Beating Broke

Zero Net Worth: The Next Steps After Beating Debt

December 9, 2019 By MelissaB Leave a Comment

Debt can feel like a heavy shackle around your neck, weighing you down and making every movement difficult. The funny thing about debt is that you may not even realize that you feel this way until the debt is paid off. Then, you suddenly feel free and light, as if you can do anything! When you reach zero net worth the next steps after beating debt are imperative for a financially secure future.

Celebrate (A Little)

Most people’s natural tendency is to splurge once they pay off their debt. Maybe they take an exotic vacation or just increase their standard of living.

While it’s okay to celebrate, do so in moderation. Achieving zero net worth is a fabulous milestone, but don’t erase all of your hard work by immediately living above your means and slowly putting yourself back into debt again.

Zero Net Worth: The Next Steps After Beating Debt — Photo by Jeremy Bishop on Unsplash

Decide on a splurge amount that you want to spend, and go ahead and spend the money. But after you’ve spent the amount you decided on, get right back to being financially disciplined and increasing your net worth.

Establish an Emergency Fund

You likely have a tiny emergency fund, if you have one at all. That was understandable while paying down debt. Now that the debt is gone, it’s time to make your future more secure with an emergency fund. In general, a six-month emergency fund is a good goal. However, if you’re the primary breadwinner or if your job is based on commission or not secure, you may want to have a nine-month emergency fund.

Create Sinking Funds

Zero Net Worth: Steps to Take After Beating Debt — Photo by Max Rovensky on Unsplash

At the same time you’re building your emergency fund, I’d also recommend creating sinking funds. Sinking funds allow you to save for future expenses, helping you avoid going into debt in the future. Let’s say you think you’ll need a car in four years. You plan to buy used and think your car will cost $20,000. Each year, you’ll want to save $5,000 for that car or $416 a month. You’ll set that money aside every month just as if you were paying a regular bill. When you’re ready to buy your car, you’ll be able to do so with cash.

Sinking funds can also be created for smaller expenses such as a vet fund for your dog. When he needs to see the vet, you’ll have the funds to pay cash. Other common sinking fund categories are home repairs, home improvements/decoration, car repairs, and medical bills.

Start Saving for Retirement

Unless your employer matches your retirement contributions, I’d start contributing to your retirement fund AFTER you have a six-month emergency fund and sinking funds established.

If your employer does match, I would start investing right away up to the amount that your employer matches. So, if you make $50,000 a year, and your employer matches the first 3% of your salary for retirement contributions, I’d go ahead and invest the $1,500 a year (3% of your salary). Your employer’s contribution will double your amount to $3,000 a year. Definitely take advantage of that offer for free money.

Final Thoughts

Congratulations! Paying off all of your debt is a huge accomplishment. Now that you have zero net worth the next steps after beating debt are crucial to your future financial security. If you take these steps, you’ll be on your way to a solid financial future.

5 Ways to Save on Utilities and Amazon

December 5, 2019 By MelissaB Leave a Comment

If money is tight and your income is lower than you’d like it to be, there are many ways you can save money. Several utility providers and even Amazon offer discounts to those with documented lower incomes. These discounts can provide necessary help to those who most need it. Here are five ways to save on utilities and Amazon.

Ways to Save on Utility

Depending on the season, utilities can cost several hundred dollars a month. If you’re at or near the poverty level, paying these bills is difficult. The following discounts can help customers meet their basic needs.

Gas and Electricity

5 Ways to Save on Utilities and Amazon — Photo by Clint Patterson on Unsplash

The Connecticut Legislature lists 11 states that are required to offer discounted gas and electricity to those with lower income. The states are Arizona, California, Georgia, Maine, Massachusetts, Minnesota, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont. Most states require an income level 150% or below the poverty level. However, some issue a maximum income based on a family of four. The discounts range from 25% to 35% off to a percentage off your utility bill. The amount depends on your income as based on the federal poverty level.

Phone Service

A number of phone and internet providers are part of the Lifeline Program. As part of this program, low income customers can receive reduced rates on phone and internet services. Only a few states are participating. These include Connecticut, Delaware, Massachusetts, Maryland, North Carolina, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and D.C.

You are only allowed to receive Lifeline services from one provider, not multiple providers. Discounts and requirements vary by state.

Spectrum Internet Assist

Spectrum offers phone, internet and television services. Customers who receive the National School Lunch Program, or The Community Eligibility Provision, or Supplemental Social Security are eligible for Spectrum Internet Assist.

Comcast Internet

Comcast offers internet for $9.95 per month (plus tax) as well as free installation to its low-income customers. Families can qualify if their child is eligible for the National School Lunch Program. Customers are also eligible if they receive HUD housing support. In addition, Comcast has rolled out a program for senior citizens, available in select locations. To qualify, the customer must by 62 or older and receive federal or state public assistance. Lastly, community college students are also eligible if they’re enrolled and are receiving a Pell Grant.

Ways to Save on Amazon Prime

An Amazon Prime membership is $10.99 a month. However, for low-income customers, Amazon Prime offers membership for $5.99 a month. To qualify, customers must have either an Electronic Benefits Transfer (EBT) card or Medicaid card. These customers can renew their memberships yearly up to four times.

Living on a tight budget can be difficult. Yet, with these five ways to save on utilities and Amazon, you can stretch your money further. Utility discounts help low-income customers have their most basic needs provided. In addition, internet and phone service discounts help people to work from home and students do their work. Amazon Prime provides families with low-cost entertainment and cheaper goods that are delivered right to their own doors. This is especially important if low-income customers live in food deserts.

What other discounts do you know of for low-income customers?

Why You Should Let Your Teen Make Money Mistakes

December 2, 2019 By MelissaB 1 Comment

As parents, we want to help our children avoid the mistakes we made. This is especially true with money mistakes as they can set people back years from achieving their financial goals. (Sad to say, but some adults never achieve their financial goals.) However, there are several reasons why you should let your teen make money mistakes.

My Biggest Money Mistake

Teen Money Mistakes — Photo by Sincerely Media on Unsplash

I made so many money mistakes when I was young! Probably the costliest one was transferring to a university for the winter semester and choosing a dorm room. I called my future dorm roommate just to say “hi”, and she was so rude and gruff! Because I was shy and fearful about living with someone, I backed out of staying in the dorm, but I couldn’t get a refund on my money. I paid for that dorm for four months, and I never lived there!!

My mom never said anything; she let me make my own choice, and that decision was certainly one I learned from.

Watching My Son Make Money Mistakes

My son is now 15, and while he used to be a great saver, over the last few years, he’s become a spendthrift. If he has any money in his pocket, he will try to find a way to spend it, often on items he doesn’t even need.

I live in fear that he’ll move out, get a credit card, and rack up incredible debt, which will take years to pay off or cause him to file for bankruptcy.

Why You Should Let Your Teen Make Money Mistakes

As hard as it may be, as parents, sometimes the best thing we can do is step aside and let our teens live their lives as they inch closer to independence.

Better They Learn as Teens Rather Than Adults

Keep in mind, it’s better to let our teens make money mistakes now than as adults. My son is trying to save for a school-sponsored trip to visit some college campuses. However, he’s struggling with this goal because any time he makes some money, he feels compelled to spend it.

The worst-case scenario here is that he won’t be able to go on the trip. As an adult living on his own, he’ll face much more serious consequences if he can’t save his money. The worst-case scenario may be that he doesn’t make rent and is evicted. I’d much rather he miss the trip this year and be envious of those who did get to go. Hopefully that will motivate him in the future to save for large goals.

Experience Is the Best Teacher

While our toddlers soaked up every word we said and thought we were the experts, our teens our cynical and eager to break free from parental control. Simply put, they don’t like to listen to us. Sometimes as parents the best we can do is not say anything and let natural consequences take their course.

Think back to your own teenage years. Did you learn best from your parent lecturing you or the experience of making your own decisions and dealing with the consequences?

When your teen stumbles after a money mistake, don’t swoop in with an “I told you so!” No one appreciates that. Instead, be a sounding board and encourage them to make smarter decisions in the future.

Watching our teens make money mistakes isn’t easy, but as they crave more and more independence, letting them experience life, and fail sometimes, is exactly what they need.