John J. Bowman Jr Accountant, John J. Bowman Jr. Accountant, personal finance

Drafting a Personal Spending Rulebook

If you’ve never given much thought to personal finance, there’s no time like the present to do so. A personal spending rulebook is a great way to get started on saving and proper spending. If you want to be a smarter spender, these tips will make personal finance easier to learn.

Use Tried-and-True Methods

Anyone who has looked into personal finance has likely encountered the 50-30-20 Rule. Its popularity stems from its simplicity, making it ideal for people of all incomes and financial know-how. The numbers correspond with what percentages of your income should go where. According to the rule, 50% of your income should go to living expenses and other necessities, including rent, utilities, and food. 30% of your income counts as “flexible spending,” money to be used however you please for entertainment and non-essential travel. The last 20% should go towards savings or loan payments. While the percentages are flexible, avoid exceeding 20% or 30% limits for financial goals and flexible spending, respectively.

Categorize Purchases

It’s easy to see how much you spend each month, but that looking at the big picture doesn’t help on its own. Dive deep into your spending habits by categorizing the purchases you make. Basic categories include “necessities” such as rent, “loans,” “food,” and “entertainment.” Additionally, you can create subcategories to explore your habits more. “Food” can be split down further into “groceries” and “snacks,” depending on what and when you purchase. These categories explain what you’re purchasing and how much, and can be used to set individual limits on specific spending habits.

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John J. Bowman Jr Accountant, John J. Bowman Jr. Accountant, personal finance

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.

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blog, John J. Bowman Jr. Accountant, personal finance, Uncategorized

Tips When Buying Your First Home

Buying a home is an exciting, yet stressful process.  You’re making one of the largest purchases you’ll ever make, and you want to ensure you’re going about things the right way.  For first time home buyers, this may seem even more difficult, since you aren’t exactly familiar with the process and everything that comes with it.  Additionally, depending on your state, the buying process may vary, to it’s important to be aware of any local differences. Generally, however, there are a few good tips to consider when buying your first home:

Enquire About Your Mortgage Options

As a first time home buyer, your mortgage options are one of the most important parts of your entire buying process.  Your mortgage loan determines the type of home you can afford (price wise), and how long you’ll be paying for it, depending on the amount of your down payment.  Keep in mind, your downpayment affects how much you need to borrow in your mortgage loan, so the more you have in your down payment, the better. However, for first time home buyers, down payments requirements also differ sometimes from that of someone who’s owned a home before.  Either way, find out what option works best for you, and work on your mortgage from there.

Start Saving Early

To ensure you have a solid down payment, you definitely want to start saving as early as possible.  Whether you’re putting down a “traditional” down payment of 20%, or taking advantage of a first time home buyer program, with a down payment as little as 3%, you will likely need a nice lump sum saved to cover the downpayment and closing costs…

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John J. Bowman Jr. Accountant, personal finance, Uncategorized

Increasing Your Savings Account Contributions

We frequently talk about ways to manage your credit score, combat debt, and be financially free.  One of the best ways to work towards financial freedom is having a savings account and directly contributing to it regularly.  A savings account is a great way to budget your money, and give yourself a nice fund for your future and any major life events that might come your way, such as purchasing your first home, or sending your child to college.  If you already have a savings account, you may want to find ways to increase your contributions. Here are a few key ways to do so:

Evaluate Expenses

Always evaluate your expenses before you get into forming your plan.  The amount of money you save will likely be based partially on how much you’re spending per month.  So you’ll want to calculate your monthly bills, and how much you spend on any other monthly expenses, such as food, gas, dry cleaning, etc.  If you’re finding your spending habits are extreme and are preventing you from regularly contributing to your savings account, find ways to cut back on things that may not be that necessary or important.

Set Achievable Goals

The first step in creating any solid savings plan is setting goals that are realistic and achievable.  You’ll want to base these goals on your current finances; how much money you bring in a month, versus your spending and expenses.  Once you have figured that out, set goals that make sense with your finances, whether that’s a specific portion of your paycheck per week or working on a monthly basis…

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John J. Bowman Jr. Accountant, personal finance, Uncategorized

Saving Tips for College Students

College is a time of education, exploration and adventure; it’s also a period where you likely need to save money. When you and most of your friends are trying to keep more funds in the bank, you can use some clever tips to help you get the most out of your money.

Review Your Meal Plan

If you’re constantly having money left over on your meal plan at the end of the semester, consider a more cost-effective plan. While the college might require you to have a certain meal plan during your first-year there, you will likely have more freedom as you earn more credits.

Shop For Textbooks Wisely

You’ve probably heard older students complaining about the cost of books if you’re new to campus. Skipping out on buying books is a bad idea because professors require them for a reason. Instead, ask your professor if it’s acceptable to use an older version or an online version of the book if one of those options is available for less. Also, you might be able to reduce the cost of books by taking them out from the library.

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blog, John J. Bowman Jr Accountant, personal finance, Uncategorized

Saving for Your Child’s College Education

With the rapidly rising cost of college tuition, parents are well-justified in their anxiousness about how to pay for their child’s education. There is a myriad of options for parents wanting to get a head start in saving for this big investment. Although it can often be overwhelming deciding what path to take when planning for your child’s educational future and how to pay for it, here are a few of the top options to consider for your savings plan:

529 College Plan

The gold standard of college saving is the 529 plan. Also known as Qualified Tuition Programs (QTP), this plan allows parents to invest after-tax money into a qualified fund and then withdraw that money and its gains tax-free to put toward use for educational expenses. With more than 30 states offering these type of plans, it pays to shop around to find the best fit for your individual needs.

Roth IRA

Although this type of investment is most associated with retirement savings, a Roth IRA can also be an invaluable vehicle when saving for college expenses. The withdraw rules are similar to the 529, however, investors can use the Roth dividends to also go toward retirement, giving this type of plan more flexibility should your child not pursue a higher education.

Prepaid College Tuition Plans

Self-explanatory in nature, these plans allow parents the benefit of pre-paying for college at today’s prices. By locking in current prices, parents can guard themselves against rapidly escalating costs while also saving money.

Coverdell Education Savings Account

This trust applies to both college education expenses as well as costs incurred at K-12 levels. Although the terms are more flexible, a Coverdell account comes with a $2,000 annual limit, making this choice a deterrent for families wishing to contribute more.

UGMA and UTMA Custodial Accounts

Although these accounts do not have as many tax advantages as its Roth or 529 counterparts, they can be gifted to a child for any reason. Unlike other investment accounts geared toward education, these accounts are placed in the child’s name, giving them full control over the money when the term expires. Conversely, since the child owns the fund, the amount of qualifying aid might be affected.

 

This article was originally posted on jbowmanaccountant.org

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