saving | John J. Bowman Jr

July 22, 2019

Why You’re Overspending (And How to Stop)

Compare your monthly income with your monthly spending. Do you notice a glaring discrepancy? Are your earnings in the red? Can’t figure out how you spent hundreds on groceries? You aren’t alone. Overspending is easy to do, and purchases can accumulate in the blink of an eye. Here are some reasons why you’re overspending and advice on how to stop.

You’ve fallen into a bad habit

Do you buy lunch at the deli down the street every day? This is just one example of a bad spending habit. It may be comfortable and convenient to make a daily or weekly purchase, but ten dollars per day, five days a week, four weeks a month equals $200 each month just for lunch.

The best way to remedy a bad spending habit is to ease yourself out of the habit. For the lunch example, try packing a meal most days each week, and only go out once a week or so as a special treat. You don’t have to quit anything cold-turkey, and easing yourself towards a better spending habit might inspire you to be more mindful of what you buy.

You ignore automatic payments

This one is easy to notice, especially if you subscribe to magazines and newspapers that clog your mailbox. Still, with the rise of streaming services and other digital subscriptions, you may not be keeping track of all the services you subscribe to. It’s easy to let automatic monthly payments slip through the cracks, but those payments are also an easy way to lose money.

Each month, carefully study your credit card statement. Write down the names of subscriptions you used during the month, whether that means watching a movie on Netflix or flipping through a copy of Sports Illustrated. Next to that list, write down the subscriptions you didn’t use. Unsubscribe from the ones that you didn’t touch. You’d be surprised how much money you can save annually just by paring down your subscriptions.

You haven’t disciplined your spending habits

It’s hard to find someone who hasn’t disciplined their spending habits. Whether you fall victim to impulse buys at the checkout line or fill your gas tank before it hits the halfway mark, everyone has a spending vice.

No two people have the same income, interests, and habits, which can make disciplining your spending habits difficult. The key is to figure out what you’re buying and why you’re buying it. It helps to break purchases up into categories, such as “loans,” “food,” and “entertainment.” Not only will this show how much you’re spending, but it will also reveal what exactly you’re spending your money on.

February 1, 2019

Common Financial Mistakes Many People Make

Rarely, does someone have a perfect financial history. Mistakes in finance are common and it’s likely that most people have experienced them at one point or another. The important thing is to figure out how to correct them, as they can tend to pile up and create somewhat of financial hardship. However, don’t panic; with the right tools, you can easily change your financial habits. The following tips are a great guide and provide insight into the many financial mistakes people tend to make.

Too Many Monthly Payments

You may not realize it, but your monthly payments tend to add up, quickly. Many people are seeking the “better” things in life, so they’re willing to tack on monthly finance payments to acquire the things they desire. And while the monthly payments may not seem like a big hit at the time, the more you have, the more they tend to add up. Additionally, it’s not uncommon for people to have monthly payments that are more on the unnecessary side. Consider the gym, for example. While for some, a gym membership is a great investment, for others, it may just be a monthly bill that isn’t regularly utilized. Consider where your bills each month are going, and see which ones are actually necessary.

High Credit Balances

While credit cards may seem like a great way to get what you need, without having to see your bank account take an immediate hit, they can do more harm than good if they aren’t used properly. Think of a credit card as borrowed money; money that needs to be paid back, and should be paid back in full to avoid any further charges like interest and late fees. The days of cash only are gone for many people, as credit cards are a regular part of today’s society. Utilize your credit cards to purchases that you know you’ll be able to pay in full and avoid using them for everyday purchases that will increase your balance quickly.

Failing to Set a Monthly Budget

Budgeting your expenses on a monthly basis is a great financial habit to have; however, many people neglect to do this. Without a budget, you’re freely spending your money without keeping track of where it’s going. By the end of the month, you’re left wondering where your paychecks have gone and why you aren’t able to contribute anything to your savings account.

Falling Behind on Bills and Payments

Making late payments is an unfortunate, but common habit for many individuals. Late payments can hurt your financial health in that you will likely get hit with late charges and increased interest payments. Additionally, late payments can affect your overall credit score and lower it by a few points. Once this cycle starts, it can be hard to correct and break.

September 13, 2018

How to Manage Your 401(k)

In the early 1980s, the Internal Revenue Service introduced a tax-deferred method for US citizens to set aside savings for their retirement. Today, a 401K investment option is provided for employees by a great majority of the nation’s employers. A 401K plan allows a participant to set aside a portion of their pre-tax earnings until the age of 59 and 6 months, at which time they can begin taking taxed distributions with no penalty.

If you have your own 401K plan, there are some things you can do to enhance your profits and protect your savings. Here are a few strategies you should consider to help you properly manage your account:

Maximize Benefits

If your employer offers a proportionate matching benefit, it would be prudent for you to maximize the amount of your contribution in order to maximize the amount your employer is offering. This is a pure benefit that simply increases your employment benefits package.

Risk Assessment

Most 401K accounts allow the participant to manage their own investments. It’s your job to decide how much risk you are willing to take. Remember, the higher the risk might be, higher the returns will usually follow. As a rule of thumb, you’ll want to invest a least a portion of your account on high return investments. Also, you might want to consider taking extra risks if retirement is multiple decades away.

Index Funds Are Your Friends

Instead of trying to find singular investments that offer good returns, investments in index funds have consistently proven to be reliable. Fund managers will usually be more adept than you at picking the right stocks at the right times. Diversity is an important attribute in long-term investing.

Avoid Early Withdrawals

The tax code for 401K accounts is designed to discourage any early withdrawals. Short of an absolute emergency, you should plan on leaving your 401K account intact until you hit the age of 59 and 6 months. The penalty for early withdrawals in 10%. You might also lose a portion of your employer match is you have not yet met the plan’s vesting requirements.

Remember, Social Security was never intended to be a person’s only source of retirement income. You have a personal responsibility to provide for your own future. In that regard, a 401K account is one of the best investments you can make.

John J. Bowman Jr