money tips

Money tips to help you get through the minefield of personal finance advice and make it make sense for YOUR situation.

I love personal finance. I’m a numbers geek and have a budget sheet {+ exploratory budget sheets} to back that up.

Me + Personal Finance = Glee

But I’ve found that sometimes when I discuss numbers and the glory of compound interest, all that is staring back at me are a pair of glazed-over eyes.

People spit out unintended-intentions at me as if they’ve run into their high school Phys Ed teacher:

That sounds great! I’ll get right on that.

Wow, I never knew that. I have some time this weekend to look into it.

Sorry I wasn’t able to get to that yet. It’s on my to-do list.

It’s not that they don’t want the best for them and their families. Sometimes it’s just a time issue. But mainly, I think I get these responses because several of the things that I and other financial bloggers discuss are levels ahead of what a person can accomplish right now {confession: we all started where you are}.

And if you can’t do something about it right now, then what’s the point? For example, saving for retirement is essential in ensuring a secure and comfortable future {don’t start glazing over on me}. But what if you are living paycheck to paycheck? Listening to this (sound) advice would probably lead you to either a) feel bad about yourself and your circumstances, or b) tune out for life.

So today I am going to take three of the best, and most-regurgitated pieces of money advice out there and break them down into bite-sized chunks that everyone can follow.

Crumbs today, whole slices of peach pie tomorrow!

Financial Advice #1 — Max Out Your Roth IRA Each Year ($5,500 Annually)

It’s true; retirement is going to happen for most of us. And guess what else? I don’t know about you, but I don’t plan on putting all of my faith and future dreams into Social Security. So what are you supposed to do if you can’t possibly put $5,500 away each year for the sake of your future self’s happiness?

  • Alternative #1: You find out your employer has a matching contribution to your 401(K), and you have yet to sign up for it. While you don’t think you can afford the $5,500 max annual contribution to an IRA, you know that if you stretch yourself, you can put 1% of your paycheck towards your retirement (which really equals 2% with your employer’s matching contribution). What a fantastic start!
  • Alternative #2: You take part or all of your tax return and fund a traditional IRA. And if you qualify for the Saver’s Tax Credit, then you’ve set yourself up for doubling down on those tax benefits. Now we’re talking!
  • Alternative #3: Even if you can’t afford the roughly $458/month you need to set aside in order to reach that $5,500 max by the end of the year, you can still set aside something. Set up an automatic withdrawal from your checking account (or paycheck) of $XX-$XXX per month to your IRA (even setting aside just $50 a month for the next 35 years at a modest rate of return can reap you close to $70,000. It’s not enough to retire on, but it sure beats nothing!).

Financial Advice #2 — Build an 8-Month Emergency Fund

With the economy the way it’s been going, even fancy-pants financial pundits like Suze Orman have decided to up the amount of time your emergency fund should cover your expenses from 6 months to 8 months {as if most people even had 6 months’ worth of expenses set aside to begin with}. This is very sound advice…but perhaps it’s not reachable for you. After all, if it was easy to do this, you’d probably already have that nice little cushion earning interest on your behalf.

  • Alternative #1: You’ve probably figured out by now that the “savings” on the end of your receipts from the grocery store, drugstore, etc. aren’t actually “savings” in the normal sense of the word. If consistently setting aside a lot of money each month puts your stomach in knots, then play a savings game instead. For every receipt that you get, transfer the amount of “savings” at the bottom of your receipt into your actual savings account. Did you save $15.06 at CVS playing the Drugstore Game? Transfer that from your checking to your savings account. Saved another $17.31 at Kroger’s? Transfer that to savings. These are bite-sized chunks of manageable savings that will add up to a whole cannoli one day.
  • Alternative #2: Deposit most or all of any tax refund you receive into a savings account, and then treat it like a black hole (money goes into it, but it never comes out). Even if you do eventually take money out of it, by treating it like a black hole you will use more creativity and practicality before tapping it than you would otherwise.
  • Alternative #3: Perhaps you don’t have 6 or 8 months, but maybe you have something in an account to begin with. Make sure you are optimizing your money (without any risk, as you need to be able to access this money in the case of, well, an emergency). I’m talking about a good ole’ savings account. Interest rates aren’t too great right now, but some accounts offer 0.25% per month while others offer 0.85% per month. Choosing the account with a higher interest rate makes a difference overtime. At the end of the year, your money may have added an extra $50 of its own to your emergency savings account. Hey, every little bit helps!

Financial Advice #3 — Put 20% Down on Your New Home

Saving up a down payment of 20% is good for many reasons. For starters, most loans make you pay PMI insurance if you have less than 20% down to begin with (a slow, steady leak of several hundred dollars out of your paycheck each month that you don’t get back, though it usually is tax deductible).

What is PMI? Mortgage companies know if they foreclose on a home, they usually will not receive full value for the home when it is sold. PMI is insurance to pay for any loss on the lender’s part when they sell a foreclosed home.

  • Alternative #1: Here’s a secret: we didn’t put 20% down on our home purchase in 2009. Why did we go ahead with it? Paul is a veteran {I snagged me a sailor!}, and so we were able to take out a VA loan which does not have that pesky little thing called PMI insurance (Note: there is an upfront funding fee that is tacked onto these types of loans, so you don’t get away completely unscathed). If you have access to a VA loan, then you can get around this PMI insurance too.
  • Alternative #2: Are you close to 20% down (keep in mind increasing/decreasing value of your home)? Calculate how much longer you will need to pay on the mortgage before reaching this because when you do you can usually get your PMI insurance removed. Not all lenders will allow it right at 20%, and it could take some time, but there is hope for you to get out of paying this fee.
  • Alternative #3: You can potentially shift the PMI costs onto the seller of the home. By finding a loan that allows prepaid PMI Insurance at closing and then having your seller cover part or all of the closing costs, you will not be responsible for the PMI despite having less than 20% to put down.

How do you think Kaitlyn Farrington was able to win the Gold Medal in the halfpipe in Sochi? She certainly did not tune out at age 8 when she could hardly ride a snowboard at all. Something inspired her, something probably far beyond what she was currently able to do, and she implemented ways to challenge her current status quo. She upped her game, inspired by someone else’s work.

I’m not here to turn you off of personal finance out of frustration with my pie-in-the-sky ideas and suggestions. I’m here to inspire you to put your finances in the best shape possible at whatever level you are at.

12 replies
  1. Emily @ evolvingPF
    Emily @ evolvingPF says:

    Great post. It is easy to forget that PF bloggers all started somewhere. In fact, we’re only partway through your basic suggestions (don’t yet max out Roths, don’t have fully funded EFs)! It just takes time to build a good baseline financial situation.

  2. Sher@knsfinancial
    [email protected] says:

    What I’ve seen with people regarding personal finance is what is common in other areas “That’s great and all, but is there someone that can do all this FOR me? I need it to be as simple as possible or i won’t do it”. It’s great that you highlighted these main points, and i don’t think they can be re-stated enough. I think the great part is that these saving ideas can be automated so one doesn’t have to continually focus on them.

  3. Lisha
    Lisha says:

    Amanda, I think everyone’s brains work differently, and typically people who aren’t good at math are also not very good with money… and usually people who aren’t good at math don’t even want to think about math, or how to use money wisely, etc… so that’s probably where the glazed eyes come in, lol!

    I didn’t know about the PMI insurance. That’s so crazy. Now I need to tell my husband because he wants to buy a house as soon as we can, but we need to save the 20% down payment first.

    • FruGal
      FruGal says:

      Good explanation, Lisha:).

      I am so glad you read this then, as PMI insurance is such a bummer to pay. Good luck with saving for and finding your new home!!


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  1. […] Amanda from Frugal Confessions takes on the 3 best pieces of financial advice and explains them in a manner that’s easy to follow. […]

  2. […] Read more here: Finding Your Own Way through the Financial Advice Minefield […]

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