• You can go old school and break out the pencil and paper.
• You can buy tax software to handle the heavy math for you.
• Or you can pay a professional to do it all.

It’s time to ask yourself a couple of important questions:

• Do you know a bit about tax laws?
• Is your tax situation fairly simple?
• Are you detail oriented and good at simple math?

If so, you can probably save some money and file by hand. Otherwise, tax prep software may help you avoid the math and researching tax laws.

• Do you have a new or complicated tax situation (like inheritance, capital gains, a new business, etc.)?
• Does the possibility of getting something wrong on your taxes keep you up at night?

If you answer “yes” to these questions, it might be a good idea to get in line at a local tax return preparation office—preferably sooner rather than waiting until April when every accountant in town is swamped.

Let’s take a closer look and compare your tax prep options:

FILING YOUR TAXES BY HAND

Advantages:

• It’s FREE.
• You learn about the tax code.

Disadvantages:

• May take more time.
• Higher chance of errors/miscalculations/typos.
• Longer wait for a refund.

I’ve been preparing my taxes by hand for more than 10 years. I think I’m in the minority with all the new tax prep software out there, but I much prefer this method over anything else. I tried to use tax software a couple of times and was always frustrated that I wasn’t in total control of my tax return. I like having it all out in front of me so I can see the whole picture.

Ten years ago, my taxes were simple. I was working one part-time job, so I just had one W-2 to worry about and could file the 1040 EZ form. If your taxes are simple—for example, you have one or two W-2 forms, claim the standard deduction instead of itemizing, and claim zero or few adjustments or credits—you, too, could probably file your taxes by hand.

Like I mentioned last week, each form walks you through the process step-by-step. If your tax return will be simple, start with the 1040 form that fits your situation and follow the directions from there. Simple forms can be completed in under an hour once you get the hang of it.

Of course, some tax returns are too complicated to do by yourself…and some of you may simply think that filing a return by hand is bananas. I get that. Fortunately, you have some other options.

TAX SOFTWARE

Advantages:

• It’s relatively inexpensive ($50 or less).
• It does a lot of the work for you.
• You can deduct the cost if you itemize.

Disadvantages:

• It takes time to learn how to use.
• You don’t get the “big picture” and you may still miss out on deductions or credits if you don’t understand the software’s questions.

Tax software’s popularity continues to grow. The biggest advantage is that it’s inexpensive when compared to hiring a tax professional and it still involves you in the tax process without all the stress and confusion of doing it on your own.

In years past Money Under 30 has recommended TurboTax, but in a couple of weeks, we’ll break down the pros and cons of the most popular tax programs. Although they’re similar, some may be better suited for certain individual needs and price ranges.

HIRING A TAX PROFESSIONAL

Advantages:

• You don’t do any work.
• It takes the stress out of tax return preparation.
• You can deduct the fees if you itemize.

Disadvantages:

• It’s the most expensive option.
• You (probably) won’t understand your tax return or how taxes work.

The biggest disadvantage with hiring a tax professional is that you’ll have to pay them to do your taxes for you and you’re not very involved in the process (of course, some of you may prefer this).

With some large tax prep companies, you could get away with paying $100 or less (some companies are even advertising free tax return preparation for very simple taxes); however, if your finances are more complicated or if you have a lot of investments, property, and/or business information to include in your tax formula, you’ll be looking at paying several hundred dollars or more.

Still, choosing a respected Certified Public Accountant (CPA) is worth the peace of mind even if you have to shell out a bit more cash. You’ll know that an expert is working to find all the tax breaks for you they can and that your return is probably error-free.

Tax preparation may be stressful, but if you’re prepared and understand your particular situation, you can make the best decision on how to prepare your tax return. Just remember that if you want to enlist the help of a professional, don’t wait until April!

What about you? How will you prepare your taxes this year? What do you like about your chosen method? Let us know in a comment!

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So whether taxes simply fail to excite you or flat out freak you out, we’re going to try to make this tax season a bit more bearable. With the help of our staff CPA/tax superwoman, Amber, we will be publishing Money Under 30′s “No-Stress Guide to Filing Your Taxes”, a six-article series, over the next month or so. We’ll cover:

1. Your tax document checklist: A guide to get you started
2. Choosing the best method to file your return
3. Tax software: When to use and how to choose
4. Advanced forms (itemizing, capital gains, business income, etc.)
5. Don’t miss…a credit and deduction checklist
6. Special situations (audit avoidance, extentions, payment plans, and estimated payments)

I hope the series is helpful. To kick it all off, here’s Amber with a checklist of how to get organized before you begin your return—perfect to grab in late January as documents like W2s start filling your mailbox. (You can download the PDF version of the checklist shown above to print out and place with your documents.

***

Taxes seem scary.

But for those of us who are just starting out, filing your taxes is usually a pretty simple task.

Shelling out a couple hundred dollars (or more) each year to get your taxes done by someone else may seem like an easy choice, but it’s not always necessary. If you’re young, single, and not yet a homeowner, doing your taxes on your own is easy. And for almost everybody else, tax software like TurboTax can walk you through your taxes step by step. And, if your taxes are simple, filing a federal return with TurboTax is even free.

We’ll help you decide how to file your taxes next time. Today we’re going to look at what forms you’ll need to collect. Before we get started, let me share a couple basics tips to get you started (and, hopefully, ease your mind):

1. Each form and every single line on every form comes with step-by-step instructions.
2. These instructions are in one of two places: on the form itself or in a separate document called “XX Form Instructions”.
3. Learn to love the IRS website. It contains answer to every question you could ever have, so you’re never alone.  They also have hotline numbers, online chat, and e-mail available. They even have a tool called the Interactive Tax Assistant that learns about your tax situation and helps you find answers to your questions.

TAX FORM CHECKLIST

Every tax situation requires different forms. But if you’re just starting out (e.g. you’re working your first job, don’t own a home, and have minimal investments), the number of forms you need is minimal.

Here’s a quick guide to which IRS forms and/or personal documentation you’ll need for the most common income situations:

If you have one or more employers…

If you work for someone else—meaning, employment and income taxes are deducted from your paychecks—you will need at least these two forms:

• W-2. Your employer(s) will mail these forms to your house no later than January 31st.
• 1040*. Depending on the complexity of your taxes, there are three 1040 forms to choose from: 1040-EZ, 1040A, or the original 1040. The different types of 1040 forms are explained below.

If you earn any money on your own (from freelancing/self-employment)…

If you worked for yourself at all (full-time or on the side), you will need a few more forms to fill out:

• 1099. You should receive one 1099 from every company or person you earned income from during the year, if it’s greater than $600.  (Even if it’s not greater than $600, you still have to report the income.) Generally, this will be a 1099-MISC. These will be included as income earned on your Schedule C form.
• Schedule C*. This is the form where you’ll determine whether you and/or your business earned a profit or suffered a loss during the year. No matter if you earned a profit or suffered a loss, this will be added or subtracted from your overall income on your 1040 form. If you earned a profit, you’ll need to pay employment taxes (like FICA, MediCare, Social Security, etc.) because an employer was not deducting those taxes from your paychecks…you were your own employer.
• Schedule SE*. If you earned a profit, this form will determine the amount of self-employment taxes you’ll need to pay. In general, you can deduct half of this amount from your total income (line 27 on your 1040 form).
• 1040 Form*.

If you were unemployed …

• 1099G.  Unemployment compensation is included in your taxable income, so you must include it in your tax return. You’ll generally receive a 1099G form from the state that paid you unemployment compensation.
• 1040 Form*.

If you paid student loan or mortgage interest …

• 1098. Your student loan or mortgage lender(s) will mail you 1098 forms showing how much interest you paid on your loans in the tax year. This interest could potentially be tax deductible.

If you earned interest from bank accounts or investments …

• 1099-INT. Your bank or investment company will send you these forms for any interest paid to you in cash. Interest income must be reported on your return.

*You only need these forms if you plan on doing your own taxes without software. Other documents you need either way.

EXPLANATION OF THE DIFFERENT 1040 FORMS

Now that you know how to report the income you earned throughout the year, you’ll need to decide which 1040 form to use. Remember, there are three to choose from, the most simple being the 1040EZ (catchy name, huh?) and the most complex being the original 1040 form. The 1040A is right in between both in terms of complexity.

Here’s how to decide which form to use:

1040EZ Form

I was able to file this form during all the years I was in school (through college) because the only income I needed to report to the IRS was simple income I received from various part-time employers. If you’re just starting out, try to use this form if you can. It makes filing your taxes very simple. Here are the requirements:

• Taxable income less than $100,000
• No dependants
• Less than 65 years of age
• Single or Married Filing Jointly status
• Interest income less than $1,500

1040A Form

This becomes a popular form for many recent college graduates because this form allows you to deduct student loan interest. If your taxes are still fairly simple but you need to deduct student loan interest (or education expenses, IRA contributions, or higher education expenses), you might be able to use this form.

Additionally, if you own a home, you probably will not be able to use this form since you cannot itemize (e.g. deduct mortgage interest expenses) when using this form.

• Taxable income less than $100,000
• You take the standard deduction (do not itemize)
• Only certain tax credits are allowed

1040 Form

If all else fails, you’ll need to file a 1040 Form. The older you get, the more likely you are to file a 1040 Form instead of the A or EZ versions.

Even if you qualify for the A or EZ versions of the form, you can still use the regular 1040 if that’s what you feel comfortable with.

Remember, no matter which 1040 form you decide to use, every taxpayer must submit a 1040 form to file their tax return. It is the head honcho of tax return documents, so make sure you get familiar with how it works.

Questions? What questions do you have about which forms you’ll need to file your tax return? Let us know in a comment!

(Disclaimer: The tax situations here are all explained at a high level. If your situation is more complex, you may need to file additional forms or seek professional guidance to begin. Tax software like TurboTax and their available help lines may be a place to start for less than hiring an accountant. )

Want to print it? Download the PDF checklist here.

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And as we’ve established, often the most straightforward way to do that is to start freelancing in addition to your nine-to-five. Ideally, you can even make that work something you already enjoy—like teaching a fitness class or creating designs—so it feels less like work. In other words, become a part-time freelancer in your chosen field.

There’s only one problem. Freelancing requires one precious resource that everyone seems to be lacking these days…

…time!

Even full-time freelancers have a hard time with time management. But if you’re already working a full-time job, have other activities you enjoy, need time to take care of yourself, and especially if you have a family, finding time to work on a freelance business can seem impossible.

It doesn’t have to be.

I asked a number of successful freelancers how they make time for their work. Read about the strategies and systems they use below, and you can be more productive and earning more money in the coming year. 

FINDING TIME

Unlike money, we can’t make more time, we can only free up the time we have. To find more time, you have two options:

• Identify blocks of uncommitted time in your existing schedule.
• Change your schedule to create blocks of uncommitted time.

I’m a newbie freelancer myself, and I’ve found that using pockets of empty time during the day has been critical to my ability to get everything done.

Identifying uncommitted time.

I know what you’re all saying:  “But I don’t have any free time!”

Exactly. None of us do. We’re all busy. Most of us have a 9-5 that we have to report to five days a week. However, this is why you need to use your time wisely by utilizing uncommitted chunks of time scattered throughout your day, instead of, say, surfing YouTube or watching another Family Guy marathon (I’m guilty of both).

For example, I’m a full-time accountant who works five eight-hour days per week, and here are some of the pockets of free time I can identify in my schedule:

• My lunch-hour (Here’s a great article for maximizing your lunch hour.)
• Waiting for meetings/teleconferences/training to start
• While I’m making dinner (I do this often!  I prop my laptop on a counter or breakfast bar.)
• Waiting at the doctor/bank/car shop/in line/etc.
• After dinner, on nights I don’t have plans.

Of course, I don’t have children, but I do have other activities that require my attention in addition my full-time job.

As you can see, my “free” time are usually short periods of time—just five to 30 minutes here or there. The key is using these times instead of wasting them. Rather than mindlessly browsing Facebook; use these times to e-mail a pitch, build on an idea you jotted down earlier that day, or finish a project. You have to stay focused.

Want to help other readers out? Think about uncommitted chunks of time in your day that you could use more productively and share them in a comment.

Creating free time.

What if you can’t think of even one time slot where you could spare a minute for freelance work? It’s time to sacrifice something else.

“I find that I can either stay up late or set my alarm at an ungodly hour to get things done.  If I alternate nights of sleep, no-sleep, sleep, no-sleep, I can get by.”  – Phil Villarreal, author and freelance writer for The Consumerist

Phil’s quote nails it—as a full-timer and a dad, he is seriously crunched for time. He had to create time slots to make freelance work fit into his life. He wakes early or stays up late. Everybody can do this. At some point, you simply need to decide which is more important: sleep or work.

This takes sacrifice. That’s the question that you have to ask yourself before you embark on your freelancing journey: Are you willing to sacrifice time or other things you enjoy to do work that you love?

If you’re not willing to give-up some shut-eye, here are some other possibilities:

• Outsource chores or other work (hire someone, recruit family members, or swap tasks with others)
• Get organized so your days become more efficient (see below)
• Say “No”; drop activities, groups, and recurring social events that don’t add value to your life
• Clear time sucks from your day like browsing Facebook or watching excess TV. (Several years ago, the Web’s wine king, Gary Vaynerchuk, said it best: If you want to find time to work on the side, “…stop watching fucking LOST!”)

Although finding decent time blocks you can dedicate to freelancing is most important, there are other things you can do to optimize your time management.

GET ORGANIZED

“Try creating a freelance schedule to make sure you’re using your time most efficiently. Use an egg timer to help you stay focused.” – Krystal Yee, freelance writer and designer

Disorganization. It’s plaguing our nation. Shows about hoarding are an extreme, but how many of us suffer from some kind of clutter and disorganization?

If you can’t keep your life organized, fitting in freelancing will be difficult. This isn’t an organization or cleaning blog, but I suggest you start by creating a clutter-free workspace. If you’re life is organized, you will be a better freelancer and be able to make more time for your work. But, it will be impossible to create top-notch work if your “freelance life” isn’t organized either.

Here are some things that you’ll need to keep organized when you start freelancing:

1. Administrative items. Keep your hours billed and invoice records in one place. (If you bill more than a couple clients and/or need to track your hours, Freshbooks is a billing app that may help.) Similarly, store tax-related items in one place (you’ll be happy you did this come tax time).
2. Contacts. Thanks to today’s tech, this is an easy task. Make Gmail or your smart phone apps work for you.
3. Your Work. I like to seperate my freelance work by clients. I have a seperate folder and notebook for each client. That way I don’t make an embarrassing gaffe like sending a draft to the wrong client.

CHANGE THE WAY YOU THINK

“Learn to accept some chaos. Focus on one or two major goals per day. Prioritize. Be gentle with yourself. Oh, and coffee. Lots of coffee.”   – Kelly Gurnett, freelance writer for Brazen Careerist

Once you get into the habit of freelancing, you can become even better at this “job” if you change the way you think.

Remember how I mentioned that you can create time in your day for your freelance work? Once you get that habit down, take the idea a bit further. Start living your freelance work.

Let me explain.

A majority of freelancers are doing this kind of work because they enjoy it; often, it’s a hobby that turned into a side business. For this reason, we tend to think about our freelancing more often than our traditional 9-5 job. This is good; this can help you become a better freelancer.

When I’m starting to write an article, I often start writing it in my head. I usually do this while I’m on the way to work, getting ready in the morning, working out, or doing other thoughtless, mundane tasks. Once I get the idea to paper, I’ve already written the opening paragraph. Things flow much more smoothly after that.

But, this idea isn’t just for writers.

By letting your mind wander and thinking about your freelance work throughout the day, you can become inspired by your daily activities. Keep a notebook handy or use an app like Evernote to record ideas that come to you throughout the day as it relates to your freelance work. Here are some examples:

• Do you do design work on the side? Take pictures or record thoughts for new designs.
• Do you develop apps?  Use conversations with your friends for tips on refining or creating your next project.
• Do you coach basketball at night?  Use team experiences at work to create team exercises on the court.

Once you get into the habit of regularly thinking about—or “living”—your freelance work, you’ll find you can really be inspired throughout your day. It can jump start your tasks when you get to them that evening (or the next morning, if you’re an early riser).

Do you work on the side? How do you make time? Share your best tactics in a comment.

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Follow us on Twitter or like us on Facebook here now.

Here are some examples of what you’re missing. 

ON TWITTER @MONEYUNDER30

Our Twitter page is where we share helpful links, chat about money, answer questions, or get involved in “tweet chats”.

Sometimes we tweet or re-tweet funny and/or helpful quotes:

Other times we send out conversation starter tweets to get your opinions on financial issues. The responses we receive are often pretty insightful and even make it into our posts on occasion:

We regularly share links to helpful financial articles across the Web:

Occasionally, we share extra personal finance or career tips that you won’t see on the blog:

FACEBOOK: MONEYUNDER30

Over on Facebook, we try to spark up great conversations about personal finance. It’s the perfect place to pose a question or thought and see what other like-minded financial go-getters have to say.

Here are some things we’ve been talking about recently:

Our social media groups are growing and evolving because of the involvement of our fans and followers. The conversations would not be as helpful or beneficial without their (your) thoughts, advice, reactions, and encouragement.

We’d love for you to join in on the action and get involved in our conversations.

• Like Money Under 30 on Facebook here.
• Follow Money Under 30 on Twitter here.

Don’t forget to tweet us or leave us a comment and let us know that you joined our group. We’d love to meet our new friends!

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What was the best inexpensive holiday gift you’ve ever received? Let’s forget the iPhones and diamonds for a second. Was there a gift that didn’t cost a lot but made you unbearably happy, not only when you opened it, but for months after that?

Now think about how much that gift probably cost.

Chances are, many inexpensive gifts were among the best you’ve ever received. Maybe they weren’t expensive, but they were probably extremely thoughtful or handmade. I’ve received my fair share of jewelry, purses, clothing and electronics over the years, but the gifts that always stick out are the ones that the giver put a great deal of thought into; the amount of money you spend doesn’t make a gift more enjoyable or worthwhile.

And because the thought of spending hundreds of dollars on Christmas gifts can be daunting to many of us, I created a list of inexpensive gift ideas. Gifts that aren’t just easy on your bank account, but that the recipient will actually enjoy and treasure.

First I wanted to poll our Twitter followers and Facebook fans since they’re one smart bunch and usually have some great insights to share.

The consensus of what our followers and fans had to say seemed to fall into four categories:

1. Thoughtful gifts
2. Handmade gifts
3. Experiences
4. Love or friendship

Here are our Facebook fans’ thoughts:

And some ideas from our Twitter followers:

Now, since we have four categories of inexpensive, yet enjoyable, gifts, let’s talk about some ideas for each of those categories:

THOUGHTFUL GIFTS

Thoughtful gifts are tailored to the receiver and can be things that you think the receiver needs or will make their life easier or better.

Our Twitter followers mentioned items involving photos, which are an easy and simple gift.  Printing photos is cheap and easy these days (online or at in-store kiosks). And you can find an assortment of cheap frames online or at the dollar store.

Other thoughtful gifts are ones that are specific to the receiver’s interests or hobbies. Try these simple and often inexpensive examples, all available on Amazon*:

• an assortment of spices for a cooking enthusiast (as mentioned by a Facebook fan)
• fishing or hunting accessories for the outdoorsy people in your life
• notebooks and pens for the aspiring writer
• resume or job hunting self-help books for the recent college-grad
• a scrapbook for a close friend
• a fashion magazine subscription for the budding fashionista

(*Affiliate links. If you purchase something on Amazon, a very small percentage goes into our virtual tip jar. Thank you!)

One thing I’ve started doing is taking mental notes (or jotting things down in the notepad on my phone) whenever one of my friends or family members mentions that they’d really like something or if something would make their life a lot easier. Usually these things are simple and small, but will really make their day when received as a present.

HANDMADE GIFTS

If you’re the crafty type, chances are, you’re already making your friends and loved ones beautiful homemade gifts. But you don’t have to be crafty yourself to give inexpensive homemade gifts! If you haven’t already heard of Etsy, it’s time to check it out. Etsy is an online marketplace where artists and craftspeople can sell their creations online so you can find truly one-of-a-kind gifts in all kinds of price ranges.

You might also want to sign up for Pinterest, an “online pinboard” that, among other things, is home to bountiful ideas for crafty, do-it-yourself gifts that practically anyone can create. You can find countless tutorials on how to make wall hangings, wreaths, desserts, decorations and more on Pinterest.

EXPERIENCES

Of course, presents don’t always have to be tangible objects. Often the best gifts are ones you experience with someone. And there are plenty of options to choose from that don’t have to cost much – if anything at all.

• a night of babysitting for the parents in your life
• a tour of your work if you work somewhere exciting (like the zoo, a brewery, historical building, baseball stadium, etc.)
• cooking a special dinner for someone
• spending the day together – doing anything!
• signing up for a race together
• going to gym classes together (you could even purchase a set for your friend)

LOVE AND FRIENDSHIP

As cheesy as this is, I got plenty of responses for this “cheap” gift!

Some of my friends and I have decided to forgo getting gifts for each other in favor of just having lunch or dinner together; this way you can spend time with your loved ones during the busy holiday season and share your “gift” of friendship without having to go out and buy a gift for them.

What about you? What are your ideas for the best inexpensive gifts to give and receive?

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Today, I asked Amber to write about how you can use social networking accounts to help your career. (At the very least, if your Facebook profile photo includes a Solo cup, it’s time to change it.) But we’ll go way past that to help you take some simple steps that will up your online presence in ways that could pay off big at work down the road. And later this week check back for my post “How NOT to apply for a job”.  Speaking from experience hiring people, I’ll share some things you can do that will make you better than 95% of your competition when you apply for a job.  Until then, here’s Amber:

***

True story: I was at work the other day chatting on the phone with a colleague. As our conversation was wrapping up, he said “Oh, by the way; I Googled your name the other day when I was looking for your e-mail address. I found your Twitter account and blog.”

It was the first time my two worlds had collided: my online career and my “real-world” career.

Aside from being flattered that somebody Googled me, my colleague’s discovery was a wake-up call . We simply cannot ignore the impact social media has on our real-life and, in particular, our career.

YOU WILL BE GOOGLED 

Has somebody in your work world Googled you? Share your story in a comment. If it hasn’t happened yet, you simply have to expect that—if they want to—anyone can and will find you online.

Today, Facebook has over 800 million users and Twitter isn’t far behind with 200 million.

But social media isn’t just about tweeting a picture of your dog’s new sweater or tagging your  friend in an embarrassing picture on Facebook.  Recruiters and employers are using Facebook and other social media to monitor employees, discover new talent, and even make hiring decisions.

Although it should be obvious that being sloppy with what you post on Facebook could  cost you a job. Many party photos have cost candidates job offers or worse, gotten employees fired. Others have been dooced: fired because of their blog or Website.

But even though there are things in your social media profile that can hurt your career, social media can help your career.  

1. PREPARE YOUR SOCIAL ACCOUNTS

In 2011, 89% of companies will use social media networks for recruiting according to the infographic below by CareerEnlightenment.com.

That means that nearly 9 out of 10 companies are now recruiting via Facebook, Twitter, LinkedIn, and more. Getting involved with these companies via these networks can help you spot new positions and connect with employees who can refer you to new positions or even to hiring managers themselves.

In addition to recruiting online, once you actually apply for a job, there’s a 20% chance that your prospective employer will research you on various social media networks.

This means that you’ve got to do two essential things if you’re on the job hunt:

1. Clean up your social media networks. Be perfectly comfortable having a potential employer see everything on your profile. Do NOT assume that just because a scandalous photo is shared “by friends only” that an employer won’t see it.
2. Get connected with potential employers. If you have a certain company in mind—or already applied for a job there— follow that company on Twitter, “Like” them on Facebook, or get connected with them on LinkedIn to increase your chances of being noticed.

2. CREATE A DIGITAL RESUME

The traditional black-and-white, one-page resume is out; digital resumes are in.

If you’re searching for jobs and you don’t have a LinkedIn profile, it’s time to get one. Signing up is easy and free and will give you access to thousands of employers.

If you want to impress future employers, consider a personal website. You can easily buy your own domain name and upload a picture, short bio, with links to your contact information or LinkedIn profile. And in some creative professions, it’s almost a sin not to have an online portfolio.

Companies already know you’re online. Why not use this knowledge to your advantage and give them even more reasons to hire you to their company?

3. BUILD A NETWORK, A BRAND, OR EVEN SIDE INCOME

We all know building side income or working multiple jobs is a great tool to further your finances.  But what you may not realize is that you can leverage this experience in your full-time career.

Being “in” with others in your career field on social media sites is the latest and greatest form of networking. It’s almost like you have two presences these days: your real-life presence and your online presence. If you’re not available in both ways, you may miss out on an opportunity or meeting your next mentor.

Like many people that work part-time online, I’ve been able to build my brand and freelance work through my online presence. Sure, I send out random tweets at times, but I’ve also secured freelance jobs, connected with top people in my line of work, networked with like-minded people, won prizes, and even had a little fun along the way.

Something You Can’t Ignore

Social media isn’t something we can ignore anymore. It’s a movement that has changed that way people interact with one another. Like anything else, it has its flaws, but it can also create a whole new world of opportunity if you use it to your advantage.

Have you used social media to help your career? Been Googled by an employer before? Were you prepared? Let us know your story in a comment.

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Here’s Amber:

***

If you lost your job tomorrow, do you know how you’ll pay the rent next month?

If your car’s transmission broke and required a $2,000 repair to be back on the road, could you pay the bill without going into debt?

For more than half of Americans, the answer is no. And chances are, among us younger (and poorer) Americans, the percentage is higher.

The answer to both of these potential problems is to have a good chunk of money set aside in savings…a rainy day fund if you will, or as we financial nerds call it: an emergency fund.

Emergency funds are like insurance: confusing and boring, but downright necessary. You shouldn’t drive without car insurance and, quite frankly, you shouldn’t try to live life without emergency savings.

If you, like many Americans, haven’t been able to save an emergency fund or have put it off because you don’t think you’ll need one, consider what you would do if suddenly you found yourself with a $1,500 repair bill or, worse, without an income.

Emergency funds could be the most vital part of your financial plan, so you really owe it to yourself to make a plan to build yours today. We’ve put together a step-by-step guide to creating your very own emergency savings—from the initial buffer to the fully-funded emergency fund.

WHAT IS AN EMERGENCY FUND?

Before we break down exactly what an emergency fund is, let’s define what it is not:

• It is not used for planned purchases like a house, a new car, a college education, and so on.
• It does not have to a large, unattainable amount; it can start small.
• It is not a set amount for everyone—it varies based on your lifestyle.

Now that you know what it’s not, let’s talk about what it is.

WHY YOU NEED ONE

An emergency fund serves two major purposes:

1. It creates a financial safety net during emergencies like a job loss, illness, or major unexpected expense.
2. It allows you to avoid the use of credit cards or loans during said emergency.

Unfortunately, there are plenty of times you may need an emergency fund. Some may be scary and severe—like a job loss or chronic medical condition—but others are simple expenses that you just weren’t expecting—like a car or home repair.

Now that you know exactly what an emergency fund is and why you need one, it’s time to look at building it!. Here at Money Under 30, we think that savings “buffer” of $500 to $800 is the best way to start.

Step 1: Build a Buffer

Last year, we wrote about 6.5 half steps to financial stability. The first and arguably most important step is to build a savings buffer of $500 to $800.

If you’re in debt, it’s tempting to throw every extra penny towards your debt. However, it’s better the build at least a small buffer of $500 to $800 dollars in savings before attacking your debt.

Those amounts may seem small, but when you’re in debt, they’re really not. When I was in debt and living paycheck to paycheck, I couldn’t seem to save even $100. Whenever you feel like you’re making progress, something comes up and you fall behind again.

So if you can’t even get ahead in your debt payments, how will you ever save extra money on top of that?

There are three primary ways to scrape together extra funds to build your primary buffer before you start tackling your debt payoff and, later, building a stronger emergency fund.

1. Reduce discretionary spending
2. Cut recurring expenses
3. Earn more

You can choose to focus on one of these items or all three to scrape together any extra cash you can.

Cutting back is easy for some people, but it just doesn’t work for everyone; that’s why building an extra income stream is vital if you can’t seem to find any extra dollars to build your buffer. Whether it’s picking up a couple extra hours at work, creating a freelance business, applying for a part-time job or creating an online store, figure out what fits best with your available time and skills.

Here are some great articles that break down tips on how to earn more money:

• Deciding to Earn More [Money Under 30]
• Infographic: The 3 Easiest Ways to Earn More [I Will Teach You to Be Rich]
• Make More Money: How To Super Charge Your Income [Get Rich Slowly]

And by the way, in case it’s not obvious, you don’t need to get a second job or start freelancing to earn enough cash to start that emergency fund…it could be simple as finding a few things you don’t use anymore and selling them on Craigslist or eBay.

WHERE TO PUT THAT MONEY

If you ever do have the need to use your emergency fund, you’ll need access to the fund quickly if not immediately.

This is why you shouldn’t maintain your mutual fund in stocks, CDs or bonds—you’ll need to keep your emergency fund liquid. The best and easiest way to do this is by using a basic savings account, either online or at your local bank. We recommend keeping the account at a different bank than your primary checking account to reduce the temptation to tap it for non-emergencies.

Remember, an emergency fund is for security, not earning a return. While you should absolutely get the best interest rate you can find while keeping your money accessible, don’t be tempted to chase yields and lock up money you might need tomorrow in an investment that may be more difficult to liquidate.

HOW MUCH DO YOU NEED?

Everybody—financial experts and amateur advisors alike—has a different opinion on how much money you should keep in your emergency fund. 

In general, however, your ultimate goal should be to have enough money in an emergency fund to pay your essential expenses for several months. Some experts say six months, others nine, or twelve.

We recommend figuring out what makes you comfortable.

At the very least, you should have enough money set aside to cover a big unexpected expense without turning to credit cards. Then, ideally, you would have enough money to get you by in case you lost your job and had to find a new one.

(Hint: The more difficult you think it will be to find a new job in your field, the more you may want to save!)

Step 2: Build Your Emergency Fund

Once you’ve created your buffer—and completed steps two and three in the 6.5 Steps to Financial Stability list—it’s time to start building a sustainable emergency fund.

Building the emergency fund will be very similar to creating your initial buffer.  If you’ve already reduced spending and/or created extra income, a percentage of that cash should go to your emergency fund.

Here are some helpful tips (in addition to reducing spending and/or earning more) for building that emergency fund:

• Direct Deposit. If you’re tempted to spend extra cash, set up a direct deposit into your separate emergency fund account. (Pay yourself first.)
• Bill Yourself. If you don’t have access to direct deposit, treat your monthly emergency fund allotment as a bill—like rent or your electricity payment. Remember to deposit that amount into your savings on whatever day of the month works for your situation. (Same idea as above—pay yourself like any other bill).
• Add Bonus Money. Use things like tax refunds, mail-in rebate checks, or unexpected windfalls to add a boost to your e-fund.

Here are some more ideas:

• Three Little Ways To Boost Your Emergency Fund [Money Under 30]
• 50 Tips to Help You Establish Your Emergency Fund [Consumerism Commentary]
• 22 Way To Build An Emergency Fund [BankRate]

Establishing an emergency fund may not be the most fun or exciting part of creating financial stability, but the safety net it creates is worth more than the actual dollar amount it contains. It’s the first step towards financial freedom that can keep you on the right financial path even if life’s events try to knock you off.

Ask Your Question About Emergency Funds

What do you want to know about emergency funds? I’m sure there are plenty of questions we haven’t covered, so ask yours in a comment and we’ll select the best ones to answer. Other readers may have some good ideas to share in response, too. Leave your question in a comment now.

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After spending 27 years independently maintaining my finances, it’s been a bit of a shock to my system (and I’m sure for him, as well). But, we’ve been talking about and planning for the switch for awhile now, so I think that softened the blow a bit. Three months is hardly enough time to know exactly how our combined finances will change and evolve over time, but I think we’ve both learned a lot thus far…

A PERSONAL DECISION

Combing finances with someone is a personal decision that requires a lot of thought and discussion. My husband and I had talked openly about our finances when we were dating and had always planned to combine after we were married. We made the decision based on many factors (we were sick of splitting checks everywhere we went, for one), but the biggest deciding factor was that we wanted to be a team; what was good for him would be good for me and vice versa. As a team, if we struggled, we would struggle together.

THE PERKS

My husband jokes that the biggest perk of combined finances is being able to say “this is on me” every time we go out to dinner (hilarious, I know). But I’d think we agree that the best part of combined bank accounts is that we truly do feel like a team. We make our spending and saving decisions together. This has made us a closer, strongly couple and family…and that’s important in a fledgling marriage.

Other perks include, of course, the fact that we don’t have to split bills anymore. We made a short out-of-state trip for a family wedding recently and, when we were flying back home, I realized I hadn’t pulled out my credit or debit card once on our entire trip. And although it was nice that I didn’t have to use my cards, the main benefit was that we didn’t have to tally up splitting the check at a restaurant or in a parking garage.

WHAT WE’RE LEARNING 

The biggest cause of bickering has been budgeting and spending habits. My husband has always been a very meticulous budgeter, spending Sunday afternoons documenting our spending from the previous week. This has clashed with my habits because I don’t follow a strict budget. I did for a short time when I was paying off debt, but now I just try to avoid thoughtless spending and always look for the best deal.

This has created debates because my husband thinks that everything we buy (from a house to clothing to small miscellaneous expenses) should have a designated “fund” in our budget and we should save for it prior to purchasing it (which is obvious for a house, but doesn’t make sense to me for little things).

I tried to tell him to create an “Amber Fund” in his budget so I could spend on things as I need them, but he looked me like I was a crazy person (the vast differences between a budgeter and a non-budgeter). So, that issue is still a work in progress.

Even though we don’t necessarily agree on budgeting, we’ve made it a point to not criticize each other’s spending. We both have modest spending habits and we both look for good deals on whatever we purchase. Although my husband doesn’t understand the concept of an “Amber Fund” (yet), he hasn’t criticized my spending or told me to cut back on anything. And I’ve done the same towards his spending habits. I think that this easy-going practice might not work if either of us spent more money than we make, but we’re both modest spenders that always spend much less than we earn.

Right now, the biggest impact on our finances is our plan to purchase a house. We’d each been saving separately before we married and we combined our house savings funds after our wedding. We plan to buy a home in a couple months and it has been fun to monitor our savings accounts together (when just a couple months ago, they were separate). Buying a home will be our first big joint purchase and with home ownership will surely come loads of new expenses and experiences.

SOME PRACTICAL TIPS

Everyone’s financial situation will be different, but we did learn a few things that would apply to everyone as we were combining bank accounts:

• Figure out which bank you’ll be switching to long before the wedding. The wedding and honeymoon are such a whirlwind, so it’s hard to make this decision during that time. You might call each of your bank’s and ask them about switching accounts or adding another person to help make a final decision.
• Try to go to your bank during non-peak hours. We were able to go to our main bank the day we returned from our honeymoon during the early afternoon. There wasn’t a wait and we were the only customers there, so it made the process much easier.
• Consider your name change. If you’re going to change your name after the wedding, it might not be complete when you’re in the midst of combining finances. Make sure you tell your bank about this to avoid confusion.
• E-mail your online banks or check FAQs. Combining our online accounts was extremely easy and took only a matter of minutes. If you’re unsure about the process, e-mail their support team and you’ll probably receive step-by-step instructions the same day.
• Discuss money management prior to the big day. I’m always amazed to hear how many of my friends didn’t discuss finances before they were married. Make sure to iron out any issues and get on the same page before the wedding to avoid any surprises.

WORKING AS A TEAM

As I mentioned earlier, the best part about combined finances (for us) is that we’re doing everything together. You really feel like a team. It can be scary to let someone have access to all your hard-earned savings and income, but it’s also exciting to know that you’re planning your financial future together—for better or for worse.

That’s what we did, although I know everybody’s different. Have you recently changed how you handle joint finances? What changed? How’s it working out so far?

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• Simple, smart ways to limit your student loan debt. [Kiplinger]
• About to buy a home? Consider these tips to get the best price. [Globe and Mail]
• Should you rent or buy? This infographic helps you decide. [Credit Karma]
• One blogger ponders whether or not an MBA is worth it. [Well-Heeled Blog]
• Another ponders the same for expensive private colleges. [PT Money]
• These simple interview tweaks could make or break your chance for a job. [Yahoo Finance]
• Tips for earning an income from  your hobby. [Adaptu]
• Full-time freelancer? Getting a mortgage may require work, but it’s not impossible. [NY Times]
• The consequences of youth unemployment are way bigger than just having to move back in with mom and dad. [The Economist]

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• Is it worth it? A list of the best foods to bulk-buy. (Mint Life)
• Social media really is taking over the world: a new study uses twitter to predict the stock market. (Consumerism Commentary)
• Until you land your dream job, here are some tips to rock out a less-than-awesome job. (Brazen Careerist)
• 15 financial moves to make right now. (Time)
• If your productivity is lacking, try taking more breaks. (Dumb Little Man)
• It’s never easy, but these 9 tips will get you started saving money. (Dumb Little Man)
• Before you decide to withdraw funds from your retirement account, consider the penalties. (Wisebread)
• An interesting look at 7 new careers that didn’t exist a decade ago. (MoneyNing)
• First-time renter? Check out these 7 things to consider. (Moolanomy)
• A guide to investing in your 20s. (MainStreet)

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