How to Build Your First Resume

Whether you’re embarking on your first big job, looking for a career change, or getting back into the workforce after an extended period of time, you’re going to need a stellar resume to get your foot in the door. However, a blank page is pretty intimidating, and it can be hard to know where to start.

resumeThe hardest part is getting the ball rolling, though. Don’t put it off for too long, as it’s far better to just bite the bullet and get started. Treat the process as a gradual drafting, ensuring that you don’t miss out on any pertinent selling points or end up with a page that looks thrown together. Remember, this is a potential employer’s very first impression of you — make it a great one!

Learn More: Are You Looking for a New Job?

Chances are that you won’t produce the perfect document the very first time. But by following these steps, and being prepared to do some polishing at the end, you can create a resume to be proud of. Here’s how to get started.

Choose a Template for Structure

An important first step is to understand the commonly-used styles of resumes, and figure out which will serve you best.

A chronological resume is commonly used by those presenting a continuous work history. In it,  different roles and their responsibilities are set out one by one, up to the present. If you have little or no employment to-date, though, this might not be the best choice for you.

An alternative is a skills-based resume, which focuses on the talents and abilities you will use in your new role. These skills might be gathered from vocational school or college, voluntary work, or even places like sports or activity groups. That makes this a good option if you haven’t held a paid position just yet.

The third commonly used format is a ‘mixed’ resume, which includes both a skills section and a short employment summary. If you have done voluntary or part-time roles, or have taken a long break from your professional activities, this style might work best for you.

Using a template is the best way to get a sense of the different structures, and some guidance on the layout and detail expected for each. Luckily, getting your hands on a template is easy. There are free resources out there — such as this one — as well as those you can buy through online marketplaces like Etsy.

Browse the options, and simply download the one you like best (in a format that you can easily download, such as Word). You’re now well on the way to nailing your resume.

Consider the Skills Employers Want

Once you have a resume structure you are comfortable with, you need to put yourself in the shoes of the employers you’re targeting. What are they looking for in a new employee?

The outputs of this exercise will vary wildly depending on the type of role and industry you’re seeking. The skills and attributes needed to become a veterinary assistant will be quite different than those needed when applying for a role as a financial analyst. Knowing your audience is crucial.

The best way to come up with a list of skills, competencies, experiences, or personal attributes that are relevant to employers in your sector, is to look at job ads. Collect a few current or lapsed online ads for the type of role you want to find. What are the key skills described?

Most likely, you will come up with a pool of skills which overlap between similar jobs for different employers. Look for things like organizational skills, teamwork, a passion for customer service, detail orientation, personal drive, and an ability to communicate with colleagues and customers. You may also spot technical requirements such as IT literacy, or familiarity with certain processes.

Resource: 10 Steps on the Career Ladder

Become familiar with the type of thing the employers in your field are asking for. That way, you can be sure to present your personal skills and experiences in a way that matches the need.

Brainstorm

This is the place where most people begin their resume writing process. But by doing the preparation described above, this stage will be far more productive and focused for you.

First, you’re going to brainstorm the experiences, skills, and attributes that you have acquired to date. Then, begin to fit together how these will ‘sell’ you to the employer.

Start with a large sheet of paper. Trust me, this exercise is one place where pen and paper has an advantage over working online. You will want to ‘join the dots’ as you go. Being able to annotate, group, and link experiences with a simple stroke of the pen will make life much easier.

If you have work experience, write this down first. This could be part time, voluntary, or freelance work… it all counts! Now briefly elaborate on the tasks you assumed within these roles, and the skills you needed to carry them out. By thinking in this way, you will create a far more professional listing.

For example, you could simply say, “Helped out my local Girl Scout troop as a volunteer.” A far better statement using this structure, though, would be, “Accompanied my local Girl Scout troop on a week-long adventure trip. This included raising $500 to fund the trip, before leading and supporting groups of 8 girls through challenging activities to help them develop teamwork and survival skills.”

One Story: How I Cut My Spending in Half to Take a Job I Loved

Similarly, “Held a charity car wash event to support the American Red Cross” can become, “Mobilized 10 students to plan, advertise, and implement a charity car wash event for the American Red Cross. We raised $750 after expenses, which was significantly ahead of our target, thanks to using social media to recruit record numbers of customers.”

Carry on the exercise to include the skills and experiences you have gathered through school and college activities. Also consider other areas of life, such as caring for your family, traveling, or taking part in sports, drama, or other clubs. As you go, think about which of these experiences are most valuable to your prospective employers. These will be your priorities in the next step.

Drop in the Details

Now it’s time to build your draft resume. Using the template you have chosen, start with the basics, such as your personal details and educational record.

If you have chosen a chronological style resume, add in the job roles you have held and their corresponding dates (starting with the most recent). Select three or four bullet points that are the most relevant from the exercise above. Include these under the position details, as they will illustrate the responsibilities you took on.

Make sure you include quantifiable data, such as the size of the team you led, the amount of budget you managed, or how you improved efficiency, customer satisfaction, or profitability. Saying, “I implemented new processes which resulted in a 15% drop in customer complaints” helps the reader understand the impact of the actions you describe.

Read More: The Biggest Mistake I Made at My First Job — and How I Learned From It

If you’re using a skills-based resume, then you need to approach the outline differently. You’ll need to group the skills and experiences you have collected in the exercise above. Then, you’ll use these to build your document.

For example, say you identified Teamwork as one attribute that all employers in your field were looking for. You should highlight your skills in this area by grouping three or four relevant examples in bullet point format. Then, add them into your resume. Prioritize the skills you believe employers are really looking for. Then, use quantifiable details to make the examples come to life.

A mixed resume uses a skills section followed by an (often short) employment history summary. Focus on the skills that employers want and build your resume around these. Then, fill out the employment history with a couple of key successes for each role, from your brainstorm list created above.

Whichever style you have chosen, the template is likely to include a more personal section up top. This is often called something like “Personal Statement, ” “Personal Profile, ” or “Career Objective.” This is the absolute first thing that the recruiter will read, and is ideally the hook that will keep them reading further.

Make sure your statement briefly introduces you, highlights what you will bring to the role, and says what you’re looking for in a new position. You should have all the detail you need to write a great personal statement now, from your previous exercises. However, you can check out more about it here.

Check, Edit, Check Again

Well done — you’re nearly finished now!

The last step when writing your resume is to check it over, make changes, and check again. It is helpful to have someone else look over your document to spot any mistakes you might miss. You can even hire a freelance proofreader through a site like Fiverr.com.

Going back over your resume might feel like a drag, but this is the most important stage of all. Typos, grammatical errors, and silly mistakes are the sort of thing that stop a recruiter from reading. They most likely have a large pile of resumes to get through. One that’s rife with poor use of language or simple mistakes will end up in the trash.

Be Careful of These Common Job Interview Mistakes

Once you’re happy with your final document, give yourself a pat on the back. Then, get ready to start sending in applications. If you’re asked for a cover letter, make sure you tailor this to each application to get your foot in the door. You can also check out this guide to writing a great cover — it’s not as hard as you think!

With your eye-catching cover letter, backed up by a knockout resume, you’re well on the way to landing that dream job.


How Much Life Insurance Do You Need?

No one wants to think about death — but ignoring the possibility doesn’t change the fact that you still need to prepare for the worst. A big part of this planning process is buying a life insurance policy.

In writing about how to save money on life insurance, I mentioned that you shouldn’t buy too much coverage. After all, if you buy more insurance than you need, you’re just throwing money away. But that begs the question…

life insurance

How much life insurance do you need?

Unfortunately, there are no easy answers. In fact, my wife and I have bought and re-bought new life insurance policies several times in the past 5-10 years as we tried to get it right. The real challenge for us has been that the “right” answer has been a bit of a moving target. As our income has increased and our responsibilities have grown, we’ve outgrown our coverage.

Given our past experiences, I thought I take some time to share what we’ve learned. Note that I’m talking specifically about term life insurance policies here. I’m a big proponent of the view that you should keep your insurance and investment needs separate — in other words, buy term and invest the difference!

Do you even need life insurance?

Depending on where you’re at in life, it’s possible that you don’t need life insurance at all. For example, if you’re single and have no dependents, you might be able to get away without buying a policy (though it might be a good idea to have enough to cover your funeral expenses). But if others depend on you for your income, then you’ll likely want at least enough coverage to replace your earning potential, at least temporarily.

Related: When Should Millennials Buy Life Insurance?

Life insurance rules of thumb

If you poke around online, you’ll find a number of websites that claim that the ‘best’ approach to determining your life insurance needs is to simply buy a policy that corresponds to a certain multiple of your annual salary. The problem here is determining the correct multiple.

Should you buy a policy for 8x your annual salary? 10x? Why not 12-15x? In the end, this really boils down to what you want your life insurance to do. If you’d want your life insurance policy to provide support for your family for an extended period, you’ll obviously need more. If you’re comfortable with your insurance policy being a short-term stopgap, you can get away with less.

An alternative approach to buying an arbitrary multiple of your salary would be to use an online life insurance calculator. In this case, you enter data on anticipated one-time expenses, ongoing living expenses, timeframe, and so on. Then, the calculator will spit out an answer.

Don’t forget employer-provided coverage

Another factor to consider when determining how much life insurance to buy is whether or not you have coverage from work (and how much). In many cases, as valuable as this sort of coverage can be, it’s important to not become too dependent on it. After all, if you lose your job, you’ll also lose your life insurance coverage.

What about a non-working spouse?

Another important thing to consider is whether or not you have a non-working spouse. On the one hand, you’ll have to decide whether or not to purchase coverage for them (we did, more below). On the other hand, you also have to worry about your spouse incurring expenses that aren’t directly reflected in your salary.

Learn More: How Much Life Insurance Does a Stay-At-Home Parent Need?

Perhaps the most troublesome point in this context is health insurance. In our case, we have great health insurance coverage. Unfortunately, it’s tied to my job. Since my wife stays home with the kids, and since we’d want her to continue doing so at least for awhile, we need to plan for private health insurance.

Other factors to consider

Are you relatively early along in your career path? Do you plan on expanding your family? Do you anticipate any other major changes in the future? If so, then it’s likely that your life insurance needs will change (perhaps dramatically) in the years ahead.

There are two main ways for dealing with these sorts of things. One is to try and project your needs and size your life insurance policy accordingly. The other is to buy the right policy for today, and then simply replace it at some point in the future.

Did You Know? Four Types of Life Insurance That Are a Complete Waste of Money

Both of these approaches have their downsides. Overbuying now means that you’ll spend more than necessary in the short term. However, if you wait to buy more coverage, you run the risk that you’ll fall ill in the interim, and your rates will increase dramatically.

How we approached it

In the end, determining your life insurance needs is a very personal matter, and broad rules of thumb are unlikely to provide you with the right answer. This last time around, my wife and I sat down and outlined exactly what it is that we want from our life insurance policies if something happened to one of us.

In short, we’d both want for our family’s lifestyle to change as little as possible. We have four young kids, and my wife stays home with them during the day. If she were to pass away, we’d need to replace her efforts at home with someone to watch the kids while I’m at work, help around the house, etc. Thus, even though she doesn’t generate any outside income, she provides significant value to the family and we need for her to be insured.

Likewise, if I were to die, we wouldn’t want for her to suddenly have to go back to work. Therefore, we’d need to completely replace my income for the foreseeable future. We’d also need for the payout to be large enough to cover new expenses like private health insurance since our health insurance is currently tied to my job.

How much life insurance do we have?

In the end, we bought a pair of twenty year term life insurance policies to cover us. We selected twenty years because that roughly corresponds to the time at which our kids will be out of the house and completely on their own. At that point, our day-to-day responsibilities, as well as our need for life insurance coverage, will drop off dramatically.

In terms of amounts, my policy is worth roughly 20x the income from my day job. That might sound like a lot, but I also make a decent amount of self-employment income, so it’s a much smaller multiple of my total annual income. On top of this, I also have a limited amount of coverage — 3x my annual salary — through my day job. The nice thing about the employer coverage is that it rises with my salary, such that our total coverage will grow slightly over time.

In my wife’s case, we bought a smaller policy, corresponding to roughly one-third of my coverage. As noted above, it’s important for us to have coverage for her, as we’d want to maintain a very similar way of life for our family even if one of us were out of the picture. We’d need to hire someone to help with the kids, help keep the house in order, etc. However, since my wife doesn’t currently generate any outside income, we can get away with less coverage for her.

Deciding how much life insurance you (or your spouse) need is a very individual process. But thinking about what you want your insurance policy to be able to provide, and the expenses you’d need to be able to cover, is a great starting point.


How to Save Money on Food

Food is an unavoidable expense. We all have to eat and none of us really want to skimp on the food we buy. So, how do we realistically trim that area of our budget?

save food

Luckily, there are many ways to save money on food — whether that’s groceries, restaurant meals, or eating while traveling. It all comes down to planning ahead, looking for good deals, and being resourceful. Here are some tips for saving in each category:

How to Save Money on Groceries

Groceries are something we all buy on a regular basis. In fact, according to a Gallup poll, the average young adult American spends almost $9, 000 in groceries each year! So, saving in this area can make a real difference.

There are many ways to save money on groceries. First, create a shopping list before you go to the grocery store and stick with it. This will help you avoid impulse spending on items you don’t need.

Resource: Save Money at the Grocery Store

Second, buy produce that’s in season to get the best prices. When fruits and vegetables are in season, they are more abundant and cost less. For example, it’s best to buy eggplant in the summer and brussels sprouts in the winter. Here’s a seasonality chart to guide your produce buying.

Third, base your shopping on your grocery store’s weekly sales cycle. When your favorite cereal is on sale, buy it in bulk so it’ll last until the next time it’s on sale. Also take a look at the weekly flyer before making your shopping list. You can meal plan based on ingredients that are discounted so that your pantry is full with discounted items.

Couponing can often be a time-consuming task, but there are apps that make it easier. Go ahead and sign up for your local grocery store’s rewards card — they are almost always free, and you’ll get to take advantage of extra savings on items. Apps like Ibotta will give you rebates on items you may have already planned to buy. You only need to take a few pictures (of the receipt) and scan the item’s barcode, then withdraw your earnings via Paypal.

Related: 5 Ways to Save Big on Things You’re Already Buying

Lastly, shop whenever the last day of your grocery store’s sale cycle is (mine is on a Wednesday). This day is when store managers are likely to apply further discounts on items that haven’t been selling well. That way, they can clear out the shelves before the next weekly sales cycle.

One extra tip: Take advantage of after-holiday sales. For example, stock up on candy after Halloween or buy stuffing after Thanksgiving.

How to Save Money at Restaurants

Even if you don’t go out to restaurants often, it’s still worth learning ways to save money in this area for those special occasions. The first way to save is to skip the drinks, soda and alcoholic. Opt for water instead. Not only is it a lot less calories, it’s usually free!

Another way to save money at restaurants (if you have children) is to go on “kids eat free” nights. Some restaurants offer special days on which kids meals are free — MoneySavingMom.com has a great master list of these restaurants and which days they offer deals. This can save you a good amount of money, especially if you have multiple children.

Third, go out for lunch instead of dinner. Restaurant menus tend to be similar between lunch and dinner, so you can get the same entree. The main differences are portion size and price. Lunch entrees tend to be a bit smaller and cost less. You can have the same restaurant service experience at a fraction of the price if you go at lunchtime instead of in the evening.

Lastly, buy discounted restaurant gift cards. You can find gift cards online to your favorite restaurants and land great deals. CardPool.com is one website that offers such deals. You can find $25 restaurant gift cards for as little as $10! That’s a savings of $15 off the bat, just for buying the card instead of paying with cash. Many rewards credit cards also offer discounted gift cards, where you can get more bang for your cashback buck. For example, Discover often offers $25-for-$20 or even $50-for-$25 cards through their rewards portal. Not only are you using cashback rewards (ie: free money), but you’re getting extra free money on top of that!

One extra tip: Take full advantage of restaurants that offer free appetizers. For example, some Mexican restaurants serve free tortilla chips and salsa before meals, and Italian restaurants often offer bread. Eating the free appetizers may satiate you enough so that you can order a smaller, cheaper entree.

How to Save Money on Food While Traveling

When traveling, choose your hotel wisely to save money on food costs. If the price is comparable to that of other hotels, opt for one with continental breakfast. Having this free meal each day can save you a lot, especially if you have a long stay. If you can, choose a hotel room that has a kitchen in it — or at least a mini fridge and microwave. This will help you prepare meals at your hotel and not have to eat out all the time.

Here You Go: Frugal Travel Tip: Rebook Your Hotel to Save More Money

While you’re traveling, you may be on the run a lot. To fuel yourself, make sure you pack snacks. These on-the-go mini meals will keep you going throughout the day. They will prevent you from getting hungry to the point where you want to make an unplanned stop at a food spot.

Third, buy groceries at a local grocery store. Just because you’re traveling, it doesn’t mean you have to eat out for every meal. You can experience your destination’s culture by buying local groceries that people in that area enjoy.

Learn More: How to Save Money on Airline Fees

Lastly, just plan ahead. If you know there are certain restaurants you want to go to, make a schedule and budget, and stick with it. Knowing where you want to go and how much you want to spend will save you money by helping you avoid any impulse buys.

One extra tip: Bring a reusable water bottle. Bottled water can be expensive, especially at airports. Keep your reusable water bottle and fill it up whenever there’s an available drinking water fountain. (Be sure to empty it before you go through TSA, though, or they’ll make you either toss the bottle or go back through the often-lengthy line. I learned this the hard way when I had to toss my brand new, pricey bottle, as I didn’t have time to go through the line again.)

Final Thoughts

Food is something we all have to buy, whether it’s groceries, restaurant meals, or food on the go. Finding savings in this category can really add up and help with your budget. Hopefully, you are able to trim your expenses both at home and while traveling using these tips.

Do you have other money-saving tips that our readers would find helpful? Share them below!


2017 Traditional and Roth IRA Contribution Limits

If you’re planning out the rest of this year’s finances, chances are you’re paying attention to the IRA contribution limits for 2017. As a reminder, the limits shown for 2017 are NOT the numbers you will use to file your 2016 taxes in the next couple of months (you’ll want the 2016 numbers for that). These, however, are the numbers you will want to reference when planning your contributions for the rest of this year.

Take full advantage of the account(s)

The easiest way I’ve found to ensure that you max out your IRA (gotta take every advantage the government will give you!) is to simply spread out even contributions throughout the year. So, with this year’s IRA limit being $5, 500, you’ll want to contribute just over $458 a month, from January through December.

What if you receive an unexpected windfall this year or get a raise? Do yourself a favor and put some of that toward your retirement accounts first. Then, come the end of the year, you won’t be stressing about whether or not you’ve hit your mark. (Your deadline actually isn’t December 31st, but more on that below). You might even be able to max out the account earlier in the year. Then, you’ll have wiggle room in your budget for the holidays or to put extra toward savings.

How much can you contribute?

As you can see from the table below, nothing has changed yet again this year as far as IRA limits go.

Year Under Age 50 Age 50+
2002-2004 $3, 000/year $3, 500/year
2005 $4, 000/year $4, 500/year
2006 $4, 000/year $5, 000/year
2007 $4, 000/year $5, 000/year
2008 $5, 000/year $6, 000/year
2009 $5, 000/year $6, 000/year
2010 $5, 000/year $6, 000/year
2011 $5, 000/year $6, 000/year
2012 $5, 000/year $6, 000/year
2013 $5, 500/year $6, 500/year
2014 $5, 500/year $6, 500/year
2015 $5, 500/year $6, 500/year
2016 $5, 500/year $6, 500/year
2017 $5, 500/year $6, 500/year

A few notes…

Traditional and Roth IRA contributions are added together

First, note that this limit is a combined limit for traditional and Roth contributions. While you can contribute to both accounts in the same year, the total contribution cannot exceed the $5, 500 (or $6, 500) limit.

Contributions may or may not affect your tax bill

Second, your traditional IRA contributions may be tax deductible. This depends on whether or not you’re covered by a retirement plan at work, and how much money you make. Details can be found here.

You might make too much for a Roth IRA

Third, you will need to ensure that your MAGI (modified adjusted gross income) does not exceed the eligibility cap for contributing to a Roth IRA. For 2017, this cap has increased and begins at $118, 000 for single filers and $186, 000 for married filers. At that point, an eligibility phase-out begins; once you reach the maximum threshold ($133, 000/single and $196, 000/married), you are no longer eligible to contribute without utilizing a backdoor Roth (a topic for another day).

Status Income
Can Contribute to Roth IRA?
Single Filers $0 – $117, 999 Yes, up to $5, 500 (or $6, 500)
$118, 000 – $132, 999 Limited contributions allowed
$133, 000+ NO
Married Filers (combined income)
$0 – $185, 999 Yes, up to $5, 500 (or $6, 500)
$186, 000 – $195, 999 Limited contributions allowed
$196, 000+ NO

December 31 is NOT your deadline

Finally, remember that you can make contributions for 2017 all the way up to April 15th, 2018. Thus, if you still haven’t gotten around to it making your 2017 contributions by the end of the year, you still have a little bit of time. However, I would still recommend front-loading your tax-advantaged accounts as much as possible, so you can end the year without worrying about maxing out contributions.

 


Should You Pay Off Your Mortgage Early or Invest?

Should you pay off your mortgage early? Or should you focus on investing with your spare cash? This is one of the most hotly debated topics in personal finance, with vocal proponents on both sides. Today, I thought I’d take a look at this issue from both angles and then share our approach with you.

invest or mortgage

Why you should pay off your mortgage early

One of the biggest advantages of paying off your mortgage early is peace of mind. Once you’ve paid it off, you’ll wake up every morning and fall asleep every night knowing that the roof over your head is 100% yours. For many people, you can’t put a price on that sort of security.

Beyond the comfort/security aspect, paying off your mortgage early is a bit like locking in a guaranteed investment return. For every dollar that you pay early, you’re “earning” the interest that you would’ve otherwise paid on it over the balance of the loan period. This sounds great, right? Well…

The flip side of the “guaranteed investment return” argument is that mortgage interest rates are often quite low. On top of that, interest payments on a mortgage are also tax deductible (for those that itemize). These factors make early payments lose a bit of their luster.

Resource: Paying Off Your Mortgage Early: Some Things to Consider

Another advantage of paying off your mortgage early is that doing so protects you from yourself. While paying the minimum on your mortgage and investing the difference might sound like a great idea, there are no guarantees that you’ll actually follow through on the second part of the equation.

To see how long it might take you to payoff your mortgage, there’s a mortgage payoff calculator at this site for mortgage calculators

Why you shouldn’t pay off your mortgage early

The biggest downside to paying off your mortgage early is the (potentially large) opportunity cost that you’ll face. By this, I mean that you’ll be giving up investment returns that might significantly outpace your mortgage interest rate.

In other words, why pay off a 5% mortgage when you could be earning 8-10% on that money? Of course, one only has to look at the past year to know the answer… Those sort of returns aren’t guaranteed, whereas the mortgage savings are.

Another important point to consider is the effect of inflation. Over time, inflation erodes the value of the dollar. This means that your future mortgage payments will effectively cost less than they do now, as the money you’ll be sending in won’t be worth as much in terms of “real” buying power.

What are we doing?

Instead of pretending to know what’s best in your situation, I though I’d tell you what we’re doing. We’ve actually gone back and forth on this issue, but ultimately decided to do a bit of both. And yes, I know that answer is a total cop-out, but it is what it is.

We are currently in the fortunate position of being able to max out our retirement accounts while having enough left over to put some extra cash toward our mortgage and to work on building up a non-retirement portfolio. So, that’s exactly what we’re doing. I view it as “extra diversification.”

A bit over a year ago, we refinanced from a 30 year fixed rate mortgage down to a 15 year fixed rate mortgage. In doing so, we cut our time horizon in half. Beyond that, we’ve been sending in an extra principal payment every month, further reducing the time until we’re mortgage-free.

Related: 30 Years or 15 Years — Which Is a Better Mortgage Choice?

Admittedly, this hasn’t been an easy decision for us, and we’re still tempted to waver at times. After all, now is a great time to refinance, and I also suspect that there’s a good bit of inflation looming just around the corner.

Given the above, we’ve been tempted to refinance into a rock bottom 30 year fixed rate mortgage and pay it off as slowly as possible. At the same time, we would focus on building our investment portfolio. However, a wise man recently reminded me that “pigs get fat, but hogs get slaughtered.” In other words, it pays to be greedy, but not too greedy. In the end, we opted to stay the course.

What about you?

Where do you stand on the mortgage pre-payment issue? Are you looking to get out of debt come hell or high water? Or are you paying off your mortgage on schedule while focusing on your investments?


Top 5 Financial Moves to Make This Year

With a new year comes the chance to have a fresh start. According to a Fidelity study, more than one-third of Americans set a financial resolution for 2017. Whether or not you set a financial resolution, though, improving your finances is likely still important to you. To help with this, we came up with a list of the top five financial moves to make this year.

5 financial moves

1. Create a Realistic Budget

A budget is simply a plan for your money. It can be as minimal or as comprehensive as you like. What’s important is that you know how much money you bring in versus how much money you spend and save.

A realistic budget is one that you can sensibly stick to over time. To create such a budget, you’ll need to track your expenses for a few months. You can do this by looking at your bank account and credit card statements and seeing how much you’ve spent in previous months. You can also use a tool like Personal Capital or Mint to track your expenses for you.

Learn More: How to Budget If You Hate Budgeting

After you’ve tracked your monthly spending, you’ll need to decide how much you can reasonably save each month. If the amount you want to save each month is doable based on your current spending habits, great! Otherwise, you may have to reduce your spending in order to meet your savings goals.

2. Build an Emergency Fund

An emergency fund is an amount of cash set aside for use in the event of a financial crisis such as job loss or a large expense. If you don’t have an emergency fund already, this is the year to build one. Aside from the obvious financial benefit, an emergency fund also provides a peace of mind that’s priceless.

Resource: How to Decide If an Expense Is Emergency Fund-Worthy

To build your emergency fund, you can set it up like any other savings goal you have. You can decide on an amount to be transferred from your bank account into the savings account on a regular basis – for example, every two weeks or once per month – until you reach your goal. Personal finance experts recommend having three to six months of expenses saved in an emergency fund.

Your emergency fund should be liquid, meaning that it can converted into cash quickly. For this reason, it’s a good idea to keep your emergency in a savings account. To get the most interest on your money, consider an online-only bank such as **add affiliate link!!** Capital One 360 or Ally. Online banks offer high-yield savings accounts with competitive interest rates compared to traditional banks.

3. Save for Retirement

If you’re like many who have access to employer-sponsored retirement plans, make sure you’re contributing at least up to the employer’s match if applicable. The good thing about employer-sponsored 401(k)/403(b) plans is that the money comes out of your paycheck pre-tax. This reduces your taxable income for the year. It also makes it a bit easier to save because you won’t have to worry about any manual transfers.

If you’re self-employed, you can still save for retirement. You can save money in a Roth IRA or a traditional IRA. There are no income limits for contributing to a traditional IRA. But to contribute to a Roth IRA, there are income limits. Both retirement accounts offer tax benefits, but in different ways. Traditional IRA contributions are tax deductible, but the withdrawals are taxed in retirement. Roth IRA contributions aren’t tax deductible, but the withdrawals are tax-free in retirement.

Resource: Current IRA Contribution Limits

4. Review Your Insurance Policies

Review all of your insurance policies to make sure you and your family are substantially covered this year. One major insurance policy that you want to be sure to review is your health insurance. A large medical expense could put you in debt if you’re not adequately covered.

The biggest decision you’ll probably have to make is whether to enroll in a high-deductible health insurance plan or a regular health insurance plan. If you have a high-deductible health insurance plan, you’ll be eligible to contribute to a health savings account, which has multiple tax benefits. On the other hand, a regular health insurance plan will give you more predictable medical costs without you having to foot a large bill upfront before your insurance kicks in.

Other insurance policies to review include your life insurance, car insurance, homeowner’s insurance (if you own a home), and renter’s insurance (if you rent your home).

5. Determine Your Lifetime Goals

The last financial move to make this year is to determine your lifetime goals. What do you want achieve? Do you want to retire early? Do you build your own business? Whatever your lifetime goals are, you’ll need to take a look at how your finances fit into that picture. If you want to retire early, you’ll need to make sure you are contributing enough to retirement accounts now to fully fund your lifestyle in the future. If you want to build your own business, you’ll need to set income goals and profit projections to make sure you’re on track.

When you’re clear on what your lifetime goals are, it makes it easier to make decisions now. It makes it easier to say “no” to things that don’t fit into your plans and “yes” to opportunities that will further your progress.

Final Thoughts

As you can see, these financial moves are pretty involved. Each one requires some effort on your part. The good news is that these recommended actions can have a positive impact on your finances and your life overall.

I like to look at personal finance as one pillar of personal development. When you manage your money effectively, you are taking control of your future. Just take things one day at a time, and before you know it you’ll be making substantial progress by the end of the year.


Dave Ramsey’s Baby Steps

While I’ve been somewhat critical of Dave Ramsey and his “Debt Snowball” in the past, he’s definitely helped an awful lot of people get their finances in order. Thus, I thought that it might be worth spending a bit of time talking about Dave’s “Baby Steps” for getting out of debt and improving your finances. Here they are:baby steps

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How to Save Money on Life Insurance

Life insurance is an incredibly important financial product. Unfortunately, it’s also relatively costly. With that in mind, I thought I’d put together some tips for saving money when you’re in the market for a life insurance policy.

save life

Get healthy

Any insurer worth their salt will require a physical as part of the underwriting process. The good news is that it’s easy — they’ll send someone out to your home or office. Smoking, obesity, high blood pressure, etc. will all result in significantly higher premiums. So, leading a generally healthy lifestyle will save you a lot of money on your life insurance premiums.

Buy it only if you need it

Life insurance makes the most sense for people with significant financial responsibilities. If others depend on you for financial support, then you most likely need it. However, if you’re young, unmarried, and childless, you may be better off skipping it and banking the savings.

Buy term and invest the difference

The simplest and cheapest form of life insurance is a term policy. Sure, insurance policies with a cash value — such as whole life or universal life — can make sense in certain circumstances. But you can save a good bit of money by foregoing the investment component, buying a term policy, and investing your savings on your own.

Don’t buy more than you need

The more coverage you buy, the more it will cost. You don’t want to go cheap and leave your loved ones high and dry. However, it also doesn’t make sense to buy more than you really need. Just don’t forget to factor in the effects of inflation.

Pay attention to your payment terms

Most insurers allow you to pay monthly, quarterly, semi-annually, or annually. While paying monthly might sound better than coughing up a year’s worth of premiums in advance, keep in mind that many companies charge for the privilege.

Shop around

The premiums on identical policies from different issuers can vary widely. Thus, it pays to shop around. Either enlist the help of a reputable insurance agent or get a quote online from a company like Haven Life (many policies don’t require a physical exam). Just don’t buy from a company on the brink of bankruptcy in the interest of saving a few bucks.

So there you have it… Six simple tips for saving money on life insurance. If you have any further suggestions, please be sure share them in the comments.

And if you’re generally reviewing your insurance policies, see our articles on how to save money on car insurance, how to save money on homeowners insurance and how to save money on health insurance.


Passive Income Streams: What They Are and Where to Find Them

Passive income is money received on a regular basis that requires little effort to maintain. Sounds great, doesn’t it?

passive income

Generating passive income is a great financial goal because it’s a smart way to build wealth. One thing to realize is that creating passive income requires an upfront investment — whether it’s money or time. You’ll need to be committed in order to be successful at creating a passive income stream. Here are three passive ideas and how they work:

Idea #1: Investing

Investing is a tried and true way to make passive income. Of all the passive income ideas, investing is probably one of the most passive. The most significant investment you’ll make is your money upfront. There isn’t much upkeep after that.

Whether you’re starting out with $1, 000 or $100, 000, you can make money in the stock market. The important thing to know is that investing doesn’t come without its risks. The value of your stock portfolio will continue to fluctuate as long as you own it. If you’re in it for the long haul, however, you can ride out those fluctuations and see profits over time.

There are many methods for investing your money in the stock market. One way is to invest in dividend-paying stocks. A dividend is a payout some companies provide to shareholders on a regular basis. Dividend yields vary from company to company, so keep that in mind.

It’s important to not merely go after stocks with the highest dividend yield. Instead, focus on companies that have a proven track record of increasing dividend payouts over the years. You can either receive your dividend payouts as cash or choose to reinvest them in the same stock. The latter is known as DRIP, a dividend reinvestment plan.

One way to invest your money that doesn’t involve the stock market is peer-to-peer lending. Peer-to-peer lending involves funding personal loans to borrowers through an intermediary like Prosper or LendingClub. As a lender, you make money through interest payments on the personal loans.

Although peer-to-peer lending doesn’t have the risk of stock market fluctuation, your money isn’t completely secure. Borrowers have the ability to default on loans. To mitigate this risk, you can diversify your portfolio with multiple personal loans. You can also review personal loan requests and decide which ones you’d like to fund. For example, you can review criteria such as credit worthiness and the reason for the loan.

Idea #2: Rental Properties

Making passive income from rental properties is effective, but it often takes more time than people expect. The way you make passive income is by receiving rent payments each month that exceed the mortgage payments. If you bought the property outright, you’ll begin making passive income right away. However, you will need calculate how many years it’ll be until you recoup your initial investment.

There are many things besides the cash investment that go into making rental properties profitable, though. You’ll need to spend the time learning about real estate to make sure you don’t lose your investment.

When looking for rental properties to invest in, one of the first things you’ll want to consider is location. In the real estate industry, properties in good school districts tend to have great potential. The same goes for properties near expanding retail or local transportation.

The next thing you’ll want to consider is your return on investment. If you want to charge a higher rent, consider doing renovations to the property. For example, tenants are usually willing to pay a higher rent for updated kitchens and bathrooms. Make sure you leave some buffer room for occasional expenses such as plumbing problems and other tenant requests.

The least passive part of rental property income is managing tenants. You’ll want to minimize the amount of time that your property is vacant because this means no rental income for you. Finding and screening tenants can be a time-consuming process. Moreover, managing tenant requests takes up time as well. To save time, you can hire a property manager to take care of these tasks for you. This expense will eat into your returns but may be worth it to avoid the headache of tenant management.

Idea #3: Information Products

Unlike investing and rental properties, information products generally do not require much upfront monetary investment. Instead, it requires a greater upfront time investment.

You’ll need to spend time researching the market for your information products (whatever type or topic they may be), creating the actual information products, and then marketing them. Despite the time investment required, creating information products is a very attractive way to generate passive income because you don’t have much to lose. If you don’t sell any, you won’t be losing money.

There are many different types of information products. There are eBooks (which you could sell on Amazon or your own website), physical books, online courses, training material, and audio content, among others. The type of information product you create will greatly depend on the topic. For example, if you want to teach people about software programming, an online course would be ideal so that you can show live examples and include practice prompts. The barrier to entry for creating information products is low. If you’re an expert in a subject matter that people are interested in, you’ll have a market. You can even outsource the creation of your information product if you just have a good idea.

A good way to prepare yourself for creating a profitable information product is to start by freelancing or consulting. Not only will working in industry increase your credibility, it’ll also give you insight into your market. For example, if you have a personal fitness training business, you can take note of the common problems your clients experience. Then, you can use that insight to package a set of videos and training material to sell to people who’d like to get in shape.

Final Thoughts

As you can see by the three examples above, passive income requires some upfront investment. Whether it’s money or time, you’ll need to invest something before you can begin generating passive income. Seeking after passive income is well worth it though. Once you establish the right foundation, you can create a continuous stream of income that requires little maintenance.


Current High-Yield Online Savings Account Rates

I frequently receive e-mails asking my opinion as to which online bank has the best high-yield savings account. I’ve used several online banks over the years for my emergency fund and look to a few factors in selecting a savings account:

  • The interest rate (of course)
  • Minimum deposit requirements
  • Monthly maintenance fees
  • The website and how easy it is to use

high-interest

Considering these factors, we’ll look at a number of high yield savings accounts. Here’s an automated rate table that will show you several of the top options.

Banking Deal: Earn 1.15% APY on an FDIC-insured savings account at Barclays.

I’ll also update the list below with accounts that FiveCentNickel readers have identified as their favorite online savings accounts.

Looking for the best online high-yield savings account? Here are some of the most popular online savings options. All savings rates were updated as of January 10, 2017.

Barclays Savings Account: 1.15% APY

Barclays has been around for over 300 years and operates in 50 different countries. Barclays is a large bank and offers competitive rates on savings accounts. There is no minimum balance or any monthly fees, and don’t worry, its FDIC insured. Click to Apply.

Ally Bank Online Savings Account: 1.15% APY

Formerly known as GMAC Bank, Ally is one of my favorites. They offer one of the highest savings rates out there, and they also have very competitive CD rates. Accounts with Ally have no monthly fees as well as no minimum balance requirement. We’re actively holding a portion of our savings with them. Click to Apply.

Synchrony Bank: 1.15% APY

Synchrony offers one of the highest rates available today on a savings account. There is no minimum balance required and Synchrony does not charge monthly fees. Money can easily be withdrawn from the account online, and it is FDIC-insured. Click to Apply.

GS Bank Savings Account: 1.20% APY

Formerly GE Capital Bank, Goldman Sachs acquired the online bank and renamed it GS Bank. Its online savings account features a highly competitive yield, no transaction fees and no minimum monthly balance or opening deposit. All GS Bank accounts are insured by the FDIC.

CIT Savings Account: 1.15% APY

CIT was founded by Henry Ittleson in 1908 with a mission to provide financing for businesses. CIT continued to grow, offering financing, lending and insurance for corporations in many different sectors. CIT Bank, an FDIC-insured institution, offers CDs, savings accounts and custodial accounts to consumers and small businesses.

FNBO Direct Online Savings Account: 1.10% APY

FNBO is currently offering a 1.10% APY on their Online Savings Account. There are no minimums and no monthly fees. They offer a return that has averaged ten times higher than traditional savings accounts according to a 2012 study by bankrate.com. Maximum principal deposit balance: $1, 000, 000.

Capital One 360 Savings Account: 0.75% APY

Building off the legacy of online-banking pioneer ING DIRECT, Capital One 360 is a new favorite. Capital One 360 offers both an online savings account and a high-yield checking account. There are no fees, and its site has an ultra-slick interface with lots of useful features.

EverBank High Yield MMA1.21% 1st Year APY

EverBank offers a high yield money market account. For first-time account holders, new account bonus rate for Yield Pledge Money Market Account – first year APY is currently 1.21% for account balances up to $150K, and an ongoing APY currently at 0.61%. There are no fees associated with your account as long as you maintain a $5, 000 minimum balance. They also have a high-interest checking option. While you may not have heard of them, they’re FDIC insured. Definitely worth checking out.

Lending Clubaverage net annualized return of 5% to 7%

If you’re looking for a significantly higher yield than a regular bank can offer, you might want to check out online investing company Lending Club. They are a good option if you don’t mind taking on some additional risk. It’s not FDIC-insured, but an average net annualized return for Lending Club notes are between 5.25% for grade A notes and 8.57% for C grade notes. It’s free to open an account, and you can get started with as little as $25. I’ve been using them for the past few months, and have had a great experience thus far. Click to Apply.

I should also note that USAA was a popular option among those that have access to it. I did not, however, include it in the main list, as it’s only available to members of the armed services (active duty, reserves, or retired) and their families.