How to Keep Kids’ Activities from Breaking the Bank

kids-sports-my-personal-finance-journeyThe following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

Studies show that the average cost of raising a child from birth to age eighteen is nearly $250,000, and a recent study reveals that a decent chunk of that cash is spent on extracurricular activities. In the case of elementary-aged children, it’s an average of $463 this year, and in the case of secondary-aged children, it’s a whopping $1,124 this year.

If you’re “average”, that means you could be spending nearly $10,000 on each of your children’s extracurricular activities over the 13-year period that they’re in school. And that’s simply the national average, which takes into account all school-aged kids – even those not participating in after-school activities. If you’ve got a kid involved in a serious sport such as baseball, hockey, gymnastics or dance, you’re likely spending a lot more than $1,100 a year, even for elementary-aged kids.

If that seems like an astronomical amount of money to spend on kids’ activities to you, you’re not alone. The fact of the matter is that the days when the education system picked up a large amount of the financial burden for extracurricular activities such as sports is long gone, and parents are left to foot the bill.

How can you as a parent keep kids’ activity costs reasonable but still make sure your kids can have the sport or other extracurricular experiences that help make for a fulfilling life? Here are some tips.

Limit Activities to One or Two per Year

Many parents these days feel as if their kids need to be involved in some type of extracurricular activity all year around. The truth is that even one or two activities a year for your child will benefit them and help them to grow in teamwork skills, discipline and obedience.

When considering which activities to sign your child up for, ask them to decide which activity or activities they like best, and narrow the list down to their top one or two. Not only will this save you money, it’ll save time and lower stress levels as well.

Pick Activities That Will Benefit Them as Adults

The reality is that the majority of kids won’t grow up to be professional athletes or world-class Olympians, no matter how much promise they show at a younger age. If your goal as a parent is to raise up a professional athlete, you may want to reconsider your motives and instead choose an activity that will hold life-long benefits.

Activities such as self-defense classes that will show them how to handle themselves should they get trapped in an attacker situation or school sports such as cross country that will help them develop a life-long habit of self-care through exercise are some examples of activities that will benefit your kids long after they’ve graduated from high school.

Do Activities as a Family or With an Organized Group of Friends

Many families choose to do activities together instead of being involved in school-sponsored sports. Some families train for marathons, triathlons and obstacle courses together, or bike together in charity or other events.

Planning regular activities with family members or groups of friends allows those same benefits of teamwork and training for a fraction of the cost.

If you’re set on providing extracurricular activities that do cost more than you’d like, there are a few ways to help make the financial burden less impactful.

Work the Costs into Your Budget

Just like you would with a regular bill such as your utility bill, it helps to figure out the annual amount you’re spending on activities and adding that monthly “bill” into your regular budget, saving the money in a separate savings account or envelope. This way when fees are due you won’t be scrambling to come up with the cash.

Ask if the Studio Will Do a Work-for-Pay Trade

Some sports centers will allow you to volunteer or work there in exchange for lowering your child’s participation fees. Just remember if you do participate in some type of a barter situation to check and follow the bartering tax laws for your state.

Kids reap many benefits from being involved in extracurricular activities. With a little planning, choosing and creativity, those activities can be affordable for almost any family.

How about you all? How do you keep kids’ activity costs affordable?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/luigi_and_linda/7240626210/

 

Buying a Car 101: What You Need to Know

buying-a-car-my-personal-finance-journeyThe following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

I hate the whole car buying process.  From haggling to sitting in a dealership for hours, I just hate it.  That’s probably why my husband and I have not bought a car since we bought our current car 12 years ago.  However, the time had finally come when sharing one car was no longer working for us, so we set out on a search for a second vehicle.

Although our search lasted only two weeks, the entire process was annoying and stressful.  We did learn a lot, though.  If you plan on buying a car anytime soon, let me share with you what we learned.

Cash Is Not Always King

The old rumor used to be that you’ll pay less for a car if you pay cash.  While it is true that you’ll pay less for the car because you won’t be paying the interest over the life of the loan should you finance a car, paying cash won’t give you a lower price at the dealership.  When I asked one salesman about this, he said that dealers now prefer that you get a loan through them.

Why?  When you get a loan through the dealership, “an auto dealer actually acts as a middleman for car lenders.  To make money off the loan, some dealers will then offer you an interest rate higher than what they are paying the actual lender—or the financial institution that is backing your loan.  This rate increase is typically called the ‘dealer markup’ and can be an additional 3% in interest—significantly increasing the cost of your car.  This is perfectly legal most of the time, with only a few states limiting how much a dealership can markup rates” (Fox Business).

Know Your Credit Score

Before you even set foot in a dealership, make sure you know your credit score.  The higher your score, the more power you have to get very low interest rates.

Get Pre-Approval First

An easy way to learn your credit score is to go to your bank and seek pre-approval for a car loan before you begin your car search.  The bank will run your credit report and tell you how much you’re approved for.  This will give you a baseline number when dealing with the dealership.  It will also help you determine how much your monthly loan payments will be at different price ranges.

For instance, my husband and I were approved for by our credit union for a loan at 4.5% interest, which was more than we needed to pay.  Dealerships we visited offered us 3 to 3.5% interest rates, which we knew were a better deal than we could get at the credit union.

Know What Monthly Payments You Can Afford

I was surprised that our credit union pre-approved us for a loan amount with monthly payments higher than we felt we could comfortably afford.  Instead, we choose a car that was $6,000 less than our pre-approved amount—at that price, we could comfortably afford the monthly payments.

Just because you’re pre-approved for a certain amount doesn’t mean you need to use the full amount.

Don’t Negotiate Based on Monthly Payments

Every time we stepped on a car lot, we were always asked, “What is the monthly payment you’re looking for.”  Not, “How much do you want to spend for this car?”  Most Americans already have debt, so they’re comfortable evaluating the price of the vehicle based on a monthly payment amount, and the sales people use that to their advantage.

If you negotiate based on the monthly payment, not the overall price, you’re giving the salesman a tremendous amount of leverage.  “A dealership can easily meet your maximum monthly payment by stretching financing out over an additional year instead of actually reducing the price” (Money).

You may be surprised, as I was, to find that now banks and credit unions are willing to offer up to 72 month loans for used cars!  Am I the only one who thinks that’s crazy?!

Check the Blue Book Value

Once you have a car in mind, make sure to check the Kelly Blue Book value, either at home before you ever step foot on the lot or on your smartphone while walking around the lot.  My husband and I always searched the Internet for cars we wanted to look at in the dealership before we went on the lot.  At home, I checked the Kelly Blue Book value of the car we were interested in.  This let me know if the car was priced fairly or not.  It also helped me consider how much room I had to negotiate the price.

Be Aware Online Prices Are Not Always As They Seem

This was probably the biggest lesson I learned from our car search.  Internet prices are subjective.  We drove two hours to a dealership because we were very interested in a car that was in our price range and had fairly low mileage.  We took a test drive and were ready to buy the car.  When we sat down to negotiate, imagine our surprise when the dealer tacked on an additional $2,700 in “dealer extras” that were not listed as part of the Internet price.  That’s not even including the additional cost for plates, title, etc.

What were the dealer extras?  Applying a special exterior coating to keep the paint from fading or peeling and a special coating inside on the upholstery and flooring to repel stains.  We called foul and left the dealership.  That was a whole day wasted from what I called false advertising.

When we called the next dealership, we were on to this game.  I asked if the Internet price had any additional fees added on.  It didn’t.  That dealership was upfront with their Internet pricing, and we ended up buying from them.

Negotiate Up from the Dealer’s Cost, Not the Sticker Price

When you begin negotiating, you have a powerful tool if you don’t start your negotiations based on the sticker price.  Money states, “Consider starting around the invoice price, or the price a dealer pays the manufacturer for the car.  Edmunds.com notes that a popular strategy is to ask to see the dealer’s invoice and offer an amount, say $500 over that.  Invoice forms can be difficult to read, so spend a little time looking over one before testing this strategy out.

“While getting a price at or below invoice is ideal, be prepared to spend an amount somewhere between the sticker and invoice price.  Ideally, you’ll at least pay no more than the average sales price you were supposed to look up on sites like Edmunds and Kelly Blue Book.”

Don’t Be Afraid To Walk Away

People always say, “Don’t be afraid to walk away,” and I found that to be true.  I couldn’t believe how many sales people would call us at home and continue to negotiate.  I wish that they wouldn’t say, “final offer” when it’s not really their final offer, but keep in mind if you walk away, you likely still have room to negotiate.  The sales person will likely be calling you to further negotiate.

Car buying is not fun for me, but I wish it had been easier.  With these tips, you can hopefully have a smoother, less eventful car buying experience than we did.

How about you all? What other tips would you add to help make the car buying experience smoother?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/rubelroy/9096822638/

One of the Benefits of Financial Independence: Sabbaticals

boat-vacation-my-personal-finance-journeyThe following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

One of the benefits of achieving financial independence is the possibility of creating sabbaticals. These are breaks you can take from work, every few years. They can last anywhere from a few months to a couple of years. They are more typical in the education field, but if you have financial independence, you can work them into your own lifestyle.

After all, since we all have limited time in his life, there’s often a trade-off between time and earning money for a living. We can see the value in weekends and vacations, so periodic sabbaticals aren’t a ridiculous idea.

Early Retirement Doesn’t Have to be the Ultimate Goal of Financial Independence

The whole concept of financial independence has now become almost synonymous with early retirement. The idea is that you will reach a level of financial worth where you will no longer need to work to earn a living.

That’s certainly a worthwhile goal, but it does have a few flaws in it. The first is that it’s not likely that most people are going to reach a point where they can stop working fairly early in life, and never have to worry about money again. Another is that not everyone necessarily wants to stop working and retire. For many, it’s enough just to have the ability to retire, even if you never do.

But that’s where sabbaticals can come into the picture. Even if you don’t fully retire for the rest of your life, you can take periodic breaks during your career. For example, you could decide to work for five years, and then take a year off.

One of the advantages of this is that you don’t have to wait until you have the enormous amount of money you will need to keep you from having the work for the rest of life. Instead of waiting until you can early retire at say, 50, you can take sabbaticals much earlier in life. If you create some level of financial independence, you could even do it as early as 30. It’s a less challenging task, which makes it more doable in the near-term.

Sometimes You Just Need a Break for a While

So why would you even want to take a sabbatical? Sometimes you just need a break. For many people, working year after year is a recipe for job burnout. But if you take a break every few years – and schedule that into your life – just the idea of doing it could prevent burnout from happening.

It may not even be that you dislike what it is you do for a living. Sometimes just getting out of it for a while helps you to reorganize yourself and clear your head, so that you can come back with a fresh perspective and a new determination.

Recharging for the Next Major Advance in Your Life

It may also be that you just need some time to get yourself ready for a major change in your life. It could be a career change, starting a new business, taking a different approach with the same career, or perhaps taking some time to get some additional training or education. A sabbatical can help you to bridge the gap between where you are and where you want to go.

Sometimes those advances are not necessarily career related. For example, you may need to take some time off to be with ailing relative, or even to welcome a new child into the world. Your employer may allow you up to 12 weeks for either of those responsibilities, but you might choose to take more time. If you have achieved a solid level of financial independence, you can take that time.

Adding Rich Experiences to Your Life

Maybe you just want to take some time off to travel the world. While it may be nice to have such a plan for when you retire, what if you don’t want to wait another 10, or 20, or 30 years to do it?

Planning a sabbatical can enable you to take such a trip in just a couple of years. There’s no need to wait until you are 50 or 55 or 65. And let’s face it, even if you’re on track to retire early, there’s no guarantee how it will all play out, or what your outside circumstances will be at the time.

If you’ve achieve financial independence, you should be able to take that time now, rather than waiting for sometime in the distant future.

Creating a Series of Mini-Retirements

It’s not necessary to try and pack a lifetime of experience into a single sabbatical. You can plan one every few years. That will give you time in between to decide on new goals and directions.

It will also help you to prepare financially. Let’s say that you want to take a sabbatical in five years. If you can save 20% of what you will need to live on for a year, each year between now and the time the sabbatical starts, you will be able to take the time off and not worry about how you would survive.

Usually when people achieve financial independence, it’s because they are able to save a much higher percentage of their income than most other people. For example, while the average person might save 10% of their income each year, you may be able to save 20%, 30%, 40% or more. If you allocate some of your savings for your sabbatical, and some for longer-term savings and investments, you will be able to have the best of both worlds. That means a sabbatical in the near-term, and greater wealth in the future or whatever else you want to do.

Early retirement is an excellent life’s plan. But if you don’t entirely trust all the possibilities that the future may hold, it’s not a bad idea to plan on taking some extended time off in the not so distant future. Think about what you want to do with your life, and how a sabbatical might help you do it. You may find out that it’s the best time off you’ve ever had.

How about you all? Have you ever taken a sabbatical from your career? What were your experiences and what did you learn?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/tylerkaraszewski/2654986116/sizes/q/

Low-Effort Ways to Lower Your Spending

consignment-shop-my-personal-finance-journeyThe following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

Many times in the past, I used to tell myself I needed to earn more money in order to improve my financial situation and make all my money problems go away. Once I started earning more, I found that this thought process was wrong as my money problems didn’t subside at all.

This leads me to ask you: Do you have an income problem or a spending problem? Maybe you have both, but you can’t expect to fix your income problem and improve your situation without fixing your spending problem first.

Overspending can look very different depending on the person. You may be an emotional spender and make impulse purchases at your favorite store each week. You may buy one too many lattes. You may not take the extra effort to lower your expenses so you spend less on utility bills each month.

Whatever you spending habit is, there are so easy and low-effort ways to lower your spending so you can have more money to put toward your financial goals whether they are paying off debt, saving, or investing.

Leave Credit Cards at Home

If you tend to overspend when you’re out and about, research shows that we spend more with a credit card than we do with cash. I know that personally, having a credit card in my hand makes me feel like I have more flexibility. If I go over my budget with a purchase, it’s not as big of a deal since my account won’t go negative and I can always pay the expenses off in 30 days.

The only problem, however, is that sometimes you don’t pay your credit card balance off in full which can lead to debt. It may be better to take your credit cards out of your wallet, or even switch to a cash budget and utilize the envelope system when you go out so you can avoid spending extra money.

Invite Friends Over Instead of Going Out

Going out when friends is super fun I’m not going to lie, but it adds up over time. A great way to lower your spending on dining out and having fun with friends is to invite them over to your place instead.

My husband and I like to go out, but we also tend to stay in quite a bit and watch movies or play games together to save money. We like hanging out with each other, but when we invite our friends over too, it’s also super fun because we get to laugh and talk all together as a group.

You can host potlucks at your house or even prepare cheap meals and snacks like nacho dip, cookies, popcorn, etc.  and have a fun night in with your favorite people. You’ll save a ton of money if you do it regularly or even let other friends host you as well.

Unplug Electronic Devices You Aren’t Using

This is a super easy way to save money on electricity. Besides clocks and your refrigerator, you should take the extra minute or two it requires to unplug items in your home you aren’t using.

Electronic devices that are plugged in 24/7 take up a small amount of electricity each day, but it adds up. I personally can’t stand when my son leaves the television on when he’s done watching it or playing a game. And I’m sure his Xbox eats up quite a bit of energy as well.

Plus, it’s not good to leave things like chargers plugged into the wall because it can drain their battery.

Read Through the Circulars Before You Go Grocery Shopping

If your grocery spending is out of control, you’ll need to take advantage of more sales and deals. The good news is that grocery store savings are all around you. You should receive weekly sales and promotions at local stores in the mail.

Most promotions are time sensitive so make sure you check the expiration dates for the deals. Before I go grocery shopping and as I’m making my list, I always check out the circulars to see what sales are being promoted.

If you don’t like looking at sales papers, you can download an app that will gather all this information for you and provide you with coupons that you can clip digitally. Free apps like Grocery Pal and Checkout 51 are great for this.

Stop By a Consignment Shop First When Buying Clothes

Clothes can be pretty expensive but if you need to buy something, you have no choice but the spend the money right? Wrong. If you’re heading out to pick up some clothing items anyway, stop by a local consignment shop first to see if you can score any deals on gently used apparel first.

Stores like Goodwill have monthly discount sales where nice clothing is dirt cheap, and other stores like Plato’s Closet offers trendy clothing for both men and women. If you have kids, I’d recommend stopping by Once Upon a Child for some good deals. I purchased half of my son’s school clothes from there and saved a ton by doing so.

If you don’t have any of these stores near you, you can try online consignment shops like ThredUp.

How about you all?  What techniques do you use to lower your spending? What do you do with the extra money?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/alan-light/10891438675/

How to Start a Profitable Home-Based Business From Scratch

home-office-my-personal-finance-journeyThe following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

Working from home is still a big craze on the internet these days. What some people may not realize is that it take a lot of hard work to work from home regardless if it’s a side hustle or a full-time business.

Yet and still, the results can be very rewarding. As someone who just quit my job to run my home-based freelance business, it was important for me to understand what to do in order to set up a profitable online business that could allow me to meet all my needs and financial goals.

Since I’m the breadwinner in my household and my family still has some debt, it was crucial that I set up my online business up for success. If you are in a similar boat and you want to work from home, one of the best ways to earn a good income is to set up a small home-based business.

Benefits of Starting a Home-Based Business

There are numerous benefits to setting up a home-based business and they include:

  • Having the flexibility to work from home and cut out tedious tasks like dealing with commuter traffic.
  • The ability to set your own hours (if you are completely location independent, you can work from anywhere)
  • An unlimited earning potential. Since you control how little or how often you work along with other aspects of the business like sales and marketing, the sky can literally be the limit in terms of how much you can earn. If you don’t like waiting around for an employer to give you a small raise once a year, this can be a huge perk that allows you to have more control over your future.

If all of those benefits sounds good to you and you’ve been playing around with the idea of working from home or starting a full online business, here are a few things you need to do in order to set yourself up for success.

Brainstorm Business Ideas

First you need to determine what type of business you’d like to have. This initial step may take a while because it’s very important. You need to choose something that you are good at and something you can see yourself doing in the long run. In other words, it should be enjoyable and a passion.

It’s also important to focus on earning potential because going into business for something you’re passionate about and not earning money will just turn it into a hobby and won’t put bread on the table. Who will you serve and what type of demand exists in that industry.

For example, if you plan on running a travel agent business because you love helping friends and family plan their trips, decide who your target market will be to gain clarity.

You can look at the industry as a whole and see if there is potential for growth and what competitors are doing to bring in income. If you can see longevity in the idea in terms of income and your happiness, it may be worth looking into further.

Some top home-based business ideas include:

  • Private Tutor
  • Childcare
  • Business Coaching
  • Consulting
  • Transcription
  • Freelance Writing
  • Virtual Assistant
  • Accounting
  • Web Design
  • Photography
  • Bakery
  • Wedding Planner

Develop a Business Plan

After you’ve determined what you will be doing and who you will be serving, it’s time to write out a business plan. Your business plan doesn’t have to be super extensive, but it should be thorough, clear, and summarize the mission of your business and how you plan to grow it.

This will help you stay organized when making certain decisions regarding your services, clients you work with, partnerships you develop, etc.

You should also include some financial information in your business plan since you might need to show it to potential investors. Determine what your start-up costs will be, if you will be providing specific services or resources to the community, and how much funding you may need to meet certain business goals.

Find Funding

Depending on what type of business you establish, you may need funding from outside sources.

If you have low startup costs and can invest your own money into your business, that’s fine, but it’s best to avoid taking out a business loan if you can.

You can start by pitching family and friends to invest in your business, but don’t stop there. You can also reach out to private investors or ask if they can sponsor a project, event, or campaign you’re having.

One business owner I know who started a remote business in order to travel around the country with his wife pitched a well-known job board to assist him and they ended up sponsoring a documentary he was working on.

Depending on the type of business you have, you may be able to qualify for some government grants. The Small Business Administration offers different types of loans and grants to businesses but the requirements vary. You can learn more about SBA grants here and search for various different grants at Grants.gov.

Sort Out the Legal Matters

You may not have to legitimize your business by forming an LLC or S-Corp, but it could help you out around tax time. Entrepreneurs need to set aside a rather large amount of their earnings aside for taxes because they don’t have an employer to supplement it for them.

Depending on your needs, you may want to just be a sole proprietorship, or become a limited liability company (LLC) or an S-Corp. You can learn more about your federal tax responsibilities here.

Trusted sites like LegalZoom.com can help you legitimize your business and if you choose this route, you’ll also need to make sure you register your business name with your state and get a tax identification number.

It’s Best to Start On the Side

While all of these steps may sound overwhelming, it’s important to realize that you can go at your own pace when setting up your business. One of the best things I did to ensure that my business was profitable was starting it on the side of my full-time job more than two years ago.

I started out slow and paced myself. I made use of the extra time I had to get organized, gain clients, and execute my business strategy and slowly it started to pay off and I was able to replace the income I was earning at my full-time job.

It was a lot of trial and error though but it wasn’t as risky because I knew that if my side business’ income didn’t meet the goals I had for the month I could always fall back on my full-time job.

Starting your business off on the side is a great way to play it safe so you can reach success when you make the leap and leave a traditional job with steady income.

How about you all? Have you ever thought about starting a home-based business? Do you have any side hustles?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/duskblackwolf/4286862314/