What Is a Sinking Fund? + How to Use Them to Stop Being Broke!

what is a sinking fund?

What Is a Sinking Fund?

In this article I am going to answer the question “What is a sinking fund?” And I will also list the sinking funds that I think every family should have (and some other fun ones that you might want to have, as well!).

Read on to learn about the power of sinking funds and how they can help you to stop being broke—for good!

 

Tip: Save the image above to Pinterest so that you can easily refer back to this article on what is a sinking fund later!

 

Tired of tiny interest rates on your savings?

Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

 Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. 

Click here to learn more and open your savings account today!

 

What Is a Sinking Fund? Three Helpful Definitions

When I Googled  “what is a sinking fund” because I was curious what definitions I would find, this is the first one that came up: “a fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset.” That’s pretty clear—except for the “wasting asset” part.

So here is another definition for what is a sinking fund, from the folks over at EveryDollar (Dave Ramsey and company): “A sinking fund is simply a strategic way to save money by setting aside a little bit each month.”

That’s not too bad of a definition. But here is what I would say, if you asked me “what is a sinking fund”: a savings account that you set up and regularly put money into in order to replace money you regularly or periodically spend on a specific purchase or expense.

Is that pretty clear? If you have an even better definition, comment below and let me know!

 

What Is a Sinking Fund Used For?

So now that we have given a basic definition for what is a sinking fund, let’s talk about what sinking funds are used for.

In order to manage your money well, it’s really helpful to use individual savings accounts to make sure that you are savings for the things that you need to be. Creating sinking funds will help you to get out of debt and to stay out of debt as you instead save up for and purchase or pay for the things that you need.

As soon as you have a fully funded emergency fund of at least 3 to 6 months’ worth of expenses, you should start setting up additional savings accounts for irregular or unanticipated (though not completely unexpected) expenses.

If your bank doesn’t allow you to easily set up multiple savings accounts, then I recommend setting up an account with an online bank such as Capital One 360. They have been a great bank for us and have one of the best savings interest rates around.

Read on to learn about 9 sinking funds that pretty much everyone should have, as well as a handful of additional savings accounts that may be beneficial (and fun to have!) in your situation.

 

What Are Sinking Funds That Everyone Should Have?

When you are considering what sinking funds to set up, here are my recommendations. Below I list the different sinking funds I feel that virtually every family (and everyone) should have (and that we ourselves have).

 

Vehicle maintenance and repairs

One of the most important sinking funds for most families (all who have one or more vehicles) is a sinking fund for vehicle maintenance and repairs. We all love our cars, but the simple reality is that they need regular maintenance and eventually they need repairs. So rather than having to put the bill on your credit card the next time your battery dies or your brakes need to be replaced or your transmission goes out, pull the money from your vehicle maintenance savings account.

 

 

Vehicle purchase

Another important sinking fund is a savings account for the purchase of a vehicle. Do you want to know where most people’s wealth is? It’s sitting in their garage. Really. I don’t mean that our vehicles make us rich. I actually mean the exact opposite, because vehicles go the wrong direction—they go down in value. They depreciate. And yet the average car payment in America is more than $400 a month.

Did you know that if you paid yourself that $400 a month for 40 years instead of paying it to the bank in car payments you would have invested $192,000 (can you believe that people spend that much on this depreciating asset?!), and at an average annual return of 11 percent, which is very realistic over the long term, you would have $2,907,969  in your investment account after that 40 years! Isn’t that amazing?

So instead of paying the bank that much money and all of the interest included when you finance a vehicle, set up a vehicle savings account and pay yourself a monthly car payment. That may mean that you want to sell your current vehicle that has a car payment and buy an inexpensive car to get around in until you can buy yourself a car for cash in a couple of years. (And if you cannot pay off your vehicle quickly, that is what I would strongly urge you to do. Please, build your own wealth; not the bank’s!)

If you can pay yourself $200 a month for 2 years while you drive a $1,000 to $3,000 get-around car, you would have about $5,000 to buy a little bit nicer car. And then if you drive that car for two more years, you could then buy a $10,000 vehicle ($5,000 from the value of the current car plus $4,800 from saving $200 a month for 24 months = ~$10,000). And then if you drive that $10,000 vehicle for four more years, you could then buy your next car, with cash, for $20,000. And because you’re going to buy a car that’s at least 2 to 4 years old, since you don’t want to take the huge bite that happens when you buy a new car (save that for when you have a net worth of at least $1 million and can really afford to take that kind of financial hit that comes with the depreciation of owning a brand-new car!), you can get a great vehicle for that price—and you’re just eight years into your vehicle saving plan. You would have a $20,000 car—and it would be paid for with cash! Amazing!

If you want to buy a vehicle for even more than that (though personally I hope to never spend more than that on a vehicle unless it’s an RV or sailboat or something—I like to use my money for things that go up in value), you could save more, such as $300 a month. If you saved $300 a month for eight years and earned a little interest on that, you would have about $30,000 to pay toward your vehicle, plus the resale value of the current car you were driving. And of course you could increase that by about $10,000 for every additional $100 a month that you chose to save—so if you wanted to buy a $50,000 vehicle with cash, you would need to save just $500 a month for eight years. Again, the average car payment in America is almost that much, so please, if you want to buy a vehicle that is that expensive, please save up the money and buy it with cash!

I know that having a car payment in America is normal, but you don’t want to be normal! Normal is broke and in debt and living paycheck to paycheck. Normal kind of stinks. So don’t be normal. Be awesome. And one of the ways you can do that is to get out of debt and never look back. Find out how you can save on the many costs related to car ownership by reading this article.

 

Auto insurance and vehicle registration renewal

Another important vehicle-related sinking fund is a savings account for auto insurance and annual vehicle registration and related fees (such as vehicle inspection and safety fees). By saving money for these expenses every month you can pay for your auto insurance annually, for example, which will generally save you money over having a month-to-month plan.

Whenever you can, it is generally a good idea to be your own bank!

 

Home repairs

When you buy a home, you not only sign up for 15-plus years of hefty payments but you also sign up for the upkeep and repair that a home requires. Home ownership (generally speaking) is definitely worth it, but you need to be prepared for the extra expense of home maintenance in your budget. You should save about 1 percent of the purchase price of your home for home repairs and maintenance each year. (If you have an older home, you may need to save more than that.)

So if you purchase a $250,000 home, that would be about $2,500 a year that you should save, or about $200 a month. This money can then be used for the deductible of your homeowner’s insurance if you need to make a claim, for example.

Note: You should consider putting your homeowners insurance deductible high enough that you never want to make a claim unless it’s something pretty catastrophic. So put your deductible at about $2,000 or more. That will keep your premiums significantly lower, but perhaps more important, it will keep you from making insurance claims that you should not make for things that you should instead pay for out of your house maintenance and repairs savings fund—or even your emergency fund if needed. If you make too many claims, not only will your insurance premiums get raised significantly, but you might even get dropped from your insurance company. And because your claims are visible to other insurance companies (on something called the CLUE, or Comprehensive Loss Underwriting Exchange, report), making too many claims will also make other insurance companies less likely to be wiling to take your business.

So instead, self-insure by having a fully funded emergency fund and then by saving monthly for the home repairs that you will need to make throughout your time in your home.

For more helpful information on saving money on housing, read this article with more than 30 top suggestions for saving money on housing.

 

Furnishings and appliances

It is also a good idea to include a sinking fund category in your budget for furniture and appliances.

You need to plan to do periodic repairs and replacement of your appliances and furniture. And you don’t want to have to rely on credit cards to do that. So instead, save up regularly for these eventually anticipated expenses. You’ll get a good feel for how much you need to save once you start paying attention to this, but if you’re unsure, start saving $50 a month. If you buy gently used furniture and appliances, you’ll get a great bang for your buck and be able to buy a lot of great things for $600 a year.

 

 

Christmas and gift giving

Another important sinking fund is a gift fund.

The way many people act, you would think they don’t realize that Christmas (and the cost of it) are coming until at least Black Friday. But you can plan better than that! If you spend the average $900 that most families in America do, then you can save up for Christmas for just $75 a month. Sweet! So get it done.

Or, you might also consider cutting back on your Christmas spending so you can save less each month and put the money toward other great causes (such as your children’s educations or your own retirement—now those are gifts that keeps on giving!). Read this article for ideas on how to save on your Christmas spending and this article on how to open an educational savings account for your child.

In addition to Christmas, look at saving some money each month for additional gift giving such as birthdays, weddings, and so on.

 

Vacations

Another important sinking fund is a vacation fund.

The best kind of vacation is the one that doesn’t follow you home in the form of credit card payments! So set up a savings account to save up for your vacations. You can estimate how much to save each month by looking at how much you have spent in the last year or two on family trips and vacations, but $100 to $200 a month is probably a good place to start.

Do you want to save money on your traveling and family vacations? Of course you do! If you haven’t checked out Airbnb yet, you need to! We love Airbnb for saving money on our accommodations while traveling! Give them a try; they’re awesome! You can get $40 off your first stay by signing up here!

 

Life insurance

If you have children and you are not independently wealthy (yet! :)), then you need life insurance. And one way that you can save on the cost of your life insurance premiums to pay for them annually. But that also means that you need the money available when it comes time to pay the annual premium. So set up a sinking fund to take care of that, that you fund every month with the amount that would be the annual premium divided by 12.

 

Miscellaneous/other short-term savings

We also have a savings account for miscellaneous purchases and expenses. You may want to have one to cover things that come up like purchasing electronics or bikes and recreational gear or things like that.

 

Tired of tiny interest rates on your savings?

Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

 Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. 

Click here to learn more and open your savings account today!

Additional Sinking Funds You Might Want to Have

I’ve listed below some additional savings accounts that you might want to consider when determining what to save money for.

 

Utilities

Your utility bill is another thing, as you are considering what sinking funds to have, that you might want to open a separate savings account for.

When we lived in our previous home the natural gas company had a bill pay program where they equalize your payment every month so that it’s easier to budget, rather than having potentially really high natural gas bills to heat your home in the winter, for example. And that was a really handy option. But at some point I decided we could just save the money ourselves during the months when the utilities cost less and pull the money from our utilities savings account for months when our utility bills were higher, like the summer with the AC and the winter with the furnace. I really like being my own bank. 🙂

For ideas on how to reduce your spending on utilities, read this article.

 

Down payment

Probably the biggest purchase you will ever make is your home, so a down payment fund is another important item to include as a sinking fund. If you hope to be a homeowner in the foreseeable future, you should start to save toward the purchase of your home.

To be able to save as much money as possible in your down payment fund, rent as inexpensively as you can. Rather than rent a posh place with all of the awesome amenities, rent an inexpensive (but reasonably safe) place for as little as you can, and save the difference. There’s a lot you can put up with if you know that it’s only for a certain amount of time (say two to five years, as you save up a good down payment) and if it’s for a great cause. To learn more about saving up to buy a home, check out this article.

If you know that you are at least five years (and the closer you get to ten years or more, the more this might make sense) away from purchasing a home, you might even consider investing the money in mutual funds to earn more money on your money.

You might even consider what we’re planning to do for our next home purchase—the 100 percent down plan! We are planning to stay in our modest, three-bedroom, 1,300-square-foot home for the next five to eight years (we’ve lived there almost eight years now) so that we can buy our next home (that will probably be close to twice the value of the one we live in now) with cash. It’s maybe a sacrifice to stay in a smaller than average home with our three kiddos, but the payoff of never being in debt ever again is worth the trade-off. And as we save that money for the next several years, because it is a mid-term time frame of more than five years, we are investing the money in mutual funds in our Schwab brokerage account.

If you want to know how we choose the mutual funds that we are investing in to diversify our investments, enter your information below and I will be happy to email it to you, no strings attached.

     

    Baby fund

    Another sinking fund to consider setting up is a baby fund.

    Those squishy little cherubs not only cost a chunk of change at the hospital, but you may have heard that they cost some money once you bring them home, too! 🙂 The copayment or deductible and all that baby gear add up, so when we’ve been pregnant (and for several months after) with our children we’ve put $100 a month into a savings account to help pay for those expenses.

    Read this article to learn ways to save on expenses for your baby.

     

    Recreation and entertainment

    Another sinking fund you could set up is a recreation and entertainment fund.

    If you spend more money some months on recreation and entertainment than others, consider opening a savings account and just puling the money out when you need it. For example, if you get family ski passes and buy needed ski gear every winter, you might save up for that throughout the year so that it’s not such a hit on your wallet at the beginning of ski season.

    For ideas on how to save on recreation and entertainment for your family, check out this article.

     

    Wedding

    If you are engaged, then a wedding fund is another great sinking fund.

    When planning a wedding, open a separate savings account to save for it. If you have a specific date in mind and have figured out how much you can afford to pay for your wedding and related costs, you can figure out how much money to save each month for them. And yes, you should create (and stick to) a wedding budget!

     

     

    RV/boat/ATV purchase and maintenance fund

    You might also want to include setting up a recreational vehicle maintenance sinking fund.

    Cash is king. Saving up and paying for your recreational vehicles is the best way to go, so if you intend to have these fun toys, save up to buy them and to maintain them after purchase.

     

    OC fund

    OK, this is just one quirky thing that I do—among who knows how many. 🙂 But I don’t ever want to touch our emergency fund if we can help it, so in addition to having an emergency fund for larger unexpected expenses we also have an OC fund. You could say it’s our backup EF—our “Oh, criminy” fund (or another slang word of your choice that starts with C). Since most financial emergencies can be covered with $1,000 or less, that’s how much we have in this OC fund. We have pulled money from this fund and then replenished it, but because of our other savings accounts for car maintenance and home maintenance and car replacement and things, we haven’t yet had to pull money from our EF. (Knock on wood!)

     

    Mission, humanitarian service, or charitable giving fund

    If you have children that you hope will serve missions for your church (as we do!) or do humanitarian service trips or study abroad or similar things or if you give a substantial amount to charity on some schedule rather than monthly, you may want to have one or more savings accounts for these funds.

     

    Disney fund!

    A trip to Disney is another (fun!) thing to consider including as a sinking fund.

    We’re planning to go to Disneyland (and other fun places in Southern California) in a few years and then Disney World and nearby attractions within a few years after that, so I just recently opened a savings account to save specifically for these trips. If there is something similar that you want to specifically save for, you might open a separate savings account to do so, since opening savings accounts such as the ones we have with Capital One 360 is so fast and easy. (And having separate accounts is so convenient—and important, so that you do not spend money you intended to spend on one thing on something else!)

     

    Other helpful sinking funds

    In addition to those listed above, here are some other sinking funds that you might want to consider setting up:

    •  Homeowners insurance (if you have paid off your mortgage and need to pay the premiums yourself)
    • Property taxes (again, if you need to pay these yourself)
    • Medical expenses (if a flexible spending account is not available to you)
    • Pet expenses
    • Clothing and shoes (if you are like us and don’t buy clothes and shoes every month)
    • Children’s sports and other activities
    • Spending money (aka fun money, blow money)
    • College expenses (if you are close enough to needing the money that you do not want to have the money in mutual funds in a college educational savings account)
    • Memberships and subscriptions

    Final Thoughts about Sinking Funds

    I hope that you feel you have a great understanding now of “what are sinking funds?” Do you have more questions about what sinking funds are or how they should be used? Leave a question in the comments below!

    If you want to set yourself up for financial success, you’ve got to stop living paycheck to paycheck, like the majority of people do. And one of the most important factors to accomplish that is to have the cash (as savings) that you need to pay for expenses as they come up so that you don’t have to rely on credit card and other debt.

    As you are able to get out of debt, as Dave Ramsey says, you are able to free up your most important wealth-building tool: your income. By having the various sinking funds identified above, you can make sure you cover all of your bases so that you are prepared for life’s financial curveballs and opportunities.

    Similarly, by putting money aside in your monthly budget to save up for these expenses, they won’t cause you to go into debt so that you’re paying potentially hundreds of dollars in interest and they won’t derail you from your investing or other financial objectives—these (somewhat) unexpected expenses won’t keep you from reaching your awesome goals and dreams!

     

    How would you answer the question “What are sinking funds?” What additional sinking funds do you have that I didn’t mention here? I would love to hear your ideas, so leave a comment below!

     

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    Money Challenge: 11 Best Money Saving Challenges to Save Money Fast!

    money challenge

    Money Challenge

    Are you looking to do a money challenge in order to save more money or save money fast? In this article I am going to share some of my favorite money challenges that can help you to reach your financial goals!

     

    Tip: Save the image above to Pinterest so that you can easily refer to this article on money challenges later!

     

    Tired of tiny interest rates on your savings?

    Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

     Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.7% on your savings account (which is really good in today’s market)!

    Click here to learn more and open your savings account today!

    Money Challenge: 11 Simple Money Challenges to Help You Save!

    There are a lot of great benefits to doing a money challenge! They can help you to save more money or to save money quickly, and they can help you to break money habits that are preventing you from managing your money well and reaching your financial goals. In this article I share some of my favorite money challenges!

     

    Tip: Save the image above to Pinterest so that you can easily refer to this article on ideas for doing a money challenge later!

     

    1. The no spend challenge

    Probably my favorite money challenge is the no spend challenge. One huge benefit of doing a no spend challenge is that it is a great way to pay off debt fast or save money quickly! Do you have credit card or other debt you need to get rid of? Do you want to pay down your auto loan or your student loan debt? Get it paid down by participating in a no spend challenge!

     

    Pro Tip: Get the FREE No Spend Tracker printable below to help you succeed at a no spend challenge and save money fast! 

     

    Do you want to save money quickly to take a trip, pay for needed home maintenance, or pay for another large purchase or expense with cash? This money challenge is a great way to save quickly for those things, too!

    A no spend challenge is where you go for a week, two weeks, or even a month or more either without spending any money at all or without spending money on anything besides the bare essentials or without spending money in a particular category such as groceries or clothing.

    Note: Learn how to save $500 a month with 5 simple frugal living hacks!

    By participating in a no spend challenge, you can save a lot of money that you can use toward things like:

    A no spend challenge has the potential to not only help you save money (sometimes a lot of money) but it can also really help you change the way you look at money and potentially even change your whole financial future.

    Read on to learn how to complete a no spend challenge successfully!

    And don’t think that you can’t have any fun during a no spend challenge! There are still tons of fun things that you can do! Find more than 90 free and fun activities that you can do during a no spend challenge here!

     

    2. 30-day money challenge

    The 30-day money challenge is another great way to save money fast. 

    With the 30-day challenge, you work to save as much money in a month as possible by cutting spending in various areas.

    There are many, many ways that you can save money (here are more than 150 ideas for easy ways to save money!), but here are some of the main ones where you can really make a difference in your spending:

    Find more information on this topic and 13 ideas for how to save money fast!

    Top tip: To learn how to start getting control of your finances and really start winning with money, get my free Save Your Money, Change Your Life ebook. Sign up below! This book will teach you how to earn more, save more, spend less, and invest more in order to right your financial ship, gain financial stability, and work toward building prosperity and wealth and reaching ultimate financial freedom.

    3. The 52-week money challenge

    There are a number of ways that you can do a 52-week money challenge. One of the most fun may be to start by depositing just $1, and then increase that amount each month by $1. So the first week you deposit $1 in your savings account, the second week you deposit $2, the third week you deposit $3, and so forth. By the last week you will deposit $52, and your total money saved with just this simple money challenge will be $1,378! Pretty awesome, right?

    This could be a great way to save up for something like a paid-for vacation, new appliances or furniture you want to buy, a simple home remodeling project or renovation, and more!

    For a simpler 52-week money challenge, you can commit to save some realistic amount each week, such as $25 or $50. If you saved $25 a week for 52 weeks, you would have $1,300. So you would save about the same amount as with the money challenge above, the math would just be easier. 🙂 If you saved $50 a week, you would have $2,600, and that would likewise be a great achievement!

    Another 52-week money challenge, though this one requires a pretty serious savings commitment, is to save $100 each week for 52 weeks. By the end of the year, you have saved $5,200! That is pretty amazing! Yes, it will take discipline and dedication and managing your monthly budget well (learn how to start budgeting here!), but it could help you fund some amazing things! For example, this is an excellent way to nearly max out your Roth IRA. Find awesome tips for how to fully fund your Roth IRA this year here.

    Haven’t really started investing yet? Learn 5 simple steps (and get the new investor cheat sheet!) to start investing here!

     

    4. Reverse 52-week money challenge

    The 52-week money challenge is a fun and simple way to save money, but it does get progressively more challenging as the year continues. The reverse 52-week money challenge is in some ways easier because you start out saving $52 the first week, then $51 the next week, then $50 the week after that, and you decrease the amount that you save each week by $1. So by the last week of the challenge, you only need to save $1. If you are like me and like to get the hard stuff out of the way first (for example, I always like to run uphill first so I can run downhill at the end when I don’t have as much energy; just makes sense, right?), then this may be a great alternative for you.

     

    5. The spare change challenge

    The spare change money challenge is just like you are probably imagining—with this challenge you save in a jar or jars (or plastic bottles; whatever you have on hand) all of the change that you collect in a specified amount of time, such as six months or a year.

    One big benefit of this challenge is that you have to use cash to do the challenge. And a huge benefit of using cash is that it can help you to be more intentional with your spending because you actually see the money leaving your wallet or purse. It is often easier to swipe a debit card and pay $7 for lunch or $9 for a cute blouse that is on sale than it is to see that same amount leaving your wallet and to see your bills dwindling down.

    For that reason, some financial experts, like Dave Ramsey, are big advocates of using cash envelopes especially for categories like groceries, eating out, entertainment, and fun (spending) money.

    But even if you don’t like to use cash, you can still take advantage of this money challenge by using an app such as Chime or Qapital. With these apps, they take your spending transactions and round them up to the nearest dollar, and that amount goes into savings. If you want to go even beyond saving, you can check out an app like Acorns, where they actually invest the difference instead of saving it. 

     

    6. The $5 or $10 money challenge

    This is another pretty simple and potentially fun challenge. With the $5 challenge, you save all of the $5 bills that you get throughout the year (or for some other specified amount of time, such as six months or three months). Similarly, with the $10 challenge, you save all of the $10 bills that you get throughout the year or for a designated amount of time.

     

    7. Summer vacation saving challenge

    Do you know the best kind of vacation? It’s the kind of vacation that doesn’t follow you home in the form of credit card payments. 🙂

    In order to plan a less stressful summer vacation this year, set up a travel or vacation savings fund (learn how here!) so that you can enjoy a debt-free, fret-free summer vacation!

     

    Related article: Find 23 easy ways to save money on your next vacation! 

     

    8. Christmas money saving challenge

    Another great money challenge is to save for a debt-free Christmas! Before you begin your Christmas money-saving challenge, figure out how much you would like to spend on Christmas (and also consider if you could maybe spend less on Christmas). And then determine how quickly you can save that amount. So if you would like to save $1,000 for Christmas and you want to save that amount in about 3 months, by say Thanksgiving weekend, then you save about $83 a week to have your $1,000. Or if you want to spend $500 on Christmas, you could save just $40 or $50 a week for three months.

     

    Also check out this article on 5 simple steps to save for a debt-free Christmas and consider doing a November no spend challenge to save money for a debt-free Christmas!

     

    9. Save $5,000 money challenge

    For this money challenge, your goal is to save $5,000 in a specified amount of time. Probably the most popular $5,000 money challenge is to save $5,000 in a year.

    You can of course use whatever increments you want (such as those used in this $5,000 money challenge found on one of my favorite money gurus Clark Howard’s website), but I like to keep things simple. So my favorite $5,000 money challenge is to simply save $100 a week (and then you either end up with an extra couple hundred dollars after a year, or you can have a week or two where you can take a bye, such as the week of Christmas).

     

    10. Save $10,000 money challenge

    The $10,000 money challenge is not for the faint of heart! Again, I like to keep things simple, so my preferred $10,000 money challenge is to save $200 a week (and then, again, you can have two weeks off where you won’t need to save the $200. Another pretty simple way to do this is to save $125 every first week of the month, $150 every second week, $175 every third week, and $300 in the fourth week. With that challenge, the last month you need to save a little more aggressively; you would save $200 the first week, $225 the second week, $250 the third week, and $325 to finish off your $10,000 money saving challenge.

    Saving $10,000 in a year is not easy, but it is an amazing way to save up the money to reach awesome financial goals like saving for your emergency fund, buying a car with cash, or saving up the money for a down payment on your first home!

     

    Check out this related article: How to Save for Large Purchases (and Why You Need To!)

     

    11. Retirement savings challenge

    And finally, another great money challenge is to do a retirement savings challenge. One easy way to do this challenge is to increase the percentage of your paycheck that goes to retirement by 1 percent each month. So if you are not currently saving for retirement, you would start with 1 percent the first month, and by the 12th month, you would be saving 12 percent of your paycheck toward retirement. That is an awesome accomplishment!

    You can learn 5 simple steps to start investing for retirement here. In this article I will walk you through the types of retirement accounts I recommend, the types of mutual funds I recommend, the amount that I recommend that you invest for retirement, the brokerage firms I recommend, and more!

     

    And sign up below to join the free 5-day Invest Your Money challenge and start your path to investing success today!

     

    Final Thoughts on Money Challenges

    Doing a money challenge is a great way to make saving money fun! And it can be a good way to save money fast, as well!

    Make a goal to participate in one or more of these money challenges, and jump-start your savings today!

    For even more ways to save money, check out these related articles:

    I can’t wait to hear about the great things that you will accomplish with the money you are able to save!

     Are you ready to a money challenge?! Leave a comment below (and post a comment in our new, closed Facebook group!) with your money-saving goal!

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    11 Best Personal Finance Books to Help You Win with Money!

    best personal finance books

    Best Personal Finance Books

    Are you wondering about what are the best personal finance books? You have come to the right place to find out! Learn about 11 of the best personal finance books in the genre.

    I have heard that most Americans don’t read a nonfiction book once they graduate from high school or college. That seems hard for me to believe (especially as an English major and someone who loves to read), but if it’s true, it also makes me really sad.

    There is so much amazing information that you can learn from books—in so many different areas of life. The knowledge you gain from books really can help you to be successful in life.

     

    Tip: Save the image above to Pinterest so that you can refer easily to this list of best personal finance books later!

     

    11 Personal Finance Books to Teach You to Be Successful with Your Money

    As one of my favorite financial experts, Dave Ramsey, says, leaders are readers. He also often mentions a statistic that the average millionaire reads a nonfiction book a month. So reading is pretty important, and if you want to win with your money, reading about personal finance is pretty important!

    I work full-time as a professional editor, so I literally read all day long, and I’ve been a bookworm for as long as I can remember.

    One time, when I had a long commute to work, I even started reading all of the personal finance books that our library had, from A to Z. I made it more than halfway through the alphabet before something else eventually caught my interest and I started reading other things again, but it was a lot of fun and a great experience to read all of the differing perspective on money.

    Some of my favorite personal finance books, or those that made me consider or even reevaluate my thinking on the subject, are these:

    The Total Money Makeover by Dave Ramsey. Possibly my favorite personal finance book, this is the best one I have read as far as laying out a simple plan that you can follow to save, get out of debt, and invest to build wealth. Two thumbs way up!

    Smart Money, Smart Kids by Dave Ramsey and daughter Rachel Cruze. In this great book for parents, Dave and his daughter Rachel teach parents how they can teach their children about working, spending, saving, giving, avoiding debt, and being content. This book teaches parents how to help their children make good financial decisions and gain character attributes that will help them not only win with money but win at life.

    Your Money or Your Life (2018 edition) by Vicki Robin and Joe Dominguez. This book takes a different approach from most of the personal finance books out there. It emphasizes discovering your values and then aligning your life to follow those values. It also shares the intriguing idea of looking at everything you buy in terms of number of hours worked (hours of life energy spent), and suggests considering whether the things you buy or spend your money on are really worth the number of hours of life energy spent to pay for them. The authors suggest the idea of potentially working less, and living more.

    The Automatic Millionaire by David Bach. This book explains the benefits of automating your finances so that you can set up systems to help you win with your money. By automating your finances you can save and invest in order to build wealth and retire in style. Set it so you won’t sweat it!

    Smart Couples Finish Rich by David Bach. This book, like Smart Women Finish Rich (also by David Bach), talks about the importance of reducing unnecessary spending in order to use your money to reach the goals that matter most in your life. In Smart Couples Finish Rich Bach focuses on how couples can work together to identify and reach their financial goals such as saving for retirement and building an emergency fund. He also specifically teaches couples to save money toward reaching their dreams, whatever those may be.

    Rich Dad, Poor Dad by Robert Kiyosaki. Though I don’t believe in all of the principles that the author follows (such as being highly leveraged—using a lot of debt—to build wealth), I definitely do believe in his entrepreneurial spirit and the importance he places on gaining financial literacy.

    Love Your Life, Not Theirs by Rachel Cruze. This book emphasizes that if we always focus on what we don’t have and on comparing ourselves to others, then we will always be unhappy and broke. She teaches the importance of getting out of debt in order to avoid the worry and stress of living paycheck to paycheck and teaches sound financial principles such as living on a budget and saving for the future that bring joy and build a solid financial foundation.

    The Millionaire Next Door by Thomas Stanley and William D. Danko. This eye-opening book debunks the idea that millionaires all live in huge homes and drive brand-new luxury cars. The reality, in fact, is that most millionaires live in ordinary neighborhoods and drive average cars. The findings of Stanley’s study are fascinating, but beware that he uses a lot of statistics. Even still, it really is a great read. Highly recommend!

    The Richest Man in Babylon by George Samuel Clason.  This classic money book teaches the importance of saving at least 10 percent of your income and of differentiating between wants and needs. It also teaches that it’s important to go after the things you want to achieve by working hard and improving your skills so that you will be able to earn the money needed to reach your goals. It teaches to invest wisely and not get involved in money-making investments that seem too good to be true.

    Living Well Spending Less by Ruth Soukup. In her first book author Ruth Soukup tells about her own journey to learn to live within her means and combat the desire to always buy more. With practical advice and humor, she teaches 12 principles that can help you get control of your money and your life—learning to spend less, declutter, get organized, and love the life you live.

    Think and Grow Rich by Napolean Hill. Another iconic book in the personal finance genre, Hill’s classic work talks about the importance of both desiring what you want and then making a plan to go after it. The author recommends setting a specific goal for how much money you want to attain and a specific date by which you want to attain it, as well as a plan for how you are going to do it. He then recommends reminding yourself daily of that plan. He also emphasizes the need to know what you want in order to make decisions quickly and not procrastinate. Though there are definitely some interesting ideas the author shares, I definitely agree with the main idea of directing your thoughts toward attaining the things that you want to accomplish in life and then following through to make those desires reality.

     

    Conclusion

    If you will continually read throughout your life, you will be able to continually improve your situation in various areas of your life.

    You can (and should!) regularly read books on personal finance, of course, to stay money savvy and learn new ways to be successful at the money game, but I would also recommend reading books on strengthening your relationship with your spouse, raising kids, increasing your faith, improving your health, leading, managing business, and more.

     

    What do you think are the best personal finance books? Which personal finance books have helped you the most to be successful managing your money? Leave a comment below and let me know! I would love to hear your thoughts!

     

    Check out these related articles:

    9 Must-Know Steps to Help You Finally Start Saving Money!
    9 Top Tips to Reach Large Financial Goals
    7 Simple Steps to Automate Your Finances
    17 Must-Know Tips to Rock Your First Budget

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    best personal finance books

    Starter Emergency Fund: What Is a Starter Emergency Fund, and How Much Should You Put in It?

    starter emergency fund

    Your Starter Emergency Fund

    In this article I am going to explain the meaning of a starter emergency fund. I will also share how much I recommend you save in your starter emergency fund, and I will give ideas for how you can fund your starter emergency fund.

    By creating a starter emergency fund,  you will be helping your family to stand on wonderfully firm financial footing!

     

    Tip: Save the image above to Pinterest so that you can easily refer to this article on building your starter emergency fund later!

     

    What Is a Starter Emergency Fund?

    A starter emergency fund, or a baby emergency fund, is savings that you put in a separate savings account and that you don’t use for anything else besides a true emergency.

    Of course people define emergency differently, but I consider an emergency something that is essential for you to get by. So if your car breaks and you have to have your car to get to work, that is an emergency. However, if you have a car and it breaks but your spouse also has a car and you can get to work for a few months by riding your bike and in the meantime save up the money to fix the car, then that is not an emergency.

    The difference between a starter emergency fund and a full emergency fund is that you build up a starter emergency fund very quickly, and you save less money in your starter emergency fund than in your full emergency fund. Read the next section to learn how much I recommend you save in your starter emergency fund.

    Learn how to build a fully funded emergency fund here.

     

       

      How Much Should You Have in a Starter Emergency Fund?

      I recommend that you save somewhere between $1,000 and one month’s worth of expenses in your starter emergency fund. Note that I mention one month’s worth of expenses—not one month’s worth of income. If your expenses currently exceed your income, then work on reversing that trend. 🙂

      But the starter emergency fund should be based on your monthly expenses, not your monthly income, and it should cover up to one month’s worth of expenses.

      If you feel comfortable with a $1,000 starter emergency fund, then go with that amount because you can save that up more quickly and because $1,000 will cover most financial setbacks you will have.

      Find awesome ideas for how to fund your starter emergency fund in the next section!

      How Can You Build Your Starter Emergency Fund as Quickly as Possible?

      Treat funding your starter emergency fund like an emergency! 🙂 That way, when you have a financial setback or emergency, you’ll have accomplished this goal quickly so that you’ll be prepared.

      There are two main ways you can build your starter emergency fund, and I recommend that you use both of them. 🙂

      The first is to work to reduce your expenses. Consider canceling your cable or satellite service, cancel subscriptions and memberships, save money eating out and slash your grocery spending, and do a spending freeze (no spend challenge) for a period of time.

      Here are some additional things you can do to reduce your expenses to save up your starter emergency fund as quickly as possible:

      • Lower your ongoing expenses. Turn up (or off) the air conditioner (to 78 or higher, for the most savings), lower the furnace (to 62 or below, for the most savings), and lower your cell phone bill,
      • Replace expensive hobbies with free or cheap ones. Tell the kids you’re on a mission to save money and that you might not be doing some of your regular activities as often for a while. Find tons of ideas here for free and cheap ways to have fun with your family.
      • Sell stuff around the house. Do you have electronics, appliances, toys, furnishings, or other items you’re no longer using or don’t need? Sell them on Craigslist, Facebook Marketplace, or your local classifieds.
      • Cut other discretionary expenses. In addition to cutting your cable or satellite bill and eating out less, consider these options to save up your starter emergency fund (and then your full emergency fund) as quickly as possible: stay out of the movie theater, reduce or eliminate other paid-for entertainment for a time, cut back on your fun or spending money, cut your clothing budget, reduce your spending on your pet, reduce your Christmas spending and other gift giving, and cancel (or adapt) this year’s vacation plans.
      • Look into selling your car. If you really want to save money fast, look into selling your car (or cars) and replacing it with a less expensive car. This could fund not only your starter emergency fund but your full emergency fund, as well. And by selling a car with hefty payments, you could reduce your overall debt and to free up room in your monthly budget.
        Or if you don’t owe much (or anything) on your vehicle but can go from two cars down to one by selling one of them, then that’s another great option to help you save money fast. We’ve been a one-car family for most of our marriage, and it’s helped us to save a lot of money over the years in not only the purchase cost but in gas, maintenance, insurance, registration, and so on.
        Find more ideas for how to slash your transportation costs here. And learn how to never have a car payment again here.
      • Do what you can to reduce your housing expenses. Here are some ideas:
        • Find a cheaper place to rent. If you’re renting, shop around to see if you can find a less expensive place. You might check different neighborhoods or a nearby town.
        • Get a roommate. Find a roommate or housemate. Or two. Or more. 🙂
        • Rent out a room in your home to vacationers. Consider renting out a spare room or two in your home on Airbnb or Booking.com. Sign up here on Airbnb and get up to $55 to go toward your first stay!
        • And also find additional ways to save on your utility bills (<< more than 30 ideas in this article!).
        • For more than 30 ideas on how to cut your housing expenses, read this article.

      For more information on how to reduce your spending, see this article.

      The other way to quickly build your starter emergency fund is to make extra money.

      You could do overtime at work or get a second part-time job, or take on extra clients or work if you own your own business. You could start a side hustle such as starting a money-making blog. (Learn some of the best ways that bloggers can make incredible incomes, from $1,000 a month to $10,000+ a month!) You could rent out rooms in your home on Airbnb, as I mention above, or you could get a side gig driving for Lyft or Uber. You could sell stuff around your house that you don’t need.

      Here is a list of simple and fun ways to increase your income:

      • Start a money-making blog. Like I mention above, starting a blog can be a great way to earn extra money! And I admit that I put this idea first because blogging is my very favorite way to earn extra money! The potential to earn a significant income is definitely one of the reasons that I started this blog. If you love helping people and enjoy writing, being a blogger might be a great fit for you! In addition to great income potential (check out these amazing income reports of bloggers who make $10,000 to $100,000 or more per month!), there are many other benefits of being a blogger, such as being able to be your own boss and work on your own schedule.
        I have been blogging part time for a little over a year, and it took about 10 months before I was making a significant part-time income. Since that time, I have been making between $1,500 and $2,000 a month, and I expect that to grow as I continue to learn more about blogging and the different ways to make money blogging.
        One of the best things about blogging as a business is that it is such an inexpensive business to start. All you need is a computer, an internet connection, and a site and hosting service. You can literally start a blog for less than $5 a month! Learn how to start a money-making blog for cheap.
      • Do freelance work or coaching/consulting. If you work in a field that lends itself to doing freelance work, take advantage of that opportunity to earn extra income to pay toward your debt! I have been doing freelance writing and editing since before I graduated from college with my English degree and editing minor, and doing freelance work has not only helped me gain experience in other areas besides what I do for my full-time job but has also at times (when I wanted to give the time to it) brought in significant additional income.
        If you are a word nerd like me, consider making some extra money as a professional proofreader. My friend Caitlyn Pyle has an awesome course where she teaches people not only how to proofread but how to set up their proofreading business and get clients. Check out her course Proofread Anywhere here.
      • Get a (second) job. If one spouse is available to get a second job in the evenings or on Saturday, for example, then this is another great potential way to earn additional income. And if you are a one-income family, or if one of you works only part-time, you might want to consider reentering the workforce or going full-time temporarily in order to get out of debt more quickly. Though raises and promotions are awesome because you’re earning more money without necessarily having to spend any more time, you’ll generally make a lot more money by working at another job. (And of course, if you and your spouse both get a raise and a second job, then you take advantage of both methods of increasing your income. Yay!)
      • Start a side hustle. If you would rather earn money without working another regular job, there are a lot of things you can do to earn a little extra income. Some ideas include starting your own small business where you turn a hobby into a money-maker, being a virtual assistant, or driving for Uber or Lyft. Learn how to start a side hustle and find out about many side hustles that you can explore.
      • Ask for a raise or promotion. In all honesty, most people can make substantially make more money from the options above than from seeking a raise or promotion from their full-time or part-time job, but it is still a good way to increase you income.
        If it’s been a couple of years or more since you received a significant raise and you’ve been an exceptional employee at work, catalog your contributions and your accomplishments, and schedule a meeting with your boss to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money. If you learn that a raise or promotion isn’t going to happen right away, ask what specific steps you can take in the next year or two to make it a reality. Read this article for more information on how to seek a raise or promotion.
      • Earn passive income. Some options for earning passive income are to create a product you have someone sell, write a book, create a money-making podcast or vlog, develop an online course, or participate in affiliate marketing. Read this article to learn more ideas for earning passive income.
      • Use money-saving apps like Ibotta and Rakuten (formerly Ebates). With rebate services such as Ibotta and Rakuten, you can earn money by shopping for things and at places where you would shop anyway.
        Ibotta is my favorite FREE grocery money-saving app. 
        I’ve been a member of Ibotta for years, and they are a fun and easy way to save money whenever you shop! With the free Ibotta app, you earn cash back on purchases you make every day from your favorite grocery and other stores such as Target, Walmart, Home Depot, Dollar Tree, Sam’s Club, Amazon, and many, many more! With the easy-to-use Ibotta app you can get cash back when you shop not only for groceries but also for clothing, home improvement supplies, travel services, and more!I can even use Ibotta at several of our smaller, local grocery stores, which I love!

        Signing up takes just a minute, and then you can start to save money whenever and wherever you shop, at physical stores and online! Sign up for your free Ibotta account here!

        With Rakuten, on the other hand, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service. Because of this, you can actually sign up for and use both apps to save on purchases!
        Sign up for a free Rakuten account here, and sign up for a free Ibotta account here. You can literally sign up for both in just seconds and let the savings start stacking up.

      • Sell stuff on eBay or Amazon. If you have a good eye for a bargain, you can buy items at thrift stores or garage sales and sell them for a profit on eBay, Amazon, Craigslist, or your local online classifieds.
      • Sell your clothes to consignment shops. If you’re like most people, you probably have more clothes than you need. So use them to bring in some quick cash!
      • Have a yard sale or garage sale (or sales!). Declutter and make money, all at the same time!

      For more ideas, check out this article on increasing your income.

      Conclusion

      If you don’t have a starter emergency fund, treat getting one like an emergency! 🙂 Try to have your starter emergency fund funded in a month or less if you can by making extra money and reducing your spending.

      And then after you have your starter emergency fund and have paid off your nonmortgage debt, work to build your fully funded emergency fund of three to six months’ worth of expenses.

       

      How much do you feel is a good amount for your starter emergency fund? What ideas do you have for funding your starter emergency fund? Leave a comment below and let me know—I would love to hear your ideas!

       

      Invitation to Share

      Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

      Join Our Facebook Group!

      Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

      13 Amazing Ways to Spend Your Tax Refund!

      what to do with tax refund

      What to Do with a Tax Refund?

      In this article I am going to discuss my best suggestions for what to do with a tax refund! Learn 13 awesome tips for what to do with a tax refund to use it to your best advantage! With these 13 fun tips, you can get great ideas for what to do with a tax refund this year!

       

      Tip: Save the image above to Pinterest so that you can easily refer to this article on what to do with a tax refund later!

      Should You Use Your Tax Refund to Pay off Debt?

      Before we talk about what to do with a tax refund, I want to answer this question: Should you use your tax refund to get out of debt?

      The short answer to the question “Should I use my tax refund to pay off debt?” is Yes!

      The longer answer is also Yes! 🙂 But if you do use your tax refund to pay off debt, then also do the things that you need to and make the changes that you need to to not fall back into the trap of consumer debt!

      Being debt free is an amazing way to live your life, and it has so many benefits. Some of the more tangible benefits of being debt free include being able to free up money for other financial goals like saving (more) for retirement and being able to have more money available to pay off your mortage early so that you can save literally tens of thousands or even hundreds of thousands of dollars over the years that you can use for other things.

      And some of the less tangible blessings of paying off your debt include having peace of mind and the satisfaction that comes in knowing that your money is your own to use as you see fit; it’s not all controlled by someone else.

      Paying off your debt and becoming debt free puts you in a wonderful place of strength financially and is an important part of overall financial freedom!

      Check out this must-read article to learn how to get and stay out of debt!

       

      Can You Get a Loan against Your Tax Refund?

      The answer to the question “Can I get a loan against my tax refund?” is also yes. Unfortunately, there are many places, like quick cash and payday loan companies and even some tax accountants who will readily give you a loan against your tax refund.

      However, I am going to encourage you to not get a loan against your tax refund because that can put your family in a very precarious financial situation. It is almost definitely a sign that you are living beyond your means. Not to mention, you will almost certainly pay more than you would for a simple loan from a credit union or local bank.

      Instead, follow the advice above, and use your tax refund to pay off debt or use it for one of the other ideas that I share below!

      What Is the Best Thing to Do with a Tax Refund?

      Answering the question “What is the best thing to do with a tax refund?” can seem kind of tricky. As I note below in this article, there are many good and even great things you can do with your tax refund.

      But if you have high-interest debt like credit card debt, probably the very best thing to do with your tax refund is to pay off that debt. And then once you have used that money to pay off your debt, keep working your way out of debt! Becoming debt free is one of the very best things you can do for your own financial well-being and long-term success! It is very difficult to build wealth and reach financial independence without being debt free, so definitely make this a goal and work toward it as quick as possible!

      What Can You Not Do With Your Tax Refund?

      If you are wondering “What can I not do with a tax refund?” the answer is, not much. Pretty much anything you can do with your regular money you can do with a tax refund.

      However, there are some things that you should not do with a tax refund. These are things that will weaken your financial situation. For example, as I mentioned above, you really should not get a loan against your tax refund. And don’t go to Vegas and gamble it all away!

      You also shouldn’t just put the money in your checking account. Even with good intentions to use the money for something worthwhile, if the money is just left there, you are very likely to just blow it on some big, expensive thing you will regret later (such as a huge flat screen TV), or perhaps worse, you will use it up inadvertently, little by little splurges here and there.

      And perhaps worst of all, do not use your tax refund money to take out a loan for something you really cannot afford, such as a new car or new truck, expensive furniture or appliances, a home renovation, or something similar. Instead, put the money in a savings account as a great jumpstart to saving up for one or more of those things. 

      Learn about the 9 savings accounts that every family should have!

       

      13 Best Ideas for What to Do with a Tax Refund

      OK, now with some of those other related questions out of the way first, if you are looking for what to do with your tax refund, keep reading! Here are 13 of the best things you can do with your tax refund.

      But before we get to the suggestions for what to do with a tax refund, I do want to make this one other important recommendation: If you regularly get a tax refund of more than $600, then you should change your tax withholding so that you are not giving an interest-free loan to the government! 🙂

      I know that most people just see their tax refund as found money, but that is money that you have given to the government to use throughout the year, and you didn’t get any benefit from them using your money!

      According to Bankrate, the average tax return for 2018 was $2,899. That means that the average American family allowed the government to use $241.67 a month that they could have kept in their own pocket and used to fund their own awesome financial goals! So let’s not do that!

      Again, if you regularly get a large tax refund, don’t just see it as a windfall and blow that money! Adjust your W-2 tax withholding, and then use the money that it saved you each month to reach your own amazing financial goals! 🙂

      But for this year, here are 13 ideas for what to do with that wonderful tax refund.

      1. Build a starter emergency fund.

      One of the best things that you can do with a tax refund is to create an emergency fund. If you do not already have a starter emergency fund of at least $1,000 or up to one month’s worth of expenses, then start there. Put your tax refund money in a separate savings account (I like Capital One 360 because it is so easy to set up multiple savings accounts for your various savings goals, and they have been a great bank for us) earmarked for emergencies only, and then don’t touch it unless you have an emergency! Learn what an emergency fund should be used for here.

       

      2. Pay down credit card and other nonmortgage debt.

      Another great tip for what to do with a tax refund is to use it to pay off debt.

      If your nonmortgage debt is less than the amount of your tax refund, awesome! Pay it all off, and free yourself from that burden! If you do not have enough in your tax refund and other money available to pay off all of your nonmortgage debt at once, then pay off the debt with the highest interest rates first, or else begin and follow a debt snowball plan to wipe out all of your debt as quickly as possible!

       

      3. Finish off funding your emergency savings.

      If you have enough money with your tax refund money and maybe even other savings you have available to do so, then fully fund an emergency fund with at least three months’ worth of savings or, ideally if you can, six months’ worth of savings. Or save as much as you can toward that goal using your tax refund.

      And then save additional money each month (the money you were overpaying the government that gave you this awesome windfall in the first place? :)) to finish funding your emergency savings account until it is fully funded with, if possible, six months’ worth of expenses (but at the very least three months’ worth of expenses).

       

      4. Invest the money for (an amazing!) retirement.

      Another great option for what to do with a tax refund is to put the money toward your retirement savings.

      If you don’t have one set up already, you should open a Roth IRA and begin putting money in it each month to save toward your retirement. As of 2019, you can save up to $6,000 in your Roth IRA.

      So just for fun, let’s say you did that. If you are 32 years old, for example, and you got a big tax refund of $6,000 this year and put it all in your Roth IRA, And then let’s say that you worked till the (now recommended) age of 67.  And let’s also say that you invested the money in good, solid growth stock mutual funds and were able to earn the 30-year historical average of 12 percent on that investment. You would have $316,797! Pretty awesome, right? I would take $6,000 and turn it into $316,000 any day. 🙂

      If you don’t have a Roth IRA yet, sign up for the cheat sheet below to get simple instructions for how to open a Roth IRA in 10 minutes or less!

      5. Invest the money in an educational savings account for your children’s college educations.

      If you have children, one of the best things you can ever do for them is to help them have a debt-free college education. (It is possible, and even very doable—I promise! Learn how to save for your children’s college educations.) Don’t let them saddle themselves with thousands of dollars of student loan debt; just don’t! You likely had student loan debt yourself, and I bet you hated it! I bet you couldn’t wait to get rid of it! So save your children from having to go through that experience by helping to ensure that they pay for their college education with cash.

      They will thank you profusely for helping to set them up for financial success in life by not having to start out their adult life shackled by student loan debt—I promise.

      6. Use the money for a large purchase that you need to make (with cash!).

      If your washer and dryer need to be replaced, now might be a good time. If your car is on its last leg, buy a new (to you! not brand new!) car with cash. If you have been wanting to buy a nice piano for your children to put all of those many hours of practice to use on, by all means go for it.

      7. Use your tax return to pay for home improvements.

      If you are nonmortgage debt free or if you have home improvements that really need to be made before they become an emergency, then using your tax refund on home-improvement projects is a great idea!

      We don’t normally get much of a tax refund (because, again, we don’t like giving the government an interest-free loan for the year when we have so many financial goals of our own!), but we are getting a tax return this year, and because we are debt free (including the mortgage!) and already saving for our kids’ college educations, we are going to use the money for some much-needed home improvements.

      A speedy driver was kind enough to rearrange the fence on the east side of our home for us, and now we are going to get it replaced and finally pour the approach for the side driveway and do a few other things like that. I’m excited!

      8. Use the money to pay down your mortgage!

      If you have an adequate emergency fund (of three to six months’ worth of expenses), you are out of all nonmortgage debt, and you are saving the recommended 10 to 15 percent (ideally 15 percent) of your income each month toward retirement, then you are a financial rock star! Congratulations to you!

      In that case, a great way to spend your tax refund is to use the money toward paying off your mortgage. My firm belief is that one of the best things that you can do for your own family’s financial well-being, financial security, and ultimate financial freedom is to pay off your mortgage as soon as you can. Once you have paid off your mortgage, no one can take your home from you if you have a financial setback such as a death of a spouse, a major illness, or the loss of a job.

      And once you pay off your mortgage, you can invest the money in your own wealth instead of the bank’s! If you will pay off your mortgage as quickly as you can and then pay yourself a mortgage payment every month (as we have started doing since we paid off our mortgage a couple of years ago! #debtfreeforlife), you can then invest that money in good growth stock mutual funds in order to buy a more expensive house with cash in five or more years (which is our plan) or for your long-term financial security and wealth.

       9. Put your tax refund money toward a larger down payment to purchase your future home.

      Another great option for what to do with a tax refund is to put the money toward your down payment for the future house purchase you are saving money toward. By saving up a larger down payment, your monthly mortgage payment can be smaller. (I know it is extreme, but you might even consider the 100% down plan! That’s our plan for our next home purchase! #100percent down :))

      10. Start savings accounts for larger purchases and expenses (sinking funds).

      Another great idea for how to use your tax refund is to open individual savings accounts (these are all savings accounts that we have and regularly fund and use) for large purchases and expenses such as car maintenance and repairs, future (cash!) car purchases, home maintenance and repairs, annual life insurance premiums, family vacations, Christmas, birthdays and other gift giving, appliance and furniture purchases and repairs, and miscellaneous short-term savings.

      These types of funds are often referred to as sinking funds, and they are a fantastic part of your overall financial success plan so that you can avoid going into debt in these and other areas.

      Read this article for more information on saving up for large purchases and expenses and this article to learn more about sinking funds.

       

      11. Use the money to continue your education.

      If you are in a position where you would benefit from additional education to further your career (or just to further your own interests), then consider taking some college classes or completing a certification or other job training program.

      One of the best investments you will ever make is in your own education if it helps you to be able to increase your income. And even if you take classes just for fun, additional knowledge is always a worthwhile thing.

       

      12. Start a side hustle or small business.

      If you have been wanting to start a side hustle (learn how!) or small business on the side, this could be the perfect opportunity to do it!

      I would not recommend that you go into debt to start a side hustle or small business, but if you can do it for cash and have done the research to show it is a good fit and a viable (profitable) option for you, then go for it! Discover 19 awesome side hustles that you can do from home (or anywhere)!

      Perhaps you haven’t considered starting a side hustle and should! If your day job lends itself to freelance or consulting work, for example, then starting a business on the side could be a great way to further use your skills, expand your professional network, and earn extra income to reach your financial goals—like paying off debt or purchasing a home—more quickly.

       

      13. Go have some (debt-free, guilt-free) fun!

      Whether or not you follow any of the suggestions above for what to do with your tax refund, if you use some or all of the money from your tax refund for some debt-free fun, you will still be ahead of the game!

      You could use the money to buy a new TV, a new smartphone, or a nicer (paid-for, please!) car, or you could even go on an epic trip, like my coworker is (he and his wife are going to China!). You could purchase bikes for your whole family (can you say “tandem”? :)). You could pay for an awesome backpacking trip or go to Disney World or take a family cruise.

      If you love to save money when you travel like we do, read this article with 5 awesome ways that we save money by using Airbnb! And if you haven’t tried Airbnb yet, you need to! They are such a great way to save money while you travel! Sign up here to receive $55 off your first Airbnb rental!

       

      Conclusion

      There are many great options for what to do with a tax refund, but these 13 suggestions are some of the best ways to spend your tax refund to get the most bang for your buck!

      As I mentioned earlier, if you regularly receive a tax refund of more than $600, adjust your tax withholding on your W-2 so that you are instead bringing that money home each month! Then use the money to move you toward financial freedom!

      Use the money to fund your own amazing financial goals like building a six-month emergency fund, like saving more money for retirement, like paying off your mortgage early, like funding your children’s college educations, or even taking an epic, paid-for family trip or vacation!

       

      Check out these related articles!

      12 Best Tips to Save Money on Entertainment

      151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!

      5 Awesome Ways We Save Money Traveling with Airbnb!

      5 Best Frugal Living Hacks to Save $500 a Month or More!

       

      What do you plan to do with your tax refund this year? Are you going to pay down debt, invest, build your emergency fund, save for a large purchase, or spend the money on something fun? Leave a comment below and let me know—I would love to hear your ideas!

       

      Invitation to Share

      Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

      Join Our Facebook Group!

      Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

      5 Simple Frugal Living Hacks to Save More Money: Save $500 or More per Month!

      Learn 5 simple frugal living ideas to save money each month! These 5 must-know frugal living tips will help you to save $500 or more per month!

      Top Frugal Living Ideas

      In this article I will share 5 simple frugal living ideas to help you save money fast. Learn 5 simple frugal living ideas that will help you save more money in order to reach your financial goals and live your dreams! With these 5 easy frugal living tips you can save $500 or more per month!

       

      Tip: Save the image above to Pinterest so that you can easily find this article about simple frugal living ideas to refer to it later!

       

      Tired of tiny interest rates on your savings?

      Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

       Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)!

      And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

       

      5 Simple Frugal Living Ideas to Save More Money

      If you are looking for simple frugal living ideas, then this article is for you! There are many, many things you can do to live more frugally and save money each month, but these are 5 of the best ways for a family or individual to live frugally in order to save more money each month. Follow these simple frugal living ideas to save $500 or more a month!

       

      1. Cut your food budget (in half!) to live more frugally.

      One of the very best frugal living ideas is to reduce the amount you spend each month on groceries and eating out.

      The average American family spends close to $800 a month on food. But you really can spend significantly less than that, especially if you nix eating out so much. So if you will cut $100 to $200 from your grocery budget for the month and $150 from your restaurant budget, you will have $200 to $300 (or more!) to go toward reaching your awesome financial goals!

      Here are my two best frugal living hacks to help you get the most bang for your grocery-spending buck:

      • First, make a plan. Get this free, helpful weekly meal planning worksheet (below) to get organized and plan your week’s worth of meals! The meal planner comes with helpful meal planning tips that will help you save a ton of money on your grocery shopping!
      • Second, shop with a grocery list and a price comparison cheat sheet! Make a list, check it twice, and then don’t deviate from it! 😊 Use this awesome, super handy shopping list and grocery price comparison cheat sheet to help you spot great deals and pass over grocery items that are overpriced.

      And here are even more frugal living hacks that will help you save a bunch of money on groceries:

      • Sign up for a grocery money-saving app like Ibotta. I’ve been a member of Ibotta for years, and they are a fun and easy way to save money whenever you shop! With the free Ibotta app, you earn cash back on purchases you make every day from your favorite grocery and other stores such as Target, Walmart, Home Depot, Dollar Tree, Sam’s Club, Amazon, and many, many more! With the easy-to-use Ibotta app you can get cash back when you shop not only for groceries but also for clothing, home improvement supplies, travel services, and more! I can even use Ibotta at several of our smaller, local grocery stores, which I love! Signing up takes just a minute, and then you can start to save money whenever and wherever you shop, at physical stores and online! Sign up for your free Ibotta account here!
      • Use what you already have. Clear out your fridge, cupboards, freezer, and pantry. There’s a good chance you have a week’s worth or more of food in your home, and using it up periodically is a good idea to make sure nothing goes bad. (But if you find things that have expired, don’t automatically toss them out. The dates are just guidelines, and you can eat most things months past the best by date.)
        You might even consider doing a no-spend challenge on groceries for a week, two weeks, or more periodically (or do a no-spend challenge on everything for a week, two weeks, or more to really turbocharge your savings).
      • Cut down on sweets, snacks, juice, beer, and so on. You can save a ton of money by just sticking to the main food groups. Leave the rest of the junk (food) on the grocery store shelf.
      • Plan to have a few meatless meals each week. Meat is one of the most expensive food items, so by omitting meat from your meals you can save a ton of money. Consider going meatless for a few dinner meals a week, or even plan a whole week or two week’s worth of meatless meals if you want to save even more money. Find awesome recipes for meatless meals here.
      • Buy only items that are in season. Blueberries may sound divine in January, but pass them up for fruits, vegetables, and other items that are in season.
      • Buy what’s on sale. Check the week’s grocery ads, and then plan what you buy for that week’s meals around that.
      • Be OK with inexpensive ane even unconventional dinner and other meals. If you really want to save more money on groceries, give yourself permission to plan super simple meals like cereal with milk, egg omelets, waffles, fried eggs with toast, grilled cheese sandwiches, peanut butter and jelly sandwiches, fried eggs with rice, chicken with rice, spaghetti, chicken alfredo, tacos, burritos, and so on.

       Want more ideas for how to save money on your grocery shopping? Read this article for more than 70 suggestions for how to slash your grocery bill without needing to use coupons!

      And dont forget to save money on eating out! The best way to save money on eating out is to eat out less! 🙂 My family spends on average less than $30 a month eating out, but we make it a priority to save for retirement, fund our children’s ESAs, and be consumer and mortgage debt free! 

      There are lots of other ways that you can save money eating out, as well. Find 19 ideas to save money when eating out here.

      Savings = $200-$300+

       

       2. Spend less money on entertainment.

      Saving money on entertainment is another great frugal living idea. The average family in the U.S. spends close to $300 a month on entertainment. So here, too, you can save a ton of money each month if you will reduce your entertainment spending.

      My favorite money-saving hack to spend less on entertainment (and the area where we save the most money) is to save on vacations and traveling! For that, I love to travel with Airbnb. If you have not tried them yet, you need to! We saved about half the price of a hotel just on our last vacation alone by using Airbnb for our accommodations. And we stayed in a three-bedroom home in a beautiful gated community with a pool and hot tub (which we had to ourselves most of the time), a playground, and more! You can sign up to become a member of Airbnb here and save $40 on your first stay!

      You also should look at reducing your monthly internet bill and your cell phone bill (and specifically, your data plan). For that, my best money-saving tip is to check out Xfinity internet and Xfinity Mobile.

      If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider), and the cell phone plan is potentially virtually free.

      Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere—really!), we pay only $3.16 a month for taxes and fees for each line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month after that, or $45 per month for unlimited.) It’s such an awesome deal!

      And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S. You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in learning more or signing up? Use this referral code to save up to $100 when you sign up: 1RQ4SP

      To save even more money on entertainment, you might spend less money on the following things (or even give some of them up completely, if you really want to save money!):

      • Paying for cable or satellite. You could easily save $60 to $100 a month (or more!) by doing that alone
      • Going to the movies.
      • Going to music concerts.
      • Going to sports events.
      • Video gaming.
      • Purchasing gadgets (electronic devices).
      • Paying for subscriptions to magazines and paid TV services (Netflix, Sling, and so on—videos from the library are free!).
      • Paying for memberships to the gym, rec center, museums or zoos, and the like.
      • Participating in recreational activities like skiing, bowling, miniature golf, playing arcades, and so on.
      • Christmas shopping.
      • Your personal monthly spending money (some people call it fun money or blow money).

      Find more ideas for how to save money on entertainment.

      And just because you decide to spend less money on or even give up some paid activities completely, that doesn’t mean you have to give up fun! Check out this article with 90+ fun, free activities you can do without spending any money!

      Savings = $200+

       

      Check out these related articles:

      12 Best Tips to Save Money on Entertainment
      91 Fun, Free Activities to Do during a No-Spend Challenge!
      151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!
      5 Super Simple Steps to Save $1,000 for a Debt-Free Christmas
      11 Ways to Save Big on Your Christmas Shopping
      4 Powerful Principles of Gratitude to Change Your Financial Life
      Contentment: 9 Powerful Principles That Will Help You Save More Money and Reach Financial Success

       

       

      Tired of tiny interest rates?

      Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

       Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)!

      And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

      3. Trim your transportation costs to live more frugally.

      Another of my favorite frugal living ideas is to reduce your transportation expenses. Especially since you’ll be cutting back on (paid) entertainment and shopping, you can likely save money on transportation as well.

      My best frugal living hack to save money on transportation is to drive paid-for cars. If you have car loans (and statistically, you do ☹), consider selling the car and buying a less expensive car for cash.

      The average car payment in America is over $400 a month, so if you will get rid of your car payments, you will be well on your way to saving $500 per month just by doing that alone! You can literally become a millionaire simply by deciding to live your life without car payments! (So please give it a try—the financial benefits are amazing! 😊 Learn how to buy a car for cash.)

      Here are some more awesome ideas for ways to reduce your transportation costs (they really will save you tons of money if you will put them into practice, especially the first one!):

      • Enjoy staying home rather than spending money going places for entertainment. Pick up reading, playing family games, doing crafts, watching (free) movies, and doing other activities at home to save money on transportation costs.
      • If weather allows, ride a bike or walk to your destinations when possible.
      • Drive less. Combine errands and find other ways to drive less.
      • Carpool to work and school, or take the bus.
      • Telecommute!
      • Drive the speed limit. 😊
      • Use apps like GasBuddy to save money when purchasing fuel.
      • Look around for a cheaper mechanic.
      • Shop around to make sure you are getting the best deal on auto insurance.
      • Save money on auto parts by shopping at places like RockAuto (which truly has amazing prices!). If you possibly can, buy the car part yourself, even if you have a friend, family member, or trusted mechanic do the actual labor. You will save a ton of money that way! In my experience (and I have looked into this in virtually all of the auto mechanic shops in my area), the markup on car parts, even by reputable auto mechanic shops (unfortunately), is huge!

      Looking for more frugal living ideas to save money on transportation? Find more than 30 ideas for how to save on transportation costs.

      Savings = $50-$200+

       

      4. Spend less on housing and related expenses (like utilities).

      Another one of my most important frugal living ideas is to reduce your housing expenses.

      For most families, housing is their largest expense. Fortunately, there are a lot of things that you can do to save money on housing, even if you own your home and so your mortgage is fixed. 

      My favorite frugal living hack for saving money on housing is to rent out your spare bedrooms on sites like Airbnb and Booking.com. If you are able to do this, you could earn well over the cost of your monthly mortgage or rent payment. And you can meet some amazing people in the process.

      To save even more money on housing expenses, look at these options:

      • Consider refinancing your home if interest rates have dropped significantly. (But don’t lengthen the term of your loan! Keep it the same or, even better, shorten it! :))
      • Talk to your insurance agent and find ways to lower your homeowners or renters insurance.
      • Save money on your utilities; here are tips to save money specifically on your winter utilities bill and summer utilities bill.
      • Work to pay off your mortgage as quickly as possible so that you can invest the money in your own wealth instead of the bank’s.
      • Sell your home and purchase a smaller, less expensive home if your mortgage payments really pinch your budget or if you no longer need as much space as you once did.
      • Save a larger down payment before you purchase a home so that your mortgage payment is smaller. (Consider the 100% down plan!)
      • Rent a cheaper place.
      • Consider moving in with family or friends.
      • Simplify your landscaping (this saves money spent on watering it, too!).
      • Get a roommate (or roommates).

      For even more frugal living ideas for saving money on housing costs, read this article with 30+ simple ways to save money on housing and related expenses.

      Savings = $50-200+

       

      5. Spend less money on clothing to live more frugally.

      And one additional frugal living idea is to not spend so much on clothing and shoes. The average American family spends over $100 a month on clothes, so if you will spend say half of that, then you can add that amount to the money that you save each month!

      My favorite hack for saving money on clothing is to set up a clothing co-op of sorts. If you have children, see if you can swap children’s clothes with your nieces and nephews or with children from your neighborhood or church.

      My sisters and I share clothes for our kiddos, and it is an awesome way to save money (and help out the environment just a little)! Plus, I just love seeing my nieces and nephews in clothes that my kiddos wore! It brings back such fun memories!

      You can also save a bunch of money on clothes by shopping the sales and by shopping at discount clothing stores, thrift stores and second-hand stores, garage and yard sales, websites like eBay and Craigslist, and more!

      Want even more ideas? Check out this article with 13 must-know ideas to help you save money on your clothes buying.

      Savings = $50+

       

      For even more frugal living ideas, check out this article with 21 must-know tips to spend less money!

       

      Conclusion

      There are really tons of frugal living ideas that can help you save more money! The possibilities are endless. But these 5 simple frugal living ideas are a great place to start and can help you save $500 or more per month!

      And while you’re at it, in order to put yourself and your family on wonderfully solid financial ground, check out these cool things to save up money for to run your financial house smoothly.

       

      What are your favorite frugal living ideas? Or which of the ideas above do you think will help you save the most money this year? Leave a comment below and let me know—I would love to hear your ideas!

      Check out these related articles:

      How to Get (and Stay) out of Debt!
      Simple Must-Know Tips to Rock Your Budget
      13 Top Tips to Help You Stick to Your Budget
      16 Best Tips to Help You Stop Living Paycheck to Paycheck
      15 Top Tips to Help You Finally Stop Overspending
      31 Budget-Friendly Easy and Cheap Dinner Recipes for under $5
      42 Cheap and Easy Budget-Friendly Meals for under $5
      73 Easy Ways to Save Money on Groceries without Coupons!
      151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!

       

      Invitation to Share

      Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

      Join Our Facebook Group!

      Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.