Emilie Burke, Author at The Free Financial Advisor

Five 401K Alternatives You Need to Know About

January 23, 2017 by Emilie Burke 1 Comment

A 401K is a savings plan for retirement that is sponsored by your employer. Employees can save a piece of their paycheck before taxes are taken out, and put it toward their retirement.

Talking about far-off retirement plans can be overwhelming and boring. After all, it’s way easier to think about the here-and-now. We budget, save for vacation and pay the bills. That seems like enough… right?

On the contrary, planning for retirement is incredibly vital and cannot be forgotten or overlooked.

The 401K may be a good fit for your lifestyle, but there can also be cons. Your employer may not be matching the money that you contribute, and also could require tenure before allowing you to withdraw. If you aren’t sure about the 401K, there are many different options out there to consider.

Here are some alternatives to the typical 401K that may compliment your lifestyle and finances better.

Index Funds- These are funds invested on an index of stocks. (You may have heard of S&P 500 or the Dow.) By investing in an index fund, you basically are investing in all the companies that make up that particular index (instead of investing in certain stocks). You are at the same risk as those who buy stock individually, but since the market typically increases over time, index funds could be used as an investing option for retirement.

Roth IRAs and Traditional IRAs- IRA stands for Individual Retirement Account. Roth and Traditional IRAs differ from the 401K by bypassing the employer altogether. You save completely on your own for retirement. The biggest difference between the Roth and Traditional lies with when you pay your income taxes. Check out the two and see if one of these may be a better retirement plan for you.

Simplified Employee Pension IRAs- SEP IRAs are a great option for any of you independent contractors, free-lance workers, or business owners out there. It is very similar to the Traditional IRA and could be very beneficial with your taxes. It doesn’t matter how small your business is, so definitely check it out!

Variable Annuities- These are contracts between you, the investor, and an insurance company. The investor purchases a variable annuity upfront or over a period of time, and the insurance company makes periodic payments to you after retirement. However, there can be high fees and tax penalties, so do your research and insure that the contract is safe and beneficial for you.

Bonds- Bonds may be great to dabble in addition to the 401K or any of the other retirement options listed above. Bonds essentially are saving accounts that pay interest rates. You set these rates at the time of purchase, and it’s an incredibly safe and stable investment. Because of its safety, they typically return less money than other higher risk investments. However, your money will be safe and making interest for retirement.

Do some research on what your employer offers and which option may be the best fit for you. Regardless of what you choose to use, saving for retirement should be a priority in your life.

Financial Habits to Set Up in 2017

January 16, 2017 by Emilie Burke 2 Comments

2017 is a brand-new opportunity to meet goals and start habits that we want to prioritize over the span of the year. Resolutions are made every year to stop smoking, eat healthy, or go to the gym. Although physical resolutions are terrific, it is also important to place focus on our financial habits as we start the new year. What type of financial goals do we have for ourselves? What habits should we form now to help us meet those goals? Here are five financial habits that will be beneficial for 2017.

Budgeting

Create weekly and monthly budgeting plans, and take time afterwards to review how well you are sticking to the budget. When you have a plan in place, it is much easier to save money and spend less. Reviewing how you are doing regularly will help you to evaluate where you are financially and what you should change.

Setting financial goals

Set some goals that are important to you and be vigilant in sticking to them. One goal may be to create an emergency savings fund of $2,000. Another may be to stay under budget for 6 months in a row. Whatever your goals are, write them down so that you can hold yourself accountable.

Avoiding debt

One of the greatest habits you can keep is to never create debt for yourself. This means always living beneath your means, and NEVER above. Can you create this habit for yourself for 2017? If so, you will be a happier you with healthier finances.

Contributing to retirement

Create a Roth or Traditional IRA and make it a habit each paycheck to contribute into the fund. It is never too early to start preparing for retirement. The sooner you start, the more money you will have saved up when the day comes.

Giving (some people may call this Tithing)

Make it a financial habit this year to give to others. This may come in the form of giving to a particular charity, tithing at church, or donating money to a cause you believe in. When we give to others, we are blessed in return. If allowed the opportunity, giving may do even more good in your life than you ever could have imagined.

Think of whatever habits are important to you financially this year and write them down! Writing down what we want is so important because only then can we continually hold ourselves accountable. Hang your list on the fridge or sit it by your bed. Every day make it a priority to continue these habits in your life.

If you think these 5 habits listed above could be beneficial to your own personal finances, then I encourage you to truly try to stick to them over the next 12 months. It is the small things that you do every day that bring about big change in your life. Healthy habits create healthy finances, and that’s the goal that we all should be aiming to reach. Good luck!

For more on forming habits, and ways to get rid of bad ones, check out these great articles.

5 Habits That Cost You Thousands
Increase Your Financial Stability by Taking Advantage of New Spending Habits
Sandy Smith Talks Gen Y Money Habits

How to Use Digit to Maximize Your Savings

January 9, 2017 by Emilie Burke 1 Comment

Whether you’re started a fund for emergencies, splurged on a trip you’ve been dying to take, or paid down debt; Digit is the money saving resource for you. Besides the fact that Digit is completely free to use; what I found most appealing about Digit was you can move your savings to other accounts (for investments or retirement) as often as you wish! Digit also automatically figures out when and how much is safe to save based on your lifestyle. It doesn’t require you to figure out an arbitrary amount to transfer every month. I’m sure you are thinking, is this app safe? The answer is yes, extremely safe. Digit takes state of the art security measures. When you enter your personal information, it is encrypted, anonymized and securely stored. If you still have some precautions, rest assure that the funds held within Digit are FDIC insured up to a balance of $250,000. Now do you feel better? Last thing you need to know before we get into the set-up process and fun facts, Digit is only available in the U.S for now. Good news for our foreign friends is that they are hoping to expand in the future!

Now let’s get down to the 10 facts and steps to start your savings:

PSA: You do not need a savings account to sign up with Digit.
Digit is completely free to download and sign up! You can find the apps in both the Apple Store and Google Play.
Connect to your checking account. Digit will analyze your income and spending and find small accounts of money it can set aside for you. The nice thing about Digit is they won’t store your blank log in!
At this time, Digit supports of 2,000 banks and credit unions.
Digit saves a little every week. Every 2 to 3 days Digit will transfer some money usually $5-$50 from your checking to your Digit savings account. The nice thing is they will never transfer more than you can afford.
Don’t be alarmed when you see “Hello Digit Inc.” on your bank statement, that’s just Digit moving funds from one account to another.
Don’t worry about over drafting your account with Digit. Their math skills and ability to identify money you can afford to save is so strong that if they do over draft your account they will cover the fee!
You can purchase your savings at ANYTIME! It’s as easy as sending a text messages to Digit and your money will be in your checking account by the next business day! There’s no minimums, no fees and they allow unlimited transfers.
Every 3 months you will receive “saving bonuses”. You’ll receive 5 cents for every $100.
Digit will send you text updates to let you know your current account balance and how much you have in savings.

The app is simple, just sign up and let Digit handle the rest!

Looking for ways to save even more? Check out these great articles

Save Money on your Mobile Phone Bill
Tips To Save Money At Home
Save Money: 4 Items To Buy Online

How to Manage Your Side Income

January 2, 2017 by Emilie Burke 1 Comment

A side income refers to work you perform outside of your regular job. So, let’s say you work a 9 to 5 office job but you babysitting on the side, that’s a side income or also known as a side hustle. A Side hustle is a great way to not only add more money to your bank account but that money can be used to pay off debt, start a savings, or use it as your fun spending money!

Instead of focusing on penny pinching every cent you bring in with your regular job the side income will allow you to focus your energy on earning and saving more. Are you looking to pay off student loans, lower your debt or saving for an awesome vacation? A side hustle is for you! The best thing about a side hustle is you are able to try a large variety of things and see what works best for you and your everyday schedule. You don’t need to quit your job or make any crazy long term decisions to start your side hustle since they are generally pretty low-risk. Stick your toes in all your options until you find one that works for you financially.

Here are some tips to help you manage your side income:

You will have to pay taxes on any side income money you make over $600. PLAN APPROPRIATELY. You don’t want to get stuck with a tax bill at the end of the year.
Remember to spend less than you make. This is a major key if you want to use your side income wisely.
Open a new bank account, whether it’s a savings account attached to your everyday account or a completely new one. Pro-tip, when they ask if you would like a bank card for the account say no.
For your new income set up direct deposit and link it to the new account. This will help eliminate the spending temptations when pay day rolls around.
Depending on how much your side hustle brings in, distribute the money appropriately, if you have a mortgage payment, car payment or credit card payment use that money first to contribute to the monthly payment.
Next, tackle that debt. Use as much money as you to pay down your debt.
If you haven’t downloaded Digit yet I would get on that. The app is extremely user friendly, making it mindless to use. Not only that is it extremely helpful when trying to start a savings account.
Use your side income to help you get ahead on payment, add another payment on your credit card or car payment. Not only will this help your credit, it will give you a little cushion if life decides to throw an unexpected expensive at you.
Finally, use some of your side income for you. This money is to help relieve some financial stress. Use that money for something that you’ve really wanted, or treat yourself to dinner and drinks with friends. You’re working hard, you deserve it!

For more ways to make extra money through side hustling check out these great articles.

101 Ways to Make Extra Money In Your Spare Time – A Review
4 Things to Do Right Now to Get More Money Each Month
Here Are 5 Things You Need to Consider Before Becoming a Landlord
The Side Hustle Stack: 38 Easy Ways To Stack Money On The Side

Dollar Cost Averaging- What You Need to Know

December 26, 2016 by Emilie Burke 1 Comment

Investing can seem intimidating and terms like “dollar cost averaging” often go right over our heads. It is so easy to get caught up with life, work and bills. Busyness and fear can lead us to living our lives without investing a penny. However, investing does not have to be time consuming or scary. It can be a fun life choice with low maintenance if given the chance.

There are some basic things you do need to know about investing before you jump right in. Many people adopt the strategy “buy low, sell high” when investing. If you are really good at predicting the unforgiving market, this may work for you. However, for many, this unreliable strategy can be what holds us back from participating in the stock market; we are not good at guessing when stocks will rise and fall, and thus we never get a chance at all.

There is another option for those of us who aren’t market professionals, but still want to be involved. Dollar Cost Averaging allows us to not have to stress about picking the exact right moment to put all of our eggs in the same basket. There is a lot less risk and a lot less that can go wrong.

dollar-cost-averaging-what-you-need-to-know

Dollar Cost Averaging is a technique where the investor buys a fixed dollar amount of an investment on a regular basis, regardless of how much the share costs. When the market is down and prices are low, you buy more shares with your fixed amount. When the market is high, your fixed amount buys you less shares. The Dollar Cost Averaging technique is based on the premise that over time, and with your regular investments, you will make more money and your average share price will go down.

This technique only requires that you put in a fixed amount of money regularly. For example, I put $450 a month into a Roth IRA, instead of doing $5,500 at the end of the year. Therefore, I do not have to watch the market to see exactly what is happening, since watching the stock market is something I don’t do regularly.

For those of us who may not have time to stare at the stock market, this can be a great option for investing our money. Choose an investment that you believe in and feel certain will grow over time. Decide what you can afford to contribute each month, and devote that money into the stock consistently, regardless of whether it is up or down.

The only way to make this technique work is to stick with it over a period of time. It is a long term strategy, and you should not expect to see immediate results. However, if you can stick to the plan, your long term results can surprise you.

If you are intimidated by the unpredictable stock market, consider giving Dollar Cost Averaging a chance. There are so fewer risks for novices with this more laid back approach to investing. Don’t let yourself get so caught up with your work that you forget to invest! You may truly thank yourself later for taking the time to consider it now.

The Daily Money Challenge

December 19, 2016 by Emilie Burke Leave a Comment

The 52 Week Money Challenge hit the internet a few years ago– where you save $1 in the first week of the year, $2 in the second week of the year, and so on– and is a great idea to boost your savings. However, it can be difficult for some people who might not be able to set aside $210 in the last month of the year. Saving so much money in one month can be intimidating for beginner savers. So, an alternative to the 52 Week Money Challenge was born– the Daily Money Challenge. Like the 52 week money challenge, you set aside a set amount of money, but this time each day instead of once a week.

Do a Daily Penny Challenge.

How many of you walk past a penny on the ground and keep walking because it’s not worth your time to pick it up? Well, now it will be! For this challenge, set aside one penny on day one, two pennies on day two, and so on until you are saving $3.65 on the last day of the year. Even on the last day, it’s still a manageable amount to save. You can easily save $3.65 by brewing your morning coffee at home instead of going to the expensive cafe or by drinking water instead of a soda when you are out to eat. By the end of the challenge, you will have saved $667.95. If you’ve never saved money before, that’s definitely a good start and will put you over halfway to saving a mini-emergency fund of $1,000 (as taught by Dave Ramsey.) Just be warned that if you choose to physically save all of these coins, cashing in at a Coinstar will cost you 10.9% in fees. If you choose to cash in at a bank, they may make you roll your coins into coin wrappers by hand; it happened to a friend of mine and it took him an hour at the bank to roll all of his coins!

Do a Weekly $12.85 Automatic Transfer Challenge instead of the Daily Penny Challenge.

One of the biggest issues to doing the daily money challenge is not carrying cash. Like many of you, my paycheck is direct-deposited into my account, I pay for all of my expenses using my debit card, and never carry cash unless I need it, which requires me to stop at the bank to withdraw some. Plus, the idea of keeping so much cash in my house makes me uncomfortable. Enter: the automatic transfer challenge. Unfortunately, most online banking systems will not let you set daily automatic transfers; the most frequent automatic transfer you can do is weekly. However, you can still participate in the challenge! If you were to automatically transfer $12.85 a week into your savings account, you will save $668.20 by the end of the year. That’s less than the cost of one fast food meal per week!

RELATED: Best Free Financial Advice

Do a Daily Nickel Challenge.

If saving pennies doesn’t provide you with the amount of money you need, save nickels instead. By the end of the year, you save $3,339.75. Although it will be a little trickier to save a larger amount of money, this is perfect for people who need to significantly increase their savings in one year’s time.

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How to Prioritize When Setting Next Year’s Financial Goals

December 12, 2016 by Emilie Burke 2 Comments

I love the beginning of the new year. There’s just something about turning the calendar over that revitalizes me. To me, the new year symbolizes a fresh start. Even if the previous year was tough, there’s always hope that things will be better next year. Every December, I outline my goals for the next year in various areas of my life. One of the areas I focus on, and will especially be focusing on in the upcoming year, is my finances. Unfortunately, towards the end of 2016, I fell off track and had to drain my emergency fund as well as acquire new debt by purchasing a new (to me) car. So, where do I even begin with setting my financial goals for next year? Below are some tips on how you can prioritize your financial goals for the upcoming year.

Assess your situation.

Take an honest look at your finances over the past year. In what areas did you excel and in what areas did you come up short? In this step, I look strictly at the “big picture.”

Set a budget for the upcoming year.

This step is key, because without budgeting you can’t meet your goals. I look at my budget spreadsheets from the entire previous year and determine in what areas I overspent and under-spent. If I’ve overspent in a particular area continuously, I ask myself how I can reduce my expenses in that area, and if that is not possible, I adjust my budget to account for the increased expense. I also look at my calendar and make notes on events that will require a budget adjustment, such as buying birthday or holiday presents or traveling. Of course part of the key of budgeting is being flexible, but preparing in advance for adjustments (when possible) is incredibly helpful!

Look at the “baby steps.”

Although I don’t always agree with everything Dave Ramsey teaches, I think his baby steps are a great guideline on setting financial priorities.

Do you have a mini-emergency fund of $1,000-$2,500? If not, make it a goal to fund your mini-emergency fund this year. Having a mini-emergency fund was critical when I had car issues because it prevented me from charging car repairs on my credit card.

If you’ve already established your mini-emergency fund, then take a look at all debts you owe and make it a goal to pay off debt in the upcoming year. I personally use the debt snowball method, which is lining up your debts from the smallest amount to the largest amount and paying off the smallest amount first, regardless of interest rate. It’s very motivating as you pay off a debt!

Once you’ve paid off all debt (minus your mortgage), fully fund your emergency fund. At a minimum you should save 3-6 months of expenses in your emergency fund, but I personally prefer to save 9-12 months.

Then, begin planning for retirement. Determine when you would like to retire and the amount of money you will need to live comfortably in your retirement.

Determine how much money you can put toward your goal each month.

I budget using a zero-based budget, which means every dollar gets a purpose. So, at the beginning of the year, I determine an average amount per month that I can put towards my goal. If you’re in the emergency fund or debt payoff stages, you may want to put extra penny towards that goal, while if you’re funding retirement you may want to put 10%-15% of your paycheck towards it.

Personal Finance Ratios: What You Need to Know

December 5, 2016 by Emilie Burke Leave a Comment

I strive for healthiness in all areas of my life: physically, relationally, and financially. The signs of physical health and healthy relationships are obvious, but what about financial health? How do you truly know if you are on the right track financially? Enter: personal finance ratios. These are calculations that allow you to determine where your financial weaknesses are; once you know your score, you can then make changes to be on the right track. Here are some of the most important personal finance ratios that everyone should know.

Total debt to income ratio: Ideally 0%, but no more than 35% of monthly (net) income. Banks use this ratio to determine someone’s default risk on loans, especially mortgages. This would include all debt, such as mortgages, student loans, credit car payments, car loans, and personal loans. Most financial professionals consider student loans and mortgages as “good” debt and stress lowering at least the consumer debt, if nothing else.

Savings ratio: Between 10-20% of net income. This should be composed of your emergency fund, retirement fund, and college fund for children (if applicable.) Popular financial guru Dave Ramsey teaches that if you are working to pay off debt, you should have a basic emergency fund of $500-$1000 until you are debt-free, which I don’t necessarily agree with (I think it should be a bit higher.) He also teaches that you should wait to contribute to retirement once you are debt-free, which I also disagree with; if your employer offers a 401(k) match, to not contribute while you are paying off debt is like throwing away free money.

Housing ratio: around 25%-28% of net income. This would include not only rent/mortgage and utilities, but homeowners taxes, insurance, homeowners’ association fees, and money for ongoing home maintenance. If you live in an area with a higher cost of living, you may have to increase this amount slightly.

Liquidity ratio: Cash divided by monthly expenses. This is just a fancy term for “emergency savings.” In the event of an emergency, such as a job loss, how many months would you be able to stay current on your bills? Ideally, you would have a minimum 3-6 months’ of expenses available in liquid accounts, although I am more comfortable with 9-12 months’ emergency savings.

Solvency ratio: Net worth divided by total assets. Ideally your net worth would be 50% or more greater than your total assets. For someone who is just starting their career, this amount would be lower because most likely they have student loans and few assets, but as someone gets closer to retirement this amount should increase.

Being properly insurance is important because you never truly know what could happen in the future and want to be protected for anything that might happen.

Disability insurance amount: around 70% of your gross income. If you were somehow unable to work, you would need a way to pay your bills.

Homeowners’ and auto insurance: the cost of replacing them and the belongings inside. If something happened to your house or vehicle, you would also need a way to purchase new ones. Ideally, this would be by insuring them for the cost it would take to replace them. At minimum, you should insure them for their fair market value.

Life insurance: This one is a bit more complicated, because it depends on your life situation. For example, I’m a single woman with no kids, so I don’t need as much life insurance as my friends with kids. If you’re debt-free with a large chunk of money in savings, you won’t need as much insurance as a person with a mortgage

Meet Emilie

October 17, 2016 by Emilie Burke Leave a Comment

I listen to this podcast called Start Up. The show originally chronicled the founding of its parent company, Gimlet Media. In one episode that sticks out in my memory, they share some insight into the editing process. Call it my naiveté, but I had no idea what kind of process went into recording a podcast. There are writers and editors and producers and teams of people working behind the scenes who help produce not only the greatest podcast, with multiple recordings and multiple edits, but also the entire podcast brand. Podcasts are written, recorded, edited, re-recorded, re-edited, and put through the ringer as many rounds as necessary to produce the high-quality listening experience that the audience expects.

Blogs are no different. Here at The Free Financial Advisor, there are teams that are working behind the scenes to produce the content, images, and social media you see right here on the site.

Today, I join the team, so I wanted to take a minute to introduce myself an my experience. My name is Emilie Burke. I’m the writer behind Burke Does, inspiring millennial women to live financially, physically, and professionally fit lives. On Burke Does, I write about overcoming debt, while balancing trying to eat healthy, stay fit, and have a little fun along the way. I can also be found on Emilie’s To Do Lists where I post weekly goals and on my Portfolio Site.

I first discovered a passion for finance and financial learning after having a debt A-ha moment. You’ve probably had one too. It’s probably why you’re reading this and looking to gain more knowledge. At one point or another, you may have surveyed your finances only to realize you were in much worse shape than you expected. That was the case for me.

I was recently-turned-22 and in my first year post-college. I was waiting for my second paycheck from my new job that I had just moved to a new city for and all I could see was the bills that were piling up. I had a small planned gap between graduation and starting college, but my planning process had not included financial planning. I was unemployed all summer and had nearly $0 to my name. Every summer expense had been charged to a credit card, including cell phone bills and the down payment to my new apartment. As the summer came to a close, I was feeling the crunch of not being able to pay my minimums as my bank accounts started to really dwindle down.

Which led to me there, on my couch, in my new apartment that I shared with my then-roommate, doing a budget planning worksheet I got from Pinterest and finding that the way I wanted to spend my money required three times the take home pay I needed. That was my A-ha moment. A-ha, I am not making very much money. A-ha, I owe a lot of money to a lot of people. A-ha, my credit card statement says I will owe for 34 years if I just pay the minimums. A-ha, something has to change.

So it did.

I decided to stop spending. Soon after, I discovered Dave Ramsey’s Total Money Makeover. That opened a new world of personal finance and financial advising to me. Many months later, here I am. And now I’m so excited to share my journey with you.