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Here’s How to Counteroffer and Win When Negotiating Your Salary

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How to Counter Offer Salary

Receiving a job offer is exciting, but it also leads to one of the more daunting parts of the hiring process: salary negotiations. If the initial number presented by the company doesn’t meet your needs, having a strategy for managing the counteroffer is essential. If you’re not sure where to begin, here’s a look at how to counter offer a salary and win.

How to Counteroffer a Salary and Win

1. Ask for Time

Before you respond to a salary offer, request a reasonable amount of time to consider it. Start by thanking the hiring manager for their consideration thus far, allowing you to start on a positive and gracious note. Then, ask if there is a deadline for a decision. In some cases, the hiring manager will let you know how long the company can wait. If they don’t have a set timeline, request two business days to respond.

Generally, two business days are enough to prepare a counteroffer. Plus, the request isn’t so long as to make it seem like you’re trying to string the company along.

If the hiring manager expects a decision in less time, that doesn’t mean you can’t make a strong counteroffer. However, anything less than 24 hours could indicate the business is trying to rush you, potentially making it harder to handle any research before beginning negotiations. While that’s not inherently a red flag, do make a note of whether the hiring manager is putting a lot of pressure on you and keep it in mind during future conversations.

2. Know Your Value

Figuring out a fair salary to present as a counteroffer generally requires some research. You’ll want to spend time learning about the average compensation for similar positions in your area. Additionally, you’ll need to factor in the value of the skills and experience you bring to the table.

Typically, you’ll want to use several resources to determine what pay rate is appropriate, as each one may be accessing data from different sources. Additionally, make sure your research is location specific, as compensation can vary from state to state or even city to city.

The goal here is to identify a figure that feels competitive to you but also leaves space for the company to counter your offer. Often, the easiest way is to identify a salary range that seems appropriate. Then, you can present a number that’s on the higher end, giving the company room to negotiate down while still remaining in your target range.

3. Examine the Offer

After finishing your research, take a close look at the initial job offer provided by the hiring manager. Along with the salary information, make sure to review the benefits, perks, and bonuses listed. In some cases, a lower pay rate is offset by benefits, perks, or bonus structures that exceed what’s found with competitors. As a result, you need to factor in the value of them when determining whether your potential salary counteroffer is fair.

Additionally, benefits and perks are points you can potentially negotiate, too. Knowing that option is available is helpful if a company doesn’t have much room to negotiate regarding pay rates but can make adjustments to other parts of the offer. For example, you may be able to request more paid time off in lieu of an increased salary.

Knowing that’s an option allows you to see where your counteroffer can potentially go if you encounter resistance during the discussion. That way, you don’t feel stuck either accepting the offer as-is or walking away. Instead, you can pivot, focusing on other points that provide you with value.

4. Prepare Several Paths

Once your research is complete and you’ve reviewed the benefits package, it’s time to prepare for several different paths. First, you’ll design your initial salary counteroffer, as that’s likely what you’ll present first. After that, consider other points you’d potentially negotiate and what you’d request, giving you additional pathways to a fair offer if a higher pay rate isn’t an option.

Essentially, this process is about being prepared for any response the hiring manager may give. That helps keep the conversation rolling while leaving you confident and collected along the way.

5. Present Facts

When you present your counteroffer, remain focused on the facts. After highlighting your ongoing interest in the role, tell the hiring manager the salary you think is fair and provide some details regarding why you came to that conclusion. For example, you can cite your salary research as the basis for your counteroffer.

The goal here is to ensure you’re backing up your requests with solid data. That not only helps you remove emotion from the equation, but it also makes your case more compelling overall. As a result, you may have a higher chance of getting a pay rate that leaves you satisfied.

6. Listen

After you present your initial counteroffer, it’s time to listen. How the hiring manager responds can help you determine where you may need to focus your energies next. Plus, using active listening skills ensures that you don’t miss a critical point.

Again, it’s critical to set emotions aside while the hiring manager speaks. By concentrating on the details they’re sharing, you’ll have a better chance of continuing the conversation in a positive manner.

7. Compromise

After the hiring manager shares their perspective, it’s time to find a compromise that leaves everyone feeling satisfied. For example, you can attempt to balance off a lower salary with improvements in the benefits package, as mentioned above. Just make sure that you remain fact-focused throughout, using data or highlighting your value to show why you’re making various requests.

Additionally, you want to listen carefully to any input from the hiring manager. Not only will that help you determine with points of the offer are negotiable and which aren’t, but it can also give you a lot of insights into the hiring manager’s mindset, the company’s culture, and more. At times, that information is incredibly revealing and may even show that a job you thought was a great fit isn’t necessarily the match it seemed to be on the surface.

8. Make a Decision

Once the negotiations show that there’s no more room for adjustment, it’s time to make a decision. Ideally, you’ll have found some middle ground between the initial offer and your first counter offer. If that’s the case, request the new offer in writing, and review it to ensure it matches what was covered in the discussion before signing.

If you and the hiring manager aren’t able to find a happy medium, then it’s time to determine if the job is genuinely right for you. In some cases, the negotiation process can reveal culture issues or other challenges that could make the position a poor fit. At times, it may simply demonstrate that the company either can’t afford reasonable compensation or isn’t willing to try. If that happens, then walking away may actually be a win, as it lets you focus your efforts on other opportunities that can pay you what you’re worth.

Do you have any other tips that can help someone figure out how to counter offer a salary successfully? Have you tried any of the recommended strategies above and want to tell others about your experience? Share your thoughts in the comments below.

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Just Lost Your Job? Here’s 10 Things Not to Do With Your Severance Pay

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Severance Pay

In some cases, companies offer severance pay to laid-off employees. If you’re someone receiving severance pay or want to ensure you’re prepared should a layoff and severance pay come later, it’s wise to have a plan for the money. Otherwise, it may not last as long as you’d expect. As you create a strategy, here are ten things not to do with your severance pay.

1. Big Purchases

Generally, you shouldn’t use severance pay for a big purchase. Primarily, that’s because the money is meant to substitute for your income until you find a new opportunity.

Unless the big purchase is essential for living, such as replacing a broken down refrigerator that isn’t repairable with a reasonably-priced model, it’s better not to treat the cash as a windfall that you can use for luxuries. That attitude can cause you to splurge far more often than you may realize, causing your severance pay to run out fast.

However, if you’re talking about a genuine essential, you could potentially make a big purchase as long as you plan accordingly. Determine if you can reasonably survive on what remains until you find a job. If the answer is yes and you’re willing to stick to a strict budget moving forward, then the purchase is potentially supportable.

2. Small Splurges

In some cases, people feel like they deserve small splurges when they’re going through an emotionally challenging situation like a layoff. They view the purchases as a pick-me-up, hoping it will improve their mood.

The issue is that small splurges can often add up fast. For example, while paying $5, $7, or more for a coffee at a café may seem like no big deal on the surface, if you do it every day for weeks on end, that represents a lot of money.

If you do want to give yourself the occasional treat, work it into your budget. For example, you could allocate $10 per week for spontaneous splurges. Then, pull out the $10 in cash and only use that money for the small luxury purchase. Once that cash is gone, no more splurges until you get the next $10 the following week.

3. Lend the Money

Some people receive their severance pay as a lump sum, and it can be a large amount of money in some cases. As a result, people may believe it creates an opportunity to assist their nearest and dearest, particularly if the person they know is struggling financially.

However, lending the money comes with the risk of not getting paid back. As a result, if the person who borrows it doesn’t handle their side of the arrangement, you might find yourself falling short during a time when you don’t have other income.

Ultimately, lending money to loved ones is always risky, but it’s particularly dangerous during times of personal uncertainty. Since that’s the case, it’s better to avoid this entirely.

4. Risky Investments

When your regular source of income disappears, and you aren’t sure when you’ll get a new job, investing the cash might seem like a smart move. However, all investing comes with risk, and not all opportunities are created equal. There’s always a chance that an investment isn’t going to pan out, causing you to lose significant amounts of money.

Since financial distress can increase your odds of considering risky investments, as those may seem like they have the most growth potential, your chance of losses is high. As a result, it’s usually best to avoid investing your severance pay in hopes of quick growth, as you could suddenly find yourself without a source of income.

5. Ignore Taxes

Many people don’t realize that severance pay is taxable. Additionally, even though an employer usually withholds some of the money for taxes, it may be insufficient, depending on what’s listed on your W-4.

Additionally, the entire amount is taxable in the year you receive it. As a result, lump sums could mean owing more in taxes during one year than you’d expect. That’s particularly true if you’re shifted into the next tax bracket up.

If you’re receiving severance pay, understand that it’s taxed the same as normal income. Review your withholdings, determine if enough was set aside, and consider saving some of the severance pay to cover any tax shortfalls should they occur.

6. Calling It Spending Money

Generally, severance pay is a short-term income replacement. However, calling it “spending money” can cause you to adopt a potentially dangerous mindset. It may lead you to believe that spending every dollar is okay, even if that means not having an emergency fund to cover the unexpected.

While it’s true that using severance to cover expenses is fine, it’s also wise to save some for potential emergencies. At times, that may mean adjusting your budget and spending habits to live on less, at least until you find a new job to replace your income. But it’s an adjustment worth making, as it can ensure that you’re not in a tough spot if something unanticipated occurs.

7. Keep Your Old Budget

Even if your severance pay provides you with the same amount of income you had previously for several months, that doesn’t mean you should keep your old budget. Instead, it’s best to find areas where you can cut back. That way, if you don’t secure a new position before the period your severance pay covers ends, you still have some money available.

Ideally, you want to scale back as much as possible while still ensuring all of your obligations are met. Remember, any sacrifices you’re making are likely short-term, as you can move toward your old budget once you’re working again if the income amount is similar. Plus, if you end up in a job that pays less, you’ll have a potentially workable budget already in place, which could give you peace of mind.

8. Skip Health Insurance

When you’re laid off, you usually have the option to continue your health insurance. That’s because of the Consolidated Omnibus Budget Reconciliation Act (COBRA), which outlines requirements for employers to have pathways for terminated employees to keep their coverage for up to 18 months.

COBRA insurance will cost more out of pocket in many cases, as the employer doesn’t have to pay a portion of the premiums. However, declining health insurance puts you at risk. Any medical needs you have before you get a new job with medical coverage will have to be paid out-of-pocket, and that’s potentially far more costly than covering the higher premium. As a result, it’s better to take a close look at this option instead of assuming that skipping it is the right move.

9. Let Debts Get Behind

After a layoff, it’s potentially tempting to look for ways to put any required debt payments on pause until you have a new position. Many lenders do have programs that make that possible, but some do come with financial risk. For example, forbearance can let you skip some payments, but interest may continue to accrue on your remaining balance. As a result, your debt could grow surprisingly quickly depending on the terms.

With some lenders, you might have to pay make-up payments once the pause ends. In this case, you could find yourself owing several payments all at once, and that could throw your future budget way off balance or might increase your risk of default.

While it’s fine to use the various programs if you genuinely can’t keep up with your debts, it’s better to continue with payments if you’re able. That ensures you don’t accidentally accrue more debt through interest or find yourself in a bind later.

10. Not Getting Financial Advice

In some cases, using your severance pay seems simple. After all, you can generally treat it like income, using it to cover expenses and save for an emergency.

However, if you aren’t sure whether you’ll get a new job quickly or if the pay in a different position would at least match your last one, getting financial advice from a professional isn’t a bad idea. They can help you come up with a plan to stretch your severance pay to ensure it lasts as long as possible, giving you more wiggle room if finding a new opportunity proves more difficult than you initially expected.

Is there anything else that you think people should avoid doing with their severance pay? Do you have any tips that can help someone properly manage their severance pay? Share your thoughts in the comments below.

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What Causes People To Have So Much Anxiety Over Finances

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Anxiety and Finances

If you’re worrying about money, you’re not alone. Financial anxiety is incredibly common, and it’s often quite difficult to manage. But even knowing that it’s widespread, many people don’t understand the causes of financial anxiety. Here’s a look at anxiety and finances, and why they so often seem to go together.

Why People Have So Much Anxiety Over Finances

Overall, the causes of financial anxiety are surprisingly varied. In some cases, the concerns are based primarily on a lack of assets. For example, living paycheck to paycheck and struggling every day to make ends meet can lead to significant worries about money. Essentially, not feeling that you have enough cash to live comfortably or safely potentially leads to anxiety.

Another cause of financial anxiety is concern that you can’t handle a financial emergency. These worries can occur even if you’re able to pay your bills and address your various needs. In this case, the issue is primarily that your financial situation is a bit tenuous, as a single major incident could functionally derail your financial life.

In some cases, people get anxious about their finances because they don’t feel they are well-informed about money. Not knowing what moves are smart or right can lead to a substantial amount of worry, especially when a significant financial decision lies ahead.

Others may experience financial anxiety based on what they want for the future. For example, even if you’re making ends meet today, concern about whether you’ll be able to afford retirement when that time comes could lead to anxious feelings.

A sense of a lack of control can also lead to financial anxiety. Worrying about where every dollar goes, being hypervigilant about household spending, and being concerned that a single misstep can cause everything to fall apart can lead to anxiety, even among people who are living comfortably from a financial standpoint and are prepared for the unexpected.

Finally, some people end up with anxiety about their finances because their parents were worried about money. In this situation, the person is incidentally taught that finances are hard to manage and worth worrying about, essentially causing them to develop the habits their parents showed as they grew up.

How to Deal with Anxiety About Your Finances

If you’re experiencing anxiety regarding your finances, then addressing the root cause is typically essential. Here are some approaches based on a range of situations.

Education Yourself on Personal Finance

When it comes to personal finance, knowledge is power. If you’re not overly familiar with the world of money, spend time learning the fundamentals to improve your skills. Dig into how to write a budget, plan for the future, and use various financial products without getting yourself into trouble. Look at how compound interest can work for and against you. Read about smart credit card use and how to avoid missteps.

Often, learning about your finances can do a lot to relieve anxiety. It removes some of the mystery about how money works, and that can quell fears that are stemming from a lack of understanding.

Create a Budget

In some cases, concerns about money are based on not knowing where your money is going or if you have enough to address your needs. In this situation, having a budget can potentially relieve your anxiety. It allows you to allocate your income to specific purposes, creating a plan that will enable you to make ends meet and manage savings goals.

When you begin, start by examining your spending patterns, preferably your activity over the last six to 12 months. See how much you’re spending in various areas. Then, use that information to identify categories where you’re overspending and establish baselines for certain expenses. Once you do that, you typically have enough details to put a realistic budget together.

Talk to Someone Trusted

Money is often a bit of a taboo subject, so it’s common for people to bottle up their feelings about it and not discuss it with others. However, speaking with someone you trust about your concerns is often beneficial. It gives you a source of support – and potentially guidance – which can make moving forward easier.

Additionally, it’s often critical for spouses to talk about their finances regularly. By doing so, it’s easier to get on the same page and plan together effectively. Plus, it ensures that one spouse doesn’t end up in the dark and prevents spouses from taking financial actions behind the other’s back, which can avoid feelings of resentment or distrust.

Remain Future-Focused

In some cases, people experience financial anxiety because they’re dwelling on a financial mistake that created hardship. While it’s wise to spend a little time looking into what went wrong – as that can help you avoid similar missteps down the road – it’s best to quickly transition to a future-focused mindset.

Concentrating on how to fix the problem can relieve anxiety. It helps you focus on solutions instead of errors, which can spur forward progress that improves your financial situation. As the issue improves, that can often lead to a sense of relief, making it easier to keep moving forward.

Create a Safety Net

A financial safety net can do a lot to relieve anxiety about money. When you have an emergency fund, you know you’ve got a cushion for handling the unexpected, and that makes your financial situation seem less precarious. Similarly, saving for retirement can relieve concerns about your financial future, which may reduce anxiety.

Precisely what the financial safety net should look like will vary based on your situation. However, aiming for at least three months of living expenses in a savings account is a reasonable goal. Additionally, contributing to a retirement account as soon as possible gives you the benefit of time, allowing smaller deposits to grow and making it easier to stay on target.

See a Counselor

If your financial anxiety is problematic to the point of it disrupting daily life, seeing a licensed mental health professional is a wise move. Finding one that focuses on finances is potentially the best option, but choosing a specialist that concentrates on anxiety isn’t a bad choice either. In both cases, the counselor can help you learn about the origins of your anxiety and can provide insights that make managing your feelings easier.

Can you think of any other reason why anxiety and finances often seem to go together? Do you have any tips that can help someone reduce anxious feelings when figuring out how to manage their money? Share your thoughts in the comments below.

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6 Reasons You Should Cancel Amazon Prime Now

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Cancel Amazon Prime

In most cases, people initially sign up for Amazon Prime because they believe it provides enough value to make the cost worthwhile. Free shipping, access to services like Prime Video, and events like Prime Day are all very enticing on the surface, making the membership fee seem like a bargain. While it’s true that some people are excellent at leveraging their Prime membership, that doesn’t mean everyone’s getting enough value. If you’re trying to decide if Prime is right for you, here’s a look at six reasons you should cancel Amazon Prime now.

6 Reasons You Should Cancel Amazon Prime Now

1. Not Shopping at Amazon Often

In most cases, people sign up for Amazon Prime to take advantage of free shipping. The issue is that it only works in your favor if it genuinely saves you money. If you don’t use Amazon regularly, the odds are decent that the membership costs exceed any shipping savings you’re receiving. That’s particularly true since you can qualify for free shipping on Amazon without being a Prime member.

Look at your order history to see how many purchases you made that were below the threshold for free shipping without Prime. If the total doesn’t justify the cost of the membership, then canceling is potentially a wise move.

2. Not Using Other Amazon Prime Benefits

As mentioned above, the main reason many people sign up for Prime is for free shipping, a feature that doesn’t necessarily provide value if your purchases would qualify for free shipping without the membership. However, this is potentially offset if you’re accessing other Amazon Prime benefits regularly. For example, if you’re a regular user of Prime Video, Prime Music, or the Kindle Lending Library, then you might be getting a decent amount of value.

However, if you never or rarely access the other perks you get with Prime, there’s a decent chance you’re paying for a service you don’t need. Take a close look at the value you’re getting, and if it falls short, it might be time to cancel.

3. Amazon Doesn’t Always Offer the Best Deals

Even if you shop at Amazon regularly, that doesn’t mean Prime is worth it. Many retailers work diligently to keep pace or beat Amazon in various areas. For example, Aldi could be more affordable than Amazon Fresh, and Costco might offer better deals on many electronics.

Plus, there are retailers that price-match Amazon. As long as the brand, model, size, color, and similar details match, that essentially lets you get the Amazon price without having to sign up for Prime or even have an account on Amazon.

4. Free Shipping Is More Common

While Amazon was one of the first companies to launch broad-scale free shipping, it’s far from the only company that offers it today. Plus, many other retailers provide it without any kind of membership requirement. Instead, they may require a specific minimum purchase, and that isn’t usually hard to hit.

Additionally, with a variety of stores offering free ship-to-store regardless of the amount you spend, you can get a very similar deal even with small purchases. The only difference is that you have to head to your selected store location to pick the product up. If it’s a store you use regularly, or the store is on a route you travel frequently, that likely isn’t a huge inconvenience.

5. Prime Day Isn’t Always What It Seems

Prime Day – where Amazon hosts a massive sale – looks like it’s brimming with bargains on the surface. However, that isn’t always what you’ll find. Many of the discounts are on third-party items that aren’t selling particularly well, effectively making Prime Day a mass liquidation from brands that aren’t household names.

While that doesn’t mean the occasional bargain doesn’t come around, the likelihood that it beats what you’ll find during larger sale events – such as Black Friday or Cyber Money at other stores – is often pretty slim. As a result, if you’re only holding onto your membership because of Prime Day, consider letting it go.

6. Prime May Lead to Impulse Shopping

Amazon is home to nearly any type of product imaginable, which is beneficial in some cases. However, since it’s constantly bombarding you with strategically placed product images and sponsored listings, it may lead to some impulse shopping that wasn’t part of your original plan. If you struggle to bypass the highlighted products even if they aren’t what you came on the app to buy, then relying on Amazon could be hurting you financially. If canceling your Prime membership prevents you from turning to the app so often, it could be just what you need to avoid impulse purchases.

Can you think of any other reasons why a person should cancel Amazon Prime? Did you cancel your Amazon Prime Membership and want to tell others why you made that decision? Are you a fan of Amazon Prime and think that canceling isn’t a wise move? Share your thoughts in the comments below.

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Is 50 Too Old To Change Jobs?

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Should I Change Jobs At Age 50

 

While the general hope is to find a career that you can stick with until retirement, that isn’t always how things play out. Typically, people associate job changes with younger professionals, mainly assuming that their motivation is based on them not knowing exactly what they want. In turn, there’s some trial-and-error before they settle down. However, that doesn’t mean workers of all ages might feel the urge to do something new. If you’re wondering, “Should I change jobs at age 50?” here’s what you need to know.

Is 50 Too Old to Change Jobs?

No, 50 isn’t too old to change jobs or take your career in an entirely new direction. There are plenty of legitimate reasons that could make switching positions or fields the right move.

For example, burnout can happen at any age. Similarly, you can discover a new passion at any time in life. Additionally, shifts in an industry could make a once-viable professional less stable moving forward, making a career change a wise move to ensure your financial future.

You may also want to head in a new direction to secure better work-life balance, as that’s harder to achieve in some sectors than others. Changing careers due to a shift in your health can also be a completely justifiable reason for switching things up at age 50.

Ultimately, you’re never too old to change jobs or careers. What matters is that you make a change for a reason that ensures you’ll remain motivated and engaged after the switch.

Should I Change Jobs at Age 50?

Even knowing that 50 isn’t too old to change jobs, that doesn’t mean you’ll automatically know if it’s a move you should make. Ultimately, whether it’s the right choice for you is a personal decision. It’s wise to consider what you have to gain from heading in a new direction, as well as review the potential risks. That way, you have a solid idea of what the road ahead may look like if you move forward.

Understanding your motivation is also essential. The “why” behind your desire for a new position can let you know where you might need to go in the future. Ask yourself whether your current issue is with your employer, the role you’re holding, your field as a whole, or something else.

If your employer is the problem, remaining on your career path but looking for opportunities at other companies may be a sound solution. If you’re no longer passionate about your entire field, then a career change is potentially the better choice.

The idea is to determine why you want to make a change and then identify the type of change you need to restore your motivation. That way, you can find the best possible path forward as soon as possible.

Tips for Changing Jobs at 50

Update Your Resume and LinkedIn Profile

Before any job search, it’s wise to update your resume and LinkedIn profile. However, the approach you need to use varies depending on whether you’re looking for a new role in your field or are planning on changing careers.

With the former, make sure your work history shows recent accomplishments that highlight your skills. It’s also wise to update your professional summary to represent where you stand today as a professional.

With the latter, you may need to reposition more of the content. Make sure you’re highlighting transferable skills that are relevant to your new target industry. Additionally, consider whether different achievements align better with the type of position you’re hoping to land next and adjust the content accordingly.

Enhance Your Skills

Whether you’re looking for a new position along your current career path or are changing careers entirely, enhancing your skills works in your favor. For a different job in your current field, consider what skill gaps exist currently within the industry and see if you can acquire those capabilities. By doing so, you position yourself as an incredible asset, allowing you to find a new role with greater ease.

For a career change, you need to determine if you don’t have capabilities or experience that are viewed as must-haves for the job you want to land. If so, work to cover those areas. You can take classes, volunteer to gain experience, learn on your own, or try side projects to boost your resume. That makes it easier to transition, as you have the capabilities hiring managers may focus on when making hiring decisions.

Be Reasonable About Pay

While you likely won’t have any issues receiving a comparable salary if you’re remaining in your field, you need to look at things differently if you’re changing careers. Often, a career change means taking a step down on the career ladder, as you’re less proven in that field or industry.

As a result, it’s wise to examine salary averages for individuals working in positions similar to those you’re currently qualified for in your new field and accept that your income may dip initially. However, as you prove your value, you can typically move up, so keep that in mind.

Explore Your Options with Temp Jobs

Temporary jobs can help you explore new fields, industries, and employers with greater ease. The roles are inherently short-term, so you don’t have to worry about committing to something that may not work for you. Plus, it lets you earn an income while you check out options, and you’ll get chances to build your network along the way.

Essentially, you can use temp jobs to support some trial-and-error. Additionally, the barrier to entry is often lower, as companies are more willing to take a chance on a candidate who’s changing careers with short-term opportunities. Finally, if a job is an excellent fit and you impress, there’s always a chance it will turn into a permanent position.

Did you battle with the question, “Should I change jobs at age 50?” and want to tell others about your experience? Do you think 50 is a good time to make a career change, or does it make more sense to stay the course? Share your thoughts in the comments below.

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Is Lifestyle Creep Ruining Your Financial Future?

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Lifestyle Creep

As you progress in your career and receive a raise or promotion, or you finish paying off a debt, one thing usually occurs; you suddenly find yourself with more money in your bank account. Typically, it’s an exciting moment, particularly if your budget previously felt tight. However, the higher bank balance might also lead to some unwise financial decisions, particularly in the area of lifestyle creep. If you’re wondering how lifestyle creep can ruin your financial future, here’s what you need to know.

What Is Lifestyle Creep?

Lifestyle creep is a scenario where your spending increases when your income rises. Essentially, whenever you have more room in your budget, you use those funds to improve your lifestyle.

Often, lifestyle creep is discrete and seemingly innocuous. It typically plays out as a series of small lifestyle improvements, many of which aren’t immediately noticed by members of the household. Minor luxuries are purchased more frequently, or versions of regularly purchased items – like groceries – elevate slightly over time. It’s the slow nature of the shift that led to the use of “creep” in the term.

How Lifestyle Creep Harms Your Financial Future

On the surface, lifestyle creep doesn’t seem overly harmful. In many cases, an improving lifestyle is simply viewed as a reward for hard work, allowing a household to make purchases that weren’t previously within reach.

However, lifestyle creep can harm your financial future. For example, if you were previously living paycheck-to-paycheck, a raise or paying off a debt could let you escape that cycle. But if you allow lifestyle creep to occur and increase your spending, you could end up living paycheck-to-paycheck again. As a result, you’re functionally in the same financial place as you were previously.

In many cases, the signs of lifestyle creep are reasonably clear. After seeing your income increase or your debt obligations reduce, a stagnant savings account balance typically means you are spending more. Using more of your money on outings or social events is another red flag. The same is true of an unshakeable feeling that you can’t get control of your budget no matter how much you earn.

Tips to Avoid Lifestyle Creep

Generally speaking, avoiding lifestyle creep requires some vigilance and planning. Fortunately, it’s not difficult to head in the right direction. Here are some tips to help you avoid lifestyle creep.

Know Your Financial Goals

Lifestyle creep is more likely to occur if you don’t have any well-defined financial goals to guide your actions. Spend time considering what you’d like to achieve to ensure your financial well-being. Be specific when you outline the targets, assigning dollar amounts, deadlines, and more to help you stay on target.

Once you have your goals defined, find ways to keep reminders on you. For example, putting a picture of your dream house in front of your debit card could give you pause when you’re about to make an unnecessary purchase. It gets you thinking about how your behavior could negatively impact reaching your goal, and that’s often enough to slow down excessive spending.

Update Your Budget

The moment your income rises, take the time to update your budget. Consider how the extra cash in your account can make reaching high-priority goals easier, then work to direct your money in those directions.

When you update your budget, make sure to allocate some cash toward discretionary spending. That essentially lets you have a little spontaneous fun while preventing you from going overboard.

Track Your Spending

Another critical tip to avoid lifestyle creep is to continuously track your spending, at least initially. By doing so, you’ll notice if you’re starting to spend more than you planned, making it easier to nip any newly forming bad habits in the bud.

Automate Your Savings

Generally, it’s harder to succumb to lifestyle creep if you don’t leave the money in your checking account. If you have savings goals you’d like to achieve, take advantage of the automatic transfer features offered by most banks and credit unions. That way, when your paycheck is deposited, the designated amounts automatically shift to the specified savings account, preventing you from accidentally seeing that money as spendable.

Increase Your Retirement Contributions

If you want to use your boosted income to secure your financial future, increase your retirement contributions right away if you aren’t currently maxed out. Make sure you’re capturing your full employer match if you receive one through your work plan. Otherwise, plan your contributions to get you closer to the maximum contribution limit.

Use the 72-Hour Rule

The 72-hour rule is a strategy for limiting impulse purchases that you may later regret. When you see a product or service and feel the urge to buy right away, make a note of what it is and then wait to take any action for at least 72 hours. In many cases, the impulse to buy will diminish during that time.

However, if the urge doesn’t go away, you are still giving yourself time to consider whether moving forward works with your budget. At a minimum, that helps you avoid splurges that would harm your financial well-being, which is still a win.

Pay Down a Debt

If you have a solid emergency fund and your retirement contributions are relatively high, use the extra money in your budget to speed up debt repayment. By doing so, you’ll pay less in interest over the life of the debt. Plus, you can eliminate the obligation sooner, allowing you to get even more room in your budget. In some cases, this strategy may also boost your credit score, which is always beneficial.

Don’t Make Big Changes Immediately

If your income increases significantly, it may encourage you to make certain big changes, like moving into a larger home or buying a nicer car. While there are situations where that could make sense, don’t make these adjustments to your lifestyle right away.

Instead, spend time reviewing the short and long-term implications of those changes, as the financial impact is often significant and lasting. That way, you can ensure you aren’t getting in over your head or putting yourself back in a position where you’ll struggle financially.

Be Cautious About Automated Spending

Subscription-style services may seem convenient, but they’re often costly. Additionally, most people don’t have the same level of awareness when it comes to subscription-style services as they do with other types of spending.

Whether it’s gym members, streaming services, meal kits, automatic product deliveries, or anything of that nature, make sure you’re tracking those activities. Additionally, review your subscriptions every month to determine if they’re worth keeping in place. That way, if something you’re paying for automatically stops providing value, you can end the subscription promptly.

Did you struggle with lifestyle creep and encountered financial hardships because of it? Do you have any tips that can help others avoid lifestyle creep to ensure their financial lives stay on track? Share your thoughts in the comments below.

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How To Ensure Your Budget is Working For You

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Is Your Budget Working

 

When it comes to personal finances, the most common recommendation from experts is to have a budget. However, many people create an initial framework for their spending only to continue struggling. Often, that’s a sign that your budget isn’t quite where it needs to be to serve you well. If you’re wondering, “Is your budget working?” here’s what you need to do to figure it out.

Do You Feel Overly Restricted?

In many ways, budgets are inherently restrictive, as they’re designed to ensure your money is going to the right places. However, if it’s restricting what you do to the point where it leaves you feeling miserable, that’s an issue.

Ideally, your budget needs to have some room for spontaneity and enjoyment. Otherwise, the rules you’re placing on yourself are challenging to follow over time. Essentially, your budget starts seeming like a punishment or burden, and that can leave you frustrated, unmotivated, or even angry.

While it’s wise to ensure you’re handling all of your financial responsibilities, try to designate some of your money for activities you genuinely love. By doing so, you’re giving yourself an outlet for fun, and that can positively impact your well-being. In turn, following the rest of your budget isn’t as difficult, as you’re still getting some joy from your hard-earned money.

Are You Being Too Idealistic?

When many people sit down to create a budget, they outline their perfect spending plan. The issue is that budgets drawn up in that manner don’t always align with reality. Instead, they’re overly optimistic based on how household members typically act and spend or don’t account for realistic costs for needed goods and services.

Overly idealistic budgets are incredibly common during periods of economic uncertainty, particularly issues like high inflation. They don’t provide enough room for rising prices, which causes households to bust their budgets even if they’re trying to be responsible.

Additionally, not accounting for actual spending patterns means missing the mark more often than not. As a result, it’s critical to take an honest look at your typical spending and set realistic targets in discretionary categories. That helps you mold your budget to your preferences and priorities, ensuring you aren’t being overly idealistic.

Do You Have an Emergency Fund?

Even the best-planned budget is quickly derailed if you can’t cover the cost of an unexpected event. Whether it’s medical bills, car repairs, or anything else, being able to cover those expenses without harming your budget makes a difference.

By having an emergency fund, you’ve got a stash of cash you can tap when the unexpected happens. As a result, the rest of your spending can simply align with your usual budget in most cases.

Make saving money in your emergency fund part of your monthly budget, allowing you to build up the account and recover the cash you had to spend to handle the unexpected. Ideally, you want to make your initial target at least $1,000. Then, work your way up to three months of living expenses, and then try six. That way, you get a sizeable cushion in place.

Did You Factor in Everything?

Common advice is to review your spending over several months as you create your budget. That lets you see where your money is going, which can make it easier to choose reasonable targets.

The problem is that only looking at a few months means you aren’t seeing irregular expenses that occur during the year. For example, you might overlook how much you usually spend on gifts for holidays and celebrations or miss routine expenses that don’t occur monthly, like vehicle maintenance.

If you don’t factor in everything and plan for it correctly, you’ll encounter months where your budget just won’t work. Instead, examine all of your spending during a year. Identify those irregular expenses, and break them down to see how much you need to set aside for them each paycheck or month to ensure they’re covered. Then, shuttle the cash to a designated savings account during the year, allowing you to tap that money when it’s time to cover those costs. That way, you’re planning for those expenses while keeping your monthly budget consistent.

Can You Actually Afford Your Lifestyle?

In some cases, the reason your budget isn’t working is your trying to maintain a lifestyle that you genuinely can’t afford. If your expenses and spending exceed your income, all you’ll do is rack up debt if you keep pushing toward a lifestyle you can’t support. In turn, the cost of your debt repayment usually rises, potentially to the point of becoming entirely unmanageable.

While it’s hard, it’s critical to get a grip on a situation like this quickly. Examine your spending across every account, including bank accounts and debt-related ones, like credit cards. Then, see if your outgoing money exceeds what you’re bringing in, and if it does, find ways to scale back. Otherwise, you’ll need to boost your income to cover the difference.

Are You Making the Right Adjustments?

Budgets aren’t a one-and-done document. Instead, they need to live, breathe, grow, and change. If you aren’t adjusting your budget regularly, what’s currently in place may not match your reality, as it’s based on old information, out-of-date costs, and other irregularities.

Make a plan to review your budget at least quarterly. See if the categories and allocations make sense for where you are today. If not, change your budget to fit what’s happening now, allowing it to grow and change with your circumstances and ensuring it’s easier to follow.

Do You Genuinely Want to Follow a Budget?

While creating a budget is an excellent first step when you want to get control of your financial life, writing one down won’t magically change how you act and spend. Instead, you need to actively commit to sticking with your budget. If you don’t, then the work you put into creating one won’t improve your situation.

Consider what you hoped to accomplish when you created your budget. Think about how adjusting your habits help you reach important goals and what it would feel like to achieve them. Use that as ongoing motivation, regularly reminding yourself of what’s most critical to you to keep yourself focused on the target.

 

Do you have any other tips that can help people answer the question, “Is your budget working for you?” Have you ever discovered that your budget wasn’t working and want to share details about how you got back on track? Share your thoughts in the comments below.

 

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Top 7 Financial Resolutions For 2023

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Financial Resolution for 2023

The start of the year is a classic time for creating new goals, giving you direction for the months to come. With inflation and a possible recession on the horizon, many people are focused on their finances. Fortunately, there are plenty of suitable objectives that can help you get your money in order. Here are the top seven financial resolutions for 2023.

1. Build an Emergency Fund

One of the most critical steps you can take to secure your financial well-being is building an emergency fund. By having some cash set aside for the unexpected, you give yourself a safety net that doesn’t rely on debt.

If you’re just starting out, set your initial savings target at $1,000 or the total cost of your vehicle and homeowner’s or renter’s insurance deductibles, whichever is higher. If you already have that set aside, work to increase your emergency fund to cover three months of living expenses, giving you a cushion in case of sudden unemployment.

Once you have three months of living expenses, six months of expenses is the next target you should go after. Then, work your way up to a year. That way, you’re covered against emergencies big and small.

2. Create a Workable Budget

Having a functional budget gives you a framework for your financial life. The issue is that many people are overly optimistic about how they’ll handle their money. As a result, it’s smart to focus on being realistic.

The easiest way to create a workable budget is to start by writing down information about your debts and recurring expenses, such as utilities and insurance. Next, review your spending over the last three months to see how much you commit to groceries, fuel for vehicles, and other cost areas that typically fluctuate.

By seeing where your money is going now, you can identify areas for adjustments. Start with minor tweaks, making it easier to adapt to stricter spending limits and focus on other financial goals, like saving. Then, if that first month is a success, see if other minor adjustments are viable. That strategy lets you take a slow and steady approach, making it easier to stay realistic while making positive changes.

3. Capture the Entire Employer Match

If you’re employed at a company that offers an employer match on retirement contributions, make sure you’re contributing enough to qualify for the full match offered. The employer match can significantly impact your financial future by giving you more funds for retirement. Plus, it’s essentially free money, so it’s an employee benefit that’s worth maximizing.

Just be aware of any vesting rules in place at your company. Usually, you can only keep the employer match if you remain employed at the organization for a minimum time period. By knowing how long it takes to become vested, you can make sure that you’re fully capturing this financial benefit before leaving for opportunities elsewhere.

4. Pay Down One High-Interest Debt

If you’re carrying any high-interest debt, choose one account and make it your focus for 2023. It’s ideal if you can aim to pay it off during the year. However, if the balance is high, simply work on paying it down as much as possible.

Begin by ensuring that you’re making the minimum payment on it and every other account as required, as well as handling your recurring expenses. Then, send any extra cash to the chosen debt that you can without completely derailing the rest of your budget. Every little bit more helps chip away at the principal faster. As a result, you’ll pay less in interest over time.

If the debt you’re focused on is a credit card or other revolving account where the minimum payment shrinks as the total owed declines, keep your monthly payment the same, using the current payment as the guideline. That creates consistency in your budget and helps you make progress faster. Additionally, don’t add to that debt along the way, as that undoes your work.

5. Adopt the 72-Hour Rule

Using the 72-hour rule can curb unnecessary spending significantly. Essentially, if you see a non-essential item you’d like to purchase, make yourself wait at least 72 hours before actually buying. By using this strategy, you’re delaying splurges that are potentially motivated purely by the emotion of seeing the item in the moment. When you revisit the idea of buying the product in 72 hours, that initial feeling is typically gone, making you less likely to purchase anything you don’t actually need.

If you still feel strongly about purchasing the product after 72 hours, take a moment to reflect on why. By considering your motivations, you can understand more about what’s driving you to get the item. At that point, if you have a legitimate reason and the money in your budget, you can potentially move forward. However, if you still have doubts, wait another 72 hours to see if the picture becomes clearer.

6. Try a No-Spend Challenge

No-spend challenges involve not spending any money on anything aside from bills and certain living expenses you can’t cover in advance – such as refueling a vehicle or fresh foods that won’t last for the entire time – for a specific period. Many people try no-spend February since it’s the shortest month of the year. However, if that idea is intimidating, try a no-spend two weeks as a starting point.

Before your no-spend period, you have to make sure that you plan your groceries for that entire period. Use a frugal approach by taking advantage of bulk items, sales, freezer meals, and similar strategies that can reduce your costs and make the experience less stressful. Just make sure you don’t go on a spending spree to compensate for a no-spend period before or after it happens, as that doesn’t positively impact you financially.

After the no-spend period, you should have some extra cash available. Take that and put it toward a specific goal, such as paying down debt or beefing up your emergency fund. That way, it has a positive impact on your financial picture.

7. Start Investing Outside of Retirement

While many people have company-sponsored retirement plans, investing outside of them can make it easier to ensure your long-term financial security. Whether you have access to a 401(k) or similar program at work, consider opening an IRA – either traditional or Roth, depending on your financial situation – to shore up your retirement savings. If you have children, you may want to explore 529 plans to put money aside for their college education.

However, even if you only have general saving goals, investing is still worth considering. You can open an account at a brokerage and start putting money into the market, potentially letting you capture better gains than if you put the cash into a savings account. Just make sure that you diversify. In many cases, going with index funds or ETFs makes that easy. Do a little research to find funds with solid track records and align with your risk tolerance, creating a personalized portfolio that meets your needs.

Did you decide to have a financial resolution for 2023? If so, what did you pick and why? Do you think resolutions are helpful or not? Why do you feel that way? Share your thoughts in the comments below.

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How To Save On Your Electric Bill In The Winter

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How To Save On Your Electric Bill

During the winter, many households spend far more on electricity. In many cases, this is due to needing to heat their homes. Whether you use wall heaters, central heat, or anything in between, it can cause your electric bill to rise. Fortunately, there are steps you can take to save on your electric bill this winter. Here’s what you can do.

Have Your Heating System Serviced

Routine maintenance ensures that your heating system is operating efficiently. At the start of winter, check your filters and replace them if needed. Then, consider replacing them monthly or as needed, as buildup on the filters strains your heating system.

Also, have a professional service technician come in and go over your system. They can make sure that it’s in good shape or make repairs to increase your energy efficiency.

Lower Your Temperatures

One of the simplest ways to save money on your winter electric bill is by lowering the temperature on your thermostat. Even a few degrees can make a difference, so find the lowest temperature that you can deal with and keep your thermostat there.

If you have a programmable thermostat, you can also make other changes. For example, you can reduce the temperature a little more at night while you’re sleeping. You could also set it up to keep your house cooler when you’re at work, suggesting it’s high enough to keep any pets comfortable.

Lowering the temperature on your electric water heater can also make a difference. If yours is set to 140°F, reduce it to 120°F instead. Generally, that still keeps baths and showers comfortable, but it costs far less.

Warm Your House with the Sun

Opening up curtains on windows that are hit with direct sunlight can warm your home, even during the winter. When you wake up in the morning, make sure to open the curtains on any south-facing windows, as those typically get the most sunlight. Then, as the sun starts getting low, close the curtains to keep the heat inside.

Improve Your Insulation and Windows

Home insulation and the quality of your windows impact heat transfer. If there isn’t enough of a barrier between your interior and the outside world, you’ll spend more heating your home.

Check your attic insulation to see if it’s suitable. If not, consider refreshing it to improve your home’s energy efficiency. Having double-pane windows also helps. However, if you can’t afford to upgrade your windows, putting on insulating window films can make a difference.

Install Insulating Curtains

Insulating curtains are designed specifically to help maintain your home’s temperature. By installing them on your windows, you get an extra barrier against the cold air outside. By making sure they fit close to the window, they can also combat drafts.

Turn on Your Ceiling Fans

While it’s counterintuitive, turning your ceiling fans on can actually reduce your heating costs. Most ceiling fans have switches that change their direction. By reversing the spin, the ceiling fan pushes hot air down, keeping you more comfortable. Just make sure to clean off any dust first and use the lowest speed setting available.

Do you have any tips based on what you did when figuring out how to save on your electric bill that would help others? Have you tried any of the options above and want to discuss your results? Share your thoughts in the comments below.

 

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Take These 5 Steps to Recession Proof Your Savings

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Recession Proof Your Savings

Currently, the economy is in flux. Inflation remains high, but there’s also a strong chance that a recession is on the horizon. Many of the steps that were taken to curb inflation make a recession more likely. As a result, experts generally believe one will occur this year. As a means of protecting your well-being, protecting your savings is a must. Here are five steps you can take to recession proof your savings.

1. Have a Separate Emergency Fund

While an emergency fund is a type of savings, it’s different from the money that’s set aside for specific goals, such as buying a house or securing your retirement. With an emergency fund, you have cash available that you can tap into when genuine financial emergencies occur. Plus, by separating it from your other savings, you won’t accidentally tap into those funds.

At a minimum, strive to have $1,000 or enough money to cover your insurance deductibles – whichever is higher – in an emergency fund. Once you have that, aim for three to six months of living expenses. That ensures you have a cushion that you can use during legitimate emergencies, making it easier to protect your retirement and other goal-oriented savings.

2. Take Advantage of Higher Interest Rates

Due to steps taken to reduce inflation, interest rates are on the rise. While this isn’t ideal if you’re looking to open new debt accounts, it works in your favor if you want to recession proof your savings. By keeping any stashed cash in a high-yield online savings account with a higher interest rate, the money you set aside grows more quickly. Plus, it doesn’t come with the risks associated with investing.

Look at your current interest rates on your savings accounts and compare them to what’s offered by other institutions. If your current rate is notably below what’s available elsewhere, consider moving the cash to a savings account at a different bank or credit union. That way, your money grows faster, giving you a bigger cushion during a recession.

3. Revamp Your Budget Now

In many cases, it’s best to update your budget to address potential financial difficulties that a recession creates well before it’s necessary. By updating your budget now and eliminating unnecessary spending, you can focus more of your energy on building an emergency fund or saving for other purposes.

Then, if a recession negatively impacts your income, your budget might still work based on the new amount you have coming in each month. Essentially, by living below your means now, you’re giving yourself some space and preparing for a time when your earnings may drop, making any future adjustments either unnecessary or easier to manage. In turn, you might not need to turn to your savings as quickly, allowing you to preserve your stashed cash.

4. Reduce Your High-Interest Debt

High-interest debts – such as credit cards and specific personal loans – cost you a lot in interest over time. By working to reduce what you owe ahead of schedule, you’ll pay less in interest over time.

Plus, when you pay off more of your credit card, the monthly minimum payment declines. While you should aim to keep your payments high to tackle your debt, this can give you a bit of a reprieve during financially challenging months. If necessary, you can transition to the lower minimum payment to provide you with more room in your budget, making it easier to avoid tapping into your savings.

5. Don’t Make Dramatic Investment Changes

During a recession, stock market fluctuations are common. However, responding to those dips by pulling your money out of long-term investments isn’t necessarily wise. In most cases, recessions are short-term episodes, and markets ultimately recover (and typically continue to grow). Since that’s the case, it’s best to leave long-term investments in place if you aren’t planning to tap those funds in the near future.

Plus, it’s critical to remember that pulling money out of the market comes with a cost. Barring specific retirement accounts and being of retirement age, you’ll usually owe taxes on any market-related earnings. As a result, selling the investments and taking the cash often comes at a price.

Additionally, market downturns can be great investment opportunities. You may be able to add securities at a lower price, allowing you to benefit from any growth that occurs when the market recovers. Just make sure you research the investments before dedicating any funds, particularly if the company itself is financially at risk of a negative outcome due to the recession.

Do you have any other tips that can help someone recession proof their savings? Have you already taken steps to recession proof your savings and want to tell others why you made the various moves? Share your thoughts in the comments below.

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