Uncategorized Archives - The Broke Professional

Ways to Decrease Your Utility Bill

This is a guest post from Anum Yoon, who is a prolific and excellent writer in the personal finance sphere.  You can find out more about her at her blog Current on Currency.

Today’s post will feature ideas on how to keep your utility bills low.  With winter around the corner, these tips could save you a lot of money.  Enjoy!

Temperatures are starting to drop. We are closing our windows now and thinking about turning on the heat. Whether you love winter or hate it, you are going to pay more to keep warm when the snow starts to fall and the temperatures drop.

The same is true for those in warm-weather climates. When the heat rises, so do the air conditioning bills. We have no choice but to heat and cool our homes to maintain our comfort, but there are a few things you can do to keep your utility bills from burdening your budget.

Check Your Settings

Are you scalding your hands when you wash them? Are your vegetables freezing in the refrigerator drawer? Check the settings of your appliances to make sure you aren’t overworking them and wasting energy, which results in higher bills.

Your hot water tank doesn’t need to be set any higher than 120 degrees. This is hot enough for dishes and laundry and certainly hot enough to wash your hands. Manufacturers and installers typical set them higher, and you may not have looked at or paid attention to the settings. Consult your manuals for more information.

Your refrigerator should be set around 37 to 40 degrees and your freezer at 5 degrees. Anything colder than that is unnecessary, and you will be wasting energy and potentially freezing your food in the refrigerator. Some refrigerators have known cold spots, but many people just set them too low.

Replace Incandescent Lightbulbs

Old lightbulbs use a lot more energy than new halogen, CFLs and LEDs. Depending on the specific type, these bulbs use anywhere from 25-80 percent less energy. These bulbs are more expensive than their predecessors, but last many years longer and will save you money over the long term.

Purchase Energy-Efficient Appliances

When it is time to get a new refrigerator, freezer, washer or dishwasher, look for those marked Energy Star compliant. These appliances can use up to 75 percent less energy than older models, which can add up to hundreds of dollars in annual savings. Even if your old refrigerator still works well, it might not be a bad idea to consider replacing it for overall savings.

(Note from TBP: Check with your local utility company to see if they provide credits for upgrading your old appliances to Energy Star models.  Many will also haul away the old appliance for you.)

When you use your appliances, make sure they are full before you run them. They will use just as much electricity washing a few items as they will a full load. Be wise and economical with your energy use and save money doing so.

Use Your Garbage Disposal Properly

The garbage disposal is a modern convenience that many take for granted. It’s not a magic hole through which anything can pass. The garbage disposal uses a lot of electricity to grind up wasted food items into tiny bits small enough to pass through the drain. Sometimes they clog, and through misuse, break. You can save money on electric bills and expensive repairs by observing some of these do’s and don’ts

Do

  • Turn on a heavy flow of water before flicking the switch. The garbage disposal needs water to do its work and will overheat without it. Continue to run the water after the grinding stops in order to thoroughly clean out the drain.

 

  • Every few months, put ice cubes down the drain and grind those up. This will help clean out the inner workings of the disposal. You can also add a lemon peel to help freshen the scent. Disposals often smell bad because they have rotting food stuck inside them.

 

  • Have your kitchen drain snaked out every few years. This will prevent clogs and possible repairs.

 

Don’t

 

  • Put grease down the drain. The grease will harden in the water and create clogs throughout the drain. Just save grease and fat and discard it in the trash can.

 

  • Grind up big food items that can be thrown in the trash. It’s a waste of energy and it puts unneeded stress on your disposal.

 

  • Put rinds, potato peels, rice or pasta in your disposal. These items should be thrown in the garbage and never put into your drain. The garbage disposal doesn’t do well with these items and will usually clog from them.

Add or Replace Insulation

Is the air you are heating or cooling escaping outside through cracks and gaps in your windows or attic? Proper insulation will keep that air inside and prevent your home from feeling drafty. This will save you money, as your furnace or air conditioner won’t have to work as hard to maintain your desired temperature.

Add weather stripping to doors and windows. Caulk up holes and cracks you can reach. If you are comfortable doing so, add another layer of insulation in your attic, or hire a professional to inspect and assess what your house needs.

Check for Leaks

Leaky pipes, toilets which run nonstop and sinks that drip constantly all waste water and cost you money. Fix these leaks yourself or hire a professional if you are uncomfortable doing so. If you aren’t sure you have a leak, you can check your water meter. If all the water is off, there should be no change in the meter after two hours or so. But if there is, you may a have a leak somewhere in the house.

Invest in a Smart Thermostat

If you are going to be gone all day, don’t waste money keeping your home at an ideal temperature when you can’t enjoy it. You can program a smart thermostat to have your home at the temperature you desire by the time you get home and give the furnace a break when you aren’t there. Some can be programmed and accessed online, in case your plans change.

There are lots of little things we can do to save on our energy costs. They don’t have to be major projects like replacing all the windows or installing a new roof — although these will help, too. You just have to properly maintain your appliances and be conscious of the energy you are using. Even making a minimal effort will lower your bills during extreme weather months and keep more of your money in your pocket.

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Sweat the Big Things. Part 3: Taxes

This is Part 3 of my three part series about housing, transportation and taxes.  These are the three things which I believe can make or break your finances.

Part 1 discussed housing and Part 2 talked about transportation.

In this Part 3 of this series, let’s save the best for last and talk about taxes!

In my experience talking with fellow doctors and professionals, the subject of taxes usually comes up.  But many people misunderstand taxes.  It is most likely the single biggest expense you will face every single year.

You need to get it right!

Depending on which state you live in (California *cough cough*), your entire income can be taxed at 50% if you’re not careful.

Everyone has to pay taxes.  There is just no way around it.  So it really pays to find out ways to keep your tax rate as low as possible.

While the tax code is pretty complex, there are two main things that most working professionals need to understand to avoid paying too much tax.

PROGRESSIVE Tax Brackets

If you understand this chart, you are far ahead of most Americans when it comes to understanding the tax code.

We all pay federal income tax.  Most of us pay state tax too, but that can vary between states.  So I will just focus on the federal brackets for now.

This chart is important and understanding it will give you a good idea about how much tax you will pay.  More importantly, it will drive some financial decisions throughout the year that will help you minimize your taxes.

The first thing to realize is that the tax brackets are progressive.  Meaning that the more income you have, the higher your tax rate will be.  But our entire income is NOT taxed at the highest rate.  Just the limits spelled out by the tax brackets.

As an example, a new doctor makes $200,000 the the first year out of residency.  Looking at this chart, he might be horrified to learn that he will fall in the 33% tax bracket.  That means he will owe $66,000 on his $200K income!

This is actually incorrect and it is how many people think the tax system works.  The doctor’s income does put him in the 33% bracket, but the entire income is not taxed at 33%, just the portion above the lower limit.

So according to the chart, our doctor would pay 33% on the part of his income above $191,650, which is $8,350.  His total tax would be 33% of $8,350 + $46,643.75 from the previous brackets.  The amount of tax owed is $49,399.25.  That’s a lot of tax but still sounds a lot better that $66,000.  In reality his tax would be even lower with the standard deduction and other deductions available, but there isn’t enough space in this post to get into that.

So with the progressive tax brackets, our entire income is not taxed at our highest bracket only the last dollars we make are.  How can we use this to our advantage for tax planning?  Reduce the amount of last dollars we make!

And by far the best way to do this is by contributing to a tax advantaged account.  This could be a 401k, Traditional IRA or even an HSA.  Money contributed to these accounts are taken off the top of our income, so we are not taxed at our highest tax rates.

In the case of the doctor, if he contributed just $10,000 to a 401k that year, his highest tax bracket would become 28% instead of 33%.  That’s thousands of dollars saved in taxes right off the bat.  We should be saving for our retirement anyway, but it’s nice to be able to save on taxes every year in the process.

Know Your 1040

 

 

The tax code can be difficult to navigate, but the IRS gives you some clarity on the 1040 form.  That is the form we all have to file for our personal taxes, and having a basic understanding of it can really help reduce your taxes.

The 1040 form provides a summary of our taxes.  It lists your income as well as any credit and deductions you receive.  It is a great line by line playbook of how taxes are paid in this country.  Knowing the ins and outs of this form gives insight on why you pay the amount of tax you do.

It would be too involved to go into each line of the 1040, so I will just mention a few things about the place where you get the biggest bang for your buck: above the line deductions.

The higher income you have, the more tax you will pay in general.  So you want to get that income as “low” as possible.  That doesn’t mean you work less or start slacking off.

What we need to do is make as much money as we can, and then try to make it look a lot less on our taxes.  This sounds shady, but it’s totally legal.  And above the line deductions are the best way.

The “line” I’m referring to is line 37 of Form 1040, which lists our adjusted gross income (AGI).  We are taxed on our AGI and not our actual earned income, so making this number lower is key.  And lines 23-36 tell us how to do just that.

Not all these lines will apply to everyone.  But find what applies to you and work on that.  For most working professionals, deductions for IRA contributions and the student loan interest deduction are two easy ones.  Check with your tax professional to see where you can maximize your deductions.

Know thy taxes

The last thing I would recommend for everyone is to find your tax return from last year and take some time to sit down and go through it line by line.  It is an enlightening exercise to see how certain calculations for deductions and credits are made.

And if you don’t like looking through your tax return as much as I do, then sit down with your CPA before the year is up and see where you can find ways to minimize your taxes.

Taxes are definitely complex, especially if you have a business.  But if you sift through the complexity you will be able to find ways to reduce your taxes that many people don’t think about.  Just be careful not to reduce them TOO much so the IRS doesn’t come poking around!

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Equifax Hack and the Botched Response

Equifax, one of the big three credit reporting companies in the country, was recently hacked.  The company states that 143 million people were affected.  Which means a lot more people were most likely affected since they are probably reporting a conservatively low number.  They are a business after all.

The population of the US is a little over 300 million.  Meaning almost half of the citizens in the country had their vital information compromised.  What type of information was stolen exactly?

According to Equifax, your name, birthday, address, social security numbers, drivers license numbers and credit card numbers were all compromised.  So essentially all the information a hacker would need to sign up for any type of account.

I miss the days of hackers targeting Home Depot.

So what should we do?  The first thing we should NOT do is listen to Equifax.  Here are 2 reasons why:

1.  They set up a bogus help website that only helps themselves.

Soon after the hack was made public, Equifax set up a pretty crude looking website called equifaxsecurity2017.  That just looks like a fake URL off the bat.

On the site you can check if you’re “potentially impacted” by entering the last 6 digits of your SSN and your last name. Yes, you can check if your information has been compromised by entering even more information.

Once you enter that info, it will say you have been potentially affected.  No matter what you enter, it will say you are potentially affected.  Which means they have no idea if you are potentially affected.

But wait, there’s more!  If you’ve been affected, you get a free trial of TrustedID Premier, the credit monitoring service offered by Equifax.  You’ll get a free trial for a year and then be charged after that if you want to keep it.

So not only did they set up a dubious looking website to get even more of our information, they are trying to take our money after a massive data breach.

Please do NOT sign up for this service.  There are many ways to monitor your credit that are free and easy that I will mention at the end of the article.

As far as the second reason we shouldn’t listen to Equifax:

2.  Equifax execs sold their company stock before the hack was made public.

Like something out of Wolf of Wall Street, three Equifax executives sold their stock in the company before the hack was publicly disclosed.  The official company line was that they had no idea the data breach had occurred.

While I’m a cynic by nature, any rational person could see that is a bald faced lie.  How any executive of any company could not know that their company was exposed in the biggest data breach known to man makes no sense.  Let alone three executives.

While some conciliatory reasons were given such as they didn’t know, and they didn’t sell ALL of their stock (aka these guys are a lot richer than we can imagine), the fact is that this deceptive action did occur.

Because of this, I will have nothing to do with this company or their “TrustedID” program.  And if there ever is a class action lawsuit that I can be a part of, I will be sure to sign right up.

What You Should Do

So what steps should we take to ensure we don’t become victims of identity theft?  Unfortunately, there is no way to completely prevent ID theft.  These hackers are much smarter than us or any company out there.  Like a good defense in football, we need to prepare the best we can and react accordingly:

1.  Monitor your credit reports.  This can be done essentially for free through services like Credit Karma and Credit Sesame.  They will send you an alert whenever there is a change on your credit report.

The best thing we should all do is look at our credit reports.  Go to annualcreditreport.com and request a report from all 3 bureaus (yes, even Equifax).

2.  Submit an initial fraud alert.  This tells any business to take some extra steps to identify you in case there is an application submitted in your name.  This usually means you have to talk to someone when you apply for a credit card or bank account.

Some people say submit a credit freeze, but I don’t think this is necessary since hackers tend to sit on this information for a long time before they act on it.  You won’t be able to apply for any new accounts during that time either, so that’s your call.

3.  Submit your taxes early!!!  Most Americans are procrastinators when it comes to filing taxes.  Many even file extensions because they don’t want to do it by April.

Don’t do that next year.

Tax filing fraud is on the rise, and with this data breach it could potentially be a huge problem for the 2018 tax filing season.  We get most of the forms we need by February.  Once you get the necessary paperwork, just go ahead and file.  Especially if you’re expecting a refund.  Don’t let the government hold on to your money interest free!

Be vigilant about your credit and identity!

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Sweat the Big Things. Part 2: Transportation

This is Part 2 of my three part series about housing, transportation and taxes.  These are the three things which I believe can make or break your finances.

Part 1 discussed buying a house.  This post will talk about the costs associated with transportation.

Don’t do it. Just don’t.

In my last post about buying a home the smart way, I mentioned that buying a house will most likely be the most expensive transaction of your life.  Coming up in second place is buying a car.

Buying a certain type of home can be a status symbol.  A sign that you’ve “made it.”  That you’re finally a grown up and don’t have to be ashamed about inviting your friends over anymore.

But I would argue that a car can be more of a status symbol.  If you drive through a nice neighborhood, you will be admiring the homes but you’ll also be looking at what’s parked in the driveway.  You’ll be thinking about the guy with the Tesla in a much different light than the guy with the old Civic.

And this is why cars can potentially destroy your finances.  There is such an emotional attachment to certain cars that it can cloud the judgement of even the most savvy and cost conscious consumer.  Someone coming in the car buying experience with eyes wide open can easily be led astray by an experienced salesman.

They’ll come in for a slightly used Toyota and leave with a brand new Lexus.  Along with a large shiny monthly payment.

There are two principal ways cars can wreck your finances.  Cost and time.  Let’s look at both of these and find out how you can minimize both.

You’re Not Paying For Just a Car

Whether buying or leasing a car (which is another discussion altogether), everyone looks at the monthly payment as the cost of the car.  We live in a paycheck to paycheck society where monthly payments are the barometer of affordability, so this makes sense.

Unfortunately, cars cost more than the monthly payment.  Just like buying a house comes with extra costs, so does buying a car.  Those extra costs come in the form of gas, maintenance, repairs, insurance premiums, parking and tolls.

The average monthly car payment has risen to $509.  With the associated costs that becomes over $700 per month.  The average price of a car sold in the US is over $30,000.  There are car loans that stretch to 7 years nowadays.  This is insanity and will keep you from accumulating wealth for a very long time.

And let’s not forget the almost immediate depreciation you get with a car.  At least homes generally go up in value at the rate of inflation.  Cars lose value as soon as you sign on the dotted line, and they keep going down after that.

So you have a hefty down payment along with a monthly payment.  And add ongoing associated costs to that.  AND the vehicle is losing value over time.  Sounds like a huge money sink to me.

But lots of people really need cars.  If you’re one of those people, like me, you need to do as much as you can to minimize all of these outlays.

Get the cheapest and safest car for your needs that is reliable and gets great gas mileage.  As long as you stay away form luxury cars and getting a bigger car than you need, you’ll be better off than the majority of Americans.

If you want to be wealthy, an expensive car will be a huge obstacle in that journey.

Death by Commute

Another overlooked part of driving is the cost of commuting.  And I’m not talking just about money.  Your health and your time, and sometimes your soul, can all be taken from you because of your commute.  Commuting can literally kill you.

I can attest to this personally.  At my first employer I was commuting less than 10 minutes each way.  I filled up the tank twice a month.  I could go home and see the family for lunch if I wanted.  Life was good.

Then I got a “promotion” which had me driving 35-40 minutes each way.  Sometimes in heavy traffic.  Life was not so good all of a sudden.  I could physically feel myself getting more stressed and I started to have more neck pain.  I had to wake up earlier than before and had less time to spend with my family.

And car maintenance issues started to crop up.  The AC randomly stopped working.  I was hearing strange new sounds coming from the engine.  And all this in just a couple of weeks of my new commute.  I was also definitely less happy at work than I was before.

The only plus was that I could listen to podcasts more often.  But it’s not really a plus since I could have just woken up earlier and listened to them before.  So pretty much nothing but negatives with this longer commute.

The new commute actually compelled me to look for a new job.  And thank goodness I did since I found a new position at a different company for more pay and a commute similar to my original short one.  I noticed the differences almost immediately.  The job was more fun, the neck pain disappeared and driving was kind of enjoyable again.

Finding a new job is one way to reduce the negative aspects of commuting, but there are others.  Public transportation, telecommuting and carpooling are some other ways.  Get creative and find what works with your current situation.

I really appreciate my short commute and it’s going to take a lot for me to give it up!

Conclusion

In my last post about housing I mentioned the Latte Factor.  It showed how you can cut out your morning coffee and invest those savings to grow some money.  Applying this to car buying really makes the Latte Factor not worth the effort.

Kelley Blue Book allows you to look up the 5 year cost of ownership of any car.  This takes into account the car’s price and along with registration, insurance and maintenance.  It’s a great apples to apples comparison to see how much cars really cost.

A 2017 Lexus ES 350 has a 5 year cost of ownership of $54,071.  A 2017 Toyota Corolla comes in at $34,286.  That $20,000 difference can send your investment accounts skyrocketing.  Both cars seat 5 people and are reliable.  And the Corolla owner can keep getting his lattes everyday.

This is a real and significant difference that can make or break your finances.  The Lexus might turn a few more heads, but the Corolla owner will be wealthier.  And if he invests his money wisely, he will be FAR wealthier.  Don’t let your ego get in the way of being rich.

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Tax Filing Open Season Is ON!

It’s actually tax season!

People love the new year for many boring reasons.  You can lament the past year (2016 wasn’t THAT BAD.  Famous people die every year).

A new year also signifies a fresh start.  That could mean a new healthy diet or starting to break some bad habits.

But most New Years resolutions die fast, so I like the new year for a different reason.  TAX TIME!

And it’s not because I’m getting a big refund.  I try to get as small of a refund as possible.  That’s because getting a large refund means you had the government hold your earned money last year.  But that’s for another post.

I just enjoy getting tax related letters in the mail and having a nice folder at the end of February with all of my financial information from 2016.  Doesn’t get much better than that.

That being said, today is a big day for me.

January 23, 2017 is the first day the IRS will accept tax returns.  This includes paper and e-file.  And why are you still using paper??

Here are some other key dates to remember:

January 31, 2017: Date by which you should have received your W-2 from your employer.

February 16, 2017:  Financial and investment institutions must mail out their various forms, including 1099’s which report any withdrawals from retirement accounts.

April 18, 2017: Tax Day!  Last day to file federal income tax returns and any extension requests.

October 15, 2017:  Last day to file federal taxes for those who had approved extensions.

This post is simply a public service announcement for the start of tax filing.

Next week I will outline where you can get your taxes done, and how it can possibly be FREE!

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The One Service That Finally Let Me Cut Cable

Pittsburgh Steelers v Tennessee Titans

Change is tough.  Changing something I’ve been used to my entire life is especially tough.  For me, that something was cable TV.

Having “background TV” on has always been a normal thing growing up.  Though probably not the best thing to grow up around, it was what we grew up around nonetheless.  After I got married and moved out on my own, it was just assumed we would sign up for a cable package.

After all, how else would I watch basketball and football?  And how else would we be able to DVR our favorite TV shows?

It turns out that there are now tons of ways to do this.  I’ve actually previously written about the benefits of cutting cable a couple of years ago.  Despite the obvious financial and anti-commercialism benefits cutting cable would provide, I just couldn’t bring myself to do it.

My main hangup was how I was going to watch sports.  If I can’t get NFL network, ESPN or any local channels I would have to invade people’s homes who did have cable.  That’s not a way to live life.

But I’m happy to say that I did finally cut the cord a couple of months ago.  And with great results.  We’re saving money every month and only watching those things we want to.  And it was a specific service that helped me finally take the plunge.

Playstation Vue FTW

There was always a video game system in my house growing up.  It all started with the original 8-bit Nintendo, then Super Nintendo, Nintendo 64, Gamecube and then the Playstations.

I currently have a Playstation 3 but I honestly haven’t used it to play a video game in years.  Being a full time doctor, husband and father will do that to you.  And I wouldn’t have it any other way.

But the PS3 is still being extensively used to watch shows on Netflix and Amazon Video.  We watch almost all of our TV shows on these two services.

And now the PS3 being used a lot more because my 3 year old son ended up downloading a free trial of Playstation Vue.  And it changed everything.

I heard of Vue from ads here and there but never really thought anything of it.  But as I dug into it more I realized it will solve my biggest hurdle in cutting cable: watching sports.  I particularly love watching NFL football and NBA basketball.  The main channels I watched on cable were ESPN, ESPN2, NFL Network, TNT, TBS and local channels for live games.

And guess what.  Playstation Vue has them all!  For $35/month I could get all these channels along with a bunch of other great ones (Comedy Central, CNN and MSNBC to name a few) streaming on my PS3.

And that’s exactly what I did.  This made cutting cable really easy and a no brainer.  Even with the Playstation Vue monthly price I’m saving a healthy amount per month from what I was paying before.  And I don’t have to pay for the DVR and the laundry list of TV related taxes.

Not Missing Anything

Between Netflix, Amazon Video and Playstation Vue, we don’t miss our cable package at all.  We get more shows than we could ever watch with Netflix and Amazon, and I get my fill of sports with the Playstation Vue options.

Since the channels are streaming there is the occasional hiccup like with any Internet connection, but that is a once a week occurrence.  The TV watching experience is almost identical as with a traditional cable package, and it will only get better as Internet reliability improves over time.

And because of certain broadcast rules, some channels are not allowed to show commercials during breaks.  This is actually an added blessing since we won’t be influenced by a barrage of ads and it actually forces us to talk to each other during commercial breaks.

In short, we don’t miss our former cable package in the least.

Actual Savings

$150.43= Old monthly cable bill (includes TV, Internet, home phone, DVR rental and various random taxes)

$72.59= New monthly cable bill (includes faster Internet, home phone and no random taxes)

$34.99= Monthly payment for Playstation Vue

$42.85= Money saved per month.  And our lives are actually a little better because of the faster internet and fewer commercials.

I could say I can’t believe we waited this long to cut the cord, but there were not many good options available to watch sports until recently.

But with services like Playstation Vue, Sling TV and even a good old fashioned antenna depending on where you live, you can still get your favorite channels and then some.

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Life Insurance Brings Peace of Mind

“With all of these financial and insurance considerations, one tool that gets lost in the shuffle is life insurance.  This is a shame since a good life insurance plan will provide peace of mind for you and your family, while being a financial cornerstone for your loved ones.”

Read the rest of my post about the importance of life insurance over at FineTunedFinances.  Life insurance is so easy to sign up for nowadays and is very cheap compared to most other types of insurance.  Checking your rate is really a no brainer.

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Digit: Save Money Easily and Automatically

An emoticon I can get behind

An emoticon I can get behind

This post may contain affiliate links

America has a savings problem.  No, not the annoying habit of trying to save every country from themselves.  That’s for another blog.  The savings problem is that Americans are just not saving enough money.

The personal savings rate in 2015 was found to be 4.8%.  This rate includes retirement account savings, such as a 401(k).  Saving 5% into your 401(k)  alone is not going to get most people anywhere close to a comfortable retirement, so this is a scary stat.

Another scary number?  62% of Americans have less than $1,000 in their savings account.  This means that many many people in this country are not able to fork over $1,000 in case of an emergency.  They will have to resort to credit cards or loans to make up the difference.  And more debt is not the answer.

The answer: make saving automatic.

If you’re eager to start saving automatically sign up here!

Enter Technology

Automatic savings has been the backbone of my finances.  Deductions from my paycheck into my 401(k).  Monthly transfers from my checking account into my savings account.  Direct debit monthly student loan payments, which also gives me a slight interest rate deduction.

The beauty of automating your finances is that the money goes where it needs to go.  I never have to worry about it being spent or disappearing into the financial ether.

But if you have read any of my posts, especially some of the earlier gems like this one, you’ll know I’m not perfect.  Some months may have different cash flow needs than usual, and as a result I have money just sitting in my checking account doing absolutely nothing.

This is where Digit has made a big impact in my life.  I first heard about it while listening to an interview on the awesome Stacking Benjamins podcast a while back.  I tried it and fell in love.

The basic idea behind Digit is that once you sign up and link your checking account, Digit uses some fancy algorithm to analyze your transactions.  After a couple of days, it is able to determine how much you can safely save and sends that amount to your Digit account, which is FDIC insured.

If you happen to be spending a lot that month, Digit will adjust accordingly and not take as much money out of your checking.  When you have some extra money sitting around, then they will save a little bit more.  If your account happens to overdraw because of Digit, which is exceedingly rare, they will reimburse you for the fee.

Easy to Use

Accessing the money is easy.  You can just use their new mobile app to withdraw funds back into your regular checking account, or their traditional way of communicating through text messaging.  I use the texting currently because they update you periodically on how much you have in your Digit account and in your checking account.  They also send funny pictures once in a while to keep things lively.

Once a month I will transfer the money from Digit into my emergency savings account.  This gives me a little savings boost each month which I otherwise didn’t have.

It’s a nearly pain free way to save.  It’s not useful for everyone, like those people who keep track of every single cent in their account (you know, THOSE people).

But it is a great service for those who have trouble saving anything, or those who would like to be a little more efficient with their savings, like me.

It’s risk free to try.  If you’re not happy with it, you can just withdraw your money and close the account on their website.

Signing up is really easy:

  • Join by clicking here and enter some demographic information
  • Link your primary checking account
  • Give Digit a few days to analyze your spending and enjoy the newfound savings!
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How I’m Pursuing Freedom

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Being smart with personal finance is not difficult.  There are a few key steps to take which will put you light years ahead of the average American.  My goal is to make personal finance simple and actionable for professionals and anyone else who cares to listen.

Find out some more about what makes The Broke Professional tick by reading my interview at It Pays Dividends.  While you’re there check out the rest of Thias’ site.  It’s jam packed with great financial information.

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4 Things You Forgot About Personal Finance

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We all forget simple things sometimes.  The other day when I was trying to login to my system at work, I could not remember my password for the life of me.  I always typed it in without hesitation and without thinking about it.  But for some reason that day I could not remember it.

My memory lapse (aka brain fart) was so bad I even had to get my password reset.  And when I remembered it later that day I couldn’t believe I forgot it in the first place.

But it happens.  We are fallible.  Even billionaires like Donald Trump make mistakes.  Or lots of them.

The same thing applies to personal finance.  I have done so much reading on finance the past few years sometimes I forget the basics.  And I know others do the same.  Life happens and sometimes we can lose sight of what’s important.

So here are four fantastic pieces of personal finance knowledge that we may have forgotten:

1. No interest is better than low interest

It is very easy to get into debt in our society.  If I wanted to, I could just visit a few websites and sign up for a car loan, mortgage and personal loan in just a few hours.  And if you have kneecaps that you don’t mind losing, payday loans are always an option!

Debt has become such a normal part of society, that people don’t really mind keeping “low” interest debt laying around.  This especially includes tax friendly debts such as mortgage debt and student loan debt.  What’s the harm in keeping around a mortgage that is “only” at 4% and where you can deduct the interest paid from your taxes?

The harm is that you are effectively giving the bank a dollar so you can get back a quarter.  If you have the funds to pay off debt quickly, you will be SO MUCH farther ahead if you pay down the principal faster rather than keep the debt around because you can save some money on taxes.  The only one’s getting richer in that situation are the banks.

Debt is so easy to obtain and even more dangerous to keep around, even the “low interest” kind.  Don’t get lackadaisical in  and pay it off as quick as you can.

2. Delayed gratification really works

Awesome personal finance habits can take a while to learn.  That’s why they’re called habits.  Depends on what school of thought/guru you follow, habits can take 21 days, 28 days, 30 days, 40 days or 2 months to fully form.

The bottom line is that they take time, and this really applies to the essential habit of delayed gratification.

But the problem is that our society is very impatient.  We want things now, now now.  And waiting to buy something you want just seems silly to most people.  But if you keep spending money every time you see something you like, you are sabotaging your financial future.

Spending money frivolously means you can’t put extra money towards debt paydown.  It means you can’t make that home improvement you’ve always wanted.  It means you don’t have enough money to start your business.  But if you save money for a period of time and live lean, you can do whatever your heart desires.

The best way to delay gratification is to save until it hurts.  If you’re saving so much money into your retirement plans, savings accounts HSA’s and self education that you can’t seem to find the money to buy that new Apple Watch, you’re doing well.  Just know that over time those accounts will grow and grow and you can do whatever you want with your money

3. Marketers know us better than we know ourselves

Walk into any major department or clothing store in the country, and you will be bombarded by sights, smells and sounds that are engineered to keep you in there.  Lights will accentuate the sharp curves of the newest smartphone.  Catchy music will be playing at a volume that will keep your ears perked up just enough.

And you will quickly forget that you popped into the store to pick up just one thing.

Making a list before going out to help keep your spending under control is a tried and true personal finance hack.  But companies know this and they hire very smart people that know how to keep us engaged.

Knowing this really is half the battle.  We need to realize that these companies need to keep making higher and higher profits every year, so they will keep looking for innovative ways to keep us in the store and handing over our money.  Keep this in mind next time you get caught in their web!

4. Focus on the big wins in life

As the old saying goes, don’t lose sight of the forest for the trees.  Going through life day to day, it can be easy to lose sight of our big goals.  We’ll hear a co-worker or family member talk about this amazing sale or this incredible new way to save some money on groceries.

The fact is, our brain bandwith is finite, so it’s important to keep the bigger goals in mind.  Things like debt repayment, family and friends and spirituality are some of the important things in my life.  But it’s easy to lose sight of that when the latest savings fad or mind numbing game or TV show comes around.

The things that have made people lots of money in the past are pretty much the same things that make people lots of money today.  Getting an advanced degree, building a business, paying off debt and investing are still the best ways to become richer.

Obsessing over things like cutting out lattes and draining the last bit of toothpaste out of the tube will save you some money in the short term.  But it could come at the expense of the real big wins.  Keep your actions geared towards those.

Personal finance has been an evolving subject for me.  I learn new things all the time and that’s really exciting.  But some things I’ve learned on day 1 are still the most important.  Sometimes all you need is a refresher!

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