets of cold water into the tub to get it to the right temperature.
For months I’ve been embarrassed by this state of affairs. What kind of real grown-up lets a basic household repair go for a year? Clearly, my husband and I are being irresponsible ignoring the broken thingy.
Then yesterday morning, while taking a shower, I thought, “Maybe we’re not being lazy and irresponsible. Maybe we’re being frugal.” After all, the broken thingy isn’t getting any worse. It’s not leaking into the walls or damaging the house. It just makes showering extra hot. So far, we’ve done a fine job of making it do, leaving us free to put our money and time into other things.
Frugality is About Choices
Now, I’m not suggesting that frugality is about ignoring regular home maintenance. One of these days, we’ll fix the shower. (And probably soon now that I’ve confessed to the world that it’s busted.)
What I am suggesting is that frugality is about making choices. Every frugal person focuses on what’s important to them, and cuts away the excess to do so. In this case, experience shows that being able to adjust the water temperature in our shower isn’t very important to my family. We’d rather spend our weekends playing music and gardening than get into this messy, time-consuming repair project. I could hire a plumber to do it, but I’d rather spend the money on yoga classes or a family camping trip. These fun things might seem like trivial luxuries next to the shower repair, but the truth is they add more to my quality of life than being able to adjust the temperature in my shower.
I suspect that every frugal person makes some odd choices like this one.
J.D.’s note: I think so, too. Our clothes washer has a broken knob, for instance. Over the past five years, we — by which I mean Kris — have used a pair of pliers to select the laundry cycle. When we bought this house, the windows were caulked shut. They stayed that way until we could budget to fix them. And so on.
One of the tricks of frugal living is to recognize that with careful planning and savings, you can have anything you want but you can’t have everything you want. Making a commitment to conscientious, intentional personal money management means making some choices. You need to develop the skill of discerning what best serves your goals, and keeping your spending and attention focused on those things.
Another part of being frugal is being able to pare back your sense of what you need. My former, spendthrift self would have fixed the shower immediately, the next day, even if it meant paying the plumber with a credit card to do it. I’d have seen it as a need. I would also have needed to immediately replace several kitchen gadgets that broke over the winter, and to take my bike to the shop for a spring tune-up.
There’s nothing wrong with doing any of those things. It’s not spendthrift to fix a shower or replace a vegetable steamer. But nowhere is it written that they’re mandatory either. I’ve been getting clean just fine with a broken shower, cooking up a storm without those kitchen gadgets, and safely riding the bike that I maintain myself. Turns out, I don’t really need any of that stuff.
In contrast, I’ve been going to yoga classes three or four times a week. I paid for these with a deeply discounted Groupon, but I’ll probably buy a full-price membership when that runs out. Yoga is expensive. A few years ago I would have considered it an unaffordable luxury to pay for yoga classes. I could just do yoga workout tapes at home. Even a few months ago when I made it a New Year’s resolution to get back into yoga, I was unwilling to spend money on this studio. Now that I’ve tried it, though, I see what a big difference it makes to my quality of life. It seems like a bargain. I’m calmer and happier — more focused. Not only are those good things in themselves, but they support my career. I’m doing more and better writing because I’m so healthy. That translates to more money. I could argue that the yoga classes pay for themselves.
For me, this gets at the core of frugal living: realigning all my spending to fit with my values. At first glance, the shower seemed like an essential, basic home repair. For me, it turns out, fixing it is really a luxury. I haven’t done it yet because it doesn’t directly support any of my financial or personal goals. I won’t be a better writer after it’s fixed, nor will I be closer to living debt-free. As long as we can make it do, getting it fixed is really an extra. One we haven’t decided to indulge in yet.
How to Make Frugal Choices
The mechanics of conscious spending are pretty simple. Before you buy anything, ask yourself some simple questions:
Do I have the money to cover this expense, or would I be going into debt for it?
Does this expense forward my financial goals?
Can I get this need or desire met without spending money on it? Could I spend less money?
Does this money need to be spent now, or can it wait thirty days?
These questions can be very useful for curbing impulse buys and keeping you focused on financial goals. I’m finding they can also help with less obvious resource sinks.
In getting ready to plant my garden, for example, I found that several of my large pots had broken during the winter. My first thought was that I needed to replace them, right now. On second thought, I was able to dig up a bunch of old plastic storage bins that will serve perfectly well as replacement containers for my garden. They’re not as pretty as new flower pots, but they were already here. Now I’ve got less clutter, more money, and a garden that’s ready to plant.
The core motto of frugal living is “use it up, wear it out, make it do, or do without”. How you’ll choose to live that motto is up to you. It’s important to question every expense and ask yourself how necessary it really is. Sometimes, the answers will surprise you.
J.D.’s tangential note: You have no idea how excited I am that after all these years, I’m finally able to link to my chore cloud concept. The chore-cloud is well-known among my friends, who find it amusing, but I’ve never found a way to bring it up at GRS. Now my life is complete.
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47k salary is a solid hourly wage when you think about it.
When you get your first job and you are making just above minimum wage making over $47,000 a year seems like it would provide amazing opportunities for you. Right?
The median household income is $68,703 in 2019 and increased by 6.8% from the previous year (source). Think of it as a bell curve with $68K at the top; the median means half of the population makes less than that and half makes more money.
The average income in the U.S. is $48,672 for a 40-hour workweek; that is an increase of 4% from the previous year (source). That means if you take everyone’s income and divided the money out evenly between all of the people.
But, the question remains can you truly live off 47,000 per year in today’s society since it is below both the average and median household incomes. The question you want to ask all of your friends is $47000 per year a good salary.
In this post, we are going to dive into everything that you need to know about a $47000 salary including hourly pay and a sample budget on how to spend and save your money.
These key facts will help you with money management and learn how much per hour $47k is as well as what you make per month, weekly, and biweekly.
Just like with any paycheck, it seems like money quickly goes out of your account to cover all of your bills and expenses, and you are left with a very small amount remaining. You may be disappointed that you were not able to reach your financial goals and you are left wondering…
Can I make a living on this salary?
$47000 a year is How Much an Hour?
When jumping from an hourly job to a salary for the first time, it is helpful to know how much is 47k a year hourly. That way you can decide whether or not the job is worthwhile for you.
$47000 a year is $22.60 per hour
Breakdown Of How Much Is 47k A Year Hourly
Let’s breakdown, how that 47000 salary to hourly number is calculated.
For our calculations to figure out how much is 47K salary hourly, we used the average five working days of 40 hours a week.
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, divide the yearly salary of $47000 by 2,080 working hours and the result is $22.60 per hour.
47000 salary / 2080 hours = $22.60 per hour
Just above $22 an hour.
Key Points….
That number is the gross hourly income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
You must check with your employer on how they plan to pay you. For those on salary, typically companies pay on a monthly, semi-monthly, biweekly, or weekly basis.
Just an interesting note… if you were to increase your annual salary by $5K, it would increase your hourly wage to over $25 an hour – a difference of $2.40 per hour.
To break it down – 52000 salary / 2080 hours = $25.00 per hour
That difference will help you fund your savings account; just remember every dollar adds up.
How Much is $47K salary Per Month?
On average, the monthly amount would be $3,917.
Annual Salary of $47000 ÷ 12 months = $3917 per month
This is how much you make a month if you get paid 47000 a year.
$47k a year is how much a week?
This is a great number to know! How much do I make each week? When I roll out of bed and do my job of $47k salary a year, how much can I expect to make at the end of the week for my effort?
Once again, the assumption is 40 hours worked.
Annual Salary of$47000/52 weeks = $904 per week.
$47000 a year is how much biweekly?
For this calculation, take the average weekly pay of $904 and double it.
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x 52 weeks = 260 working days
Annual Salary of$47000 / 260 working days = $180 per day
If you work a 10 hour day on 208 days throughout the year, you make $226 per day.
$47000 Salary is…
$47000 – Full Time
Total Income
Yearly Salary (52 weeks)
$47,000
Monthly Wage
$3,917
Weekly Pay (40 Hours)
$904
Bi-Weekly Pay (80 Hours)
$1,808
Daily Wage (8 Hours)
$180
Daily Wage (10 Hours)
$226
Hourly Wage
$22.60
Net Estimated Monthly Income
$2,990
Net Estimated Hourly Income
$17.25
**These are assumptions based on simple scenarios.
47k a year is how much an hour after taxes
Income taxes is one of the biggest culprits of reducing your take-home pay as well as FICA and Social Security. This is a true fact across the board with an all salary range up to $142,800.
When you make below the average household income, the amount of taxes taken out hurts your hourly wage.
Every single tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
So, how much an hour is 47000 a year after taxes?
Gross Annual Salary: $47,000
Federal Taxes of 12%: $5,640
State Taxes of 4%: $1,880
Social Security and Medicare of 7.65%: $3,595
$47k Per Year After Taxes is $35,884
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$35884 ÷ 2,080 hours = $17.25 per hour
After estimated taxes and FICA, you are netting $32,830 per year, which is $10,170 per year less than what you expect.
***This is a very high-level example and can vary greatly depending on your personal situation and potential deductions. Therefore, here is a great tool to help you figure out how much your net paycheck would be.***
In addition, if you live in a heavily taxed state like California or New York, then you have to pay way more money than somebody that lives in a no tax state like Texas or Florida. This is the debate of HCOL vs LCOL.
Thus, your yearly gross $47000 income can range from $32124 to $37765 depending on your state income taxes.
That is why it is important to realize the impact income taxes can have on your take home pay. It is one of those things that you should acknowledge and obviously you need to pay taxes. But, it can also put a huge dent in your ability to live the lifestyle you want on a $47,000 income.
47k salary lifestyle
Every person reading this post has a different upbringing and a different belief system about money. Therefore, what would be a lavish lifestyle to one person, maybe a frugal lifestyle to another person. And there’s no wrong or right, it is what works best for you.
One of the biggest factors to consider is your cost of living.
In another post, we detailed the differences between living in an HCOL vs LCOL vs MCOL area. When you live in big cities, trying to maintain your lifestyle of $47,000 a year is going to be much more difficult because your basic expenses, housing, transportation, food, and clothing are going to be much more expensive than you would find in a lower cost area.
To stretch your dollar further in the high cost of living area, you would have to probably live cheap and prioritize where you want to spend money and where you do not. Whereas, if you live in a low cost of living area, you can live a much more lavish lifestyle because the cost of living is less. Thus, you have more fun spending left in your account each month.
As we noted earlier in the post, $47,000 a year is below the average income that you would find in the United States. Thus, you have to be wise with how you spend your money.
What a $47,000 lifestyle will buy you:
If you are debt free and utilize smart money management skills, then you are able to enjoy the lifestyle you want.
Have some fun money in your budget.
You are able to rent in a decent neighborhood in LCOL and maybe a MCOL city.
You should be able to meet your expenses each and every month.
Participate in the 200 envelope challenge.
Ability to make sure that saving money is a priority, and very possibly save $3000 in 52 weeks.
When A $47,000 Salary Will Hold you Back:
However, if you are riddled with debt or unable to break the paycheck to paycheck cycle, then living off of 47k a year is going to be pretty darn difficult.
There are two factors that will keep holding you back:
You must pay off debt and cut all fun spending and extra expenses.
Break the paycheck to paycheck cycle.
It is possible to get ahead with money!
It just comes with proper money management skills and a desire to have less stress around money. That is a winning combination regardless of your income level.
$47k Salary to Hourly
We calculated how much $47,000 a year is how much an hour with 40 hours a week. But, more than likely, you work more or fewer hours per week.
So, here is a handy calculator to figure out your exact hourly salary wage.
$47K a year Budget – Example
As always, here at Money Bliss, we focus on covering our basic expenses plus saving and giving first, and then our goal is to eliminate debt. The rest of the money leftover is left for fun spending.
If you want to know how to manage 47k salary the best, then this is a prime example for you to compare your spending.
You can compare your budget to the ideal household budget percentages.
recommended budget percentages based on $47000 a year salary:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$274
Savings
15-25%
$705
Housing
20-30%
$1018
Utilities
4-7%
$157
Groceries
5-12%
$313
Clothing
1-4%
$24
Transportation
4-10%
$157
Medical
5-12%
$196
Life Insurance
1%
$12
Education
1-4%
$12
Personal
2-7%
$35
Recreation / Entertainment
3-8%
$88
Debts
0% – Goal
$0
Government Tax (including Income Tatumx, Social Security & Medicare)
15-25%
$926
Total Gross Monthly Income
$3917
**In this budget, prioritization was given to basic expenses and no debt.
Is $47,000 a year a Good Salary?
As we stated earlier if you are able to make $47,000 a year, that is a decent salary. You are making more money than the minimum wage and close to double in many cities.
While 47000 is a good salary starting out in your working years. It is a salary that you want to increase before your expenses go up or the people you provide for increase.
However, too many times people get stuck in the lifestyle trap of trying to keep up with the Joneses, and their lifestyle desires get out of hand compared to their salary. It is okay to be driving around a beater car while you work on increasing your salary.
This $47k salary would be considered a lower middle class salary. This salary is something that you can live on if you are wise with money.
Check: Are you in the middle class?
In fact, this income level in the United States has enough buying power to put you in the top 95 percentile globally for per person income (source).
The question you need to ask yourself with your 47k salary is:
Am I maxed at the top of my career?
Is there more income potential?
What obstacles do I face if I want to try to increase my income?
In the future years and with possible inflation, in many modest cities 47k a year will not be a good salary because the cost of living is so high, whereas these are some of the cities where you can make a comfortable living at 47,000 per year.
If you are looking for a career change, you want to find jobs paying at least $55000 a year.
Is 47k a good salary for a Single Person?
Simply put, yes.
You can stretch your salary much further because you are only worried about your own expenses. A single person will spend much less than if you need to provide for someone else.
Learn exactly what is a good salary for a single person today.
Your living expenses and ideal budget are much less. Thus, you can live extremely comfortably on $47000 per year.
And… most of us probably regret how much money wasted when we were single. Oh well, lesson learned.
Is 47k a good salary for a family?
Many of the same principles apply above on whether $47000 is a good salary. The main difference with a family, you have more people to provide for than when you are single or have just one other person in your household.
The costs of raising children are high and will steeply cut into your income. As you can tell this is a huge dent in your income, specifically $12,980 annually per child.
That means that amount of money is coming out of the income that you earned.
So, the question really remains is can you provide a good life for your family making $47,000 a year? This is the hardest part because each family has different choices, priorities, and values.
More or less, it comes down to two things:
The location where you live in.
Your lifestyle choices.
You can live comfortably as a family on this salary, but you will not be able to afford everything.
Many times when raising a family, it is helpful to have a dual-income household. That way you are able to provide the necessary expenses if both parties were making 47000 per year, then the combined income for the household would be $94,000. Thus making your combined salary a very good income.
Learn how much money a family of 4 needs in each state.
Can you Live on $47000 Per Year?
As we outlined earlier in the post, $47,000 a year:
$22.60 Per Hour
$180-226 Per Day (depending on length of day worked)
$904 Per Week
$1808 Per Biweekly
$3916 Per Month
Next up is making $50000 a year.
Like anything else in life, you get to decide how to spend, save and give your money.
That is the difference for each person on whether or not you can live a middle-class lifestyle depends on many potential factors. If you live in California or New Jersey you are gonna have a tougher time than in Oklahoma or even Texas.
In addition, if you are early in your career, starting out around 38,000 a year, that is a great place to be getting your career. However, if you have been in your career for over 20 years and still making $47k, then you probably need to look at asking for pay increases, pick up a second job, or find a different career path.
Regardless of the wage that you make, if you are not able to live the lifestyle that you want, then you have to find ways to make it work for you. Everybody has choices to make.
But one of the things that can help you the most is to create a biweekly budget to make sure you stay on track.
Learn exactly how much do I make per year…
One of the best ways to improve your personal finance situation is to increase your income. Here are a variety of side hustles that are very lucrative. With time and effort, you can start enjoying the lifestyle you want.
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To remain financially responsible, everyone must pay bills on a regular basis. These bills include your house payment, Dish Network with the HD package, water bill, Sirius satellite radio and few of the other essentials out there. Unfortunately, many people do not follow the same concept was it comes to investing.
The harsh reality these people may discover is that a steady saving and investing plan is sometimes necessary to help pursue such financial goals as paying for a wedding or new car, buying a house, and funding retirement. Everybody as their own opinion on the right way to generate wealth. One approach that is often seen consistently is called dollar cost averaging (DCA).
Please keep in mind that systematic investing does not ensure consistent market gains. Dollar cost averaging is a strategy that involves continuous investment in securities regardless of fluctuating price levels of such securities, and the investor should consider their financial ability to continue purchasing through periods of low price levels.
DCA Defined
Dollar cost averaging is a technique often used in buying mutual funds in which investments of defined amounts are made on a regular basis. As a long-term, disciplined strategy, DCA can help you take advantage of the benefits of compounding to potentially build a sizable sum. Consider the accompanying chart, which shows the result of investing $100 in stocks every month from January 1998 to December 2007.1
The Benefits of DCA
Month
Share Price
Shares Bought
Jan
$15
3.3
Feb
$13
3.8
Mar
$12
4.2
Apr
$14
3.6
May
$13
3.8
Jun
$12
4.2
Jul
$13
3.8
Aug
$14
3.6
Sept
$16
3.3
Oct
$16
3.1
Nov
$17
2.9
Dec
$16
3.1
TOTAL SHARES:
42.7
AVERAGE PRICE PER SHARE:
$14.25
AVERAGE COST PER SHARE:
$14.05
Other Long-Term Benefits of DCA
Another potential benefit of using DCA is that it ensures that your money purchases more shares when prices are low and fewer when prices are high. Over the long term, the result could be that the average cost you pay for the shares may be less than the average price. Assume you invest $50 per month in an investment for 12 months and every month the share price fluctuates a bit. You can see that your $600 total would have bought you 42.7 shares. The average price per share, as calculated by adding up the monthly prices and dividing by 12, would have been $14.25. However, the average cost that you would have actually paid, as calculated by dividing the total amount invested by the number of shares, would have been $14.05 per share. Over the years, this method could potentially save you a lot of money.
In addition, DCA can offer the psychological comfort of easing into the market gradually instead of plunging in all at once. Although DCA does not assure a profit or protect against a loss in declining markets, its systematic investing “habit” helps encourage a long-term perspective, which can be soothing for people who might otherwise avoid the short-term volatility of the riskier, but potentially more profitable, investments, such as equities.
And last, DCA may help you make savvy investment decisions if you stick with it. For example, if your investment rises by 10%, you will likely post big gains because of the shares you’ve accrued over time. And if it declines by the same amount, take comfort in knowing that your next investment will purchase more shares at a less expensive price – shares that may regain their value and even exceed the higher price in the future.
Regular Investing Makes Sense
While investing a lump sum at the most opportune time can potentially profit you more than if you dollar cost average your investment, defining “opportune” is difficult for even the most seasoned experts. As a long-term strategy, you may find DCA to be more appropriate to help potentially lower your average cost per share, and allow you to feel more comfortable during uncertain markets knowing that you made sound investment decisions. Keep in mind, however, that you should consider your ability to purchase over long periods of time and your willingness to purchase through periods of low price levels.
1Source: Standard & Poor’s. Stocks are represented by the S&P 500.
2Richard E. Williams and Peter W. Bacon, “Lump Sum Beats Dollar Cost Averaging,” Journal of Financial Planning, April 1993, pp. 64-67.
Read What Other Bloggers Are Saying about Dollar Cost Averaging:
Dividend Growth Investor: Dollar Cost Averaging
Digerati Life: You’ve Got Money: Invest It All or Dollar Cost Average?
Cash Money Life: Pros and Cons of Dollar Cost Averaging
Certificates of deposits are some of the safest investments you can make. They are not dependent on the stock market, they are protected by deposit insurance and they have clear terms that you understand going in. A bump-up CD, also known as a step-up CD, has the potential to offer the same high level of stability while also allowing you to take advantage of a rising-rate environment. Let’s take a look at what bump-up CDs are, how they work and if they’re the best option for you.
If you’d like personalized advice on your savings and investment strategy, consider working with a financial advisor.
Bump-Up CD Definition
First, let’s define what a regular CD is. A CD is a savings account that holds your money for an agreed-upon period of time. At the end of that time period, your money is released to you along with an agreed-upon amount of interest. If you withdraw your money before the agreed-upon time is up, you’ll pay a penalty.
A bump-up CD operates on the same principle, but you have the option to raise the interest rate during the CD’s lifespan — to bump it up, if you will. Some CDs will only offer one opportunity to bump up your rate, while others may have longer lifespans and offer more than one chance to raise it.
A bump-up CD is designed to allow customers to take advantage of rising CD rates without having to cash out their CD, swallow the penalty and put their money back into a new, higher-interest CD. But because of the option to bump up, this kind of CD usually offers a lower starting rate than a traditional CD.
How Does a Bump-Up CD Work?
Let’s look at a simple example of a bump-up CD. You put your money in a bump-up CD with a 24-month maturity date and a starting interest rate of 1.5%. At the 12-month mark, the CD rates at the bank that holds your CD rise to 2%, and you use your bump-up option to raise your rate to 2% for the remaining 12 months.
This simplified example of a bump-up CD shows some of the positives of a bump-up CD: You can get an improved interest rate in one of the safest and most predictable savings vehicles that exist.
Is a Bump-Up CD Right for You?
While a CD is an excellent way to earn interest and a bump-up CD might sound like a great way to maximize your earnings, it might not be the best choice in all scenarios. Let’s take a look at three things to consider before you put your money in a bump-up CD.
Bump-up CDs may not out-earn traditional CDs. As mentioned above, while bump-up CDs offer the option to raise rates, they often start you out at a lower rate overall. Say in the above scenario, where a bump-up CD allowed you to go from a 1.5% interest rate to a 2% interest rate halfway through the lifespan of the CD, you had the option of taking out a traditional CD for the same term at a 1.9% interest rate. You would earn less over the life of the bump-up CD than you would have just going with the traditional CD.
Interest rates may continue to rise after your bump-up. Let’s say that in the above scenario, a month after you took your bump-up, rates rise again to 3%. Interest rates are difficult to predict, and if your timing is off, it could mean sticking out several months at a less competitive rate.
The terms of a CD may not be right for you. CDs, whether bump-up or not, aren’t for everyone. CDs overall may not offer enough flexibility for some savers due to the fact your money is locked away for a set amount of time, and if you need to access it, you will likely lose a good deal of the interest you earned by having it in a CD in the first place. CDs can also require high minimum deposit amounts to lock in competitive interest rates, which again might be too illiquid for some.
The Bottom Line
A bump-up CD can be a great choice in a rising interest rate environment, allowing you to take advantage of a secure savings option while still having the opportunity to bump-up your rate. On the other hand, bump-up CDs can leave you behind if rates continue to rise after your bump-up and have other limitations that might not make them right for everyone.
Tips for Savings
For more help determining which CDs or other investment vehicles are right for you, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Putting your money in a savings account rather than a CD may be a better choice if you want more flexibility. Just make sure you look for a high-yield savings account so that your money is still working for you.
Interested in seeing how quickly your savings will grow over time? Check out SmartAsset’s savings calculator to see how big your savings account will be in a few years, how interest can impact your savings and more.
A universal life insurance policy can accumulate cash value in addition to providing a death benefit. There are two basic types of universal life insurance policies you should know about. With indexed universal life insurance, the cash value can increase based on the performance of a market index. With variable universal life insurance, on the other hand, a policyholder directly invests the cash value into securities.
A financial advisor can help you determine how life insurance fits into your financial plan.
Universal Life Basics
Universal life insurance is a kind of permanent life insurance. Permanent life insurance differs from the other main variety of life insurance, term life insurance, in that permanent life insurance does not expire and part of the premium is used to build up cash value in a subaccount. Term life insurance generally costs less and is for a limited number of years but provides only a death benefit, without any cash value feature.
There are two major varieties of permanent life insurance, including whole life insurance as well as universal life insurance. With both types the cash balance in the subaccount can increase, but with whole life the growth is based on a fixed interest rate while with universal life the growth rate can vary.
Whole life premiums are also fixed. A universal life policyholder can opt to pay a lower premium during a period when cash flow is tighter, or pay more to build cash value. These policies also may also include other features, including long-term care coverage and other living benefits.
Favorable tax treatment is an important characteristic of permanent life policies. The death benefit is free of income taxes. Funds in the cash value subaccount also grow tax-free, and policyholders can withdraw funds or take loans against the cash value while still alive without owing taxes on the proceeds.
Indexed Universal Life
Indexed universal life is one of the sub-types of universal life. With an indexed universal life policy, the cash value can grow based on the performance of a stock market index. This allows for a potentially higher return than a whole life policy with a fixed return.
Indexed universal life policies typically have participation rates describing the return’s relationship to the index. A 60% return rate means the cash value will earn 60% of the return posted by the tracked index. If the index returns 10%, in this case, the subaccount will earn 60% of 10% or 6%.
However, these policies also often have caps on the maximum return. In the previous example, if the policy had a cap of 5%, the subaccount would earn 5% instead of 6%.
In addition, indexed universal life policies often have floor rates describing the minimum return the return will post. A floor of 1% means the policy will return 1% even if the index posts a negative return.
Pros of indexed universal life include the ability to get a death benefit along with tax-free growth and distributions. Policyholders can also contribute unlimited amounts and use the money at any time, which are useful advantages compared to retirement accounts such as IRAs.
Cons of indexed universal life include caps on returns along with sales, administrative and other fees which are typically higher than other investment options such as exchange-traded funds. Also, withdrawals from the cash value subaccount may become taxable if the policy is surrendered or lapses.
Variable Universal Life
Another type of universal life insurance is variable universal life. It shares many of the features of indexed universal life, including tax treatment and the ability to pay flexible premiums and accumulate cash value in a subaccount. The primary difference is how funds in the subaccount are handled.
Instead of tracking an index, the cash value in a variable universal life policy subaccount can be invested directly in securities, such as stocks and bonds. Variable universal life policies do not have participation rates, cap rates or floor rates as indexed universal life does.
The return on a variable universal life policy cash value will reflect the actual performance of the securities, without any limits up or down. This means it is possible to get a higher return than with an indexed universal life policy but also to get a lower return as well as to lose money.
Pros of variable universal life policies include the possibility of a higher return while still getting favorable tax treatment and a death benefit. Cons include the possibility of a lower return or actual loss. Variable universal life policies also typically have higher fees than indexed universal life due to the added costs of managing the investments.
IUL v. VUL: Which One Is Better?
As outlined above, there are positives and negatives for both products. Which one is best for you will largely depend on what you want to get out of your life insurance policy.
Indexed universal life can be a good choice for someone who wants a death benefit as well as flexibility in paying premiums and the prospect of a somewhat better return on the cash value than is offered by a whole life policy. Indexed universal life buyers tend to be more risk-averse than variable universal life policyholders, who are willing to take the chance of higher returns in exchange for the possibility of a loss.
The Bottom Line
Indexed universal life and variable universal life are two types of permanent life insurance that let policyholders pay varying premiums and accumulate cash value. Indexed universal life cash value can grow based on the performance of a stock index. Variable universal life cash value can be invested directly into securities. Indexed universal life typically limits both gains and losses, while variable universal life offers the opportunity for higher gains as well as losses.
Life Insurance Tips
Life insurance can be an important part of a financial plan. A financial advisor can help you select which type of life insurance works best for your situation. SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset’s investment calculator shows you how much your investment will be worth over time assuming a constant rate of return and regular contributions.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
You must identify and understand your money attitude before you can make any financial changes. Otherwise, you are destined to make the same mistakes time and time again.
There is a say “Attitude is everything.” I honestly believe that. Your attitude towards every aspect of your life plays a vital role in how you think and act. But, did you know that your attitude can also affect the way you handle money?
Your money attitude is often the reason why you spend too much, are in debt or fear your finances. But, that doesn’t have to mean you can’t make a change.
Changing your financial outlook begins with your money attitude. If you don’t first get to the root of your problem, you will be destined to make the same mistakes time and time again.
WHAT IS YOUR MONEY ATTITUDE?
There are four different money attitudes with which you may identify. And, it is possible that you fall under more than one. However, when you ask yourself these questions, you should lean more towards one than the other. Read these below to figure out which one you to which you relate.
You can use a checklist to help you better identify your attitude when it comes to your finances. They will help you make the changes necessary to take control of your money.
ADORING
If you adore money, it means you love to spend it. In many cases, you buy things (often on credit) just because you enjoy shopping. You don’t worry about the fact that you must pay for it later. You look at the credit card bill and focus only on the minimum payment.
Simply put, you love to spend money. That’s it.
ENTITLED
This attitude can is best described as “keeping up with the Joneses.” However, did you know that in all likelihood, the Joneses are up to their eyeballs in debt? Why would you want to keep up with someone who lives their life that way?
The truth is, the Joneses are showing you what you want to see. For all you know, they fight over money every night. Their kids may resent their parents for pushing them too hard. You can’t judge a book by its cover, so don’t hold yourself to an idea about which you know very little.
AVOIDANCE
If you feel you don’t deserve money, then this money attitude is yours. It isn’t even just a feeling of not deserving money. You may also feel anxious or stressed at the mere thought of money. You don’t handle it well.
Avoidance is one of the most difficult attitudes to change. That doesn’t mean it is impossible. It means that you may have to work a bit harder to make it happen.
CAUTIOUS
You might be careful with your money. Some may call you frugal. Others may call you a miser. Whatever the name, you need to learn to let go once in a while.
This cautious person refuses to spend money. They are afraid to let it go and fear that it will be gone, never to return. When you are overly cautious with money, you risk opportunities.
CHANGE YOUR MONEY ATTITUDE
Now that you know which attitude you have, now is the time to make changes. It is something only you can do. No one can do it for you.
IF YOU ARE ADORING
The first step in overcoming your love of money is to cut off its head. That means drastic changes. You should cut up your credit cards. If they prompt you to spend without limit, then this is the first change you need to make.
If you like to spend your free time in the store, you’ll need to find new hobbies. Find something to do with the time you would usually spend walking the aisles hunting for the treasures you believe you need.
The final thing to do is to make a list of everything you love in this life. Don’t leave anything off of your list. Got it? Good. Now, go through the list and cross off everything that does not love you in return. You’ll notice that what remains are the people in your life (and maybe a pet). Those other things? They’re just things. They do not matter.
IF YOU ARE ENTITLED
To start, you have to determine why you feel the need to keep up with them. There could be a reason why you feel this way.
You may hate your job and use these things to compensate. Low self-worth is another reason you buy items as you want to impress your friends. It could even be that you had nothing growing up and feel you are due. You owe it to that poor child.
If you use money to keep up with another individual, take a look at their life and determine what part of it intrigues you. He may have an amazing job that you would love to have; so maybe you should find one that makes you equally as happy.
You are only entitled to be happy and need to look at your life in that way. Things won’t make you happy.
IF YOU AVOID MONEY
If you don’t feel you deserve money, you need to ask yourself one question: Why not? It could be due to things you’ve done in your past.
Whatever the reason, you need to know that everyone deserves to make money. You need it to survive. You don’t need more than you can handle, but you do need enough to support yourself and your family.
The truth is, avoiding your finances doesn’t make money issues go away. In fact, it makes them worse. For example, if you found a lump on your neck, would you avoid it and hope it went away? No. You’d go to the doctor to figure out what it was, and then do whatever is needed to remove or treat it.
IF YOU ARE CAUTIOUS
When you refuse to spend money, you risk missing out on opportunities. What about that once-in-a-lifetime trip? You could miss the chance to go to dinner to meet the person of your dreams or make a key career connection. You don’t want to live your life with regrets.
I’m not saying to go crazy. I’m telling you that you need to give yourself permission to spend money.
When you set up your budget, just add an item that gives you permission to spend. It will be OK. I promise.
IS YOUR MONEY ATTITUDE THAT IMPORTANT?
I have heard many people tell me that this really doesn’t matter as it doesn’t have that much bearing on your finances. The truth is that it can control the way you look at money – even if you aren’t aware of it.
In 2002, when I declared bankruptcy, I never took the time to understand what lead me down that path. Let me rephrase that. I never took the time to understand why I spent so much money and racked up that much debt. I walked out of the courtroom that day, thinking I’d never make any mistakes with money again. Boy, did I get that wrong!!
Around 18 months after that happened, I married the love of my life. We didn’t go crazy spending money, but we did accumulate debt. Here I was, a couple of years removed from the bankruptcy and debt was building back up again. Are you kidding me?!?!?
When my husband and I decided that we wanted to work ourselves out of debt, I felt the same way I had years earlier. I came to realize that I simply put a Band-Aid on an open wound when I declared bankruptcy. I never took the time to understand why I did this to myself.
It took a lot of soul searching and understanding, but I figured it out. I had a mix of entitled and adoring attitudes. I never had money growing up. When I became an adult, I thought I owed my younger self the opportunity to experience these things. This, in turn, led me to adore money. I loved spending and I loved getting things.
This time around, I did not have debt due to excessive purchases. However, we had still overspent and were struggling to make ends meet. When we both committed to making the change, we talked about money and the way it made us felt.
Together, I helped him with his money avoidance, and he helped me with my entitled attitudes. It’s been more than seven years now that we’ve been debt free. It has a lot to do with understanding our money attitudes.
CAN YOU REALLY CHANGE YOUR MONEY ATTITUDE?
It will take some time to change the way you look at money and your money attitude. I promise that it won’t happen in one day. It may not even change next week. You may find it’s still the same three months from now.
The point is that you can now recognize your attitude and work with it. You’ll no longer fight your feelings about money. Instead, understanding the way you look at money – and the problems it creates – is a good thing.
Change cannot begin until you know what you need to change.No matter your attitude toward money, there are things that everyone needs to do:
Determine your financial goals. Decide what’s important to you — and only you. Not the Joneses, not your childhood self. Once you know where you want to go, you can create a plan to turn your dreams and goals into reality.
Figure out why you’re being held back. You have to understand why you feel the way you do about money. That allows you to move onto the final step.
Make the changes needed to allow you to move forward. If you don’t change the way you look at money, you’ll never succeed in your financial reboot. You might have the right budget and financial plan, but if you don’t change how you deal with money on a fundamental level, you’ll continue to have financial failures over and over again.
Now that you know your money attitude and are ready to change it, you’re ready to move on to the fun part: the action plan for your budget, your debt, and beyond!
If you want to really take control of your finances, check out the Financial Reboot ebook. It is a guide to help you not only identify your money attitude but create a budget, control your spending and change your financial future.
Our rights as women have come a long way since we earned the power to vote on August 26, 1920.
But the financial playing field between men and women still isn’t level. Not even close.
To help you make waves in your own financial life, I interviewed several Millennial and Gen Z women to find out what financial advice they’d give to other women today
Here’s what they had to say.
What’s Ahead:
1. “Don’t be afraid to negotiate your salary.”
Anna Barker, Founder of LogicalDollar, offered me this advice.
There’s no question that it can be scary to ask for more money. Especially as women, we often internalize the feeling that we’re going to be seen as pushy or demanding if we ask for a raise.
However, various studies show this is actually one of the reasons women end up earning less over their lifetimes than men, who tend to be more likely to ask for more money.
2. “Take advantage of any employer match ASAP.”
Barker also talked with me about retirement. One of the best things that you can do for your future financial security is to start investing as early as possible.
If your employer offers any matching of your 401(k) contributions, this is basically free money and you should do everything you can to invest up to the limit of the match.
3. “Avoid high-interest debt.”
According to Barker, a big money mistake that a lot of women in their 20s and 30s make is signing up for high-interest credit cards. To be clear, credit cards can actually be a great tool if used correctly — which primarily involves paying the balance off in full by the end of each billing cycle.
The problems start to arise once those interest-free periods run out and you realize you’re not able to immediately pay off the debt you’ve accrued.
4. “It is SO cliché, so hear me out… please start saving early for retirement!”
Heather Albrecht, Financial Coach and Founder of Balance Financial Coaching, discussed this with me.
It’s hard because when you’re young, you seem to have SUCH a long time until that money is needed. But the math doesn’t lie.
Starting young makes it easier because you can save less. Gosh, I wish I had made the space in our spending plan to save earlier even though it seemed impossible. The $25 here or there would have been huge by now.
5. “Start using a spending plan or budget. Zero it out each month, and save the rest.”
Albrecht also spoke with me here. And I have to say if I had been able to get myself into the mindset of “saving money is spending money on my future freedom” at a younger age, there would have been a lot less stress at times.
Budgeting doesn’t have to be difficult, either. Just pick the right method and it’ll become just another habit.
6. “As a Millennial myself, the best money advice I would give women in their 20s and 30s is to diversify how you save and spend money.”
Siobhan Alvarez, Founder of Budget Baby Budget, shared this wisdom with me.
I am a big believer in not being dependent on one checking and savings account! I have a long-term high-yield savings account for an emergency fund, a savings account at my local bank for big purchases, a checking account for everyday expenses; and a checking account for fun purchases throughout the month.
This has helped me not only pay off a huge amount of debt over the past few years but do it in a way so I didn’t feel like I was missing out on life and fun!
7. “Protect yourself and your people financially.”
Brittney Burgett, Head of Communications at Bestow, gave this little nugget of advice. Emergency savings, disability insurance, and life insurance matter, especially if you have financial dependents.
Insurance, in particular, is more affordable to buy the younger and healthier you are. I, for example, have life insurance because I own a home.
My mom is my beneficiary, so if anything were to happen to me, the payout from a policy would enable her to continue the mortgage payments and decide later on what to do with my house — keep it, rent it or sell it. Life insurance would give her flexibility when it’s needed most.
8. “Educate yourself so you understand how money, interest, and debt works.”
Lindsay Feldman, Publicist and Founder of BrandBomb Marketing, broke down this for me.
It wasn’t until I really started reading financial books and listening to podcasts that I really began to take control over my financial situation. Understanding how money, interest, and debt works are key to being able to make your money work for you. I look at everything differently now which has empowered me to make smarter decisions.
9. “Sign up for Experian Boost. It’s free and will report monthly bills that generally don’t boost your credit like a phone bill, gas, and power!”
Feldman offered up a way for folks to finally help their credit the easy way. Experian Boost™ is free and it takes just a few minutes to sign-up.
Always be on the lookout for ways to improve your credit – it’ll only help you in the long run.
Feldman shares a great tip that can help homeowners own their home sooner (and pay wayyy less in interest). If it’s possible, work those extra payments into your budget.
11. “When it comes to money, you can have your cake and eat it too.”
Youmna Rab, Founder of Brilliantly Budgeting offered me this quote.
You don’t need to save every penny you earn and give up your favorite indulgences like spa days or dinners out.
If you make a plan for your money, you can enjoy what you like while also saving money for the future.
12. “Do not share bank accounts with anyone you’re dating but not married to, even if you live together.”
Shannon Vissers, the Financial and Retail Analyst of Merchant Maverick, shared some tough love here.
If you break up or your partner spends on things you don’t agree with, you’ll have no legal recourse to get your money back apart from suing them in small claims or court (which is expensive and stressful and may not go in your favor).
13. “Do not lease your car. Take out a loan instead.”
Vissers makes a good point here as well. A lease is essentially a very expensive car rental, and it’s a bad choice unless you’re wealthy enough to comfortably afford this luxury.
This doesn’t mean you can’t get a new car when you’re young. Rather than leasing a car out of your price range, opt to finance a cute, reliable car that you’ll own in three or five years (ideally three). You’ll build credit history this way and, in a few years, you won’t even have a monthly car payment.
14. “Be a minimalist, especially if you rent.”
While this tip may not be for everyone, there’s a good reason Visser’s offers this pearl of wisdom as well.
A good case can be made for spending on experiences when you’re young – trips, concerts, etc. — but overspending on retail goods is another story. Ever heard of the saying, what you own, owns you?
It’s true.
Remember, you’ll have to deal with all your clothes, shoes, furniture, kitchen items, knick-knacks, etc. the next time you move — and your headaches will be compounded if you have to move to a smaller place.
15. “The greatest gift you can give yourself is to save and invest early.”
Sarah Jane Paulson, CFP® at Valkyrie Financial, gave me this bit of guidance.
The classic pay yourself first mentality is the easiest way to a financially strong future. Build that emergency fund (or F*** You fund, if you prefer) of three to six months worth of expenses in a separate account other than your everyday checking.
Then go out and open an IRA or Roth for yourself. Put your money into cheap, diverse index funds and keep adding to it. The greatest money strength you have on your side is that you have years for the market to create an avalanche out of the first few snowflakes of money you invest.
16. “Becoming a financially grown-up woman means unlearning a lot of money lessons society taught us as girls: that men are better at money and math (they’re not), that investing is scary (it’s not), and that the best route to financial stability is to marry a high earner (absolutely not!).”
Sara Rathner, credit cards expert at NerdWallet, wanted to share this with other women.
So throw all those old lessons in the garbage, because that’s where it belongs. Now, today, learn everything you can about managing your finances on your own.
There is nothing more empowering than being the boss of your own life, and of being an equal partner in your relationships. No one will ever care as much about your money as you will.
17. “Surround yourself with people with similar money values.”
Sue Hirst, Co-Founder and CFO of CFO On-Call shared her experience when we talked.
When I was in my 20s, I used to hang out with many people who didn’t share my money values. As a result, almost every time I went out with my friends, I splurged money recklessly due to peer pressure.
This was one of the top reasons I was unable to save as much money as I would have liked each month. Looking back, I wish I had either told my friends directly that I wasn’t comfortable spending huge amounts of money routinely, or made new friends whose financial values aligned with my own.
18. “Make saving a habit as soon as you start making income.”
Imani Francies, Finance Expert at US Insurance Agents, shared this little mind shift.
Saving becomes easier when you look at yourself with the same significance that you look at your power bill or any other bill. No matter what, you are going to do your best to pay your power bill. You should feel the same way about putting money into your savings.
Paying yourself first every month is investing in your future. Even if you can only put $5 into a savings account once a month, start early.
19. “Budget, but give yourself room to indulge.”
Lisa Thompson, Savings Expert at Coupons.com, offered up ALLLL the good tips when I spoke with her.
What’s your weakness: designer handbags, weekend getaways, fine dining with a great bottle of champagne? Make room for things you love by controlling what you spend in other areas.
20. “Cash back offers are everywhere, from brands like Rakuten, to credit card perks, to apps like Coupons.com. Use them!”
Thompson also offers this bit of advice. Refuse to pay full price for anything until you’ve looked for an offer. If you can pair a coupon or cash back offer with a store discount or sale, bam! That’s a savvy way to shop.
21. “Learn to use credit cards wisely.”
To tack on, Thompson also had this to say.
She makes a good point, too. Today, there are so many options for credit cards that offer perks from cash back to miles to points, as well as incentives, like a free Dash Pass for DoorDash or money toward a Peloton membership. The key, of course, is to not carry a balance and pay so much interest that it cancels out the perks. But if you can learn to use credit cards wisely by paying them off each month, the perks and incentives can help make everything from dining out to travel more affordable.
22. “Get a side gig by turning a passion into a money-making opportunity.”
Finally, Thompson ended our conversation with the quote above.
Do you love essential oils? Make balms, rollerballs, and pillow sprays, and sell them on Etsy or at pop-up shops.
Do you love thrifting, going to estate sales, and visiting antique shops? Find items worth more than what you’re paying and resell them! Facebook Marketplace is the perfect spot for that, and it’s free.
If you can turn a hobby into a source of income, that’s extra money for you to invest, save, or use as your slush/entertainment fund.
23. “Know your worth and advocate for yourself when negotiating.”
Amy Maliga, Personal Finance Consultant at Take Charge America, tells it like it is with her wise advice above.
Since the gender pay gap is still a real thing (ugh), it’s important to do your research on salaries for your position and advocate for yourself when negotiating a new job or discussing your annual performance review.
24. “Set goals and actively work toward them.”
Maliga offered me a simple but strong piece of advice above.
Whether it’s buying a home, starting a business, or embarking on world travel, setting financial goals gives a structure and framework to how you plan your finances.
25. “Forget FOMO. Don’t be afraid to say no.”
Maliga also makes a good point here.
TikTok made me buy it – or did it?
It’s way too easy to shop these days, and social media knows exactly what it takes to get you to press “add to cart.” When you’re tempted to buy something you hadn’t planned on, or friends are trying to talk you into activities you can’t afford, keep those long-term financial goals in mind, and don’t be afraid to say no.
Summary
We celebrate Women’s Equality Day every August 26th to commemorate the day the 19th Amendment finally recognized that women have the right to vote. But that same equality hasn’t trickled to the financial space yet, where the gender pay gap, wealth gap, and investing gap still exist today.
We’ve made a lot of progress over the decades, but a lot still needs to happen at the company, state, and national levels to achieve equal pay and equal opportunities for equal work. Until then, I hope these financial tips from awesome Millennial and Gen Z women serve as inspiration for how you can up the ante in your own financial life.
Are there any tips you’d add to the list? Let me know in the comments below!
Imagine a situation where you could transform your mortgage into a more favorable and empowering financial tool. Picture the possibilities of accessing the equity in your property or securing lower interest rates. Welcome to the world of mortgage refinancing. Refinancing your mortgage is like hitting the reset button on your home loan, allowing you to replace your current mortgage with one that better aligns with your financial goals. The general rule of thumb is that you’ll pay between 2% and 6% of the refinance value. Here’s how it breaks down.
For help figuring out how to refinance your mortgage in a way that works for you, consider working with a financial advisor.
Mortgage Refinances Basics
A mortgage refinance refers to the process of replacing an existing mortgage with a new one, typically to take advantage of more favorable terms or to access equity in a property. Refinancing means receiving a new loan to pay off your current loan and obtaining a lower interest rate, longer loan duration, or a different type of mortgage. For instance, you might refinance your fixed-rate mortgage to a 5/1 adjustable-rate mortgage (ARM) for a lower interest rate.
Remember, although mortgage refinancing can provide a more favorable loan, it involves closing costs and fees. As a result, it’s essential to calculate whether the potential savings or benefits outweigh the expenses over the long term.
Average Cost to Refinance a Mortgage
Refinancing a mortgage means paying for the loan servicing required for your original mortgage. While the average refinance costs 2% to 6% of your loan amount, costs vary depending on your circumstances. In addition, interest rates have risen in the last two years, making borrowing more expensive.
Here’s a breakdown of refinancing costs:
Application fee: $0-$500
Attorney fees: $500-$1,000
Credit report fee: $10-$100
Discount points: 0%-3%
Document preparation fee: $50-$600
Flood certification: $15-$25
Home appraisal: $300-$700
Home inspection: $300-$500
Origination fees: 0.5%-2%
Recording fees: $25-$250
Reconveyance fee: $50-$65
Tax service: Varies
Title insurance and search: $400-$900
Factors Affecting Refinance Costs
Refinancing your mortgage can save you a significant amount of money. However, it’s critical to note that, similar to acquiring a new home loan, a refinance entails closing costs that can impact your immediate and long-term financial situation. Compared to closing on a comparable purchase loan, the closing costs for a refinance are generally lower. The precise amount you’ll be required to pay depends on various factors, such as:
Your Loan Size
As mentioned above, lenders base mortgage insurance and other costs on your total loan amount. Therefore, the larger your loan, the higher the refinance cost.
Your Lender
Each lender has its own fee structure. For example, some lenders may waive your credit report or application fee. As a result, it’s wise to shop around for lenders and ask for a summary of fees before committing to a specific lender. This way, you can compare the offers available.
Your Location
Costs of home inspections, recording fees, taxes and more depend on your location. Therefore, where you live can change your refinance costs by hundreds or thousands of dollars.
Your Credit Score
Your credit score and history demonstrate your consistency and reliability as a borrower. As a result, your lender charges lower interest rates to customers with higher credit scores because they present less risk. On the other hand, a low credit score means you’ll pay more interest, increasing your refinancing costs.
Your Home Equity
Similarly, home equity can also impact the interest rates available when refinancing. Generally, lenders offer better rates to borrowers with higher levels of equity. With more equity in your home, you represent less risk to the lender, which can result in more favorable interest rate options.
In addition, the loan-to-value ratio (LTV) is a crucial factor lenders consider when evaluating a refinance application. You can calculate it by dividing the loan amount by the property’s appraised value. Lenders typically have maximum LTV ratios they are willing to accept. For example, if a lender has a maximum LTV of 80%, they will only refinance up to 80% of the home’s appraised value. So, if your original mortgage required private mortgage insurance (PMI) because you had a low down payment or a higher LTV ratio, refinancing can help you eliminate PMI. Building equity to achieve an LTV ratio of 80% or less can eliminate PMI, reducing your monthly payment.
Your Loan Duration
Refinancing means receiving new terms for your loan. For example, you might extend your loan by five years or more through a refinance. Although doing so can lower your monthly payment, it usually increases the amount of interest you pay over time. On the other hand, shortening your loan duration means paying it off more quickly, reducing paid interest.
Your Type of Mortgage (Fixed-Rate or Adjustable-Rate)
With a fixed-rate mortgage, the interest rate remains constant throughout the entire loan term. The rate you agree upon at the beginning of the loan remains unchanged over the life of the mortgage, whether over 15, 20, or 30 years. This stability allows you to have predictable monthly mortgage payments, making budgeting easier. The downside is your interest rate is permanent, even if market trends in the future produce lower interest rates.
In contrast to fixed-rate mortgages, adjustable-rate mortgages (ARMs) have an interest rate that can change periodically. Typically, an ARM has an initial fixed-rate period, such as 5, 7, or 10 years, during which the interest rate remains stable. This rate is usually lower than fixed-rate mortgages. Then, after the initial period, the interest rate can adjust periodically based on an index, such as the U.S. Treasury rate. Therefore, the interest rate can fluctuate over time, potentially resulting in higher or lower monthly payments. If interest rates rise, your payments may increase, but if rates fall, your payments could decrease.
Your Specific Mortgage Program
In addition, you’ll pay different amounts for mortgage insurance depending on the loan type. For instance, mortgage insurance for conventional loans costs 0.15% to 1.95% of the loan amount every year. For FHA loans, you’ll pay a 1.75% premium upon closing and 0.15% to 0.75% of the loan amount every year. VA loans have a funding fee at closing of 0.5% to 3.6%. Lastly, USDA loans have a 1% upfront fee and a 0.35% annual fee.
Your Type of Property
The type of property you own can impact the refinancing process. Lenders may consider different factors and have specific guidelines based on the property type. Here are a few ways the property type can affect a refinance:
Primary Residence: Refinancing a primary residence typically offers the most favorable terms and options. Lenders may provide lower interest rates and more flexible terms for primary residences because borrowers prioritize them over other real estate and assets.
Investment Property: Refinancing an investment property, such as a rental property or vacation home, often comes with slightly higher interest rates and stricter eligibility requirements. Lenders may impose stricter debt-to-income ratios, require larger down payments and assess the property’s rental income potential to determine the feasibility of the refinance.
Condominiums: Refinancing a condominium may have specific requirements. Lenders may assess the financial health of the condominium association, including factors such as the percentage of owner-occupied units, insurance coverage and reserve funds. Additionally, lenders may have stricter appraisal requirements for condos to ensure the property’s value and marketability.
Multi-Unit Properties: Refinancing a multi-unit property, such as a duplex, triplex, or apartment building, may involve different considerations. Lenders typically evaluate the property’s rental income potential, occupancy rates and the borrower’s experience as a landlord. The appraisal process may focus on the property’s income-generating capabilities.
Manufactured or Mobile Homes: Refinancing a manufactured or mobile home may have specific requirements and considerations. Lenders may have stricter criteria for these types of properties due to their unique characteristics. They may require specific certifications, consider the property’s foundation and location and have limitations on the loan-to-value ratio.
Typical Cost Breakdown
Here’s an example of how these numbers work. According to a recent report by Freddie Mac, the average rate refinance is about $273,500. So, here’s how the costs look at percentages of the loan balance on average using the dollar figures introduced earlier:
Application fee: 0%-0.18%
Attorney fees: 0.18%-0.36%
Credit report: 0.003%-0.03%
Discount points: 0%-3%
Document preparation fee: 0.018%-0.2%
Home appraisal: 0.11%-0.25%
Home inspection: 0.11%-0.18%
Origination fees: 0.5%-2%
Recording fees: 0.009%-0.09%
Reconveyance fee: 0.018%-0.023%
Title insurance and search: 0.14%-0.33%
Additional Considerations
Here are several other aspects of refinancing a mortgage to contemplate before taking action:
Interest Rates Variations
Interest is the foundation for how lenders make money on loans. As a result, it’s one of the primary expenses for refinanced mortgages. The rate is a percentage of your principal balance, and your monthly payment goes toward interest first, then the principal. As a result, a higher interest rate means you’re paying more for the cost of the loan and less on the loan itself, increasing the cost and requiring more time for repayment.
Choosing Between Fixed-Rate and Adjustable-Rate Mortgages
Remember, a fixed-rate mortgage offers an interest rate that doesn’t change throughout the loan. This feature offers predictability for monthly payments until you repay the loan. On the other hand, adjustable-rate mortgages (ARMs) have interest rates that shift according to market trends after the initial fixed period. The advantage of ARMs is that your initial rate is usually lower than fixed-rate mortgages, and the adjustable rate afterward could also remain lower, increasing your savings.
Potential Savings Over the Long Term
How long you plan to live in your home is another crucial factor regarding refinancing. The refinancing process entails paying closing costs, which can outweigh the savings the interest rate reduction provides. Therefore, it’s best to estimate how long you plan to stay in your home to determine if you can break even or save money through refinancing. One method is to calculate the break-even point by dividing the total cost of the refinance by your monthly savings.
For example, say you save $100 per month, and the closing costs amount to $5,000. In this case, it would take approximately 50 months (or over four years) before you experience savings on your refinance. If you intend to stay in your home for longer than that, refinancing is worthwhile.
Loan-To-Value Ratio (LTV)
The eligibility of your mortgage for refinancing is influenced by the current value of your home compared to the loan amount. During the refinancing process, an independent party appraises your home to determine its market value. The appraised value is critical since the LTV usually can’t exceed 80%. If your home’s value has declined since you purchased it, you might lack sufficient equity to refinance, or you may need to bring additional funds to cover the difference between the home’s value and the loan amount.
Income Stability and Debt-To-Income Ratio
Other debts besides your mortgage, such as car loans or credit card debt, can impact your ability to refinance or the interest rate you receive. Lenders evaluate your debt-to-income ratio when you apply for a refinance. To calculate this ratio, divide your monthly debt payments by your gross monthly income. Generally, a debt-to-income ratio below 43% is desirable for mortgage or refinance qualification.
In addition, your current income and employment status, will influence the refinancing application. Specifically, changes in your income or employment can affect your refinancing eligibility. For instance, you may qualify for a better rate or more favorable terms if your income recently increased.
Conversely, suppose your income has decreased or you recently changed jobs. In that case, the refinancing process may be more challenging, depending on the duration of your current job or the extent of the income reduction. If you’ve recently started a new job, giving your situation several months to stabilize before attempting to refinance can help you qualify for a loan.
Cash-Out Refinance
Freddie Mac’s most recent report shows that 41.9% of refinances in 2021 were cash-out refinances. A cash-out refinance means liquidating a portion of your equity, putting thousands of dollars in your pocket. Homeowners cash out their equity for numerous purposes, such as improving the home, paying off debt, or starting a business. As a result, this refinance enlarges your mortgage, and you get a lump sum in return.
Strategies to Minimize Refinance Costs
Because refinancing can be expensive, it’s recommended to reduce costs as much as possible. This way, excessive fees won’t ruin the benefits of the refinance. These strategies can help you do so:
Shopping Around for Lenders
The whole lending market is open to you when refinancing. Although refinancing with your current lender might be convenient, you could find better rates and terms by getting quotes from several lenders and comparing the offers. This way, you’ll get the best deal available and save money on fees and interest.
Negotiating Fees and Closing Costs
Negotiating fees and closing costs with the lender is also an option. Many fees have wiggle room on the price, so asking lenders about discounts and waivers can be fruitful. In addition, a preexisting relationship with a lender, such as having a bank account or loan beforehand, allows you to access special deals.
Utilizing Mortgage Points
Lastly, you can purchase mortgage points to reduce your interest rate. Typically, they cost 1% of the loan amount per point. As a result, you can cut your interest rate down by paying several thousand dollars up front, reducing interest payments over time. It’s crucial to calculate when you break even if you do so. For example, say you spend $1,500 to lower your interest rate by 1%, lowering your monthly payment by $50. In this scenario, it will take 30 months to break even.
Hidden Costs to Be Aware Of
In addition, some refinancing costs are less apparent when shopping lenders. Here’s what to keep an eye out for:
Loan duration and its impact on costs: Generally, the longer the repayment schedule, the more expensive the loan. Your loan duration affects how long the interest rate builds upon the principal. So, repaying the loan faster means fewer compounding periods, which equates to less interest accrual.
Tax implications: Both original and refinanced mortgages provide a tax deduction for paid interest. In addition, purchasing points for a refinance loan creates another tax deduction. Specifically, you’ll divide what you paid over the number of years for the loan. So, paying $1,000 for a mortgage point for a 10-year loan results in a $100 deduction every year.
Costs associated with mortgage insurance: Refinancing with a conventional loan can incur mortgage insurance costs if you have less than 20% equity in your home. Specifically, private mortgage insurance (PMI) charges a percentage of your loan amount. These charges can occur at closing and each month as part of your loan payment.
The Bottom Line
Mortgage refinancing can benefit homeowners by allowing them to take advantage of more favorable terms and access equity in their property. However, it’s vital to carefully consider the costs involved in the refinancing process and determine whether the potential savings or benefits outweigh these expenses in the long term. As a result, it’s necessary to understand how numerous factors, including the loan amount, origination fees and discount points, can impact the overall cost of refinancing and evaluate the potential savings. Other considerations include the option of a cash-out refinance, which allows homeowners to access their equity, and using strategies to minimize refinance costs.
Tips for Refinancing a Mortgage
It’s a good idea for homeowners to analyze their financial situation and goals before refinancing their mortgage. Fortunately, you can consult with a financial advisor to evaluate your circumstances and make informed decisions that align with your long-term plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
The real estate market fluctuates daily, making it challenging to understand when refinancing is beneficial. You can get an interest rate estimation using SmartAsset’s rate comparison tool to see if the market conditions suit you.