We all know the usual budget derailments like car repairs, Starbucks runs, iPhones, and eating out. But what about those not-so-obvious cash drains like Facebook applications? Not so, you say. They’re just fun time wasters on a great social media site and besides, what else am I going to do since I’m still unemployed?

Ok. I can accept your point. After all, enough people have commented about Facebook providing an unexpected silver lining during some very rough times. So many old friends to find, so much news to catch up on, so many great applications to check out.

And unfortunately, a few new ways to bust the budget.

Frankly, I was a reluctant Facebooker. I had no time and even less interest. But I was told, in no uncertain terms, that if I wanted to keep in touch with my socially hip friends, I had to join. Apparently, email is as passé as a handwritten letter – who knew?

So I sucked it up, created an account, and had some fun.

I didn’t get the Farmville and Mafia Wars hype though, especially when I found out users could buy virtual privileges. It just didn’t make sense to me. If I’m already on a budget for real life items, why would I want to blow money on virtual stuff I can’t even use?

And then there are the tests assessing your 70’s groove thang, sports personality, or doppelganger tendencies. Continue Reading »

Do you own a cash-value life insurance policy? Have you been thinking about donating the policy to your favorite charity? There are two ways to do this—you could gift the policy outright, making the charity the owner and beneficiary, or you could name the charity as the beneficiary when you die. Which choice makes more sense? The answer really depends on a number of factors, including:
• What the charity wants and when it needs the money
• Whether you need a current tax deduction (and are willing to give up control)
• Whether you still want to keep some or most of the benefits of the insurance policy.
If you want or need the federal income-tax deduction, you should make sure that the non-profit is actually a 501(c)(3) entity. Ask the executive director for the organization’s tax status and get them to send you written proof. Then make sure that they want the life insurance policy. In some cases, the organization might simply accept the policy and immediately surrender it to get the cash. In such cases, the charitable gift could end up being much less than what you intended.

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Few people like talking about it.

Fewer admit doing it.

But as the jobless recovery grinds on, more people find that they have no choice but turn to family members for financial help. A December New York Times/CBS poll revealed that out of the 700+ people surveyed, over half had borrowed money or requested some other assistance from family or friends.

Swallowed pride, eating crow, loss of independence–whatever you want to call it, asking siblings and parents for help is not easy.

After all, it’s one thing for a newly-graduated, 20-something with college loans to move back with Mom and Dad. It’s another when the mid-career, almost 40-something, moves back in. And let’s not forget the unexpected monkey wrench when older parents lose jobs, houses, or suffer medical setbacks.

Borrowing from the family bank often generates queasy feelings for both borrower and lender, regardless of whether the lender is the parent or the child. As one person put it, “It’s a cliché, but when you lend money to a friend, when you lend money to family, it changes things.”

But it doesn’t have to be this way.

In fact, many borrowers have a fierce sense of pride about repayment. Some family members will even insist on drawing up a repayment schedule.

Formal notes are one of the more equitable ways to approach this emotionally fraught situation. For the borrower, a private loan can set a manageable interest rate, create flexible repayment options, and possibly allow future tax deductions. For the lender, there is future interest and principal income, plus an assurance that the loan might actually be repaid.

However, while formal notes can reduce the stress of Family Bank borrowing, Smart Money Magazine adds a final caution. The IRS is particularly vigilant about “interest-free” loans that exceed the $10,000 annual, tax-free gift limit. If you don’t establish an interest rate, they’ll gladly set one for you.

Bottom line: formal notes can make a difference so just make sure your tax accountant ties off any loose ends.

Note:  BudgetTrackers currently have two Lender/Borrower options available. They can either create a loan entry in the “My Bills” section or an “I Owe You” memo that connects both the lender and borrower (as long as both are BudgetTrackers) until the debt is satisfied.

Other resources to check out:

Borrowing from friends and family to buy a house. While this article refers specifically to documenting private mortgages, it has pointers that can help with other family-type loans.

Keep in mind that not everyone is a reliable debtor. If you have one of these in your family, check out this useful article (plus, interesting reader comments) from Money Magazine.

When the economy is in the midst of a major downturn, many investors will immediately conclude that their funds are under-performing. However, before making this blanket assessment, there are several factors that you should take into account. If your fund has declined in value enough to worry you, then it’s time to ask yourself some key questions.

1. Is This Fund Appropriate for You?
A fund that has returned 11% over a given period may seem “better” than a fund that has returned 3% over the same period, but the better-performing fund may have earned those returns by taking on certain market related risks that you might not want to assume. Investment objectives will vary widely among investors, so you need to consider whether the fund fits your time horizon and investment objective.

2. How is this fund performing relative to other funds in its peer group?
Different asset classes, such as stocks and bonds, will perform differently because they have different risks. The value of a stock fund will tend to be sensitive to equity market fluctuations, while bond fund values will respond more to interest rate movements. So before concluding that your stock or bond fund is underperforming relative to one of its peers, be sure that you’re comparing apples to apples.

3. How is the fund performing relative to its appropriate benchmark?
Virtually all mutual funds impose certain requirements that limit the investment options of the portfolio managers. For example, if the investment policy statement of a given stock fund requires that at least 80% of its portfolio assets to be invested in stocks, the portfolio manager will not be able to allocate more than 20% of assets to bonds or cash, even in a bear market. Therefore a reasonable standard for measuring mutual fund performance might be to consider how the fund’s performance compares to the overall performance of an appropriate index (meaning one that matches the subcategory of the fund as closely as possible). If your fund consists of bonds, it obviously makes no sense to compare it to the Dow Jones Industrial Average. There are several classes of stock funds, such as small-caps and international funds for which the Dow is probably not an appropriate comparison.

4. Are there any specific extenuating circumstances to explain the under-performance?
There could be any number of reasons why your fund’s short-term performance may not be particularly meaningful, especially if the economy as a whole has experienced a decline in production. For example, you may have bought a fund that has performed poorly in the past, but you also believe that a new management team will turn this around in the near future. This factor is particularly important to remember after a decade like the 1990’s, where rising annual returns were achieved by many funds. In view of this, you might want to consider whether your expectations are realistic. Before you cash-in your “under-performing” shares, you may want to determine the factors that are driving the performance of your funds.

If it looks too good to be true, it probably is.

Twenty years ago, Mom was probably referring to things like the Publisher’s Clearing House Sweepstakes, free puppies, and clowns. Today, Mom would most likely replace the sweepstakes scam with debt settlement companies.

And for good reason.

Debt settlement companies quickly spring up in bad times and vanish just as quickly in good. Most people don’t even realize these exist until skyrocketing debt levels come pounding on the door. Then they appear, circling, as the graphic Southern vernacular puts it, “like crows around road kill.”

Dark humor aside, the reason why there are so many debt settlement companies is quite simple. Seasoned Budget Trackers already know the challenges of successfully paying down credit card debt. For those new to the budgeting self-discipline, it can seem overwhelming. And after a few rounds on the unexpected medical bills + mortgage interest rate jumps + threatened job loss rollercoaster, a settlement company’s expert appeal can appear heaven-sent.

But before saying that you’re too smart to fall for something this obvious, consider this point.

Anyone who’s recently attempted a mortgage modification, probably thought more than once how nice it might be to have someone else deal with all the red tape and all those voice-activated phone trees from hell.

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Mid-January is a tough time for budget resolutions.

Think about it.

January 1st arrives, complete with new hopes and fresh dreams, only to be derailed mid-month by football playoff parties and the after-after Christmas sales. These onslaughts can shake even the most determined BudgetTracker off the resolution bandwagon.

The good news is that we can always start over. The better news is that budgeting doesn’t have to be painful.

First, clearly state those reasons to budget and save.

• I want to get rid of nasty credit card debt;

• I want to pay down auto/student/home mortgage loans;

• I want to build a safety cushion;

• I want to build the “I-can-now-quit-my-job-to-start-my-own-business” fund;

• I want to travel around the world in my new, 300-foot yacht.

Well, the last suggestion is a bit of an exaggeration, but you get the picture.

Keep determined by singing, muttering, or even chanting your reasons over and over again. Do whatever is necessary, even if it means putting post-its all over the house or re-jiggering your BudgetTracker goals. If your family and friends look at you strangely, tell them it’s a new type of meditation practice.

Whatever works, do it.

Next, re-calculate your total fixed monthly expenses. Remember, fixed expenses will include rent, mortgage payments, student loan payments, utilities, child care expenses, phone, gas, cable—all those essentials necessary for keeping a roof over your head.

Subtracting fixed expenses from net income reveals your monthly free cash flow amount. This is what you can use toward your other variable costs. Have more income than fixed expenses? Congratulations, you can now get back on the budgeting bandwagon!

For those new to budgeting, I recommend applying 10% (possibly even 15%) of the free cash flow total toward your goals. Schedule this for three months in a row.

Why three months? And why just 10-15%?

Well, they don’t call them the little things in life for nothing. Just about everyone can manage 10-15% and three months is typically the time it takes to establish a new habit. I’m betting that after three months, you won’t miss the money and will probably be addicted to watching the BudgetTracker transfers mercilessly eat away at the remaining dollar goal amounts.

I’m also betting you’ll bump up the transfer percentage amounts.

Think I’m wrong? Then take the three-month, 10% challenge and let me know how things turn out. If I’m right, I’ll expect to see some serious Debt-Free Strutting on YouTube.

Note: Other options are possible when fixed expenses exceed net income. I plan on discussing these in a later post.

When thinking about budgeting your money, there are typically two types of budgeting, Categorization and Envelopes. The idea behind categories is that you create separate categories for each expense over a monthly period and allocate from the entire monthly income how much you would like to spend during that month. With Envelopes, this usually is allocated based on each check so you know how much is available after each check instead of the whole month. With BudgetTracker, we offer both methods for budgeting your money.

• Categories – The way categories work is that you first need to setup your Bills and Income. By doing this, the budget categories will automatically get created for those expenses and income and will be calculated directly from the Bills or Income page. So if you have a Paycheck that occurs weekly, the budget amount will change depending on how many weeks are in the month. Once you see your Bills and Income on the My Budget page, then it’s time to start entering in your manual categories. For this you have 3 options:
  • Enter the categories directly on the My Categories page. You’ll also see categories that have already been created for you from the My Bills or My Income page. Once the categories are entered, go to the My Budget page and you’ll then see links next to each new category titled “Add to Budget”. This will allow you to determine how much you would like to allocate for that category. As you progress, you can see at the bottom how much is available from your Income.
  • The second method is to manually create your categories from the My Budget page. With this method, we give you some default categories to choose from or you can create your own. This works similar to setting up your categories on the My Categories page, only that you get more options and can enter the Budget Amount directly from the input section. Also note, your Categories and your Budget Categories are the same thing so that when you record a transaction against a category, you are updating your budget at the same time.
  • The third option for manual budget entry is to use the Setup Wizard by selecting “Setup Wizard” at the top of the page. This give you default category names with text-boxes to make it easy to enter in several new categories/budget items from a single page.

  Continue Reading »

When setting up your Income on the My Income page, we give you the flexibility to split the way your Income comes in. The easiest way to handle Income is record the Net Amount in the amount field but if you are one of those users that want to keep track of taxes withheld or taxes paid, here are a few options:

• The first option is to enter the Net Amount in the top Amount box, then enter your Gross Amount in the first split box. In the 2nd input box and on, you’ll want to enter in negative amounts to simulate your taxes. This is essentially how it will look on your paycheck. Gross – Social Security – Federal, etc. The tricky part comes when selecting a category. With this method you’ll want to choose the same category for all split amounts so that when viewing your chart by category, you see the total net amount for the month and not your gross. You can then further categorize your taxes by turning on Tags from the Settings page and tagging the split items as their appropriate tax category.
• The second option which is mainly for Small Businesses is to enter your net amount in the first split box, and taxes in the text boxes thereafter. If you have a small business this works well since in real life you are adding the full gross amount to your Checking Account and then spending it when tax time comes. For personal users however, this method will not work since the total amounts whether negative or positive will not add up to the actual amount you received.
• And the third option is to utilize the “Deposit To Multiple Accounts” feature. This will allow you to specify the net amount for your Checking account and assign the category as expected. You’ll then want to create a special account just for your taxes as a placeholder to keep track of so that they do not effect your Checking Account balance when recorded. You can then assign the additional split text boxes their own category and the Tax Account allowing you to graph them separately when needed.