Even on Amazon, Some Deals Are Too Good to Be True — Here’s How to Spot ’Em

Amazon has everything.

Seriously. No matter what you need to buy, your first stop is Amazon. Sometimes, you even find what you want for an amazing price.

It turns out that some of those too-good-to-be-true prices are just that: too good and not true.

Because we can never have a good thing without someone trying to screw it up, a wave of Amazon fake sellers has started to create problems for buyers, legit sellers and Amazon itself, according to BuzzFeed News. Forbes reported earlier this year about what seems to be a growing number of fraudulent sellers on Amazon.

A Scammer’s Gotta Scam

Amazon fake sellers are just what they sound like: people who set up an account and put items up for sale that they don’t actually have. Not only do they put items up for sale, they slap crazy-good prices on them.

Fifty percent off a laptop? Yes!

Then buyers click away and send their payments only to wait for that awesome delivery that never comes.

Luckily for buyers, Amazon’s A-to-Z Guarantee means buyers usually get their money back.

Unfortunately, that means Amazon refunds the buyer, while the fraudulent seller runs off with the money. Amazon loses.

Think Before You Click to Avoid Amazon Fake Sellers

As we get closer to the holiday season and you start looking for those sweet deals on gifts for your friends and family, avoid scammers by paying close attention.

The easiest way to ensure you’re using a legitimate Amazon seller is to look through their reviews. If a seller has a relatively long history of positive reviews, you should be fine. Be wary of any seller with reviews from consumers who claim they never received their items.

If a seller’s information says they “just launched,” it means they are new to Amazon. Now, there are plenty of legit sellers out there who may have just started out, and they could be great. However, if you find a price on an item from a new seller that is dramatically lower than you’d expect, consider it a red flag.

There’s no need to run away from Amazon. Just be a smart consumer, and don’t let scammers ruin your day.

Tyler Omoth is a senior writer at The Penny Hoarder who loves soaking up the sun and finding creative ways to help others. Catch him on Twitter at @Tyomoth.

This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.

What the Latest Dispatches From Our $1.4 Trillion Student Loan Hell Reveal

If you are one of the 44 million people responsible for repaying the $1.4 trillion in student loan debt in the U.S., there’s a good chance it’s harder for you to pay it off than those who came before you.

That’s according to some depressing facts from a new Consumer Financial Protection Bureau report released Wednesday.

According to the CFPB, 30% of borrowers who started repaying loans five years ago have not paid down their loans at all or owe even more. That could be because the amount they pay each month doesn’t even cover the interest on the loans. And that’s if you’re paying at all. More than 60% of people in this category are delinquent on their loans.

Lucky enough to escape that category? Well maybe you’re among the 40% of borrowers who owed more than $20,000 when repayment started. In 2002, this group made up only 20% of overall borrowers.

What’s worse, in 2002 only 5% of borrowers owed more than $50,000. That percentage has now more than tripled to 16%.

This is especially telling because a decade ago, 50% of borrowers could fully repay their loans within five years. That percentage has now slipped to 41%.

Even if you managed to dodge that bullet, you’re still not out of the woods. The CFPB report points out that nearly 50% of borrowers are over 34 years old when they enter repayment. In 2003, this group made up only 25% of the borrower pool.

This all means we are borrowing significantly more money to pay for education, starting the repayment process much later in life and still finding it tougher to pay down the debt than borrowers who came before us.

Employee Benefits Packages Provide Some Relief

Now that you’re probably wallowing in a pit of despair, I’ve got the slightest silver lining to pull you back out: This increasingly burdensome debt landscape has changed many employers’ benefits packages.

According to the CFPB, about 10% of companies with 40,000 or more employees use third-party student loan repayment programs to help stabilize their employees’ financial lives. These benefits also help with employee recruitment and retention. Although the percentages are not as readily available, the report also said small companies have started to offer similar benefits.

These kinds of programs are especially enticing because they can save borrowers thousands of dollars if they stay with a company long term.

Unfortunately, these programs often leave out the most vulnerable borrowers who are already in default, according to the CFPB survey. For them, income-driven repayment is an option that could provide relief, particularly if low income and unaffordable payments led to default.

Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.

This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.

Is the 50-20-30 Budget a Good Rule of Thumb?

Budgeting is a cornerstone habit for building wealth. One approach to creating a budget is the 50/20/30 rule. In this article we cover this method to managing your money and how to apply it to your finances.

How can the numbers 50, 20, and 30 help you manage your finances? Well, they could completely transform your budget.

Today, we’re going to talk about the 50/20/30 rule of budgeting. A company called LearnVest popularized this rule of budgeting a few years back, but it’s been around long before them. I’ve seen many financial experts write about it, as well.

The bottom line is that the 50-20-30 budget has some advantages as a starting point, but, like most financial rules of thumb, it can also lead you astray. So today, we’re going to walk through this form of budgeting and talk about its pros and cons.

Listen to Our Podcast on This Budget Type:

What is the 50-20-30 budget?

At its basic level, the 50-20-30 budget divides your after-tax, take-home pay into three buckets.

The first 50% of your budget goes towards necessities, including shelter, food, utilities, transportation, clothing. These are the things you need to get by day to day.

It also includes minimum payments you need to make on your debts. Without making them, you can suffer some serious consequences! So minimum payments on your car loan, credit cards, student loans, etc. also go into this bucket. This rule of thumb says that those expenses should comprise no more than 50% of your take-home pay.

Related: How to Bring “Shock and Awe” to Your Monthly Expenses

The next 20% of your budget goes to long-term savings and extra payments on any debt you may have. For example, this bucket would include contributions to your 401(k) or IRA. And if you’re trying to become debt-free, the extra debt payments would go into that budget.

Basically, the 20% bucket is for your financial priorities — your savings for the future and some debt repayment. This bucket does not include short-term savings, like a vacation. That’s for the third bucket.

The 30% bucket is for your lifestyle choices. It includes things like vacations, entertainment, gym fees, hobbies, pets, eating out, cell-phone plans, and cable packages. These are things you don’t really need to get by. So the remaining 30% of your take-home pay goes into this bucket.

To sum it up, with this budgeting rule, you put 50% of your money to necessities, 20% to long-term savings and debt payments, and 30% to lifestyle choices and non-necessities.

A personal shift in thinking

I do want to give you my thoughts, specifically, on the 50-20-30 plan for budgeting. But first, I want to talk about a shift in my own thinking on money that’s occurred in the past five or six years.

Before I started blogging about personal finance in 2007, I thought about money like most people do. I went to college, got a job, and started spending. We saved some in an online savings account, but our monthly savings was typically in the 5-15% range. We’d contribute to our 401(k) and a little bit beyond that, but nothing more.

My attitude was that my job was going to finance our living expenses until we retired at age 65. It was all about the job. I’d go to work for 40 to 50 hours a week, earn income, save a little, and spend the rest.

Resource: Here’s How Much to Save (and How to Do It!)

With that mindset, I did what a lot of people do. I bought a new car, the expansive cable TV package, and the big TV. We bought a big house, and then a bigger one. We took expensive family vacations and other things that most middle-class Americans do. In that sense, we were very normal.

But that all started to change when I started this blog and began to write extensively about personal finance.

The change wasn’t immediate, of course. But as I blogged about personal finance, I started to save a little more money, pay off more debt, and watch my retirement nest egg grow. Then, I suddenly had this “aha” moment.

I looked at the money we were saving. It was becoming more significant. It takes some time because you need to benefit from the power of compounding. But after a while, I started thinking about how much my money was working for me. It was almost like sending out employees who were working for me.

And then I started to see how that money could fund a fair amount of our expenses, particularly if we became more frugal with our lifestyle. And then I began to realize that the most important thing to me was not a bigger house, expensive vacations, 200 cable channels, or a new car.

The most important thing was my freedom.

Don’t get me wrong. I didn’t want to quit and not work at all. But I wanted the freedom to work when I wanted to work, where I wanted to work, doing what I wanted to do. I didn’t want to be chained to a desk five days a week.

I realized that I could get there by giving up things that had once seemed important to me. For example, I could trade in the bigger house, new cars, cable packages, and expensive vacations for freedom. I could trade those things for a lifestyle where I spent less money and saved more, which would let me have this lifestyle where I have the ability to work where and how I want.

Learn More: 100 Ways to Improve Your Finances (Most in Under 10 Minutes)

When you’re just starting out, this seems like an impossibility. When I graduated from college, we had no money and a lot of debt. I had about $55,000 in student loans, which means we had a negative net worth. So, if I saved $500 or $1,000 or whatever, it might help me when I turned 65. But how was that going to help me now?

The truth is, that at that moment, it wasn’t going to help me much. And I think that’s a big reason why many people don’t save more money or cut back on expenses. They don’t see the advantage in the near term. The benefit is always 20, 30, 40, or more years away.

And eventually, that just shifted for me because I’d been saving for a while. As I learned more about personal finance, I started to look at money in a different light. Now, I don’t see money as a way to buy “stuff.” I look at it, instead, as a way to achieve freedom for myself and my family.

An example of financial freedom

Have you ever noticed people you think have a lot of money seem cheap? I’ve had plenty of discussions with people about that idea. You know that the person is probably wealthy, but they watch every dime.

In some ways my stepmother, who passed away a couple of years ago, was like that. She watched every dime. And you know why? She lived off her wealth.

By retirement, she had done pretty well for herself. She had a part-time job, but mostly lived off her nest egg of about $1 million.

How much income can that generate in a year? Well, if you use the 4% rule of thumb, $1 million generates $40,000 in income. That’s not a lot of money, so my stepmother had to watch what she spent. But by making her nest egg last, she was able to enjoy freedom.

For instance, she was able to take a part-time job she loved. She was a pilot for years, and her part-time job was with a company that built things for pilots. It didn’t generate a lot of income, but she could do it because she loved it and had money saved to live on. And then she could do things in her community on the side, as well.

As I get older, that’s what I’m trying to achieve, too. And looking at money this way puts saving into a whole new category.

Resource: Our Favorite Personal Finance Books

Changes in thinking lead to changes in doing

These days, I’m stunned when I see someone I know is struggling financially pull in with a brand new, 100% financed car. I guess they can afford the payment, but what are they thinking? To me now, people just seem so casual about the money they spend.

Don’t get me wrong —  I’m not perfect here, either. But I’m trying.

For example, I’m reducing the cost of our cell phone plan by moving to prepaid plans with Republic Wireless. I’m also reducing our cable package. And eventually I want to downsize our home. I look at how much this big house costs us to heat and cool and maintain, and we just don’t need the extra space. So, we’re working on those things.

The point to my ramblings is so you understand how I look at something like the 50-20-30 budget.

My thoughts on 50-20-30

So, what are my thoughts on this approach to budgeting?

First off, I actually think that 20% is a decent savings rate, especially compared to the average savings rate in the United States. Sure, you hear about people like Mr. Money Mustache, who saved upwards of 70% of his income and retired at age 30. But he’s on the extreme end of things.

Most people would do really well to save 20% of their income.

But what this budget reveals is just how much a lot of people spend in that 50%-for-necessities category. If you can’t save 20% of your income, could it be because you’re spending too much on your home and car, especially? When you buy a home with a large mortgage and an expensive, financed car, those things alone can eat up half of your take-home pay.

So that’s where I think this budget can be helpful. It can give you a framework for examining your spending, so that you can see where you need to make changes. As you look at your spending through this particular lens, here are a few other things to consider:

Rules of thumb are a starting point

Keep in mind that this budget framework, like any other, is a starting point. It’s just a rule of thumb, but it’s not one size fits all.

The goal here isn’t to contort your spending until it exactly matches these categories. The goal is to look at your spending through this lens to see where you might make some tweaks.

Related: How to Live on a Budget with 4 Valuable Lessons

Part of this rule’s ability to work for you will depend on your income. Do you make $35,000 per year or $350,000 per year? Or do you fall somewhere in between?

If you’re on the upper end of the income range but can’t figure out how to fit your spending into this framework, you may have an issue over-spending on necessities. For those at the lower end, a higher necessities budget may be necessary for a while, especially if you live in a place where housing is more expensive.

For most people in the United States, on the whole, the biggest problem isn’t income, though. It’s spending.

If you make anything above average on your income, you should be able to at least fit into these categories. At best, you’ll spend less than half your take-home pay on necessities, and be able to up your savings rate.

Again, though, this isn’t all cut and dry. Sometimes you’ll want to adjust the budget categories to fit your circumstances. Here are some examples:

  • Getting out of debt: If your goal is to pay off your debts as soon as possible, consider reducing your spending in both the necessities and lifestyle choices categories (especially the latter). Throw that extra money at your debt. Once you’re debt-free, consider moving towards this 50-20-30 structure.
  • Retiring early: This is a great budget structure if you want to retire at 65 or even a little bit early. Saving 20% of your income, especially starting at a young age, is a great way to move towards your retirement goals. But if you want to retire in your fifties or even earlier, you’ll have to save more. This might mean downsizing or driving an older car to cut down on your necessities. Or it could mean restricting your lifestyle choices category even further to up your savings rate.
  • Starting out: When you’re just starting out on a small income, you may need to tweak your rates here, as well. You should first seek to limit your essential expenses as much as you can. Live in a cheaper apartment. Drive an older car. But then cut back on the lifestyle choice category, too. That way, you can maintain a relatively high savings rate (though maybe not 20%) until you get a pay increase.
  • Increasing your income: As you increase your income over time, consider moving out of this framework. Instead of increasing each category’s spending amount with a pay raise, increase just your savings category. Or maybe add a bit to your lifestyle expenses category for a nice vacation, but then add the rest of the increase to savings. In this way, you can avoid lifestyle inflation and achieve financial freedom earlier.

Necessities vs. lifestyle choices

Saving 20% is a good start, but maybe you aren’t quite there yet. Or maybe you have a good income that could allow you to save more. Saving more than 20% is possible, though, even on an average income. It all depends on your priorities.

After my own personal finance “aha” moment, I decided I wasn’t happy with a 20% savings rate any more. I wanted to save more. So I started out with the 50-20-30 framework, but planned to quickly move beyond that.

For me, this came down to understanding the difference between necessities and lifestyle choices. Many of our spending choices, even those that fall into the necessities category, result from lifestyle choices.

Sure, you need a place to live. But the house you decide to live in is a lifestyle choice. Many people could significantly reduce monthly expenses by moving into a smaller place or a different neighborhood.

Likewise, you have to eat. But reducing your grocery spending is usually an easy way to save money every month. You may also be able to reduce spending on other necessities, like clothing and your vehicle.

The key when looking at these spending categories is honesty. You may find that some things fit into your necessity budget. But maybe you need to take part of that spending and put it into the lifestyle choice bucket.

Learn More: How to Create Wealth and Make Your Life Easier

For instance, you need a car and don’t have enough saved to buy one in cash. You can choose an older car with a $130 monthly payment, a necessity. Or you can choose a car with a $200 monthly payment, and pull that extra $70 from the lifestyle choices category.

(The best choice? Opt for the lower payment, and save the difference!)

One other note here: What looks like a lifestyle choice for some individuals may be a necessity for others, and vise versa.

For instance, I work from home full-time. That means I need good, reliable internet access. My internet payments fall into my necessities category. But if you work outside the home and don’t need internet at home, consider cutting it out altogether or paying for the cheapest plan.

Cars are similar. If you live in a city that offers a robust transportation system, you may not need a car. Sure, taking the bus may be slightly slower, but it’ll still get you where you’re going on time. But if you live in a cheaper house in the suburbs or work in a city without a good transportation system, you may need a reliable vehicle to get to work.

As you can see, some of these expenses are dependent on your circumstances. So, again, the goal is to be honest with yourself about needs versus wants.

What Counts as After-Tax Income?

After I originally talked about this topic back in 2014, I got a few questions about what counts as after-tax income. For instance, if your HSA and 401(k) savings come out of your paycheck before taxes, does that go towards the 20% savings category? Or do you save 20% on top of that?

The answer, again, is that it depends.

One commenter asked about pension payments. In this case, I’d highly recommend saving 20% on top of the pension payments. So those contributions wouldn’t count towards your net income amount.

This is, by the way, because you typically have very little control over pensions.

Your 401(k) contributions, on the other hand, may be different. In this case, you have more control over the investments. You could decide to count the 10% (or whatever amount) of your paycheck that goes into your 401(k) as part of your “after-tax” income. Put it into the 20% savings category.

As far as other deductions, such as dependent-care accounts and HSAs, those are really more for necessities or short-term savings.

If you’re spending your dependent-care account money on dependent care that year, it should be counted as part of your necessary expenses. (Necessary, that is, if both spouses work, so that you must have childcare.)

You might decide to split your HSA savings. Whatever you roll over to the next year could be long-term savings, but whatever you spend can be necessary spending.

They key here is still to try to save as much as you can. So, if it’s at all possible to save 20% of your income after these pre-tax deductions are taken out, go for it.

Consider using Personal Capital

I’m a big fan of Personal Capital’s free financial dashboard. Connect your checking accounts and credit cards, and it automatically tracks all your spending. You can also connect your retirement and other investment accounts. It will analyze your investments for you and analyze whether you are on track to retire.

To truly manage your money, you need to go beyond these rules of thumb, including the 50-20-30 budget. It’s fine as a starting point, but you need to look at the specifics of how you spend your money and how you can make better choices. It’s been a process for my wife and I, for sure.

Learn More: 22 of the Best Tools to Manage Your Money (Most Are Totally FREE)

The bottom line here is that once you start down the path of living like everyone else does and pursuing the American Dream (as it’s commonly defined), it’s hard to reverse course. It takes time. It doesn’t happen immediately.

If you’re just starting out, keep this in mind so you don’t go down this destructive road at all. But if you’ve already started spending more than you should, figure out where you can cut back on your expenses — sometimes with almost no sacrifice — and think about how different choices now can buy you financial freedom later.

Topics: BudgetPodcast

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