From last month’s dreaded six letter word, to next up the &*#! four letter word…. D-E-B-T.   Let’s get real about the impact this four letter word has on your life.     First off, I want you to imagine all the things you could do if it was gone forever from your life?     Imagine the relief you would feel, the freedom and the possibilities.     What could you do without this four-letter word in your life?

Over 25 years ago, I imagined how my life would play out without this four-letter word.    I was single, in a good paying job and received a nice bonus at the end of each year.    I would use this bonus every year to pay off my most pressing debts: multiple credit cards.  Then come January, I would start charging them back up again.    You know how it is – dinner out, car repairs, a new outfit (or four), a vacation, gasoline, birthday gifts and on and on.  Come December, I would receive the bonus and pay them all off again.    

This circle continued for several years until one day I looked at the year-end bonus check and imagined how my life could look if I did not have to pay off the credit cards with the check.  I imagined taking a nice vacation, using it towards a new car, building up my savings or helping to fund a retirement account while simultaneously treating myself to something extra special.  I also imagined what would happen if I did not get this customary year-end check the following year.   Something finally clicked in this imagining time, and I decided that year was going to be the last year I would use my year-end bonus to pay off credit cards.   

A new plan was born and starting the year fresh, I made a commitment to myself to pay off the credit cards every month.   I imagined what it would be like to hold that year-end bonus check in my hand without having a single credit card balance come December.   I was determined to succeed.    I wish I could say it was easy, or that I considered not using credit cards at all, but it was not that simple.   I continued to use the cards and struggled to pay the monthly bills in full every month, often juggling and trying to time the purchases based on the due dates and my cash flow.  Some months I barely scrimped by, having only a few dollars in my pocket to make it through the week.   As the months went on, I was more cautious on what I charged and tried to buy less and pay cash more often.  I told myself anything under $20.00 had to be paid by cash (something I still try to do today).   Some months I found myself dipping into emergency savings to help pay off the monthly credit card bills.   It took a while, but I found my stride and eventually even consolidated down to using only one credit card for everything.   I said “no” to a lot of purchases but was able to find satisfaction in keeping my promise to pay off my credit cards each month throughout that first year.   You cannot even imagine the sweet feeling it was holding a bonus check that first December, knowing I owed zero on the credit cards!  It was an incredible feeling and gave me the incentive to continue with the same plan of paying off my credit card every month in full for the next 25 years.    

Debt comes in all shapes and sizes, and for most people is more widespread than credit cards.  Yet I shared this story as a pivot point in my relationship with debt.    I began by getting my credit card spending under control and moved on to other debt.     

Over the next four weeks, I plan to continue to post about the value of losing this four-letter word completely.  For now, gather up all your debt statements and list out all your debts, monthly payment due, full outstanding balance and the interest rate charged.  If you have followed along the organizing binder project this year, go back to your net worth statement as a starting point to see your list of debts and use this list of outstanding bills to pull your statements.    Up next week “Why should I live without the four-letter word?”

For many, creating a budget is high on their “not to do” list!    It is a reminder that you should be responsible, that you should live within your means, that you should be paying down debt, that you should be in a better place.  But what if instead you looked at it as a positive?   A way to build wealth, get your finances under control, improve your current situation, plan for your future, and get real about where your money is going every month.  

Creating a budget is a skill that many of us do over and over again throughout our life.    I think of budget planning like dieting… it is hard to start the process, but once you start seeing the benefits you want to keep going.   Like dieting, if you are too strict or too hard on yourself, you are going to give up quickly.    It’s best to start simply and to know that an occasional splurge is okay. Remember your goal in dieting is to be eating healthy rather than lifelong dieting.   Likewise, look to “spend less than you earn” and bank the difference for long-term financial health.  

In creating your budget, list your income at the top and then your expenses at the bottom.  Pull your pay stubs, year end statements, and look through your monthly bills and checking account to gather your estimated monthly amounts.    Below is a sample budget with several categories.   You may need to add or subtract some of your own.   Set this budget up on a spreadsheet and save it to your master finance file.  Or just write it out on a sheet of paper.   Place copy of the completed budget in your financial binder behind tab 2.

Categorize your budget as above and pay attention to what you can change.   If you have too many expenses, you can either bring in more income or cut out some expenses.   Both the total income and the total expenses amounts need to match.  In this example, the income is $4,700 each month and the expenses match at $4,700 per month.   Did it automatically work like that?  No, I adjusted the category amounts several times to make the expenses match the income.   You cannot allocate more money than you make.    I’ll write more about debt next month, but for now stretch yourself to make additional payments to pay off your debt.  The faster you pay off debt, the faster you can build wealth.  

If you do not have an emergency savings, take a look at this post and get started today.   If you already have $1,500 in your emergency savings, shift this money down to your monthly debt to pay off outstanding debt quicker.   

End your budget stress today by creating a different 6 letter focus word and begin to create your best financial F-U-T-U-R-E.

Hello and Happy New Year 2021!!    I know it’s been a while since you’ve heard from me, like many others, last year was overwhelming in many ways.  Year 2020 was going to be the year I kicked off my blog, but instead became the year when many of us were working from home, isolating at home, quarantining at home all while being tied to a computer screen at home.   Quite honestly it has taken me a good number of months to strike a balance between home and work and to get back to the place where I am committing time to my blog.  So, for this brand-new year, I’m hitting the restart button and planning some great posts.   I am starting the year with this recycled Jump Rope Finance 401K tip:

If you are now contributing 3% to your 401K, go to 4% for the coming year.    The goal is to eventually reach 15% towards retirement savings.  If you have not signed up for your workplace 401K, do it today and try to start with at least 2%.   If you have a spouse, have them sign up too.    

Why this tip again?    Because it is something you can do today or tomorrow.   Over the last decade or so, more and more people have become what is called 401K millionaires.    They have socked money away in their retirement accounts and watched it explode thanks to the incredible stock market returns.   Imagine what your retirement years could look like with one million dollars!   Travel, time for hobbies, volunteer work, spending time with family and friends and most of all not having to worry about money.  

I know it seems like a long time away, and you may be asking yourself, why think about this now?   

• Because on the flip side, most employers have done away with pensions or retirement accounts, so without a 401K your only other options are to continue working or rely on Social Security.   Do you want to be working at age 75 to cover your basic needs?   What about Social Security?    The average social security check is about $1,400 or well under $20,000 per year… for most that is not enough to live your best life. 
• Because if you start small and increase every year, you won’t miss the extra dollars in your paycheck.
• Because it feels good to plan for the future and know you have a plan. 
• Because you don’t want to penny pinch when you retire or have to rely on your kids or family.
• Because you want to retire early.
• Because you have time on your side and money grows over long periods of time with steady contributions. 

Just start today… you will never regret putting away a few dollars now that will grow to a huge nest egg over your lifetime.     Next up, reread this post on creating a financial binder.  Grab a three-ring binder and start your financial binder.  Over the next few months, I am going to begin to walk down each of the tabs to create financials that go behind each section.  Next week’s post will be on creating your net worth statement.   This first step is a game changer as you plan your future!   So, read over the post, grab a binder, the free printable index page, and stay tuned for next week.  Until then, Happy New Year!   2021 already feels more promising!

To Scan or Not to Scan?  

What documents should you scan for quick access?   Some important documents should be kept electronically on your computer and on an external hard drive for quick reference and for emergency access.  There are many documents you may not have electronically saved, that should be scanned into your electronic files.    

I love my financial binder for easy grab and go reference, and I keep many files electronically organized, but some documents should also be scanned and readily accessible for reference and emergencies.

Scanning is so easy to do today with many printers, scanners, your phone camera and scanning apps, and you might be tempted to scan all your documents and do away with a hard copy of data.   While this may be tempting, it is best to have a combination of both types of files (hard copies and electronic copies).    There are documents such as birth certificates and car titles that you must retain the physical paper.   Electronic clutter can also become a major headache, so scanning every receipt and every document would be overwhelming.  It’s also unnecessary because many receipts, documents and paperwork are never needed again.   

Three types of documents you should scan and save: 

• A photo of everything in your lockbox (printable checklist)
• Major purchases
• Major household receipts and repairs

Your lockbox – contains your most important papers.   You may already have many of these documents electronically and can save them on your computer to either a file folder under your finances folder called “Important Docs” or place them in the appropriate file folder.   For example, you should have a copy of your most recent tax return in your lockbox.  Your scanned version could reside in the tax folder on your computer or the important docs folder.  

Major purchases – such as vehicles, musical instruments, real estate, etc. should be scanned and placed into the important docs file.   Keep a “major purchases” file folder inside the important docs folder for these type of receipts and name them with the item and the date purchased.   For example: “Honda Civic June 2019” or “Keyboard Oct 2011”.   This serves as two important pieces of information, item and when purchased, without even opening the receipt. 

Major household receipts and repairs – such as large appliances, interior and exterior repairs, and remodeling receipts.    For appliances, before you scan write the model and serial number on the receipt for quick reference if it is not already listed.    Having these types of files on your computer can provide multiple benefits.  If you need a repair, you can pull up the receipt and have the date of purchase, model, and serial number to report to the repairman without scrambling to find the numbers inside or behind your appliance.   We also recently saved a bundle by sending in a large remodeling receipt to our homeowner insurance company.   Because the file was already on our computer, it took just minutes to email and resulted in a savings of $700 per year on homeowner’s insurance.

Keep a copy of all these scanned documents on an external hard drive that you update once a year and store a copy off-site either in a bank safety deposit box, or with a trusted relative.    Although these are not original documents, they would help you quickly identify what documents you may need to duplicate or even to just grab policy numbers and phone numbers in a situation where you could not access original documents.  

I hope you have enjoyed this series on organizing your finances, for quick reference, link to posts you may have missed below. 

LINKS

Week One:      Gather your Financial Papers

Week Two:      Create a Financial Binder

Week Three:  Organize your Files Electronically

Week Four:     Processing your Bills and Paperwork

Week Five:      Create a lockbox of important documents

Week Six:        To Scan or not to Scan?         

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What’s in your Lockbox?

 Although I love my financial binder for a quick file reference, and I keep many files electronically, there are some documents that you should keep physically secure. Items such as birth certificates, social security cards, passports, wills, insurance information and your back-up hard drive should be securely tucked away in a locked, fireproof box.  

Some people keep these items in a bank security box, but there are disadvantages to having your papers offsite. One reason is accessibly. When I need my birth certificate, I don’t want to wait for the bank to open, and to have to take off work to go to my security box during banking hours.   I want to be able to grab documents when I need them.  

If you are considering keeping your documents onsite, three types of inexpensive lockboxes under $100 are below. The photos are boxes that I have at my home, but I’ve linked to a few similar items:  

Fire resistant cash box:  a simple but durable metal container with a lock.   Until very recently, my family used this type of box.   It’s small, but simple and can be tucked away in a drawer or cabinet.    Mine lost its handle along the way, but still works fine!

Small fireproof/waterproof lock box:  a sturdy fireproof and waterproof box.   Again, small and simple but a little more substantial.  For both this option and the cash box, you do need to fold most papers to fit in the box, but I’ve never had trouble doing this, and most documents are already folded when received.  

Medium size, fireproof/waterproof file lockbox box:   Fireproof and waterproof file box that accommodates letter-size hanging files and folders for easy storage.     I purchased one of these for about $60.00 at a local store and have been pleased with this hanging file format.  

In all three cases, these boxes are not safes to keep your millions, someone could pick up and take the lockbox or break the lock.   However, it is a safe place to store documents and keep them all in one central location, safe from fire and in some cases from water damage such as flooding.   

Once you choose your lockbox type, next gather and organize your documents.   I’ve created a listing of suggested items for your lockbox. Personalize it to fit your needs and what is irreplaceable to you if lost or just something you might need to get your hands on quickly.  For example, your spare set of car keys, a flashdrive of your wedding/baby photos, or a small family heirloom.   If you choose one of the smaller boxes, rubber band like items together, and use a notecard or to identify place on top before placing in the lockbox.   You can also use an envelope to group small items such as social security cards.

If you choose the medium size, file lockbox, you can organize with hanging folders and file folders, labeling each one.  

Think about your most important papers, are they all in one place and secured? If not, it’s time to create a lockbox for your home.

Up next week #6: To scan or not to scan.

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It’s Time to Get Organized!   We get what seems like a million pieces of paper each year.   It’s easy to get overwhelmed by the piles of paperwork on the counter.    And if one of those pieces is a bill or a tax document, sometimes its out of sight, out of mind.  It can be easy to accidentally miss the due date.    

This post is week four out of six of sharing financial organizing tips.   Continue reading to see my method to process bills and paperwork.  Although I have automated many of my bills, such as mortgage payment, electric and gas bills, insurance premiums and giving to my church,  there are some bills that I still want to see every month like credit card bills and loan statements.   This is a photo of my family room bookshelf.   You should know; it was much messier before I took the picture!

Do you see the black and white box in the middle near the top?  It’s actually a file box where I store my incoming bills and important paperwork.    When I get bills in the mail, or anything that requires a check (a school form, a tax bill, a registration) and I don’t have time to deal with it, it goes in the box.   When I am ready to sit down and pay a bill or fill out the form, I grab the whole box and take it to my kitchen counter. 

The box is a Thirty-One Fold N’ File box that I bought at a resale shop. If you want a fold n’ file box like this one, reach out to a thirty-one consultant or check out ebay or Mercari where they sell for about $15 to $25 and come in a variety of patterns.   The box size is approximately 12 X 10 X 7.  Alternately, you can use pretty rattan basket, or seagrass basket or this gray foldable basket.  I also like Marshalls or Target for organizing supplies.    

I just toss the bills in the box when received.   You could create file folders too, but I found that it is just easier to toss them in and be done with it.  The box is simply a temporary holding place for items I need to deal with, to write a check, or complete a form or registration.  It is not a long-term storage file.   I look through it once or twice a month.   

One side of the box is flat and the other has two mesh pockets on the outside.In the pockets I keep blank envelopes, stamps, address labels and a few pens. You could also keep your checkbook here if you still write checks.    When I put this on the shelf in my living room, I turn this side towards the wall.   If you have a box without the outside pockets, just rubber band the supplies together and toss inside the box with your bills.  Or use a plastic pencil case and toss on top.  Target has these pencil boxes for about a dollar each.

Although I have automated most of my bills, there are some that I receive monthly because I want to keep track and review them.   I have found that if I receive them online, I don’t always look at them with close scrutiny.    While online might be fine for the monthly electric bill that doesn’t change much, I do want to see the Target bill and the VISA statement to review my purchases every month.     My mortgage payment is made automatically, but I also receive a paper copy in the mail because I like to keep an eye on the outstanding balance.   One day we will own our house free and clear!  

Once my bills are paid, I toss them into a white Ikea box, in a nearby closet that I’ve turned into a mini office (a future post!). 

At one time, I filed everything in file folders by vendor (Phone Company, Electric, Gas, Cable) but that took much time.   Next, I tried file folders by month and lumped all together (Jan 2020, Feb 2020 etc.), but I found I rarely went back through them and file folders were jammed in file cabinets.   Now I just rubber-band each month’s paid bills together and write the month and year on the top bill with a sharpie, open the box and toss them in.  It’s kind of organized in that the last month’s items are always near the top.  Since so much is paid automatically, I really don’t have a lot of bills in this box and it usually lasts one or two years before it is full.   If I need to reference a paid bill, I pull down the box and shuffle through the rubber banded groups to find the monthly batch.   Simple and works for me!   

Much like life, things are always changing and what works today, may not work down the road.    So, if you try something and it’s not working, find another method.   

Disclosure:  If you purchase anything from links in this post or any other Jump Rope Finances blog post, I may receive an affiliate commission.  However, I only mention products I love and would recommend whether I was being compensated or not.   Thank you so much for your support of Jump Rope Finances. 

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