My MBA costs $120,000. Let that sink in. How long to pay off MBA debt depended on implementing my 6 step debt pay off strategy. This is how I did it.

I paid off my MBA debt in 3 years following this 5 step framework.

• Step 1: Stabilize your debt
• Step 2: Save to have a strong financial foundation
• Step 3. Negotiate your salary
• Step 4. Student loan refinancing
• Step 5. Create small goals to shorten the debt pay-off

How long to pay off your MBA debt depends on the amount of debt when you leave school, repayment plan length, and your financial ability to refinance and make extra payments. The standard time frame is 10 years for graduate student loan repayment terms. Extended or graduate repayment plans can be 12 to 30 years, depending on the total amount borrowed.

I didn’t panic when I got the bill for my MBA because I knew how to attack my student loan debt.

My hope is that, whatever your situation, sharing my approach will give you a few ideas for creating a strategy that enables you to pay off your MBA or grad school debt quickly.

Day 1 of paying off my MBA debt

During my final weeks of business school, every single person in my graduating class had to meet in our auditorium. Sadly, this wasn’t a fun talk by Coach K, Duke’s famous basketball coach who often gave talks and always packed the house. It was a seminar on our student loans and how long it would take to pay off our MBA debt.

As we filed in we were handed a personalized folder with a printout of how much we owed. And we were gently reminded that not even bankruptcy would relieve us of our student loan payment obligation. The cost of attending Duke was—and still is—astronomical.

Most people sitting in that room had six figures of debt waiting for them on the other side of graduation.

This is when my MBA debt got real

When I opened up my folder to see $120,000 staring back at me and the date I needed to start repayment, I didn’t panic. I had a good job that was going to pay a healthy salary.

I could do this! Live my life with a $1,500/mo loan payment…for the next 10  years.

A few months into the real world with my new job, my healthy salary (that was less than the total amount I owed on the loan, btw) wasn’t going as far as I needed.

I was living in LA—a pretty expensive city—feeling a little panicked by my MBA debt. I didn’t know what my options were but decided I could not spend the next decade making that $1,500 payment every month. It was time to figure out Plan B for loan repayment.

Context on my astronomical MBA debt

Before we get into the details, a note: I know debt numbers and how long it took to pay off my MBA debt like these are unrelatable for many people.

For context, my payment was more than 25% of my monthly income and more than my rent. Yes, I was paid a lot, but I was also living with a heavy debt load in an expensive city.

That said, I was privileged to be able to make my payments, period. As funding for higher education decreases and the cost of tuition rises, more graduates face daunting debt, regardless of their degree or job prospects. My hope is that, whatever your situation, sharing my approach will give you a few ideas for creating a strategy that works for you.

Why did I prioritize paying off my MBA debt?

I have a lot of friends from business school who didn’t prioritize their debt. Their decision wasn’t wrong and my decision to pay it off wasn’t right.

When deciding whether to pay off debt, invest, or save, there are two components: mathematical and psychological.

Mathematical component to debt pay-off

The mathematical component is data-based. Where can you earn more—paying off debt or investing?

Can you afford to make higher payments?

Do you have at least a small emergency fund set aside?

Are there opportunities to start a side hustle or ask for a raise? Or could you negotiate in other areas to free up cash for higher payments?

Psychological component to debt pay-off

The psychological component is based on the individual. How much risk can you handle? How does this affect your life decisions and future spending? Does having high debt weigh heavily on you?

For me, the psychological toll was too high.

Even though the math said it would likely be better to live with the debt and throw as much as possible into investments, there were three reasons I wanted to pay off my MBA debt quickly.

1. Career choices

While I was making enough to afford the debt payments and still squeak by (though it was by no means a glamorous lifestyle), I didn’t want to feel chained to a certain paycheck amount.

I really wanted the freedom to pursue other career avenues, some of which might pay less. Jordan and I ended up moving to London two years after graduation and salaries are lower there, so having my loan under control made taking a pay cut easier to manage.

2. Pride (or guilt?) in paying off my debt

Jordan and I got married soon after I graduated. He was still in his MBA program at Duke. His employer covered most of the cost and he used his savings to pay the rest. He didn’t have loans and I didn’t want to be the only one with a loan burden in our relationship. I just couldn’t handle knowing that my loans were going to keep him from the things he wanted to do.

3. The best of both.

Finally, I realized that paying off my debt quickly wasn’t an either/or approach. It was a balancing act, but I could do both. Sure, if I had skipped saving for retirement for four years, my debt would have been paid off a year earlier. But I also wouldn’t have that nest egg sitting there waiting for me.

Plan of Attack to Pay Off MBA Debt: 5 Step Framework

Once I got serious about my loan payments, I decided to sketch out a plan. I didn’t have the suggested six months of expenses in an emergency fund and hadn’t started saving for retirement. Where to start?

Here’s exactly what I did. This isn’t meant as a step-by-step plan for every situation, but a framework to help you think about where to focus your energy.  

Step 1: Stabilize your debt

I knew that I didn’t want credit card debt on top of my student loan debt. No, thanks. So I decided to keep an “emergency pillow” savings account. I didn’t have enough for six months of a cushion, but I was able to put away $3,000 for dire emergencies. I used it a few times over the years—most memorably when my tire was slashed by a lunatic in my LOCKED apartment building parking garage. Ugh.

Step 2: Save to have a strong financial foundation

My employer didn’t offer retirement accounts or matching contributions, so I was tempted to forgo retirement savings entirely to focus on extra loan payments. Instead, I decided I wanted to take advantage of the great tax benefits of contributing to an IRA. You can contribute a maximum of $5,500 per year ($6,000 in 2019!), so I only saved that amount for retirement each year and focused the rest of my cash—every last spare dollar—on my loan payment.

I tracked all of my money—my student loan debt, savings, and investments—with Personal Capital. Their free tool made it easy to login to one place and see everything: my remaining loan balance, how much I had in my savings account, and how my retirement balances were growing.

I’ve previously shared how I paid off my loans so quickly, but I wanted to get more specific with my numbers and tactics because it’s a question I get often. The next 3 steps are more tactics you can and should use to shorten how long it takes to pay off MBA debt.

Step 3. Negotiate your salary

The single best thing I did was negotiate—twice. While I had arranged my lifestyle choices around paying off loans, you can only cut back so much. Sometimes you need to make more.

So that’s what I did. I didn’t negotiate because I had loans, though. I negotiated because I truly deserved to be paid more. Having the loans was an extra push that I needed in order to get me to speak up and ask for more. But I didn’t use that as a reason why I deserved more money.

Faster debt pay off by negotiating my salary

I negotiated two signing bonuses and one raise, which cumulatively knocked out 20% of my debt. Let me say it again for the people in the back: twenty percent of my debt was knocked out in two 10-minute conversations. My original loan term was 10 years and by putting this money toward it, I shaved off more than two years of payments.

The first negotiation was for a cost of living adjustment as I was moving across the country to a city with a high cost of living. It was a one-time bonus. Rather than use this money to rent a nicer apartment, I found cheap digs and put this entire bonus toward my loan.

The second negotiation was as I was accepting a new position in London. We had just moved and the salary they were offering was okay, but not great. I tried to get them to budge on base salary, but they’d only go up $2k. Frustrated, I moved on to my backup ask: a signing bonus. They had a lot more flexibility with the signing bonus and were able to offer $10,000. As soon as that bonus check hit my bank account, it went straight to my loan.

Step 4. Student loan refinancing

The second most important thing I did was refinancing my loans. While there are pros and cons to refinancing, to me, the lower rate was worth it.

When I graduated and had federal graduate student loans, my rate was horrible. I was paying a blended rate of more than 7.5%. I had a 10-year term on a loan of $120k, which meant that over the life of the loan, I was going to pay $51,000 in interest. My monthly payment was roughly $1,500.

When I began looking at refinancing, I discovered there were benefits I would be foregoing, but what I’d get in return made up for them.

Wondering if refinancing is right for you? Read the following:

Is It Smart to Refinance Student Loans? 4 Questions to Ask Before Refinancing

Refinanced with SoFi to pay off my MBA debt faster

I refinanced my loan with SoFi to get my interest rate below 5%. While the difference between 7.5% to 5% doesn’t sound that big, it ended up making a significant difference.

Had I stuck with a 10-year payoff, my monthly payment would have decreased to $1,272 and the total interest paid would have decreased to $33k. That would have saved me $228 a month and $18k over 10 years.

Not bad.

Had I refinanced but kept making the larger monthly loan payment of $1,500 a month (rather than the decreased amount of $1,272) I would have paid off my loan 22 months faster. Nearly 2 years sooner! And I would have only paid $26k in interest.

At the same time that I refinanced my loan down to 5%, I also received a raise at work that boosted my income by around $500 a month. So while my monthly payment was lowered, I ended up increasing what I paid each month to $2,000 ($1,500 that I was previously paying + $500 raise).

After refinancing and getting a raise, I was making serious progress on the loan. At this pace, I would have had it paid off in 6 years.

Step 5. Create small goals to shorten the debt pay-off

The third and final thing that I did was to create small goals for myself and spend on only the things that made me the absolute happiest. I did this in the last year or so of my loan.

At this point, I decided that while I was on a good track with my loan, I was completely miserable having it hang over my head. A switch flipped in my head and I wanted it gone, quickly.

I started playing a mental game. Rather than think about how I could pay off the enormous balance, which was still overwhelming, I started to think about how I could double my payment.

Still overwhelming? Yes, but somehow not quite as bad.

Example of shortening debt pay off with small goals

After I had that goal of paying $4,000 each month, I started looking at every dollar I spent as a tradeoff. Did spending that money make me happier than paying off the loan? Honestly, sometimes yes. Taking a trip or going to a museum was still really important to me (though I looked for deals). But the box of freshly baked cookies from the bakery down the street? The spin class? I stopped spending on the things like that which made me less happy than paying off my loan.

To see immediate results from not buying that thing (whatever it was I decided to skip), I would log into my loan account immediately from my phone and make a payment. So if I decided to not go to a spin class, I’d transfer $25 immediately. If I skipped the bagel and coffee, I’d transfer another $5.

To be honest, I rarely made that double loan payment. But seeing all of those small little tradeoffs add up over the month gave me a huge sense of accomplishment.

With all of these tradeoffs and strategies, I ended up paying off my loan in 3.5 years. While not having the debt is amazing, the best part is that I gained some amazing skills (hi, negotiating) and adopted a really healthy money system that has helped both Jordan and I use our money to live to the fullest.

Paying off student loans is a journey, but it can be smoother—and faster!—if you make smart decisions along the way. Make your first smart decision by signing up for the weekly newsletter- Make Me Smart-ish. Everything you need to know about money delivered straight to your inbox.

Oh hey there. One quick note. I used and love both SoFi and Personal Capital. The links I included in here are both affiliate links, which means if you decide to use them I may receive a small commission for recommending them. You can read more how we make money here.

This article was originally published on March 9th, 2018 and updated on October 15th, 2019.

The latest and greatest

Are you feeling restless or don’t see an opportunity for growth within your current company? One women had the courage to create a VP position and ask for a 20% raise in the process. She lays out  how to create a new postion in a company in 6 steps.

This is how you create your dream position within a company:

1. Prove yourself in your current role
2. Identify an opportunity to justify a new position (e.g., re-structuring, manager leaving, change in company strategy, downsizing etc.)
3. Identify the business problem that the new position will solve (e.g., saving money, not hiring another person)
4. Request a 2 month test period and don’t ask for a raise
5. Build a relationship and trust during the test period (schedule bi-weekly meetings)
6. Seal the deal with a justification proposal and a decision

This real-life, anonymous interview provides a sample of how to create a new position within a company. She did all this and a 20% raise at only eight months after starting with the company. Read how she did and then follow her example.

Title: VP of Marketing, Luxury Goods Industry

Location: New York, NY

Original salary: $125K

Salary asked for: $150K

How did you create a new job role?

I was six months into my role as a marketing manager for a small, luxury brand. There was only one other marketing manager and she had just put in her notice, leaving a role open.

One of my concerns about working for such a small company was that there weren’t many opportunities for growth. I reported to the VP Strategy and Sales who reported to the CMO.

When the other manager left I agreed to take on some of her work until a replacement could be found. After a couple weeks with the additional workload I realized that this could be my chance to create an opportunity for myself to grow.

Justifying a new role at my current company

I started mapping out a new organization structure for marketing.

The objective of my re-structuring was to create a new job role for me. By re-structuring the workflow, I could justify a marketing director role for myself and promote one of our marketing assistants to a marketing manager.

It would be a win-win: I’d get a promotion and the company would save money by not having to hire an additional employee.

Though I was still new to the company, I knew this was my chance to move up by creating a new job at my current company.

1st try at negotiating a new position within the company

I started first with my direct boss, the VP, to convince him of the new role.

I brought forward my plan with the new organizational structure and how I envisioned the group working. I was hoping that if I could sell her on this, she would be able to easily get it approved by the CMO.

Instead, I was a little shocked when she brushed me off.

She told me that organizational changes and the new positions needed to be approved by the CMO so if I wanted to talk about this I’d need to speak directly with him.

I was a little disheartened by the fact she wouldn’t help support my growth and my plan to create a new position of marketing director, but I decided that I couldn’t let it stop there. A few days later I booked a meeting with the CMO.

Before I went into my meeting with him, I decided to be bolder.

As there was no VP of Marketing, I thought it would make sense to create this role so I would report directly to the CMO.

It was a big ask, but I felt like my performance in my short time there had been incredibly strong and the plan would still benefit the company by not requiring another employee to be hired. This is how I would justify the new position.

Related articles:

• How to Get the Promotion You Deserve
• 5 Negotiation Mistakes I’ve Made
• 4 Ways to Research Your Salary

2nd try at negotiating a new position

He was interested but also hesitant. We hadn’t worked together much and this was a big change for our little marketing organization. As I advocated for this new role and organization structure I emphasized the cost benefit for the company.

At the end of the conversation he told me that he would put the search for another marketing manager on hold and we could test run this organization for the next month or so to see if it made sense.

We didn’t talk about a raise in this conversation – I wanted to prove that this new position was going to work before I asked for what I wanted.

How did you write your position justification proposal?

During the next two months I had bi-weekly meetings with him to talk about the new structure, new marketing initiatives, and the vision that I had for the group. I think he saw how passionate I was about making this work and he began to get more comfortable working with me.

After two months I knew that I needed to push him to make a decision and to make this official. In our next meeting I laid out my updated justification proposal in writing, based on some revisions we had talked about.

Then, I laid out my ask.

Additional information:

• How to Write a Proposal to Justify a Position to Your Boss

I wanted the following in the negotiation for creating a new position

As we had worked closely over the 2 month test period, the point of this discussion was to confirm my new role.

The justification proposal needed little discussion because he was well versed on how well the new organization was working. Our bi-weekly meetings ensured we were testing and proving ideas that were best for the company.

The justification proposal for a new position included the following deal for myself.

• To have a VP title
• To report directly to him
• To get a 20% raise to $150K

I asked him to agree to the plan and I could work with HR to make it official.

He took a minute looking it over and then said the new position, organization, and salary made sense for the company.

The CMO said that I had proven myself, and he would sign off on everything I proposed.

How long did it take to create a position?

In total it took a little over 3 months to create a position within my company. All 6 steps to create a new position are required and they take time to implement correctly.

The 3 months includes the couple of weeks working as the interim marketing manager as this was a key step in creating the new position for me.

A couple weeks in the interim position was enough to prove myself and also better understand the workings and gaps in the organization. Drawing up the initial re-structuring and job position justification proposal took a couple of days.

The longest period was the 2 months testing period that I had agreed with the CMO. 1 month wouldn’t have been enough time to build a relationship with the CMO and prove the organization was working. If I had waited more than 2 months to get the final decision then I would have risked becoming the status quo.

People will take something for as long as they can if it is free. You have to cut off the test period to get the position approved.

Seize the opportunity to create a new position within your company

There are a few moments in your career where you can be incredibly bold and take full advantage of an opportunity in front of you. My opportunity was to create a new position in the company.

When you get this moment, you have to seize it.

Had I stopped when my boss didn’t want to support this change for a new role, I would still be in the same role wishing I had done something more.

It took a lot of courage to present my idea for a new organization with me as the VP of Marketing to the CMO and advocate for myself for the next two months, but it paid off.

This article was originally published on November 4th, 2016 and updated on October 16th, 2019.

The latest and greatest

Should you pay off your student loans in full is a common debate. Paying off student loans can mean not saving or investing as much. What I learned from paying off my student loans in full was how to find balance, especially when a marriage is financially out of balance.

Paying off my student loans in full taught me the following life lessons:

• Lesson #1: financial anxiety is real and it’s really unhelpful
• Lesson #2: it’s easier to add than to subtract
• Lesson #3: being open and transparent is really hard
• Lesson #4: you can only cut back so much. Sometimes you have to make more.
• Lesson #5: good debt can still keep you stuck
• Lesson #6: good habits are hard to break

We’ll give you strategies to pay them off, but more importantly, we talk about how to find balance and not let those loans drive you crazy.

Why I paid off my student loans in full

When Jordan and I started to brainstorm how we should approach the student loan conversation for the podcast, I asked Jordan what he thought the biggest issues were with paying off my student loans fast. His response?

“I don’t remember having any issues with your student loans.”

Liar.

There was a lot of tension. There was a lot of avoiding the issue. And then there was a lot of having to talk things out. But we made it through unscathed and apparently it was so smooth that he doesn’t remember.

So let this be hope to anyone out there: whatever your financial situation (loans, debt, treading water), you’ll get to the other side. And you may even forget what it’s like to go through debt repayment.

This is not an “I paid off this much in this long” story. Because that’s not what I want someone to take away from this.

Yes, I paid them off. But I want to talk about the lessons we learned along the way in paying off my student loans in full. There were some things we did really well and some things, frankly, were tough lessons. Especially in learning to handle such a financially imbalanced relationship.

We hope they may help give you some insight, ideas, and, most of all, hope that you will pay off your student loans.

The cost of paying off your student loans in full

My thoughts on paying off student loans in full or early is just my two cents. My lessons from paying off my student loans are more psychological then running the numbers.

If you are asking yourself, is it worth it to pay off my student loans fast? You probably want to pay them off. Paying them off feels better than making 1% to 2% more on an investment.

Create a spending plan

Start with making a spending plan. You need a plan on how you are going to pay off your loans. Don’t overcomplicate it, start with Creating a Spending Plan.

If you have a plan for where you want your money to go, you’re more likely to have it go there. Do you want to save for a vacation and pay off your student loans?

Creating a spending plan will help you direct money to where your priorities are. You can save for retirement, your vacation, and paying off your student loans. You just need to make a plan and then automate said plan.

Automate your student loan payments

Second, pay off your student loans in full start by automating your payments. Follow our system on How to Automate Your Finances so you can make those payments without them being a drag on your life.

Paying off student loans in full doesn’t always offer the best return

Many people will say paying off your student loans in early is a bad investment. If your student loan interest rate is below 10 percent, and it better be right now or go refinance, then the extra money you apply to the principle on your student loans would be better put into an investment account.

Historically, the average annual return on the stock market has been 8 to 10 percent. If you extend your loan payment to the 20 to 30 year extended repayment plan, then the stock market could give you a better return.

If you had the choice between two investments, what would you pick?

• Investment #1 pays 8 percent and you can get your money back anytime
• Investment #2 pays 5 percent and you can’t get it back for many years

Investment #1 sounds the best.

By paying off your student loans early, you’re choosing investment #2. The money is gone once you make your loan payment.

But investment #2 is a guaranteed return. That is a huge advantage. Stocks and other high yield securities also come with higher risk, the return isn’t guaranteed.

With a recession looming, you may feel better paying off those loans so you can recession-proof your life.

And as my six lessons will tell you, the feeling of paying off your student loans in full create many other life altering benefits.

Related article:

• Is It Smart to Refinance Student Loans? 4 Questions to Ask Yourself

Podcast: 6 Lessons from Paying Off 6 Figures of Student Loans Early

TL;DR? Then listen at 1.5 speed to our discussion on the lessons I learned paying off my student loans early.

Lesson #1: financial anxiety is real and it’s really unhelpful

85% of Americans suffer from financial anxiety. I was one of them (and let’s be honest, on a bad day I can still slip right back there). I was handling it until my debt started to impact Jordan’s finances.

Lesson #2: it’s easier to add than to subtract

This is my mantra with anything in life. I first heard it as it related to food and dieting, but I think it’s a perfect example of money. In food, the concept is to fill your plate with more good things, so you don’t leave room for the bad. With money I look at it as we need to do more of the high value, low-cost activities then we won’t have time or interest in the expensive activities.

By doing this I was actually able to save. While I was paying off my loan I contributed to retirement and saved up a small emergency fund. I saved in an IRA that year because it’s a “use it or lose it” tax benefit.

Also, having small savings gave me a safety net that helped with my financial anxiety.

Lesson #3: being open and transparent is really hard

Jordan knew the extent of the debt, but I was always handling it. Cracks started to show once we realized our priorities were diverging. I remember he wanted to save for our future child’s college fund and I was sitting there with a pit in my stomach because all I could think of was the mountain of debt that I still had to get through.

Things came to a head when Jordan was offered a transfer to London. It was too great of an opportunity to pass up but this meant my salary was going away.

This was the kick in my pants to refinance my student loans. I break down refinancing student loans here – Should you refinance your student loans? and Everything You Need to Know About Student Loan Refinancing.

Lesson #4: you can only cut back so much. Sometimes you have to make more.

It was a struggle to get a job in London. Most marketing companies wanted to pay me half as much as I made in the US. Half! Negotiating enabled me to make more, and pay off a big chunk of my debt.

Lesson #5: good debt can still keep you stuck

I wanted to quit my new London job but we were so close to paying it off. Jordan and I were not agreeing on when to quit as he was antsy to pay off the debt. I ended up having a panic attack, as one does.

I had $12k left. I was so close to having it all paid off.

Lesson #6: good habits are hard to break

People will ask what it’s like to make that last student loan payment. Anti-climatic.

Our spending didn’t change at all. While paying off the debt we focused on filling our life up with things we love and value that didn’t cost a lot. Our habits continued after the debt was gone.

Summary on paying off student loans in full

In a nutshell, this is what we learned as a married couple while we payed off my student loans.

Terrible decisions on paying off student loans

• Treated student loan debt like it was monopoly money while in grad school
• Not clueing Jordan in earlier on how I was managing paying off my student loans in early
• Not getting on the same page with goals and vision – we should’ve done the 3 questions to determine why we were saving so we could assess the values and trade-offs of paying off the debt

Great decisions on paying off student loans

• Negotiating like a boss for my signing bonus
• Making micro-payments on the principle to give my minimum monthly payment a boost
• Refinancing to a lower interest rate and shorter payoff term, better late than never
• The biggest impact – getting a healthy mindset and having the right mindset around learning how to love my life, without a lot of money

Life update after paying off student loans

In episode 1 on What Are We Doing with Our Lives we talked about how the three questions helped us define what we wanted in life:

• Move to spend more time with family
• Reduce our impact on the  environment
• Start a business
• Be healthy and active

We haven’t moved yet but that doesn’t mean we’re waiting on living our best life.

• The grandparents are out here in the UK and we’re taking more time on the weekends to prioritize quality time with Henry and family, which is getting us out and adventuring locally. A dog with anxiety and separation issues and a 1-year old baby, there isn’t a lot of stuff we can do. Hence, we do lots of walks that end at cute english pubs. We have also been embracing the family dinner. Jazz goes on, apps are served, and we have those conversations that we can’t have over FaceTime.

• Reducing our impact on the environment starts with baby steps. For us this means cutting out food waste. We’ve never been huge into cooking, but have found a love of it now as we focus on eating the best food possible. AND it’s had a huge impact on our budget. We’re buying more expensive food, which I wasn’t thrilled about (like our fish from the local fishmonger who gets it fresh every morning from the coast). But the total cost has gone down SIGNIFICANTLY. Plus, we actually feel creative. Our town makes us have a compost bin so we can measure our food waste. We have a bag of food waste a week, not too shabby. Our fridge is empty at the end of the week thanks to our food planning and Sunday food prep ritual. And, the best part is I get to channel my inner Barefoot Contessa.

• Minimalism is a journey. We realize this more of each month as we get the urge to purge. What was sentimental last month, now goes straight out the door. Jordan has been selling stuff online to get it out of the house, make some money, and let someone else enjoy what we once loved. Goodbye Gilmore Girls 7 season box set.

Thank you for reading and listening to the podcast! Stay tuned for more updates on our journey from someday living our best life to living our best life now, in our mid-thirties. It’s never too late to start.

We would love your feedback as we share our journey. Write us a review on iTunes or your preferred podcast player. We read every review, promise. You can also email us questions and comments at erica@theworthproject.co or jordan@theworthproject.co. Thanks again for listening and talk to you next week!

The latest and greatest

When I talk to most people about why they don’t negotiate, they say “I’m just not good at negotiating.” Please. My 5 negotiation mistakes will make you crinch. And then make you want to negotiate for a higher salary. 

Here are my 5 negotiation mistakes that costs me thousands in missed income.

• 1. I didn’t ask
• 2. I asked… and then I apologized
• 3. I gave a play-by-play of my previous benefits package
• 4. I asked without a clear goal
• 5. I didn’t realize I could negotiate for more than money

While we will all make mistakes, the key is to learn from them as well. While I won’t be called in to negotiate peace deals, my negotiation skills have improved so that I’m able to confidently ask for a raise, negotiate a contract with a client, and ask for what I need in order to shape my career.

While I may be confident in my skills now, here are 5 negotiating mistakes I made, what I learned, and how you can avoid making the same mistakes.

5 common negotiation mistakes

While these are my worst negotiation mistakes, I hear the same negotiation pitfalls from many of the women I interview. I am a firm believe we learn best from our mistakes and other’s mistakes.

Most popular salary negotiation interviews

• How to Negotiate a Promotion With Your Boss
• How to Get the Promotion You Deserve
• How to Negotiate a Consulting Contract

When a negotiation goes bad, it stings. One’s pride is hurt more than the lost money or benefits.

The worst thing, is I’ve made these negotiation pitfalls numerous times. It took me years to build up the confidence and learn How to Negotiate Your Salary and Earn More Money so I would avoid these 5 common negotiation mistakes.

Now, regardless if I’m discussing rates with a writing client, battling our landlord on rent, or asking for extra Taco Bell hot sauces, I lean on these negotiation mistakes to have the courage to negotiate for more.

By studying these 5 common negotiation mistakes and how you can avoid them, you can set yourself up for even better outcomes:

1. I Didn’t Ask

You don’t get 100% of things you don’t ask for. My first job out of college I worked hard for a year. I figured if I did the things that were asked of me, I’d do ok. Fast forward to one year in and I was handed an average employee rating with an average salary increase for cost of living. It stung as I saw my co-workers get bigger raises, be rated higher, and get more opportunities for the next year in their career.

When I turned to my mom for advice, she gently pointed out where I went wrong. “If you want to be valued, ask to take on more, do a great job, and then ask to be recognized for it.” Simple.

The next week I marched into my manager’s office and asked to do more, with the objective of being promoted the next year. I think she was caught by surprise (I was, after all, average). But she gave me an opportunity and I knocked it out of the park. Then she gave me another one and I excelled as well. Finally, when it was time to review my year, I confidently asked that I be considered for a promotion and the sizeable raise that came with it. Guess what? I got it.

2. I Asked…and then apologized

After I learned my lesson about not asking, I decided that I needed to be more proactive with my asking. So when an opportunity came along for me to negotiate my salary (I was being offered a salary that was well below market), I decided to ask for more appropriate compensation.

As I made my case, I knew it was well justified. I had the exact experience they needed, came with great recommendations, completely crushed the interview, and they were offering me a salary that was well below market rate.

But right after I finished asking for a higher salary, I faltered. The HR woman I was speaking with was silent when I finished my ask. Uncomfortable with even a moment of silence, I began talking again. This time instead of my well-rehearsed ask, I started to apologize. I apologized for wanting more money, I apologized for asking, and I apologized for not being able to accept right away. I couldn’t stop the “I’m sorry’s” that were streaming out of my mouth.

I cringe still thinking about that moment, but luckily I learned from that mistake and it never happened again. Be comfortable with silence and do not apologize.

3. I gave a play-by-play of my previous benefits package

At the end of my final round of interviews with a company, an HR woman walked in to answer any questions and chat with me about the process. This was really a cover for what she actually wanted: my current salary.

I was still in the mode of wanting to please. I didn’t know if I had an offer yet and I was eager to do anything to not mess it up. So when she asked “what are you currently making?”, I responded as quickly and truthfully as I could. I knew I shouldn’t answer this question but I didn’t know how to NOT answer this question. So I told her my exact salary. Then my bonus. Then what my signing bonus was. Then my other compensation like stock options and vacation. I was oversharing and I just couldn’t stop myself.

Surprising to no one, their offer came in at exactly what my current salary was. Now, I’m always prepared, and surprisingly calm, when this question comes up. My responses include:

“I don’t really feel comfortable discussing my salary because the job responsibilities aren’t quite an apples to apples comparison.”

“My current company forbids us from disclosing salary information and I’d like to respect their privacy.”

If they continue pushing:

“If you could share the salary range you have available for this position, I can let you know if that’s in line with my expectations.”

“I can’t share my exact salary with you but my research shows that the market value for this position is $x – $x.”

You know this is going to be asked. Come with responses locked and loaded.

4. I asked without a clear goal

As I was preparing for a negotiation, I decided to do a little reading on what to say. After perusing google for a few minutes, I came across the rule that I shouldn’t give a number first (by the way, that “rule” isn’t always right).

But that felt great to me. I didn’t want to have to think of a number so I’d just ask for “more” and be happy with what I got.

With that, I went into the conversation. When they came back with a number that was slightly higher than what I was currently making, I jumped. I did it! I successfully negotiated for more!

It was a few minutes after the meeting ended that I began to question what just happened. Was I happy with that number? Was that what I actually wanted? I had spent so much time trying to figure out how to avoid giving them a number, I had forgotten to spend time figuring out what it was that I actually wanted.

What was my goal and what is the number I’d be happy with? I didn’t have that then, but I always do now.

5. I didn’t realize I could negotiate for more than money

If you’re in a job that you don’t really like, it can be easy to pile on all of the reasons that it’s not right for you. That’s what happened to me, without even realizing that’s what I was doing. And unfortunately, I didn’t think that negotiating could help me endure a bad job situation, or like my job more.

What I’ve learned since then is that a majority of what you do in your job is negotiable.

At times I felt like I was being crushed by an exhausting travel schedule, only to learn that I could have negotiated to take on different projects or adjust my schedule to make the travel more bearable.

I was burnt out to the point of quitting because a lengthy project I’d been given was exactly the opposite of what I was interested in doing. I didn’t realize until too late that I could have negotiated working on an alternate project or taking on a different project that I actually enjoyed, to balance out what I didn’t enjoy.

When one of my co-workers was let go and I was given her work, I was completely burnt out and didn’t realize that negotiating for more admin help was an option.

While I fretted about having to leave a job due to my husband’s work relocation, I didn’t realize that negotiating working from home was an easy solution.

Main takeaway on my 5 negotiation mistakes

Looking back there are so many things that I could have negotiated for, but didn’t. And those things actually would have meant as much, if not more, than money.

If you’ve made any negotiation mistakes, we’d love to hear. Share yours in the comments below.

Don’t stumble

through another awkward conversation.

Negotiate for more money, flexibility, or different opportunities.

The latest and greatest

I’m writing about something a little bit different today, and I am thrilled about it. Someone emailed me and asked what were the must-see cities for their first time in Europe.

And, because I want everyone to get the most bang for their travel dollar (as well as fall in love with it all like I did), it took me a minute to think about. 

Of course, London should be on the list, right? It’s my favorite city in the world and we were so lucky to call it home for nearly six years. And then Paris is just a short train ride away, so tack that on. But how can you miss Rome? And Florence? And Barcelona? Don’t forget about Amsterdam. 

Before long, I had a 10-day travel itinerary planned out for them that had them zigzagging their way around the continent. Clearly that was a terrible suggestion and would lead to a disappointing and exhausting first trip to Europe. 

I searched the interwebs to see what other people were recommending, and I didn’t like the answers. So I went back to brainstorming and created an itinerary that was truly the must see cities for their first time in Europe.

The Definitive List of Must-See Cities for Your First Time in Europe

Whether this is your first time in Europe or your fifteenth, here’s the itinerary strategy I recommend: visit one big city and explore a nearby, smaller area.

For must-see cities in Europe, I recommend these cities and surrounding regions for your first time in Europe: 

• 1. London and the Cotswolds
• 2. Paris and Dijon or Il de Rey
• 3. Florence and San Gimignano
• 4. Munich and Garmisch-Partenkirchen

Trust me when I say that this is probably the best strategy for your first trip to Europe. It’ll give you a good introduction and leave you wanting more.

First time to Europe itinerary: the strategy

Most first-time-to-Europe lists will tell you to visit three cities: London, Paris, and Rome. 

Let’s say you’re planning a 10 day trip to Europe — that means you have 3 days in each city (plus one day to travel home). That puts you on a tight timeline. 

Add travel days between cities, and you’re really looking at two fully enjoyable days in each spot. You’ll be rushing through the city to get snaps in front of the different monuments, and collapsing into your hotel room each night.

That doesn’t sound like much of a vacation. 

But picking just one city might not be the right strategy either. 10 days in London is a lot of days in London.

Why this strategy works for your must-see cities in Europe

There are a number of reasons why I love and highly recommend this itinerary strategy of visiting one big city and exploring a nearby, smaller area.

See more of the country you are visiting

First, not only do you spend less time traveling, but you also get to actually see more of the country you’re visiting. 

For example, there’s more (much, much more) to the U.K. than just a nickel and dime tour of London. Heading to a mid-sized city — or better yet, to the small villages — will give you a different appreciation of that spot. 

Reduced travel day costs

Second, the cost. Travel days are not only tiring, but they’re also expensive. 

That quick little train ride to Paris is likely going to cost you $100 per seat. A flight down to Italy will likely cost more, depending on the season. 

Add in taxis or ubers to get to and from stations with your luggage (unless you love the tube like I do) and it all just adds up. Plus, cities are usually the most expensive locations you could stay in. 

I love using my rewards points (we used this credit card to book our most recent night in London), but I also love staying in cool places that aren’t very expensive. Like an old manor house in the countryside, a villa in the Tuscan hills. I mean, who doesn’t like that?

Europe at a relaxing pace

Third, it’ll likely be a much more relaxed pace and you may even return home feeling well-rested. 

This has never been more important than now, with us traveling around with a toddler. Carting him through numerous big cities on one trip? Hard pass.

Four itineraries for your first time to Europe

What would your trip look like if you picked one of these countries from the list? Rest easy knowing you picked the right European cities to visit. Here are four itineries when planning to go to the must-see cities for your first time in Europe.

London and the Cotswolds

Obviously I’m biased here, but I think London is one of the most fantastic cities in the world and is a perfect way to dip your toe into visiting Europe. 

They are an English speaking country, which should make an easy transition for your first trip. But though we share a somewhat common language, you are in for a cultural treat. 

• Get tea at the Goring. 
• Visit Buckingham Palace. 
• Ride bikes through the Royal Parks.
• Take a cruise down the Thames. 

Enjoy the beauty and splendor of one of the most famous cities in the world. It is truly not overrated. 

Once you’ve seen the sights in Londontown, grab the train or rent a car and head out to the famed Cotswolds. 

This picturesque part of the English countryside is perfect for long walks and pub visits. While it’s quiet, the beauty of it doesn’t get old. We made annual weekend getaways to the Cotswolds and I think I loved it more each time. 

Stay in an inn, an old manor house, a pub (yes, many come with rooms to rent) or book a quaint Airbnb. 

We stayed in a renovated bakehouse from Airbnb one weekend and it was one of our most memorable stays to date.

Related articles:

• Exploring London With a Toddler
• How to Get Global Entry for Free

Paris and Il de Rey

Paris is always listed as one of the top cities to visit for a first trip to Europe, and it’s easy to see why. Between the beautiful architecture, the impressive museums, and the food, Paris is a romantic trip. 

Enjoy the city of lights for a few nights: 

• take in the Eiffel Tower
• explore the museums
• take a trip to Versailles

Then pack your bags and hop a train. Take a three-hour journey to the region of Burgundy and stay in Dijon, Beaune, or another town in the Burgundy region. 

Spend your days wine tasting, touring the French countryside, and eating as many baguettes as humanly possible. 

Or, if wine isn’t your thing, take a five-hour drive to Il De Rey, a picturesque island off the west coast of France. You can rent bikes, visit the beaches, and enjoy a top-quality seafood dinner every night. 

The island is small, peaceful, and offers a completely unexpected pace after a few days in Paris. 

As a bonus, prices tend to be much more reasonable once you leave the heart of Paris.

Florence and San Gimignano

Florence rarely makes the top of the list for cities to visit your first time in Europe. Most websites will send you to Rome. 

Not here! 

While Rome is, well, Rome and is well worth a visit, Florence is the gateway to a beautiful part of Italy: Tuscany. 

Get your Italian sea legs during your first few days in Florence and after the espresso, pizza, and gelato, then walk your way through this beautiful city. 

• take a tour of the Duomo
• see Michelangelo’s David
• walk the Ponte Vecchio bridge

Then, grab a car and head out to explore the rolling hills and medieval walled towns like San Gimignano. 

You can choose to stay at a hotel in the center of San Gimignano or book a room at a farmhouse. The countryside is beautiful, the food is fresh, and you’ll still have plenty of historical sights to visit.

Munich and Garmisch-Partenkirchen

Germany has some beautiful cities, but my favorite is Munich. Bavaria is a beautiful region and Munich is the capital, which makes it a great city to see before you explore the rest of the region. 

While you’re in Munich,

• walk through the English Garden
• head to the Marienplatz and watch the glockenspiel 
• have a meal at the Hofbräuhaus

It’s a beautiful city that is easy to walk around and explore. 

Then hop a quick 90-minute train ride down to Garmisch-Partenkirchen. 

That can be your base for exploring Bavaria and southern Germany — and maybe do some day trips into other countries like Switzerland, Austria, and Lichtenstein. 

We spent our days driving around the countryside going to Neuschwanstein Castle and hiking, with a quick day trip to Austria.

Ready to pack your bags for Europe?

Great. Take me with you. All of these locations are beautiful, culturally and historically interesting, and will leave you with memories that last a lifetime.

Jordan and I love to make our dollars stretch while traveling, especially with family.

Save on food and flights while making your first trip to Europe memorable. Download our free Don’t Go Broke Guide to Travel for our favorite travel advice. Plus, get our 3 tips for picking the right reward credit card.

Take 10 seconds to enter your first name and your email address. You will then be taken to a landing page that reminds you ever so sweetly to check your email inbox for the confirmation link. That email will then let you download the travel guide.

With the travel guide, you won’t go broke traveling with family. You’ll get home ready to save up for another trip abroad.

The latest and greatest

Now that we’ve moved to Hawaii, our friends are a bit more interested in visiting us. They love hanging out with us, I’m sure, but they are looking for a cheap trip to Hawaii. We can tell because they always drop into the conversation, “so, how much does a hawaii trip cost?”

There’s a big range when estimating a hawaii trip cost. This Tripadvisor thread has people saying costs from $1,500 per person to $15,000 per person. We estimate a mid-range, family of 4 trip to Hawaii cost $11,000 for 10 days in 2020, in the summer, leaving from the west coast.

The breakdown for a mid-range expenses, 10-day trip for a family of 4 to Hawaii is in the table below. Read below for the ranges and explanations for airfare, local transportation, food, and accomodations.

We like to make our travel dollars stretch so check out below for our 3 ways to save money when taking the family to Hawaii in 2020.

How much does an average trip to Hawaii cost?

While we did have a lot of visitors when we lived in London, it was usually a solo traveller who was passing through on their way to another spot or who was working in town and wanted to spend a few extra days with us.

But Hawaii is a more realistic destination for our friends with kids. 

While we love hosting (really, we do), we currently live in a 2 bedroom condo. So if you’re coming out and visiting with your family of four, we love you but you’re not going to be staying with us. (To make it up to these friends we’ll show them around the island, give them the best recommendations, and have them over for pupus.)

But that leaves the question, how much does a trip to Hawaii cost for a family of four?

We can do this the cheap way, the expensive way, or (my favorite) the cost-effective, but still really nice way. 

There’s such a big range when talking about a trip to Hawaii. This Tripadvisor thread has people weighing in with prices from $1,500 per person to $15,000 per person. And it’s 12 years old so counting inflation…yikes.

Hawaii family vacation cost estimate assumptions

Let’s break this down a little to get a better average.

We’ll assume the following with our cost estimate to give you context and for comparables:

• you’re a family of four
• flying from San Francisco
• planning a trip to Oahu and Maui
• duration of 10 nights
• June holiday

Average airfare to Hawaii

Where you’re coming from is going to be a big determinant of your travel costs. Are you flying from California during the winter? Things are going to be cheaper. Flying from the northeast during the summer? That’s going to be a hefty plane ticket. 

For our example, with some advanced planning you can expect to pay around $400-$500 per person for the roundtrip flight from San Francisco to Honolulu. Flying into Honolulu and out of Kahului, Maui may cost just a little more. 

Island hopping will usually add around another $100 to the total. 

This brings total cost of airfare Hawaii to be $2,000 – $2,400 for your party of four. 

If you’re traveling from the east coast, you might want to add another $1,200 total to that estimate. 

Don’t worry, we’ll get to ways to save below. We’re just getting cost info now.

Average rental car price in Hawaii

Rental cars in Hawaii can be expensive (I mean, rental cars everywhere are expensive, right?). But like with all travel costs, there’s a range. You can find deals with a rent a wreck for $25 per day. But if you’re going for a more traditional rental car option, you’re looking at $50+ per day for a midsized vehicle. 

We’ll estimate Hawaii car rental cost to be $500.

And trust me, there’s so much good stuff going on around the island outside of your resort, you’d be doing your traveling heart a disservice by skipping it. 

Rent the car. Save money elsewhere.

Average hotel price in Hawaii

Once you get to Oahu, you’ll have a wide range of places to stay. From budget-friendly hotels away from the beach to the Disney Aulani resort.

If you’re treating your kids to a Disney experience, expect to pay around $650 for a room that sleeps four over the summer. Spending your first five nights there will put the total at $3,250.

Turtle Bay on the North Shore will probably cost you an average of $350 a night during that same time period. Head down to Waikiki and you can find rooms for $250/night. 

Total Oahu hotel costs: $1,250 -$3,250

Once you’re done on Oahu, you head to Maui for the remaining five nights. The prices don’t get any cheaper on Maui — in fact, there are a number of luxury hotels in that $500+ range. For example, The Grand Wailea is $750/night. 

In Ka’anapali on the west side, you’ll find hotels in the $250+/night range. 

Total Maui hotel costs: $1,250 – $3,250.

That brings your total hotel costs for the 10-day stay to $2,500 – $6,500+. 

Related articles:

• The 2 Things We Always Do to Get Cheaper Flights
• Does Credit Card Travel Hacking Ruin Your Credit?

Recommended spending money for Hawaii

Ok you’ve perfectly planned your trip so far to stay within budget. You’ve picked the perfect hotel that isn’t too expensive but also comes with amenities you know you need (like a great pool). You’ve scoured the internet for the flight that is going to save you $300.

And then you land in Hawaii.

Your budget is about to be put to the test because food on the island is not cheap. Not even a little bit. 

Estimated cost of food for 10 days

Depending on the restaurant (and how much you drink) you can expect to pay between $50 and $100 per person for dinner. If your kids still eat off the kids menu, estimate $15 – $20. 

Lunch out will probably be a bit cheaper and you can expect $20-$30 per person, again depending on the type of restaurant. 

To have a fairly comfortable food budget, I’d say expect to spend $75 per adult per day and $30 per child if you’re staying at a resort. 

That brings your food total to $2,100 for your 10-day stay. 

Thankfully food is one of those vacation line items that can fluctuate wildly. Tips on how to seriously cut back are below. 

Estimated cost of activities in Hawaii

While you’re here there is plenty to do. You can hike (free!), snorkel (really cheap!), attend a luau (kind of pricey), or do a full day excursion on a boat (definitely not cheap). There may be days where you spend nothing and other days where you spend handsomely to do a two hour surf lesson. 

As an average, give yourself:

$1,500 for a family of four for activities.

Total recommended spending money (food and activities) estimate: $3,600

So where does that leave our total?

A mid-range, summer trip for a family of four to Hawaii for 10 days will be $11,000. 

That is not exactly a budget friendly trip. 

How to save money on your family trip to Hawaii

Luckily, there are ways to spend much, much less on your trip. Let’s go over a few:

1. Use credit card points

I’m currently planning a week long trip for us to visit the big island, and points are going to be our best friend. While we do get some discounts by being Hawaii residents, there’s no better discount than free. Jordan and I have a few credit cards that give us great rewards and we cash in our points strategically through the year. We’re going to use them for a few free nights, which should save us $600-$750.

We used this site to compare and select our favorite travel rewards credit card.

Another great option if you can plan ahead is to build up points and cash them in for flights. Typically you’ll see a more valuable conversion using points on airfare. Build up enough points and get the Southwest companion ticket or see if you can qualify for bonuses with Hawaiian Airlines card offerings. You might not get all four tickets for free, but getting one or two paid for will cut your costs down significantly. 

2. Travel during cheaper seasons

Don’t come to the islands during summer or over Christmas and New Years’ expecting deals. They just don’t exist out here during that time. Plan a trip in February or March and you’ll find some great deals. 

Timing is everything with a cheap trip to Hawaii. And if you need to work around school schedules, see if you can get creative. In elementary school, I missed a week of classroom work for a trip to Maui. We packed homework and I gave a report to my class upon my return. In high school, we would leave for the airport hours after the last day of school ended, because we could still get some decent deals leaving a week before everyone else.

3. Rent a vacation home

A vacation home rental won’t necessarily be cheaper than a hotel, but you can save a bundle on food. Groceries are still extremely expensive, but if you have a Costco membership and your rental car, you can save big during a 10 day trip. Eat out a few times but cook the rest of your meals at home. That could easily save you $1,000. 

4. Stick to one island

If you’ve come all this way and you are set on seeing more than one island, do it. At the end of the day, it’s not going to save your budget tremendously to stay put. But if you don’t care about visiting multiple spots, stick to one island. You’ll save the inter-island airfare and likely get a slightly better rate on your rental car, which could add up to $600. 

Firm up your family of 4 trip to Hawaii cost

Time to do your own math.

Now that you have an idea of what a trip to Hawaii would cost your family of four, price it out based on your interests.

By adjusting this estimate based on your preferences, you could find that you spend a lot more or a lot less. But really, these islands are worth a trip. 

The latest and greatest

Investing is complicated. At least we make it complicated. A few months ago, I was helping a friend set up her investment account. As I was walking her through her options, I realized that the words coming out of my mouth sounded…obnoxious. 

“You’ll want to make sure you have proper diversification. What’s your risk tolerance? These funds have good historical performance and the expense ratio is lower.”

She, rightfully, looked at me like she hated me. I hated myself. We had somehow moved from an easy conversation over coffee to a jargon-filled exposition on her best investing options. And I couldn’t get away from it.

No matter how hard I tried to back up and start the conversation over, I had no words to appropriately describe where she was about to put her money. And since one of my biggest rules is to not buy things you don’t understand, I was failing her to make investing less complicated.

I spent a long time trying to figure out how to explain investing in a way that didn’t sound so complicated. One morning as I was blending my smoothie, it dawned on me that this might be the perfect, simple analogy for investing.

If you’re a seasoned investor and you have it all figured out, this isn’t for you.

But for the rest of us, this should clear things up.

Move from “investing is complicated” to “let me explain investing to you”

Take the jargon out of investing to make it less complicated. The financial industry loves to make up big words to describe simple ideas. Take the complexity out of investing by falling back on this simple investing analogy.

Investing isn’t complicated, its a Juice Bar

This is where the whole investing process begins. You walk into a juice bar and you’re ready to buy some juice. In investing terms, your brokerage is the juice bar. There are big-name companies like Vanguard, Fidelity, or Schwab, and the newer arrivals like Betterment or Wealthfront.

These juice bar brokerages don’t grow the fruit—they’re literally a place to buy the juice. They might blend the juice in-house (e.g., Vanguard) or buy juice from someone else (both Betterment and Wealthfront buy juice from Vanguard and sell it to you, adding on their own little twist).

The glass is your investment account

Once you get into the juice bar, it’s time to pick your glass. The glass is just a vessel to hold your juice. An account is just a glass, nothing more.

But you have a lot of different choices in the glass you choose. A few types of glasses you’ll see on the menu are the following.

Types of investment accounts

“Get 25% more—free!”

This is what the sign for your 401k glass would say. If it’s being offered, this glass is usually your first choice because of an employer match. If you buy 12 oz of juice and put it in the 401k glass, your employer will throw in another 3 oz.

Employers have different match amounts, so the percent free would vary, but the basic idea is this: you get free juice. Who doesn’t like free juice?

“Get a break on taxes!”

This is what the sign for your IRA (both traditional and Roth) glasses would say. Amazing. If I can’t get free juice, I might as well get tax-free juice. There are some stipulations though, and two main ones are:

1. There is an income limit. If you make over a certain amount of income, you can’t pick this glass 
2. There’s a limit to how much you can fill up this glass each year. You can only buy $5,500 worth of juice ($6,000 starting in 2019!) to go in this glass each year if you’re younger than 50. Even if you can afford $7,000 of delicious juice.

“Super healthy, but regularly priced juice!”

This is what a sign for your brokerage account glass would say. There are no special deals going on, but it’s better for you than buying a coffee or a glass of water (i.e., it’s better for you than not buying a juice/not investing). Depending on your options, it might not be your first choice of glass, but it’s a great glass to have.

The juice is your investment portfolio

When you go to a juice bar, they have a menu of different options for you to choose. You don’t walk into a juice bar and order straight apple juice. That’s weird. They have blends of different types of fruit or vegetables that, when blended together, are supposed to give you better results.

These blends of juice represent the investment funds that you pick. In this example, we’ll specifically use Index Funds.

For the rest of this article on juice and reducing the complexity of investing, we’re going to talk about investing in the stock market, specifically.

A blend for every taste (index funds)

Let’s say you pick the “Basket of America” juice from the menu. This juice tries to give you a flavor of every fruit and vegetable grown in the US. That would be like a total stock market index fund.

You get a tiny taste of every single type of fruit and vegetable out there (or a taste of every single company’s stock in America). Some might be good, some might be bad, but when blended together it tastes balanced yet refreshing.

You might also pick the “Small Fruit Smoothie,” which would be a mix of only small fruit. No bananas or pineapples in here. That would be picking something like a small-cap (investing code for small company) index fund.

There’s the “International Cooler,” which only blends fruit and vegetables not grown in the US. Or the “Tech,” which only blends GMO fruit and vegetables or those grown by tech companies.

The point is, there are a lot of different juice blends that you can pick from—and each has different benefits.

What’s the difference in blends?

Some blends (aka, index funds) have performed really well in the past. These blends might include traditional fruit and vegetables like apples and bananas. Some blends are rising stars, like blends with the “superfood” acai—they don’t have a long history but could have a strong performance in the future.

Just like juice blends, there are countless different funds. Understanding how well each blend has performed in the past and how well it is expected to perform in the future is one part of your decision to buy.

And—good news for those of us who are indecisive—you don’t have to pick just one juice blend. In fact, you should pick more than one juice blend and have some diversity (investing word: diversification) in your account.

The fruit is individual stocks

You may have guessed by now that the fruit or vegetable that goes into the blend is the individual company stock. One type of fruit or vegetable represents one company.

A question you might ask yourself here is “Why are we blending the juice together? Why can’t I just have apple juice?”

You can just have apple juice. Or kiwi juice. Or whatever single flavor of juice that you want. But what if the apple crop is horrible that year and the juice is disgusting?

You just wasted your money on it. If you had just a bit of apple juice in a blend, the apple might be horrible the but strawberry might be a stellar crop this year and it will even out the bad apple.

Sure picking only apples reduces the complexity of investing but it increases the risk you will lose your whole crop.

Pick the blend. In the long run, it’s the safer bet. 

Barista or Bottle? Active vs passive investing

One of my favorite juice spots in London has two options for your juice: you can grab pre-bottled juice from the fridge or you can stand in line and wait for a custom blended juice from the barista. I always grab the bottled juice because it’s cheaper and it does the same thing as the barista-blended juice.

You may have heard of the terms “active” or “passive” investments. When you’re picking a fund (your juice) you can either go with an actively managed mutual fund or a passive index fund.

The index fund is like picking up a pre-packaged bottle of juice. There’s nothing wrong with this juice. A lot of people drink this juice. But because it’s been pre-packaged and doesn’t have someone concocting it each day, it’s cheaper.

The actively managed mutual fund is like ordering from a barista. He or she makes custom blends, hoping to get better results than what you’d get from a bottle. But to have the barista make the blend, they’re going to charge you a little more. Anywhere from 1% to 3% more. That doesn’t sound like a lot, but add it up over the years and it’s a ton of money.

What’s even more interesting is that studies show the juice you order from the barista (the actively managed mutual fund) doesn’t perform any better than the juice you pick up off the shelf (the passive index fund). Want to learn more? Check out a summary of index funds trouncing actively managed funds one of the studies from Morningstar.  

Getting some help from a financial advisor

Investing is simple but not easy. Figuring out what juice you want to order can sometimes be confusing. You might want a little help deciphering the menu and deciding what your juice priorities are.

A Juice Advisor

There might be someone at the juice bar who can help you figure out your goals and decide what exactly you want to order. They can suggest juices to buy and other add-on items like protein bars or moon dust, to round out your whole purchase.

When it comes to investing, this is what a financial advisor would do for you. They’d listen to your goals, and then suggest what juice blends (funds) you want to buy, as well as what other products you should add to your basket (like CDs).

To get that in-person, individual help they’re going to charge you a little more. They might charge you a flat fee or a percentage of your entire order. This is on top of the price of the juice you’re already buying.

A Juice Robo-Advisor

If instead of a person to dole out advice, you were to go up to a computer, fill out a questionnaire about your goals and preferences, and get a list of things to buy, that would be like using a robo-advisor.

The fee for filling out that questionnaire and getting a list of things to buy is cheaper than getting in-person help, with fees that usually range from 0.25% – 0.5% of your entire order. Again, this is on top of the price of the juice you’re already buying.

DIY Juicing

If you don’t take a survey and prefer to read up on the different benefits of different products yourself, you can buy them directly from the source: either the barista or the pre-bottled juice. If you’re buying pre-bottled juice and you know what you want to buy, you can go directly to a brokerage like Vanguard or Fidelity and purchase the juice (the index fund) out of the fridge.

The long game on a healthy juice (investing) lifestyle

If you drink a green juice once, do you really get the health benefits? No. (We aren’t drinking liquified kale for the taste, are we?)

The same goes for investing. The best benefits come over the long term. There will be ups, there will be downs, but this isn’t a Wall Street movie. The majority of us aren’t in it for the (sometimes daily) ups and downs that come with investing.

While there is no way to know that your investment will definitely make money, most financial experts feel relatively comfortable estimating long-term stock market gains at 7%. (The data, at the previous link, shows that the historical returns have been 7%. Historical performance doesn’t predict future performance, but this is a decent indication that investing over the long term isn’t a bad idea.)

Since the financial crash, the market has gone up—a lot. But it’s good to remember that there will always be ups and downs, even when you’re buying a blended juice (fund). That doesn’t necessarily mean that your long-term investing plans should change based on your short-term concerns.

Keeping tabs on your juicing

The best way I’ve found to keep track of all of the different types of investments I own is with Personal Capital. Because I have investments in retirement accounts, in Henry’s 529 college savings plan that we chose, and in taxable investment accounts, it can be a chore to get an overview of everything that I own. Personal Capital knows investing is complicated, so they actively make their dashboard simple to use.

This is where Personal Capital shines, in my opinion. With their free tool, you can take a look and see exactly what investments you own and see how much you’re paying in fees. I have a full review and tutorial video that you can check out here.

(Quick note: this is an affiliate link for Personal Capital, but I only include it because I actually use it and love it, which you can tell from my 20-minute tutorial video. For more information on affiliate links, check out this disclosure.)

Summary: Investing is complicated if you don’t think of a juice bar

Have I taken this too far? Do you hate me at this point? Are you just really thirsty? 

Here’s the TL;DR version to simplify investing. Investing is complicated, if you don’t write this down. But I am confident you won’t be able to forget this analogy.

Steps for investing in the stock market:

1. Pick the juice bar: your brokerage – Betterment, Vanguard, Fidelity, etc.
2. Pick the glass: 401k, IRA (Roth or traditional), Taxable
3. Pick bottled juice or a barista blend: passive or actively managed
4. Pick the juice: the funds or other products you think will be best for your health. You can pick it on your own, fill out a survey and have a computer pick it for you, or talk to someone about your goals and have them pick it all for you.
5. Don’t pick the fruit: don’t pick individual stocks. There’s too much to lose.
6. Things go up and down: don’t lose sight of your long-term strategy because the market will go up…and it will go down.

As with anything, there are nuances. People will pick apart details of decision making until you’re ready to completely give up and keep your money under your mattress. But if you start with really understanding the basics, and strip everything else out, talking about risk in your juice blend or fees from a barista make a lot more sense.

Photo by Monika Grabkowska on Unsplash

The latest and greatest

If you want to wade into an emotionally charged topic, this is it. How should married couples split finances is a perfect storm of money and relationships. To do it right, one must consider all options and pick the one right for your personality and relationship.

Married couples should split finances by having one joint account for household spending, separate accounts for personal spending, or keep finances completely split by divvying up the bills. A TD Ameritrade survey found 42% of people living together keep a separate account. Finding a happy medium rests with having separate accounts for fun money.

I share the pros and cons on the 3 ways married couples split finances. I then go deep on we how we split our finances and stay happily married.

 Read on for the ultimate guide on how married couples spit finances.

2 examples of how married couples split finances

I was having lunch with a newly married couple when the wife commented that her husband still had a bank account that was set aside for his “fun” money. This irked her because as a married couple she felt like things should be 100% combined and they should make all money decisions together.

He didn’t want to close the account. She expected I’d immediately jump on her side. 

I didn’t bite.

There’s no one way to handle money in a relationship. She wanted to combine everything but her husband wanted to be able to buy football tickets or a round of drinks without considering how it would impact her spending. He wanted to hold onto a little independence, she wanted to go all in.

Neither way is right, but it’s important to find a strategy that works for both people, rather than get frustrated because one person won’t heed to the other. 

On the other end of the spectrum, I was having lunch with another couple a few months later and one person remarked that they still kept their money almost totally separate. She was almost embarrassed to admit it because to her it felt like an unconventional way to handle money. But they were both happy with it, so why change it?

So how should married couples split finances and their money responsibilities?

I’ve share how Jordan and I split and share our money, but that approach isn’t right for everyone. Read on to find the strategy that works for you. 

How do married couples handle finances?

Because I love knowing how other people do manage their money, I really wanted to see if there was any data out there about how married couples handle finances. There are headlines that proclaim that millennials don’t open joint accounts. Sounds more like click bait.

On the other side of the spectrum, people say that keeping money separate will lead to an unhappy marriage.

But the truth is that how people handle their money is a bit mixed. According to a TD Ameritrade survey, 82% of people living together have a joint account. But 42% of people living together also keep a separate account. 

So married couples handle their money in all different ways, none of which are wrong or right in every situation. 

Should married couples have separate bank accounts?

Here’s where the conversation starts to get tricky, like for couple number one above. One person wants a separate account, the other doesn’t. How should this married couple split finances?

Benefits of a joint bank account

• Full financial picture: Sitting down to look at your financial standing and doing budgeting each month can be a chore. But when all money is jointly owned, it makes looking at the full picture much easier. Assessing spending and saving towards goals is much easier when you only have to look in one place to get a view of it all. (Really want to make looking at everything easy? Here’s how we manage our money in 15 minutes per month with Personal Capital.) 
• Transparency: Financial infidelity is a big problem, with a CreditCards.com survey finding that 28% of millennials are currently hiding money from a partner. While having joint accounts won’t solve that problem (someone can always hide money if they want to) joint accounts do promote transparency. Nothing is off-limits and for some, that level of openness is comforting. 
• Makes things easier: Joint accounts are convenient. There’s never any calculation about who needs to pay how much and it can streamline your financial process. It can also help in the event that one person passes away, access to money for the surviving spouse is easier. 

Drawbacks of a joint bank account

• Loss of independence: If for years you’ve been spending your money however you see fit, it can be a rude awakening to have to OK your spending with another person. While your partner may really not care about your spending it may still lead to feeling like you don’t have control to make even small spending decisions independently. 
• No financial safety net: If you need to leave a bad situation, it’s that much more difficult to do if you don’t have any of your own money. Not having some money of your own can lead to having to stay in unhappy (and potentially dangerous) situations because you don’t have an out. 
• Increase financial conflicts: If your partner loves something that you think is ridiculous (insert expensive bottles of wine, sneakers, designer sunglasses) you may constantly find yourself trying to justify the splurge. Over the years, that tension can wear on a relationship. 

How to split bills based on income

There are a number of ways to split bills based on income or a way that what works best for your relationship. Some bill splitting approaches you might consider include the following.

One joint account for household spending

For all bills that are included in running the household (mortgage, groceries, childcare), each person contributes a set amount to a joint account. Everything is paid out of the joint banking account.

The contribution can be equal — each person contributes 50% of the total. Or it can be divided based on income — the higher earner would contribute a percentage that matches how much they earn. All other money is kept separately. 

A serious downside here is that if one person stops earning an income, they won’t have any of their *own* money. 

One separate account for personal spending

This is the exact opposite of the income splitting method above. Paychecks are deposited into joint accounts and each person has a set amount (an allowance, if you will) to a separate account. The set amount can be equal or split based on income. 

Divvy up the bills

If you want to keep finances completely separate, you can each decide who will pay what bill.

For example, maybe one person pays the mortgage and utilities while another person pays the childcare and groceries. To make this equitable, as income changes, the bill distribution will need to change.

How to both stay in the know on splitting finances

However you decide to combine or split your money, don’t forget this one important point. Both people in the relationship need to stay educated and in the know when it comes to money. Maybe one person has a natural inclination to handle the investing or one person is better about paying bills. It doesn’t matter: both people need to stay informed. 

Jordan and I have found that the very best way for us to communicate and talk about our money is to use Personal Capital to aggregate all of our accounts. We can dive into our retirement accounts, check out Henry’s 529 college savings plan, and look at our spending, all in one place.

And because this seriously cuts down on the number of disagreements we had around money, I’m a huge fan. Read my full Personal Captial tutorial and review l review and watch the tutorial I created.

What to remember on married couples splitting finances

There’s no right answer to the question as to how married couples should split money. What matters most is that communication around this topic is always open and both people completely understand the financial situation. Beyond that, well, you do you. 

How Jordan and I, a married couple, split finances

We all have likely heard that money is one of the leading stresses in relationships. So when Jordan and I started dating, moved in together, and eventually got married, we were very intentional with how we approached our money together.

It has evolved over the years. How we manage it now that we’re married is different from how we managed it when we were dating and living together. And it may change again as we change.

The underlying premise of our joint money management is this:

Big financial (and life) decisions are made together. Everything else is simplified.

Our tactic for splitting finances when married

We are fans of the automating your spending and saving budget. Day to day, here’s what this looks like:

• Both of our paychecks are deposited into a joint checking account
• Bills are automatically paid
• Transfers are made to different joint savings and investment accounts and each of our individual retirement accounts
• An automatic transfer is done to individual checking accounts for each of us. We each get an equal amount transferred to our checking each month and we can choose to spend it (or not spend it) as we please.
• We are free to spend what’s left in our joint checking on what we need and want for the remainder of the month (rent, groceries, eating out, entertainment, etc)

The transfer done to our individual checking accounts is key of us. To be honest, it might be more key for me than it is for Jordan. I need to have my freedom.

How we decided to split finances when living together

When we got married we made roughly the same salary, but we both knew it might not always be that way. Career changes, moves abroad, and kids would eventually come into the equation.

As there are so many ways to combine – or not combine money, we went through the 5 ways to combine finances (see below) and picked one that felt fair to both of us.

We could have kept our money separate and only kicked in a percentage of our salary to cover shared expenses. But I know how competitive I am and if there came a time when I was earning less, I wouldn’t want to be constantly reminded that the percentage I contributed was less.

We could have totally combined our money and not had separate spending accounts, but there are some things that I want to do or buy and I don’t necessarily want to weigh how that would affect our household finances. I need some freedom.

Giving ourselves equal spending amounts each month that went to individual accounts helps us both to feel like we have freedom without always breaking down who contributes what to the household finances.

Why having personal savings accounts is important for us

When Jordan was offered the opportunity to move abroad in 2014, salary was a big consideration. At the time we were equal earners. The move abroad was going to result in him making substantially more while I would take a significant pay cut, due to the job market in London. (I quickly learned that my MBA from Duke didn’t matter at all in a different country.)

If we had contributed to household expenses based on the percentage that we earned and his percentage shot up to 75% and mine went down to 25%, that would have been a huge hit to my ego. And I probably would have been resentful.

Though that scenario did happen, because we didn’t look at it based on percentages and who can contribute what, it made it easier for me to stomach the pay cut and focus on the great international experience we were going to have.

In the future as Jordan explores new career paths and I continue to make more, not having to compare who earns what will again be helpful as we navigate those choices.

How to manage a personal savings account when married

As I’ve mentioned, I focus solely on making sure my spending reflects what I love. And Jordan does the same. Having individual spending accounts enables us to focus on what we really want to spend on as individuals and not hold back.

Who am I to judge his decision to buy a new pair of skis or fly to the US for a bachelor party? It’s his happiness, not mine.

When we were in Italy last month we went to the Prada outlet. As he debated a leather jacket that was really, really expensive, it was his decision to make, not ours. He knows whether he has money in his account and can make the decision that makes him the happiest, without considering me, our credit card, or our savings accounts.

We’ve both used this money for wildly different reasons. Here are a few:

• Taking my Mom and my Dad on respective 60th and 70th birthday trips
• Helping my sister when she had a huge emergency medical bill and needed a quick loan
• A weekend away with friends
• Birthday or Christmas presents for each other
• New clothes, shoes, etc.

And my favorite: when I quit my job to try my hand at working freelance and writing, he bought me my computer. That I’m currently still using. Knowing that he spent his personal money on that because he believed in me gave me the confidence to go out and believe in myself.

When our finances change, we change how we split money

Based on our different life goals, we regularly look at our savings rate and determine if we can adjust it. When we decided that we wanted to start saving up for a second home (this one a tiny home), we adjusted our automatic savings transfer by a little each month.

We also realized at one point that the money in each of our individual checking accounts was accumulating a little too quickly. So we cut that monthly transfer by 25% to see if we could still feel comfortable living with that. (We do.)

Of course, this is just one of many ways to combine and split finances. It works for us because we both get to keep our independence with separate extra spending accounts while combining everything else.

5 Ways Married Couples Split Finances 

I wrote a piece last year for The Everygirl that went through 5 ways married couples split finances. It included options for splitting and combining money. I received some strong feedback:

“5 ways! There’s only one way! Combine everything!” or “Combine your money? Why make this so difficult! Just keep it separate.”

I get it. Money is touchy. Money and marriage combined? Tread even lighter with your opinions.

The most important thing to know is it works for the two people who are actually in the relationship. And that means sharing your feelings and opinions about money. Openly.

The good news is that once you decide on an approach on how married couples split finances, and you make it easy with the automate your spending budget, you don’t have to keep having this same conversation over and over again.

To help you get started deciding what is right for you, there are 5 options on splitting or combining finances below. We’ll use Jane and John as our fictional couple to help illustrate each one.

Their household income is $100k per year: Jane makes $60k and John makes $40k. Go, Jane.

1. Separate finances but 1 joint checking account

The idea here is that all accounts are kept separate except for one joint checking account. That joint checking account is used for shared expenses: rent/mortgage, bills, groceries, eating out. Each person can contribute equal amounts to this account or can contribute based on how much they earn.

Jane and John added up their monthly joint expenses and they total $4,000 per month. Jane and John can either contribute equally or based on how much they each earn. If they contribute equally, they’ll both transfer $2,000 into the joint account at the beginning of the month. If they decide to do it based on how much they earn, Jane would contribute $2,400 (60% of the total) and John would contribute $1,600.

Jordan and I used this approach when we were living together but not married. It worked pretty well for us – aside from when I would get mad at him for eating too much cereal. (And no, I don’t understand how he puts up with me either.)

2. Combine all finances but 1 separate account

This is the opposite of option 1. Rather than having one joint account and keeping everything separate, you combine all checking and savings accounts and keep one individual checking.

Each month an automatic transfer is made from the joint account to the individual checking for that person to spend or save as they please. It’s like an adult version of an allowance.

Jane and John each put their entire paycheck into their joint checking account. From there they pay their bills and transfer money into savings. Once a month they also make an automatic transfer into their individual checking accounts of $200. Jane lets that money build up until after a few months she treats herself to a spa weekend with a friend. John spends his money every single month on video games. But neither of them gets mad or judges how they spend their separate money.

This is the option Jordan and I use right now, and we love it.

3. Combine all finances

There’s no hiding anything here. The two completely combine their money meaning that their paychecks are deposited into one account and only flows to joint savings accounts and to pay bills. When they want to spend money on anything, they do it from a joint account.

Jane’s spa weekend and John’s video games will come out of the joint checking account. They have a few options as to how they can talk about their spending. They can set a dollar amount, say $200, and anything that costs less than $200 they can purchase without checking with their spouse. They can choose to discuss any purchase, large or small, as my friend did. Or they can choose to not discuss everything and trust that the other person is making the best decisions with the family finances in mind.

4. Split all finances

This is the opposite of option 3. Rather than combining any money, the couple can choose to pay for different expenses separately, from their own bank account.

There’s no combined account and each person keeps their own checking and savings accounts.

Jane and John decided that it made sense for Jane to pay the mortgage on their home since she makes more, and John would pay for groceries and utilities. They trade off paying for eating out and other joint activities. They’re each in charge of managing their own individual spending and individual saving, but check in with each other frequently to make sure they’re on track with their goals.

5. Live off one paycheck

For those serious savers, or people that eventually hope to only have one person earning an income, living off one income is a good option. With this option, one person’s paycheck goes into a joint account and pays all of the living expenses and discretionary spending. The other person’s paycheck goes right into their saving and investment accounts.

Jane and John decided that they wanted to save as much as possible, as easily as possible. Since Jane earns more, they’ll use her paycheck for all of their living expenses: their mortgage, utilities, groceries, and fun spending. John’s paycheck will be deposited directly into their savings account. Since Jane makes 60% of the household income and John makes 40%, they have a savings rate of 40%.

These 5 options are just the basics of how to combine (or not combine) money with your significant other. Once you find an option that sounds about right, fit it to what you both want. There is no perfect solution to “how should married couples split finances?”

And don’t listen to the naysayers who claim there’s only one way to do it. You’ve got to do you.

Once you decide how to split finances

Jordan and I have found that the very best way for us to communicate and talk about our money is to use Personal Capital. Personal Capital lets us see all of our accounts in in one place, on their dashboard. 

And because this seriously cuts down on the number of disagreements we had around money, I’m a huge fan.

Read my full Personal Captial tutorial and review l review and watch the tutorial I created. Open an account with Personal Capital here.

(note, this is an affiliate link for Personal Capital. Read how we make money.)

If you’re not into financial programs or you’re just warming up to the idea of both taking ownership in your money, use a spreadsheet or a notebook, and have a regular discussion about your money: your goals, how it’s being spent, and where it’s being invested. 

The latest and greatest

If you’re feeling a little (or a lot) uncertain financially, you’re not alone. With the stock market taking a dive and businesses shutting down, things are scary. But it’s not all bad: there is help available from the government, you just have to know where to look. 

The CARES Act, along with the Families First Coronavirus Response Act, offer relief that includes:

• Paycheck Protection Program
• SBA Economic Injury Disaster Loans
• SBA Economic Injury Disaster Loan Grants
• Expanded unemployment
• Paid time off
• Rebate checks for people earning under $99,000
• Extended tax deadline
• Penalty-free retirement withdrawals
• Student loan forbearance
• Mortgage forbearance
• Credit protection

A recent article I read had the line, “now is the time to overprotect, not overreact.” To help you overprotect your family, here’s what you need to know about getting the money to help you weather this financial storm. 

If your business (even as a freelancer) is suffering

Small businesses are the backbone of the US economy and they’re not being forgotten. There are a few options that can help you make ends meet right now: 

Paycheck Protection Program

This is one of the biggest features of the CARES act for anyone who runs a business or is self-employed. If you’re a freelance writer, a dog walker, a coffee shop owner, this is for you.

This act set aside $350 billion dollars to keep employees working. It’s a loan that can be forgiven if you follow the rules. So yes, if you meet the requirements for forgiveness, this is like a grant from the government to keep your business running. 

Paycheck Protection Program summary:

You can apply for a PPP loan with an SBA 7(a) lender (find a lender here). The maximum loan amount you can borrow is 250% of your monthly payroll costs. 

Let’s say your monthly payroll cost is $5,000. The maximum amount that you can borrow is $12,500.

The goal of the program is to have you continue making your payroll payments — they don’t want you laying off your employees. If you use the loan to make payroll, pay utilities, mortgage interest, rent for eight weeks you may qualify for forgiveness. 

If you use it to buy inventory, you won’t qualify for forgiveness, but you’ll still have a nice low-interest loan (the maximum interest rate is 4%). 

You may wonder if this applies to you. To be honest, I did. And the odds are, it does. 

If your business has been hurt by COVID-19 (or you expect it to) this is a great tool to keep things up and running for a couple of months.

This is a very simplified explanation of the program. I’ll write more about it, but for now you can review details of the Paycheck Protection Program here. 

Small businesses can begin applying April 3rd and independent contractors can apply beginning April 10th. 

April 3rd update: Banks and lenders are beginning to open applications online. Most banks are requiring that you have an existing banking relationship to apply. Start with your bank and ask if they are participating. If not, you can search for SBA 7(a) lenders on the SBA website. 

SBA Economic Injury Disaster Loan

If your business is being hit and you don’t have other credit options to turn to, the SBA is offering loans of up to $2 million with a 3.75% interest rate. These loans can be used to fund working capital, like paying employees, rent, utilities, or debt payments. 

Review the SBA loan application for more information. 

SBA Economic Injury Disaster Loan Grants

If you’re a small business owner who is considering applying for an SBA Economic Injury Disaster Loan (also just called Disaster Loan), you can get relief quickly while waiting for your loan to come in. 

Disaster loans are loans for small businesses — up to $2 million with a 3.75% interest rate and up to a 30 year term. This money can be used for working capital — paying your employees and paying your bills.

But this money can take a few weeks to receive. So in the meantime, businesses can apply for a $10,000 advance. You’ll receive the advance within three days and you won’t need to repay it, even if you’re not approved for the loan. 

If you can’t work, your work has been reduced, or you’ve been laid off, who can qualify for unemployment?

Big changes are here for unemployment. This changes who qualifies for unemployment, how much they get, and how long they get it. 

How has unemployment changed? The basics are:

• More people will now qualify for unemployment
• Unemployment checks are bigger
• Benefits will last for longer
• You can get your check sooner

A quick primer on unemployment benefit programs: the federal government sets guidelines, but ultimately it’s up to each state to decide on their own benefits. The federal government has rolled out updates to their guidance and now it’s up to each state to review the guidelines and update their own rules as they see fit. 

Right now states are updating their policies so check back often to see what your state guidelines are. 

Here are the updates the federal government is making:

More people now qualify for unemployment

If you have had your hours reduced, you’ve had to stay home with a child because their school is closed, or you were laid off, you’ll probably qualify for assistance. 

Don’t skip this section because you think this doesn’t apply to you because you weren’t laid off. You don’t have to be unemployed to qualify for unemployment benefits. 

That’s right, forget the name. You can still have a job and collect unemployment benefits. 

Who can qualify for unemployment? The CARES act allows states to offer unemployment benefits to people if they are unemployed, partially unemployed, or unable to work because:

• A person has been diagnosed with CODID-19 or is awaiting a medical diagnosis
• A member of a household has been diagnosed with COVID-19 
• A person is providing care for a family member who has been diagnosed with COVID-19
• A child or other person in the household is now at home because their school or childcare shut down and the parent (or caregiver) can’t work
• An employer temporarily shuts down, which prevents employees from coming to work
• An person is quarantined with the expectation of returning to work after

A caveat is that if you are on paid leave, which we’ll cover below, you are not eligible for unemployment benefits just yet. 

The government is also making unemployment benefits available to people who wouldn’t normally qualify. This includes self-employed, gig workers, or people with limited work history. 

So freelancers, rejoice. And then check with your state unemployment agency to see what their updated guidelines are. 

Unemployment checks are bigger

Because unemployment benefits typically aren’t enough to live off of, the CARES act is stepping in with more money. People who qualify for unemployment (and that’s an expanded list as you saw above) will now get an additional $600 per week for four months. 

Let’s say you qualify for the maximum unemployment amount in California of $450 per week. The CARES act throws on an additional $600 per week, so you’ll get $1,050 each week that you qualify. 

Unemployment checks last for longer

Because no one knows when the economy will get back to business as usual, unemployment is being extended. People in most states will receive unemployment benefits for 26 weeks. This thing might take just a little bit longer to sort out. 

The CARES Act gives people an additional 13 weeks of unemployment benefits, once their state unemployment ends. 

Unemployment checks should come sooner

In many states when you apply for unemployment, you don’t get the benefits immediately. You have to wait for a 7-day “waiting period” to be over before you qualify. The federal government is reimbursing states that waive the one week waiting period. 

Unemployment offices are overloaded with requests right now so getting benefits will take more time than normal. 

You can search for your state’s unemployment office on CareerOneStop.com. 

And a quick note about applying for unemployment. You may have seen that state websites are crashing because they can’t handle the volume of people applying. Don’t give up. The CARES act gives more funding to agencies to help them improve this. 

Paid time off

The Families First Coronavirus Response Act lays out requirements for paid leave that employers need to adhere to. These changes apply through the end of the year, so even if you aren’t in this situation yet read this because you may be at some point later this year. 

If you can’t work because you are:

• Required to be quarantined or you are experiencing symptoms and awaiting medical results, you’re eligible for two weeks (up to 80 hours) of paid leave at your full pay
• Caring for someone who is quarantined, caring for your child because their childcare or school has closed, or other reasons determined by the Secretary of Health and Human Services, you’re entitled to two weeks (up to 80 hours) of paid sick leave at two-thirds of your normal pay

If your child’s school or childcare is closed and you can’t work, but you’ve been with your company for over 30 days, you’re eligible for an additional 10 weeks of paid family and medical leave at two-thirds your pay.  

You can read all of the paid leave details here.

If you make less than $99,000 per year

Most people know by now that there are rebate checks coming…eventually. The CARES act gives $1,200 rebates to everyone who has income of $75,000 or less (or married couples who make $150,000 or less). 

If your income is above that, your rebate check will be reduced by $5 for every $100 above the $75,000 (or $150,000) threshold. So if you make $75,100, your rebate will be $1,195. 

If your income is more than $99,000 (or $198,000) for a married couple, you won’t be getting a rebate check.

If you have a qualifying child (usually a dependent child under 17), you’ll get an additional $500 per child. 

The IRS is sending out these checks and they’re using either your 2019 or 2018 tax returns. If you’ve filed 2019 they’ll use that. If you haven’t, they’ll use your 2018 tax return. 

You won’t be getting these checks tomorrow, though. They’ll start mailing checks in three weeks. In 2009 it took three months for the checks to be mailed out. 

You can stay up to date with the IRS rebate checks here. 

If you haven’t filed your taxes yet

That’s cool. You have until July 15 to file and pay. 

But if filing your 2019 tax return could be the difference between receiving a rebate check and not receiving one, get those tax returns in asap. 

If you can’t pay your bills

Even with the Paycheck Protection Program, expanded unemployment, and a rebate check, there’s a good chance a lot of people are going to struggle to make ends meet. Things are going to be tough financially for the foreseeable future. 

But there’s more in the CARES act that you can use. 

Retirement withdrawals

If you have a 401(k), IRA, or another qualified retirement account, you probably know that you really can’t touch that money. At least, not without paying a 10% penalty. 

That 10% penalty is now waived for up to $100,000 in retirement withdrawals. 

To qualify for the penalty waiver:

• You, your spouse, or your dependent needs to have been diagnosed with COVID-19
• You experienced adverse financial consequences from COVID-19 because you were quarantined, furloughed, laid-off, had your hours at work reduced, or you had to close your business.

So really most people will qualify to use their retirement savings without penalty right now. 

You do have to pay income taxes on your retirement account distribution but those can be paid over three years. You can also repay the distribution over three years.

Before you dip into your retirement to pay your bills, look for other ways to make ends meet. Your retirement funds are likely sitting in investments and investments are low right now — you may be selling some of your investments at a loss. 

Student loan deferment

If you have federal student loans, your loans are automatically being placed into administrative forbearance until September 30, 2020. 

If you have a Direct loan, an FFEL loan, or a Federal Perkins Loan, your interest rate will be set to 0% until September 30, 2020. That means no payments need to be made and no interest is accruing. You can log into your loan account to confirm whether you have been placed on forbearance or not. 

Private student loans are not covered by the CARES Act and aren’t required to provide the same benefits. If you are struggling to make payments on a private student loan, call your lender. They may offer loan deferment though interest still may accrue. 

To get updates on Federal Student loan actions during COVID-19, visit their website. 

Mortgage Forbearance

With so many people expecting to not make ends meet, lenders are being directed to accommodate those who are unable to pay. 

The CARES act prohibits foreclosure for a 60-day period beginning March 18, 2020. 

If you’ve been financially hit by COVID-19 (which is pretty much everyone) it also provides up to 180 days of forbearance for people who have a federally backed mortgage, including those who have mortgages that were purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA. 

Lookup whether you have a Fannie Mae or Freddie Mac mortgage. 

Even if you don’t have a Fannie Mae or Freddie Mac mortgage, it’s worth calling your lender. Our mortgage isn’t federally backed and our lender was still offering a 180 day forbearance, interest-free, which will then be amortized over three years. 

Additionally, states may be asking for assistance. Most lenders in California are offering forbearance or relief options to any of their customers impacted by COVID-19. 

When in doubt, call your lender. 

Credit Protection

If you work out an agreement with a lender to pause payments on your debt, the CARES act also spells out just how these lenders need to report that. If you were current on your account and set up a deferral or forbearance agreement with them, they must continue to report your account as current. 

This is a big deal because you don’t want your credit that you’ve worked hard to build be negatively impacted. 

If you want to know more about the CARES Act or the Families First Coronavirus response act, you can read the government summaries of each. 

If you’re worried about financial uncertainty (and who isn’t?), sign up for my weekly newsletter where I share the best information I’ve found from trusted sources to help you navigate your money in the time of COVID-19. 

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When I decided to leave my nine to five job and work freelance, I knew I’d have to figure some things out when tax time came around. Namely, how much can you earn as a freelancer before paying taxes? As a CPA, I thought I’d be able to navigate the new-to-me world of self-employment taxes easily. 

I was wrong — there’s a surprising amount of misinformation out there that had me totally confused on more than one occasion. 

There’s a common misconception that if you earn under a certain amount you won’t have to pay tax on your freelance income. If you earn more than $400 freelancing, you’ll have to file Schedule SE and pay self-employment tax. But even if you earn less than $400, you’re still required to report (and possibly pay) income tax on the money you earn. 

New to freelancing and need to learn the tax ropes? Let’s walk through everything you need to know about self-employment and taxes:

What is self-employment tax?

There are a lot of perks that come from being a freelancer. Unfortunately, taxes are not among them. 

To understand self-employment tax, let’s first cover how taxes work when you are an employee. When you’re an employee, in addition to any income taxes you pay, you and your employer pay payroll taxes on your earnings, made up of social security and medicare taxes. The Social Security tax rate is 12.4% and the Medicare tax is 2.9%, so most are taxed a total of 15.3%. 

When you’re an employee, you pay half of the payroll tax and your employer pays half. 

But when you’re a freelancer you don’t have an employer to pay half of your payroll taxes. Instead, the IRS requires that you pay self-employment taxes. This is basically the same as the payroll taxes you’d pay if you were an employee, but now as a self-employed person, you have to pay both the employer and the employee portion. The entire 15.3% needs to be paid by you.

This rate can adjust a little depending on how much you make, but for now, what’s important to know is that you’re fully responsible for the self-employment tax. 

How much can  earn freelance before paying taxes?

There are two taxes you’ll need to pay as a freelancer: self-employment tax and income tax. What if you didn’t really earn that much from self-employment — do you still have to pay taxes? 

Yes, probably.

If you earn at least $400 for your freelancing, you’ll be on the hook to pay self-employment tax and file Schedule SE. 

To be clear, you only have to pay self-employment taxes on your self-employment income. Say you have a full-time job paying $75,000 and also have a side hustle paying $2,000. You’ll only be required to pay self-employment taxes on the $2,000 because you’ve already paid payroll taxes on the income from your full-time job. 

As far as income tax, you’re required to report any income you make — there is no minimum threshold. Whether you have to pay taxes on that income depends on your income tax bracket and how much money you earn in a year. 

When (and how) do I pay self-employment tax?

The US has a pay as you go tax system, meaning you need to pay taxes regularly throughout the year instead of paying them all at once. As an employee, your employer makes tax payments regularly for you. As a self-employed person, you’ll need to make estimated tax payments. 

These estimated tax payments are due at four intervals throughout the year: April 15, June 15, September 15, and January 15. If any of those days fall on a weekend or holiday, the due date is the next business day. 

You make estimated tax payments using Form 1040 ES to estimate and pay your taxes. In there you’ll find a worksheet to help you calculate your self-employment taxes that are due. 

Do I have to report income under $600?

This was the other misconception I found — many people believed that if you earn less than $600, you won’t have to pay income tax on it. 

It’s easy to understand where this misconception comes from: if you make less than $600 the person that paid you doesn’t need to file a 1099-MISC. But that has nothing to do with whether you have to actually report the income on your tax return. Even if you don’t receive a 1099-MISC, any income that you earn needs to be reported on your income tax return. 

How much can you earn from your hobby without paying taxes?

What if you’re not freelancing, but you earn money from a hobby? Unfortunately, the rules are still the same. Any income that you earn will need to be reported and if you earn more than $400 you’ll need to file a tax return and pay taxes. 

How can you reduce how much you pay on your freelance income?

While taxes are kind of a bummer for freelancers, there is a silver lining. Tax deductions can be your best friend to help reduce the amount of tax you pay. Tax deductions reduce your taxable income.

Some of the most common tax deductions for freelancers include:

• Home office tax deduction
• Travel expenses
• Business meals
• Advertising and marketing
• Office supplies
• Computer hardware and software

Keep those receipts during the year to make sure you’re getting the deductions that are allowed. 

Bottom line

There are two taxes you need to be concerned with: income tax and self-employment tax. 

If you earn any amount of money from freelance work, you will likely need to report it and pay income tax on it. If you earn at least $400 from freelance work, you will have to pay self-employment taxes on it. 

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