Beating Broke

Is It Really Possible to Invest When Broke?

March 9, 2020 By MelissaB Leave a Comment

Investing is the best way to grow your wealth. You can watch your money grow thanks to the compounding power of interest and dividends. Especially if you start investing at a young age, say your teens or twenties, the power of time is on your side and you will increase your money much more rapidly than someone who begins investing in their 40s or 50s. But if you’re just starting out or have debt, you may wonder, is it really possible to invest when broke?

The answer is, yes, it’s completely possible, though you may start investing with less money and in a less conventional way than other individuals who are investing. Remember, every little bit helps!

Is It Really Possible to Invest When Broke?

Should you be investing at all if you have debt or if you don’t have an emergency fund or extra money each month? Yes, you should, but feel free to invest in a smaller way. Consider some of these options:

Take Advantage of a Company Match

The first place to start investing is in your company’s retirement plan. This is an even smarter option if your company matches your contribution.

Is It Really Possible to Invest When You're Broke? — Photo by Allef Vinicius on Unsplash

When I started my first full-time job in my 20s, I was broke. Flat out broke. And my company automatically withdrew 8% of my paycheck every paycheck to put in the state retirement system. There was nothing I could do to stop this investment, and trust me, I would have if I could have.

But, I’m so glad I couldn’t! My company also matched the mandatory 8%, so I was investing 16% of my salary in my retirement. When I left that job 10 years later, I walked away with an impressive start to my retirement, thanks in large part to the company match.

Use Acorns

Another easy way to invest is with an investing app. Acorns is a microsaving app that takes the discipline out of investing. You connect the app to your checking and credit card accounts. Every time you make a purchase, Acorns rounds up, and the difference is invested.

You can also choose the option to boost your round ups by up to 10x. So, if you make a purchase for $4.60, normally, 40 cents would be invested. However, if you boost that amount by 10x, Acorns will invest $4.40 for you.

There are over three million people currently using this app, which is a great way to start investing even if you’re very young, say still in college, and don’t have a full-time job.

How to Learn More About Investing

Once you start investing, you may want to know more and invest more. If you’d like to learn more about investing, there are several low-cost classes such as Udemy’s Investing in Stocks: The Complete Course. This 11-hour course is currently $14.99. If you’d like a free option, Morningstar offers a free investment class that includes 170 lessons!

Final Thoughts

The best time to invest is now, especially if you’re young. But even if you’re not, it’s never too late to start investing. Your future self will be so glad that you did!

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

March 5, 2020 By MelissaB Leave a Comment

Your budget is tight. I get that. You stare at your long list of debts and don’t know where to begin. You may wonder how to pay down your credit card faster even if you don’t have extra money. After all, you may be doing all you can just to meet your basic monthly obligations.

If you search the Internet for help, you’ll likely find suggestions like eliminating eating out, visiting coffee shops, and buying designer clothes. But what if you’ve already eliminated all of those extras, plus cable television, date nights out, and entertainment with the family? What if you buy used clothes, have your grocery budget as low as it can be, and have changed to VOIP phone service? Perhaps you’ve cut as much as you can. What if you have nothing left to cut?

You may feel like you’re in a desperate position, but there are still strategies to pay down your credit card faster even if you don’t have extra money.

Stop Using the Credit Cards

Before you begin to employ any pay down strategies, the most important thing you can do is stop using the credit cards! There’s no way to pay down the balance if you keep using the card. Let’s be honest, if you stop using the card completely, eventually it WILL be paid off even if you don’t use any strategies to pay down your credit card faster, even if you don’t have extra money.

However, if you stop using the card and use the following techniques, you will slowly but surely pay off your credit card. And, you will do it faster than if you just stopped using the card and paid the minimum payment every month. (Sure, that’s better than using the card and having a perpetual balance, but just paying the minimum will take you sometimes 20+ years to pay off the card.) Instead, use a two fold approach: stop using the cards and use these strategies:

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

Use these techniques to “create” extra money to put on your credit card, which will slowly but surely help you lower those balances.

Switch to a 0% APR Credit Card

If your credit is good enough, you may want to try applying for a 0% APR card. These cards often give you a 0% APR for 12 to 15 months. Since you’re not paying interest during that time, you can pay off your credit cards more quickly than if you were still paying interest.

If you owe $10,000 on a credit card, and you have an APR of 16.99%, each year, you’re paying approximately $1,699 in interest on the card or approximately $141 a month in interest. Now, imagine having a 0% APR for a year. That means if you make your exact same payment as before switching to a 0% APR credit card, you’re paying an additional $141 a month on the card instead of interest. By taking advantage of a 0% APR credit card, you can reduce your balance by an additional $1,699 in a year!

Many of these cards charge a 2 to 4% transfer fee, so do the math first and make sure you will save money over your current card charging interest. If the math works in your favor, consider continuing to use this strategy. When the 12-month promotional 0% APR ends, switch your remaining balance to another 0% APR card until you have the card paid off.

Negotiate a Lower Interest Rate

If you don’t have access to a 0% APR credit card, try to call your credit card company to negotiate a lower interest rate. I’ve had good luck with this strategy. Just recently, I called one of my credit card companies and asked for an interest rate drop. They moved me from 13.99% APR to 10.99% APR.

Let’s say again that you have a $10,000 balance. If you’re paying 13.99% APR as I was, then you’re paying approximately $1,399 a year in interest. Just this simple rate reduction to 10.99% APR means you’ll be paying approximately $1,099 in interest per year, saving you $300 a year in interest. That entire $300 can be used to reduce your overall balance, assuming you continue to make the same payment throughout the year. This difference in interest rate means you have more money you can apply to the balance without increasing your monthly payment.

Pay Weekly or Bi-monthly

Most people pay their credit card monthly. If you instead pay weekly or every two weeks, you’ll pay down your balance faster without increasing your payment.

Why? Two very important reasons.

First, your interest rate is computed based on your daily average, and if you pay more frequently, you’ll lower your daily average. If you normally pay $100 a month, just pay $25 a week instead or $50 every two weeks.

Second, if you pay weekly or biweekly, you’re actually paying more than if you pay monthly. If you pay $100 a month, you’re paying $1,200 over the course of a year. If, however, you instead pay $25 a week, you’re actually paying more–$1,300 a year. Sure, it’s only $100 more on principal over the course of a year, but in time, that additional principal payment will make a difference in how quickly you’re able to pay down the card.

Don’t Lower Your Payment as Your Minimum Payment Drops

If you’re currently paying your required minimum payment of, say, $100 a month, in a few months, that minimum payment will drop to, say, $97. Don’t drop your own payment. Keep paying the $100 you’re used to paying. That extra will be put on principle without affecting your current budget.

Final Thoughts

If you’re looking at your bills and desperately wondering how to pay down your credit cards faster even if you don’t have extra money, remember, there are strategies to help you pay off the cards faster. Just using these simple steps will help you pay more on principal without putting extra money on the debt. Of course, as you make additional money, you’ll want to put it on the debt, but until then, you can gain traction with these strategies.

What other tips do you have for people to pay off their credit cards faster even if they don’t have extra money to throw at the debt?

6 Unexpected Baby Expenses to Budget For

February 27, 2020 By MelissaB Leave a Comment

There is nothing more exciting than the anticipation of a new baby. However, a baby can increase the budget even if you’re frugal. These are just 6 unexpected baby expenses to budget for. These items can’t bought second hand and likely won’t be gifted at a shower.

6 Unexpected Baby Expenses to Budget For

If you’re planning for a new arrival this year, there are a number of expenses you should plan for:

Formula

6 Unexpected Baby Expenses to Budget For — Photo by Rainier Ridao on Unsplash

I breastfed all three of my kids, but all three were such massive babies with big appetites that I had to supplement with formula while breastfeeding. We hadn’t planned on that expense, and formula is expensive!

Breast Pump

If you are going to breastfeed, you’ll need a breast pump because even if you’re a stay at home mom, there will be times that the baby doesn’t want to eat or you won’t be with the baby at feeding time, and you’ll want the option to pump. If you don’t plan to breastfeed for long, you can rent a pump month by month through your local hospital. I bought mine for $200 and used it for all three children, so it was well worth the expense.

Unexpected Medical Expenses

While most babies are perfectly healthy, some babies have issues and have to visit the ER. My friend’s baby got RSV and then had a partially-collapsed lung, all at 5 weeks old, so she spent five days in the hospital. That was an expense they had not planned for, and it took them a few months to pay it off.

My daughter had jaundice for three months, and we had to see a number of specialists, and she was checked into the hospital one night. (She was fine, but we hadn’t planned on the specialists and going to the hospital several times a week to check her bilirubin.)

Increased Grocery Bill

If mom is breastfeeding, she’s going to eat a lot! It takes a lot of energy to produce all of the nutritional needs for baby. Don’t be surprised to see your grocery bill increase for the duration of the time that mom breastfeeds.

Clothing

Mom’s body changes after delivery and the post-partum period. Not only will she need clothes that fit her when maternity clothes are too big and she can’t yet fit into her pre-pregnancy clothes, but she’ll also need some good nursing clothing if she’s breastfeeding.

Miscellaneous Items

There are other, little items that you may need such as diaper rash cream and gas drops. Our second child had so much gas that she wouldn’t sleep at night, and we went through baby gas drops what felt like every week. We later found out she had a milk intolerance, and when we took her off milk, she did fine.

Final Thoughts

If you’re expecting a baby, you can get many of the items that you need at your baby shower. However, there are other items that you’ll need that you won’t get as gifts and can’t get secondhand. Being aware of these before the baby comes can help you create a realistic budget.

What other expenses would you add to this list?