Category Archives: Financial Literacy

5 Simple Rules for Investing Success

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“Definiteness of purpose or single-mindedness combined with PMA (positive mental attitude) is the starting point of all worthwhile achievement. It means that you should have one high, desirable, outstanding goal and keep it ever before you.” W. Clement Stone

Investing is a mental game.  And to be successful at the mental game, you must adjust your mindset and retrain your thinking that as a long-term investor, you need to be able to buy stocks and open new positions when the market is crashing or correcting.  You’re genetically programmed to be a lousy investor.  You must set up systems and rules to fight our normal urges and invest at what appears to be the absolute worst time and when everyone else is fearful and selling.

It is important to accept the fact that you will absolutely enter a position at the wrong time and make a bad buy in the short term.  It happens to every investor at sometime in their life.

Investing doesn’t have to be intimidating or challenging. To get started investing in stocks and bonds, you should follow with deliberate purpose and action five simple rules for building a long-term portfolio, according to TD Ameritrade:

  1. Contribute early and often – The single most important thing you can do in investing is to invest early and save often. Thanks to the magic of compounding, money invested early has more time to grow. Delaying investing can have a significant effect on your portfolio. In fact, for every 10 years you wait before starting to investing, you’ll need to save roughly three times as much every month in order to catch up.
  2. Minimize fees and taxes – Charges and taxes will have an impact on your overall returns, so it’s important to take these into consideration when choosing your investments.
  3. Diversify your portfolio – We all know the saying ‘don’t put all your eggs in one basket’, but it’s particularly important to apply this rule when investing. Spreading your money across a range of different types of assets and geographical areas means you won’t be depending too heavily on one kind of investment or region. That means if one of them performs badly, some of your other investments might make up for these losses, although there are no guarantees.
  4. Consider how much time you have – Investing should never be considered a ‘get rich quick’ scheme. You need to remain invested for at least ten years, but preferably much longer to give your investments the best chance of providing the returns you’re hoping for. Even then you must be comfortable accepting the risk that you could get less than you put in. If your investment goals are short-term, for example, two or three years away, investing won’t be right for you, as you’ll need to keep your money readily accessible, usually in a savings account.
  5. Have a financial plan and focus on long-term goals – A financial plan creates a roadmap for your money and helps you achieve your goals. It is a comprehensive picture of your current finances, your financial goals and any strategies you’ve set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life. Knowing what your financial goals are and what sort of timeframe you are investing over may help you stick to your plan and strategy. For example, if you have long-terms goals, perhaps saving for retirement which may be several decades away, you may be less tempted to dip into your investments before you stop work.

https://youtu.be/NxEcO7ITtMo

And, never forget the top two and oldest rules for investors, according to Warren Buffet:

  • Rule #1 of investing is “Don’t Lose Money.”
  • Rule #2 is “Don’t forget rule #1.”

What Buffett is referring to is a state of mind and philosophy for investing. Simply, it means that there’s no such thing as “play money.” You don’t go out and speculate on a stock. You remain patient and disciplined, whether your tax deferred or brokerage accounts are up or down for the month or year.

Investing is not gambling and the stock market is not a casino. There’s no such thing as the house’s money in investing. It’s all your money, and it has to be protected.

So, don’t become anchored to the price of stocks, instead focus on buying good businesses at fair prices.  Only thing that truly matters in investing is the long-term future prospects (innovation, moat, management acumen) and growth opportunities of businesses. Don’t let the loss in the price of a stock get in your head and don’t let a short-term paper loss sway your emotions, behaviors or actions.

Better to be a regular investor rather than be perfect or optimize to price of the stock.  And remember, celebrate good stock buys, and recognize and learn from bad buys.

References:

  1. https://www.barclays.co.uk/smart-investor/news-and-research/investing-for-beginners/10-golden-rules-for-investors
  2. https://www.fool.com/retirement/2007/08/06/invest-early-and-often.aspx
  3. https://www.investopedia.com/articles/financial-theory/11/6-lessons-top-6-investors.asp
  4. https://www.investopedia.com/articles/fundamental-analysis/09/market-investor-axioms.asp
  5. https://cabotwealth.com/daily/how-to-invest/10-basic-rules-of-investing-according-to-the-legends

April is Financial Literacy Month

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“The goal behind teaching financial literacy is to help people develop a stronger understanding of basic financial concepts—that way, they can handle their money better…Financial literacy is the possession of skills that allows people to make smart decisions with their money.” Dave Ramsey

April 2021 is Financial Literacy Month – In 2004 Congress passed a resolution officially recognizing April as Financial Literacy Month to “raise public awareness about the importance of financial education in the United States and the serious consequences that may be associated with a lack of understanding about personal finances.”

Financial Literacy. The goal of financial literacy is to help people develop a stronger understanding of basic financial concepts—that way, they can handle their money better.  Especially when you consider a few realities about our country’s lack of financial literacy and about how the typical American handles money:

  • U.S. college students continue to struggle with massive debt. There’s also the uptick in adults living paycheck to paycheck.
  • Money management appears like it should be simple and easy…just spend less money each month than you make and save for the future.
  • It’s never too late (or too early) to learn good money management habits, or to start saving for the future, and investing for the long-term and to grow your money.
  • Money management and financial planning are not only for the wealthy; it’s available to every American.
  • Learning about money management and personal finance should be a lifelong endeavor that you’ve now begun!

  • A large number of Americans lack financial literacy. They believe financial success is doing things the same way that they have always done or planned to do is the recipe to success; for example, not preparing and planning for the future and only living in the moment.
  • Often times, your spending can take on a life of its own before you can take time to think about it. This is where many people get into trouble. It is not unusual to find someone who is working in an industry or job they may not like, simply because they need a paycheck and do not have a choice financially.

Lacking financial literacy is a significant enemy of financial progress and success. Since living paycheck to paycheck has become a significant way of life for most Americans, according to 2017 CareerBuilder Survey, which highlights:

  • An estimated 44% of Americans can’t cover a $400 emergency without going into debt.
  • 56% of Americans have less than $10,000 in savings for their retirement.
  • 78 percent of U.S. workers live paycheck to paycheck to make ends meet
  • Nearly one in 10 workers making $100,000+ live paycheck to paycheck
  • More than 1 in 4 workers do not set aside any savings each month
  • Nearly 3 in 4 workers say they are in debt today – more than half think they will always be
  • Financial literacy and knowledge has never been more relevant. The only person who will truly always be looking out for your best financial interest is you. Learning about money management and personal finance should be a lifelong endeavor.

It’s never too late (or too early) to learn good money management habits, or to start saving. Since, personal finance is not only for the rich! Read books and financial publications, watch the videos and follow closely emerging and trending issues and practices in finances. Also, work with a financial advisor.

Our schools don’t do the best job preparing us for handling all of the challenges of personal finance, so it’s up to you to figure it all out. As a nation, we must embed basic financial literacy into our education system.

Financial Literacy and understanding money are vital to planning for financial well-being and a life well lived. Financial literacy, when dealing with bills, tracking long and short term payments and how to develop a system for saving, paying for the dailies, etc. is incredibly important.

No. 1: Successful money management is about making sure your money is doing for you what you want it to. This means that before you can be successful with your money, you have to know what you want. To get control of your finances, you must understand your own personal expectations, goals, and values. According to a study by the University of Tennessee, less than 1 out of 20 Americans have clearly defined goals; the key to developing a practical spending plan. That means 19 out of 20 find it difficult to avoid debt and save for the things that really matter.

No. 2: Managing finances is an important part of living a balanced life. It helps you pay your bills, build strong credit, establish realistic goals, and plan for the future. Simply put, it’s the process of making sure you spend less than you earn and save for the future. Income and expenses often vary from month to month, so keep track of your spending and following a budget and financial plan are critical and not hard once you get the hang of it. Don’t focus on the numbers — focus on the outcome! And, at some time or another, everyone will confront a financial emergency. The decisions we take regarding your budget and financial plan can have lasting impact on you, now and far into the future. And, a critical part of that planning is emergency savings to help navigate turbulent times.

No. 3: As every personal finance course emphasizes, retirement savings in tax-advantaged retirement accounts are important but not enough. It is critical that we think about the future, but every household also needs emergency savings to help navigate turbulent times. We must identify ways to make these savings strategies simple, even automatic.

No. 4: Don’t make dramatic changes during periods of high market volatility and economic uncertainty. Instead, embrace a strategy of goal based money management, financial planning and investing. When your tempted to react dramatically to market volatility and economic uncertainty, ask yourself which one of your long-term goals is no longer a priority. Which goal or goals do you want to abandon in order to move assets from stocks to safer asset classes such as bonds or cash. The older you will thank the younger you for not panicking and sticking with your long-term goals.

Let’s each of us make sure that financial literacy becomes part of the curriculum in our education system. We should push for mandatory personal finance education in schools starting next year.

Visa and the NFL Launch New Financial Football Game

Visa and the National Football League (NFL) have teamed up to create Financial Football, a fast-paced, interactive game that engages students while teaching them personal finance skills.

Students of all ages can learn key concepts about saving and spending, budgeting and the wise use of credit in preparation for game play.

References:

  1. https://www.daveramsey.com/blog/what-is-financial-literacy
  2. http://press.careerbuilder.com/2017-08-24-Living-Paycheck-to-Paycheck-is-a-Way-of-Life-for-Majority-of-U-S-Workers-According-to-New-CareerBuilder-Survey
  3. https://www.forbes.com/sites/forbescommunicationscouncil/2019/12/16/why-financial-literacy-in-schools-matters-today-for-the-workforce-of-tomorrow
  4. http://video.cnbc.com/gallery/?video=7000121923
  5. https://cdn.zephyrcms.com/c90050c9-f059-4e40-a9d7-381cf48d84bd/-/inline/yes/personal-finance-course.pdf
  6. https://www.practicalmoneyskills.com/play/financial_football
  7. https://www.financialfootball.com

Investing Intelligently

Aside

As an investor, your general investing objectives are to grow your money and invest for the long-term.

Investing can seem challenging since there’s an overwhelming amount of investing information, choice of investment accounts, and strategies out there. Plus, the markets fluctuate and are volatile, and the idea of potentially losing money can create stress, fear and uncertainty.

The lesson for the investor: The fears you feel when you think about starting investing or during periods of market volatility are very similar to those many seasoned feel after decades of investing. The doubts. Negative thoughts. The fear and uncertainty that lead us to think about giving up. The encouragement you get from focusing on the future and your long-term goals. And the satisfaction of crossing goals of financial freedom that you thought were all but impossible.

Investing in stocks is an excellent way to grow wealth. For long-term investors, stocks are a good investment even during periods of market volatility — a stock market downturn simply means that many stocks are on sale. And for long-term investors, time tends to reward their behavior, though research has shown that it is as difficult to practice as it is uncommon.

Most investors never hold stocks long enough to benefit from the fact that the market rises over the long-term. Investors typically buy too late and sell too early. They routinely “greed in” and “panic out” of stocks. They hold stocks for just a few years — or worse, a few months — rather than carefully curating and diversifying a portfolio of stocks for the long-term, typically over decades.

https://youtu.be/hE2NsJGpEq4

By learning more about the process of investing in stocks, understanding the financial markets, and knowing what securities you are investing in— you can gain more confidence and understanding that you are on the right path, according to SoFi.

Investing your hard earned money

Historically, the return on stock investments has outpaced other asset classes like bonds and real estate, making them a powerful tool for those looking to grow their wealth over the long-term.

The average interest rate on a savings account at the top five U.S. banks this year was 0.08%, while the average return on the S&P 500 from 1950 through 2009 was 7%. So, what does this mean for your money? If you had $10,000 today and put it in a savings account with an interest rate of 1% (some banks have rates this high), you would have $11,046 in 10 years. If instead you took that money and invested it, earning an average annual return of 7% and compounding annually, you would have $19,672 in that same time period!

Everyone should have these two, what SoFi calls “bookend goals”, as their primary short-term and primary long-term goals:

  • Create an emergency fund and
  • Save for retirement

Getting started investing is simple.

Investing in stocks will allow your money to grow and outpace inflation over the long-term.

Investing is not just for the wealthy; it’s for anyone who wants to achieve their financial goals and achieve financial security. And your focus should be on the opportunities and rewards of achieving financial goals.

It’s important to understand your goals. Selecting an investment strategy depends on your goal amount (how much you want to save) and the time horizon (when you’d like to use that money).

Before you invest, you should make a list of all of your accounts (bank, investments, retirement, credit cards, other debt) and their interest rates. Know and calculate your personal net worth. And, know your cash flow. How much do you make after taxes? How much do you spend?

First goal: Emergency Fund

Your emergency fund is a cash account that you can easily access should an emergency arise—for example, if you face an unexpected health cost. This fund should be 6 -12 times the amount you spend monthly, depending on how risk-averse you are.

For example, if you’re unable to work, you may be comfortable with having three months saved. You want to keep your emergency fund money “liquid,” or available to access as soon as you need it. With that said, many savings accounts only pay you 0.01% interest on cash balances. This doesn’t keep pace with inflation, so you’re essentially losing money. Instead, you might consider opting for a high-yield savings account that earns 1% interest or more.

Ultimate goal: Retirement

Retirement should be your highest priority and your largest financial goal. Even if it feels very far away, it’s important to start saving early, diligently and purposely. You may share the same priority and retirement goals as many retirees, such as:

  • Essential Living Expenses
  • Reserves in an emergency fund to cover unexpected expenses
  • The stuff that brings joy, emotional well-being, and provides purpose like vacations and spending time with others
  • Leaving a legacy for your family, a charity, or something else

Remaining financially independent and understanding ways to ensure there is enough money to last a lifetime is of great importance to retirees.

https://twitter.com/tdameritrade/status/1362095933387927562

Let’s say you and your partner will need $6,000 per month in retirement income (in today’s dollars). If you start saving at 40, you would need to save $46,000 per year to be on track for retirement at 67. However, if you start saving at 30, you need to save $32,000 per year. (Note: This assumes you’ll both receive Social Security.) This illustrates the importance of starting early and giving your money time to work for you.

Need to catch up? It’s never too late! You may need to save more or be more aggressive, but the most important step is to start saving (and investing) as soon as possible.

Investing should be for long-term goals

If you’re investing for a far-off goal, like retirement, you should be invested primarily in stocks or stock mutual funds and ETFs.

This is an important lesson for the investor: When you think about investing, you usually feel that you know exactly what you are looking for. In your mind, you have defined the plan that will lead to success and you begin to execute it hoping to be able to fulfill it to the letter. The truth is, it rarely happens. The path of the investor is full of surprises, of unintended consequences that you did not appreciate, of outcomes that you did not expect to face. Let yourself be surprised by them, live them and just like the best investors do, dare to take the first step that could take you to achieve financial freedom in retirement.

To start investing for retirement, most financial experts and institutions advise you to invest in an employer-sponsored tax deferred retirement plans. There are several investing options for longer-term goals like retirement and college, according to Navy Federal Credit Union. Here are a few you may consider:

  • As part of your employee benefits package, you may be offered a retirement plan such as a 401(k), 403(b), or 457 plan, Thrift Savings Plan (TSP), or pension. Your contributions to an employee-sponsored plan aren’t taxed until they’re withdrawn in retirement, and your contributions may even be partially matched by your employer.
  • Individual retirement accounts (IRAs): IRAs can operate standalone or in addition to an employer-sponsored plan. Depending on the type of IRA you have, you’ll either pay taxes when you contribute (as with a Roth IRA) or when you withdraw (as with a traditional IRA). A Roth retirement account that allows individuals to pay taxes on contributions to the plan at the time they are made, but when funds are withdrawn during retirement, they are tax-free.
  • 529 college savings plans: 529 plans allow you to make large contributions, some with limits beyond $300,000, with withdrawals used for qualified K-12 and college expenses free from federal income taxes. These plans are a great way to save no matter your level of income or timeline for your or your child’s academic career.
  • Coverdell education savings accountA trust account designed to help fund educational expenses for individuals under age 18. The maximum yearly contribution is $2,000.
  • (ESA): ESAs let you save for school with a greater variety of investment options than 529 plans. If your gross income is under $110,000 (or $220,000 on a joint return), you can set aside up to $2,000 a year for college or K-12 expenses.
  • Brokerage accounts: Brokerage accounts allow you to purchase and sell investments, including stocks, bonds and mutual funds, through a brokerage firm. These investments aren’t insured and are subject to taxation, but you may be able to earn more in returns than with other savings vehicles, and you can use the money for any purpose, such as for retirement.

And, do not be too conservative or risk adverse with your investments. The most successful investors have done little more than stick with stock market basics. That generally means using a low cost S&P 500 index fund for the majority of your portfolio and choosing individual stocks only if you believe in the company’s potential for long-term growth.

Your Tolerance for Risk

“Practice patience in stock investing and give your investments a chance to grow into mighty oaks.”

Learning to invest means learning to weigh potential returns against risk, according to TD Ameritrade. Basically, no investment is absolutely safe, and there’s also no guarantee that an investment will work out in your favor.

Furthermore, the risk of losing money can be daunting and upsetting to typical retail investors. This is why it’s important for you to know your risk tolerance level.  When it comes to your choice of assets, it’s important to understand that some securities are riskier than others. This holds true for both equity and debt securities (i.e., “stocks and bonds”).

Consequently, the best thing to do after you start investing in stocks, ETFs or mutual funds may be the hardest: Don’t look at them. It’s good to avoid the habit of compulsively checking how your stocks are doing several times a day, every day. Instead, stay focused on your values and long-term goals. and periodically check your investments.

Additionally, the toughest thing in stock investing is to do nothing. That’s right, nothing! Once you buy a stock and watch it move up, down and all around for a few weeks, there is an urge to take action.

Most investors lack patience, which is a shame, because almost every successful investor you’ll ever meet or read about has an abundance of patience. You should wait for the right time to buy. And, being patient means you are the best prepared when opportunities emerge.

Many times, the stocks you purchase don’t move much in price for many weeks after your initial purchase. But if you have the patience to stick with those stocks, a few can turn out to be huge winners. And in the end, those big winners are what make all the difference.

References:

  1. https://d32ijn7u0aqfv4.cloudfront.net/wp/wp-content/uploads/20170718165706/Guide-to-Investing-Intelligently_V5-1.pdf
  2. https://www.navyfederal.org/makingcents/knowledge-center/financial-literacy/actively-saving/saving-for-longer-term-goals.html
  3. https://www.nerdwallet.com/article/investing/how-to-invest-in-stocks
  4. https://www.debt.org/advice/debt-snowball-method-how-it-works/
  5. https://tickertape.tdameritrade.com/investing/learn-to-invest-money-17155
  6. https://cabotwealth.com/lessons/practicing-patience-stock-investing/

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Manage Your Debt

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You must protect your wealth from destructive forces, such as debt, taxes and inflation, which all can erode wealth. Add to these another wealth destroyer: overspending.

Americans are drowning in debt. Before COVID-19, Americans were merely treading water in dangerous seas. But once the economy turned ugly, jobs went away and nest eggs cracked, those with the most debt, sunk, according to the Bill “No Pay” Fay the founder of Debt.org. Many people were forced into insolvency or foreclosure, unable to pay their obligations or provide for their families.

Today, debt is almost a fact of life for most Americans. When you owe money to someone, you are in debt. Owing money is not always bad. Debt allows you to buy homes and cars, send our kids to college, and have things in the present that we can pay for in the future and nearly everyone has at least one credit card. Indeed, capitalism essentially was built on the extension of credit and the ensuing debt it creates. But credit’s convenience can easily lead to spending more than you earn or budget. And, debt becomes bad and financial bondage when you owe money you cannot pay back.

Debt is rampant

“Most American’s spending habits are based on the amount of available credit they have, not on their cash flow (income) or checking account balance”

According to the New York Federal Reserve, consumer debt was approaching $14-trillion in the second quarter of 2019. This includes mortgages ($9.14-trillion), auto loans ($1.65-trillion), student loans ($1.44-trillion), and credit card loans ($829-billion).  It was the 24th consecutive quarter for an increase.

Living without debt these days is next to impossible. Debt falls into two categories: good debt and bad debt. It’s good to know that all debt (or money owed) isn’t created equal, and it’s even better to know the difference, according to Navy Federal Credit Union. Before buying anything on credit, it’s a good idea to determine whether you’re accruing good debt or bad debt.

Good Debt:

  • Good debts are those that create value and can be seen as an investment. Think mortgages, loans for college education or business loans. School loans and mortgages often have lower interest rates than other kinds of debt. Student loans can increase your ability to command a larger income. An ideal situation in a home loan is that the property increases in value over the course of the loan term, an increase that could offset the interest paid on your loan.

Bad Debt:

  • Bad debt comes into play when you purchase items that quickly decrease in value and don’t generate income. Bad debt often carries a high interest rate—think store credit cards and payday loans or cash advance loans. The rule of thumb for avoiding bad debt is: If you can’t afford it, don’t buy it. Every month that you make a partial payment on a high-interest loan, that item loses value while the price you paid for it increases.

When it comes to your credit history, well-managed debt can actually help improve your credit score. When purchasing on credit, know what you’re getting into and take on only as much debt as you can afford to pay off.

https://twitter.com/cbcfamily1889/status/1354852205451501569?s=21

For many, using credit is a normal part of handling their finances. For others, using credit can lead to uncontrolled spending, anxiety, and even bankruptcy. It’s important to recognize your own spending and savings habits so you remain in control.

Knowing when and where not to use credit –and what type of credit to use –can help you avoid getting in over your head. Borrowing for higher education is probably a good idea as it should result in a higher earned income later. Charging extravagant vacations, and for expensive dinners and gifts that you really can’t afford is not a good idea.

Installment credit and credit cards

“Your biggest enemies are your bills. The more you owe, the more you stress. The more you stress over bills, the more difficult it is to focus on your goals. More importantly, if you set your monthly income requirements too high, you eliminate a significant number of opportunities.” Mark Cuban

There are two major types of household debt: installment and revolving credit.

  • Installment debt is paid off in a specified period of time with predetermined periodic payments. Conventional mortgages are the best example.
  • Revolving credit is a line of credit that is instantly available, usually through credit cards. As you pay down your debt in a revolving line of credit, the minimum payment is also reduced, which can extend your payoff period and the interest you pay.

Installment debt is excellent for big-ticket purchases like a home mortgage and should be accounted for in your monthly budget. Compared with credit cards, interest rates for installment debt are usually relatively low.

According to statistics collected by the Federal Reserve and other government data, credit card debt is the third highest source of household debt behind mortgages and student loans, with an average owed of $15,863.

The modern-day credit card — which entered the culture in the late 1950s — has meant far greater buying power for U.S. consumers, but also financial disaster for many individuals and families.

Consider these statistics about credit cards in America :

  • More than 189 million Americans have credit cards.
  • The average credit card holder has at least four cards.

Credit cards are a convenient way to buy virtually anything at any time, but you need to use them intelligently and be aware of the interest costs. And, you might not realize it, but every time you use your credit card, you’re essentially taking out a loan. The purchases you put on your card are bought with your line of credit, and you’re responsible for paying your credit card company back for whatever you buy. When used responsibly, a credit card can be a great tool for building credit history; used incorrectly, it can lead to debt.

Credit cards can offer the temptation to overspend, but you can curb that urge by using these tips to be smart about your spending:

  • Budget. Budget. Budget. Keep track of your finances with an up-to-date budget that accurately reflects your income and output. Knowing your finances is a huge step in knowing how much you can afford.
  • Borrow only as much as you repay. A good rule of thumb is to not tie up more than one-third of your income in debt, including mortgage, credit cards and installment loans. Borrow only as much as you can pay back in a reasonable time, while staying on top of the daily necessities.
  • Pay bills in full and on time. Don’t overextend your funds. Be mindful of when your credit card bills are due and make a concerted effort to pay them off in full each month.
  • Check your credit report regularly. By keeping an eye on your credit report, you can monitor your status and whether there are mistakes that could negatively affect your score. You can check your credit report for free on an annual basis at

Remember that you have to pay back every charge you make. In a nutshell – don’t charge things you can’t afford. Try to pay your entire balance each month to avoid finance charges and be sure to make the payments on time to avoid late payment fees.

Assessing your financial situation helps you to manage your debt efficiently. And with respect to wealth destroyers — taxes, inflation debt and overspending — the last two can have the most destructive effect on your wealth if not kept in check. They are the forces over which you can manage and have the most control.

Keeping Debt Manageable

Compounding interest can be a powerful tool to have in your arsenal. It can be very beneficial in accumulating wealth and in creating large sums of money over time if wielded correctly. But unfortunately, debt has a best friend forever (BFF) and it is the darker side to compounding interest – compounding debt.

When you get into debt, it’s you that incurs interest on what you owe. And if you don’t have a solid repayment plan, that can easily spiral out of control. If you’re stuck in the vicious circle of compounding debt, it’s important to quickly get out as fast as you can. The less you owe the less interest you incur so pay as much as you can as often as you can.

The simplest way to maintain a manageable amount of debt is to ensure you never owe more than you can pay, but simple isn’t always easy. Follow these tips from Navy Federal Credit Union to better manage your debt:

  • Know how much you owe. Make a list of all of your debts. Include the debt total, monthly payment, interest rate and due date. Track your progress by updating the list regularly as you make payments. As the old adage goes, you can’t manage what you don’t measure.
  • Pay your bills on time each month. Set up automatic payments so you don’t miss payments and incur late fees. Determine which bills are due first and pay them in order. Pay more than the minimum on each bill if you’re able. Paying the minimum on high-interest debt usually doesn’t help you make real progress, but if that is all you can pay, it does keep debt from growing.
  • Pay off the high-interest debts first. High-interest debt costs you the most, so you’ll want to immediately wipe it out. The faster you pay these debts off, the less interest you’ll pay. The thinking behind this solution is that if you let the debt with the highest interest rate sit for a long time, it will cost you a bundle in interest payments so attack it immediately. Waiting to pay off high-interest debt likely will cost you thousands of dollars and increase the amount of time you spend in debt.
  • Start an emergency fund. That way, should an unexpected expense come up, you won’t have to add to your debt to pay it.

Eliminate Your Debt Before You Invest

“If you’ve got $25,000, $50,000, $100,000, you’re better off paying off any debt you have because that’s a guaranteed return.” Mark Cuban

Bottomline about paying off debt is that you must be committed to the process. It’s likely you didn’t incur the debt overnight and it’s even more likely you won’t get out of debt overnight. A study published in the Journal of Marketing Research says that the act of closing accounts after they’re paid off, regardless of size, is a better predictor of whether you’ll get out of debt in the long run.

“Credit is a financial tool, debt is a financial problem.”

References:

  1. https://www.debt.org/faqs/americans-in-debt
  2. https://equitable.com/goals/financial-security/basics/manage-your-debt
  3. https://diversyfund.com/blog/compounding-debt-the-dark-side-of-compounding-interest
  4. https://www.navyfederal.org/makingcents/knowledge-center/financial-literacy/understanding-debt/about-debt.html
  5. https://www.bankrate.com/finance/savings/wealth-destroyers.aspx
  6. https://www.thinkbank.com/managing-debt

Creating a Budget

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“A budget is telling your money where to go instead of wondering where it went.” John C. Maxwell

Spending within your means may sound like a simple rule to follow, but many Americans spend more than they save, which can result in debt. The good news is that it’s completely avoidable, and it’s reversible over time. With a little budgeting, planning, tracking and adjusting your spending, you can live happily within your means.

Keeping your personal finances in tip-top state does takes some planning, effort and time. Yet, many people live above their means and don’t even realize it. More than three-quarters of American workers (78 percent) are living paycheck-to-paycheck to make ends meet, according to survey conducted by Harris Poll on behalf of CareerBuilder in 2017. Thirty-eight percent said they sometimes live paycheck-to-paycheck, 17 percent said they usually do and 23 percent said they always do. 

To improve your financial health and money management awareness, the one piece of advice you hear most often from financial experts is to create a budget.

“Budgeting helps you better understand how you spend your money and shows you ways to manage your money, pay off debts and save for future financial goals.”

Budgeting is one of the single most effective tools for money management. Making a budget simply means examining your income and expenditures in order to determine exactly how much money you have coming in and where you’re spending it. Once you’ve got a clear understanding of your current budget – what income you’re receiving and what expenses you’re responsible for – take a closer look and find places where you can spend less.

A budget will help give you a clearer picture of how much money you have coming in (income) and how much is going out (expenses). It’ll set guidelines for your expenses that will help you understand how much you can set aside for those bigger ticket items like a house and long term goals, like saving for retirement or an emergency fund. A budget is a personal cash flow roadmap. It can span a week, month, quarter—three months—or any set length of time. They are created by individuals and businesses.

Begin planning your monthly budget by figuring out how much you have coming in versus how much is going out every month. Ultimately, you want to end up with a blueprint that specifically breaks down your cash flow (income minus expenses), so you know how much you can spend and how much you can save each month. Building a budget starts with a few simple steps.

Budgeting is Important

“When making a budget, the idea is to make sure your expenses don’t exceed your income.”

A budget is a foundational piece of a financial plan. If you’re serious about reaching your financial goals, making a budget and sticking to it can help you achieve them. Here are some of the benefits of making and following a budget:

  • Live within your means: If you haven’t been budgeting up to this point, you may often wonder at the end of the month where all your money went. It’s even possible that you’re running a deficit and taking on credit card debt to cover the difference. A budget can help you live within your means when you use it to set clear boundaries for your spending.
  • Pay off debt: Making a budget is about taking control of your finances. If you’re working to get out of debt, decide how to allocate your spending to prioritize paying more toward debt payments. For example, if you notice that you spend a lot on entertainment, you can set a budget to only allow yourself to spend up to a certain amount on that category. Then use the savings to pay down debt.
  • Save money: Long-term savings goals are also an important part of a personal budget. Think about setting aside money each month to save for retirement, a vacation or a home down payment. In the short term, make sure to save enough for an emergency fund. A budget can give you better control over how you spend your money, allowing you to cut back on spending and save more.
  • Reach financial goals: You likely have financial goals you’re working toward. But if you don’t have a budget, it can be tough to know where to focus your efforts and make meaningful progress. A budget can help you decide how much money to allocate for each goal to keep yourself accountable.

While these are general benefits of budgeting, take a moment to think about why you want to budget. Whether it’s due to a short-term need, long-term goals or simply to understand where your money goes, knowing your reasons for budgeting can motivate you to keep up with it.

Step 1: Look at your paycheck.

To create a budget, you first need to know your net monthly income, or after-tax income. This is your monthly take-home pay, not your total salary — an important distinction when figuring out how much you can spend on a monthly basis. Knowing this number is the first step to creating a spending strategy.

To start, make a list of all your sources of income coming in the door every month. Every paycheck you get. Maybe a regular side hustle. Do you get alimony or child support? What about income from investments? Everything.

Step 2: Distinguish your essential needs from your wants and discretionary spending.

Start listing your expenses. Start with the big stuff: rent, car payments or transportation, utilities, groceries, any debt payments you need to make — things like that. Now it’s time to make a list of your essential expenses. This involves separating your “wants” from the “needs.” Needs usually include things like:

  • Housing costs (monthly rent or mortgage payment)
  • Transportation costs (car payment, fuel, public transportation)
  • Utilities
  • Food
  • Insurance
  • Internet, cable, and phone bills

Once you’ve tallied those costs, add them up and deduct your needs total from your after-tax income. Make note of that number. What about everything you spend money on that you like, but maybe don’t need? Eating out, entertainment, that new pair of shoes. Add those as a list to your expenses. Treating yourself is great! But you want to do it within your budget.

Step 3: Calculate how much your wants cost you.

Next, outline all the things you spent money on that don’t fall into the “needs” bucket, and tally up the total. The easiest way to do this is to look at your credit card statements from the last month or two. If you use cash to pay for things, keep a log for several days (or better yet, a couple weeks) of all your expenses.

Once it’s all written down, use a critical eye and note where you’re being your own worst enemy by overspending or wasting money on things you don’t need (or even want). Strategize on how you can modify your behavior to reduce these unnecessary expenses.

While it’s a-okay to splurge on occasion, it’s important to do so in moderation.

Step 4: Add up all your costs.

Jot down the total amounts of your “needs” and “wants” and see how they stack up against a common rule of thumb: the 50/30/20 budget. This popular money management plan says you should spend 50 percent of your take-home pay on needs, 30 percent on wants, and put the remaining 20 percent toward savings, investments, and any debts you may have, like school loans or revolving credit card debt.

Don’t panic if your current financial picture doesn’t align with this ideal ratio. It can be difficult to stick to this plan, especially if you’re new to the workforce and possibly paying down student loan debt.

But that’s exactly why a budget can be so useful. Matching up how much you spend to established guidelines can be a helpful way to identify where everything’s lining up — and where you can put in a little more effort and reduce your spending.

Step 5: Keep it up.

Now that you have your budget created, here comes the harder part: sticking to it.

The primary part of your budget should always cover your needs. What’s left over is split between the things you want and your savings. When it comes to minding your numbers, try out some of these tips:

  1. Be a stickler and set aside some savings for an emergency fund. It’s smart to have it an intrinsic part of your budget.
  2. While putting 20 percent of your take-home pay toward savings and debt isn’t technically considered a “need,” you should treat it as one. Avoid dipping into that bucket to pay for “wants,” so you can pay down debts and afford future unknowns, should something arise. In fact, you could remove temptation by setting up monthly automatic savings transfers.
  3. Break it down. If a budget isn’t as manageable, try chopping it up into monthly or weekly segments. A shorter time frame can make it easier to stay on track. That way, you won’t discover that you’re already pushing the limit of your budget.
  4. Review regularly. Along those same lines, keep track of your purchases as they happen instead of totaling them up at the end of the month. Checking your balance online or reviewing your recent credit card charges is a great reality check for daily expenditures.
  5. Get everyone on board. If other people, like your spouse, are supposed to follow your budget, make sure they’re on board with the financial goals you’re trying to meet. To help create a comprehensive budget, most financial advisers recommend following the 50/30/20 model for budgeting. This model suggests you use 50% of your take-home pay for essential needs, 30% for wants or discretionary spending, and 20% for savings.

Trim your expenses if your budget proves your expenses outweigh your income. One of the easiest ways to trim your expenses is to evaluate how much money you’re spending on the things you want but don’t necessarily need. For example, a night out with friends costs an average of $81, which really adds up if you go out multiple nights a week. This doesn’t mean you can’t go out and have fun, but you may need to limit your spending to make your budget work.

Another way to cut your expenses and get control of your finances is to see if you can lower the cost of certain services. Contact cellphone, internet and cable television providers to see if a competitor offers a better deal or if you can save money by bundling. Consider dropping premium cable television channels and opt for an economical basic package.

Setting goals

Successful budgeting starts with aligning your spending with your priorities. Creating goals and rewards is a fantastic way to increase your chance of budgeting successfully. For example, set a goal to save a specific amount to pay off debts by spending less on unnecessary expenses like dining out, buying lattes or shopping. Put this money into a savings account to earn interest. When you meet your savings goal, reward yourself with a reasonable splurge on something fun. Typical goals and priorities include:

  • Planning and paying for college and post graduate educational expenses
  • Saving a down payment to buy a home or paying off the mortgage early
  • Paying off high-interest student loans and credit card bills
  • Saving and investing for early retirement

Budgeting doesn’t have to be the complicated or intimidating task that it’s often made out to be. Follow this simple process, and your monthly budget will help keep your finances in check.

Now you have the beginnings of your monthly budget! It’s most efficient to build this your budget in a spreadsheet or budgeting software. Then add new expenses as you spend.

Keep it Simple: The 50/30/20 rule

Tracking your finances doesn’t have to be complicated. A budget starts with a list of your income and your expenses, and following a simple strategy as the 50/30/20 rule.

The 50/30/20 rule is a popular budgeting method that splits your monthly income between three main categories. It’s pretty straightforward: You split your money between your needs, wants and savings, according to those ratios.

Here’s how it breaks down, according to NerdWallet:

Monthly after-tax income. This figure is your income after taxes have been deducted and the cost of payroll deductions for health insurance, 401(k) contributions or other automatic savings have been added back in.

50% of your income: needs. Necessities are the expenses you can’t avoid. This portion of your budget should cover costs such as:

  • Housing.
  • Food.
  • Transportation.
  • Basic utilities.
  • Insurance.
  • Minimum loan payments. Anything beyond the minimum goes into the savings and debt repayment bucket.
  • Child care or other expenses that need to be covered so you can work.
  • 30% of your income: wants. Distinguishing between needs and wants isn’t always easy and can vary from one budget to another. Generally, though, wants are the extras that aren’t essential to living and working. They’re often for fun and may include:
    • Monthly subscriptions.
    • Travel.
    • Entertainment.
    • Meals out.

    20% of your income: savings and debt. Savings is the amount you sock away to prepare for the future. Devote this chunk of your income to paying down existing debt and creating a comfortable financial cushion to avoid taking on future debt.

    How, exactly, to use this part of your budget depends on your situation, but it will likely include:

    • Starting and growing an emergency fund.
    • Saving for retirement through a 401(k) and perhaps an individual retirement account.
    • Paying off debt, beginning with the toxic, high-interest type.

    Making a budget can be an important step in the right direction for you. But budgeting for the sake of budgeting isn’t fun. As you work with your budget each month, remind yourself of the reasons why and purpose you’re doing it. Also, evaluate your progress periodically to make sure you’re on track to meeting your financial goals.

    References:

    1. http://press.careerbuilder.com/2017-08-24-Living-Paycheck-to-Paycheck-is-a-Way-of-Life-for-Majority-of-U-S-Workers-According-to-New-CareerBuilder-Survey
    2. https://www.thebalance.com/benefits-to-budgeting-453688
    3. https://www.ally.com/do-it-right/money/how-to-build-a-budget/?CP=135969424;274374394
    4. https://www.marketwatch.com/story/the-beginners-guide-to-building-a-budget-2019-08-09?mod=article_inline
    5. https://www.nerdwallet.com/article/finance/nerdwallet-budget-calculator

    Personal Debt in America

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    “Debt means enslavement to the past, no matter how much you want to plan well for the future and live according to your own standards today. Unless you’re free from the bondage of paying for your past, you can’t responsibly live in the present and plan for the future.” Tsh Oxenreider, Organized Simplicity: The Clutter-Free Approach to Intentional Living

    Debt stands stubbornly in the way of Americans’ financial goals and life dreams.  Moreover, debt is the biggest barrier to wealth creation and is the great destroyer of wealth. Debt and financial freedom are polar opposites – they never meet. Where there is debt, there cannot be wealth and financial freedom.

    In the U.S., adults aged 18+ report having an average of $29,800 in personal debt, exclusive of mortgages, according to the latest findings from Northwestern Mutual’s 2019 Planning & Progress Study. The research also revealed that 15% of Americans believe they’ll be in debt for the rest of their lives.

    While those numbers are staggering, they represent an improvement over last year when U.S. adults reported an average of $38,000 in personal debt. Still, the debt problem in America continues to run deep with wide-spread implications. The study found:

    • On average, over one-third (34%) of people’s monthly income goes toward paying off debt
    • 45% of Americans say debt makes them feel anxiety on at least a monthly basis
    • 35% report feeling guilt at least monthly as a result of the debt they’re carrying
    • One in five (20%) report that debt makes them feel physically ill at least once a month
    • One-fifth (20%) of U.S. adults are not sure how much debt they have
    • Over one in three Americans (34%) are unsure how much of their monthly income goes toward paying off their debt

    Among the generations, Gen X reported the highest levels of personal debt with $36,000 on average. They’re followed by Baby Boomers at $28,600; Millennials at $27,900; and Gen Z at $14,700.

    This is the latest round of findings from the 2019 Planning & Progress Study, an annual research project commissioned by Northwestern Mutual that explores Americans’ attitudes and behaviors towards money, financial decision-making, and factors impacting long-term financial security. This year marks the 10-year anniversary of the study.

    The Credit Card Crisis

    The leading sources of debt for most Americans is a tie between mortgages and credit cards, according to the study. An equal 22% of U.S. adults listed each as their main source of debt, more than double the next two highest sources — car loans (9%) and personal education loans (8%).

    Millennials cite credit card bills as their main source of debt (25%), while Gen Z notes personal education loans as theirs (20%). Both Gen Xers (30%) and Baby Boomers (28%) note mortgages as their leading source of debt, followed by credit card bills (at 24% and 18% respectively).

    Digging deeper into the numbers around credit card debt, the study found:

    • Nearly one-third of Americans (31%) are paying interest rates on their credit cards greater than 15%
    • Over 1 in 10 (12%) say they “always” pay only the minimum required payment, just covering the interest without paying down any principal
    • Close to one-fifth (19%) don’t know what their interest rate is, with Millennials being the most likely to report not knowing (22%)
    • 18% report having four or more credit cards, with Baby Boomers being more likely than other generations to have four or more (23%)

    According to the Federal Reserve Bank of New York, credit card debt has reached $868 billion in the United States, and delinquencies are on the rise.

    “Before you spend, earn. Before you invest, investigate. … Before you retire, save.” William A. Ward

    When you are in debt the clock works against you. Every morning when you wake—weekends, holidays, sick days, birthdays and work days—you are already behind. The mortgage, credit card, car loan, et cetera, all tacked on interest the second after midnight. Long before you rolled out of bed and poured your first cup of coffee you need to work to pay the interest before you have money for food, clothing, shelter or entertainment.

    In debt you are a slave; without debt you’re free.  Every day in debt you owe your master. Every day! He is a cruel, heartless master. When the clock ticks past midnight the interest for the day ahead is due.  Only those without debt and in possession of investment assets are free to live each day as they choose.

    Without debt you are free; without debt and with possessing of assets and wealth, each day is yours to use as you chose.

    References:

    1. https://news.northwesternmutual.com/planning-and-progress-2019
    2. https://wealthyaccountant.com/2018/04/12/the-greatest-secret-between-debt-and-wealth/

    Markets are Unpredictable: Pullbacks, Corrections and Bear Market Happen

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    Pullbacks and corrections are commonplace, and investors always say “this one feels different” until it’s forgotten in the next pullback.  Since 1920, the S&P 500 has recorded a 5% pullback three times a year on average and a 10% correction once every year and a half, according to Fidelity Investments.

    Corrections, as opposed to bear markets, often leave no lasting damage. According to
    Schwab, since 1974, the S&P 500 has risen an average of 8% one month after a market correction and more than 24% one year after a correction. Investors see sell-offs as a way to rewind the valuation spring, while also shaking out coattail-riding stocks that
    were not rising on merit.

    According to Fidelity, from Jan. 1, 1980, through Aug. 31, 2020, if you missed only the best five days in the market your performance would be 38% lower for the time frame. It’s far better to focus on developing a strategy that you can stick with over the long run than trying to predict what the market will do on a day to day basis.

    Many investors have the urge to tinker with their investments. This is especially true when the markets are volatile. Watching your holdings gyrate widely in value can make anyone uneasy. That helpless feeling causes many to want to trade more frequently or make portfolio tweaks or running to safety. However, sitting on your hands and not doing anything is usually the best approach.

    During turbulent times, it’s crucial to avoid the big mistakes. Usually those missteps stem from succumbing to emotion (fear of loss) and doing too much, not doing too little.

    Warren Buffett put it best when he said, “be fearful when others are greedy, and greedy when others are fearful.” As markets sell off or correct, it’s critical to focus on long-term time horizons. If you have available cash, it would be a great time to buy more stocks. Understandably, the act of investing more money after seeing your portfolio drop so dramatically is very difficult. The comments received by financial advisors included, “Why add money to something that keeps dropping in value?” and “Shouldn’t we cut our losses and move to cash?”

    While every fiber of your being is telling you to run for the hills, reaffirming your strategy by adding money is generally the best decision when markets are in a selling frenzy or correction.

    References:

    1. https://www.fidelity.com/viewpoints/investing-ideas/six-tips

    Financial Literacy: Six Principles of Personal Finance | TD Ameritrade

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    Imagine operating a boat without the basic understanding of nautical rules of the road or even how to operate a boat. Scary thought.

    Here’s another scary circumstance – one that is all too real. Many Americans are making financial decisions with minimal financial knowledge of investing, budgeting, and credit. The TIAA Institute conducted a survey on U.S. financial literacy, asking 28 basic questions about retirement saving, debt management, budgeting, and other financial matters. The average respondent answered only about half of the questions correctly.

    Another study, conducted by Pew Research, found that one in four Americans say that they won’t be able to pay their bills on time this month.

    It has been said that knowledge is power, and if that’s true, then too many Americans lack the power to control their financial futures. Financial success rarely happens by accident; it is typically the outcome of a journey that starts with education.

    Talking about money is one of the most important skills to being a fiscally responsible and a financially literate person. However, 44% of Americans surveyed would rather discuss death, religion or politics than talk about personal finance with a loved one, according to CNBC.

    Why? Two major reasons are embarrassment and fear of conflict, even though the consequences can be grave: 50% of first marriages end in divorce, and financial conflict is often a key contributor. Additionally, it is considered rude to discuss money and wealth.

    The missing component is financial literacy education and training.

    Mastering personal finance requires you to look at your financial situation holistically and come up with a plan for how to manage your money. In this TD Ameritrade video, we’ll look at helpful principles for six personal finance topics:

    1. Budgeting – focus on the big ticket items by cutting cost on the expensive costs such as cars and homes
    2. Saving and investing – be specific about your destination and your plan on achieving your goal and reaching your destination
    3. Debt and Credit – avoid high interest debt and loans on items that will quickly lose value
    4. Reduce taxes – find ways to legally pay less taxes on the income you earn,
    5. Avoid insurance for expenses you can pay out of pocket – purpose of insurance is to protect you in unfortunate scenarios.  60% of all bankruptcy is related to medical expenses
    6. Investing for retirement. – don’t just save for retirement, invest for retirement.

    Make high impact adjustments to your finances to improve your financial future.

    References:

    1. https://www.cnbc.com/2019/04/30/the-us-is-in-a-financial-literacy-crisis-advisors-can-fix-the-problem.html
    2. https://www.tiaainstitute.org/publication/financial-well-being-and-literacy-midst-pandemic
    3. https://www.pewtrusts.org/en/research-and-analysis/articles/2017/04/06/can-economically-vulnerable-americans-benefit-from-financial-capability-services

    Annual Black Investor Survey by Ariel Investments Charles Schwab

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    “Black Americans are already behind the eight ball, and it is disheartening to see that at current savings and investing rates, the wealth gap will continue to expand, endangering our futures and leaving our families exposed.” Mellody Hobson, co-CEO & President of Ariel Investments

    The annual Black investor survey by Ariel Investments and Charles Schwab was recently released.

    This year, the survey revealed that Black Americans continue to have less opportunity to benefit from stock market growth than white Americans at similar income levels, according to Ariel Investments. The data also showed signs of hope, including increased young investor engagement.

    For more than 20 years, the Ariel-Schwab Black Investor Survey has compared attitudes and behaviors on saving and investing among Black and white Americans.

    This year’s results show the deep-rooted gap in participation between the groups persists. The survey conveyed several important trends:

    • Growing engagement in the stock market by younger Black Americans, with 63% under the age of 40 now participating in the stock market, equal to their white counterparts
    • The closing of this gap among younger investors is being driven by new investors: 3 times as many Black investors as white investors (15% vs. 5%)
    • A wide investing gap exists overall – 55% of Black Americans and 71% of White Americans reporting stock-market investments

    It is encouraging to view that younger African Americans are investing in greater numbers. Yet, a significant gap persist in the overall number of who invests by race and ethnicity.

    More Black Americans became first-time investors in 2020 than in any other year, according to the results of a new survey by Ariel Investments and Charles Schwab. The rise has primarily been driven by younger investors: 63% of Black Americans under 40 now report participating in the stock market, equal to their white counterparts.

    On the whole, however, wide gaps remain, with 55% of Black Americans and 71% of white Americans reporting stock-market investments. “This disparity, compounded over time, means that middle-class Black Americans will have less money saved for retirement and less wealth to pass onto the next generation,” the report’s authors write.

    The ongoing pandemic has only exacerbated the imbalance, according to the report. In 2020:

    • More than twice as many Black 401(k) participants (12% vs. 5%) borrowed money from their retirement accounts.
    • Almost twice as many Black Americans (18% vs. 10%) dipped into an emergency fund.
    • Nine percent of Black Americans (vs. 4% of white Americans) say they asked family or friends for financial support.

    “Financial literacy is a great equalizer, and a life skill that everyone needs.” Carrie Schwab-Pomerantz, President of Charles Schwab Foundation

    Financial literacy and education are desperately needed in the African American community. And, it needs to start at a very early age before the vestiges of debt and negative spending behaviors becomes a difficult to break habit.

    Trust Remains an Issue

    Trust in the financial services industry continues to affect stock market participation among Black Americans. While similar proportions of Black and white investors believe that financial services institutions are not trustworthy, only 35 percent of African American investors feel they are treated with respect by financial institutions versus 62 percent for white investors. As a result, Black Americans are less likely to work with financial advisors.

    Additionally, what works against new African Americans investors is that most wealth and financial advisors will not work with you if you don’t already have large amounts of money you either earned or inherited. This leaves the vast majority of American (Black, White, etc) out of the financial advisory equation.

    There will be a conversation among leading financial services experts from Ariel Investments, Charles Schwab, and CNBC discussing the challenges driving the racial wealth opportunity gap. This group will discuss the research findings, broader trends, and how the financial services industry can challenge the status quo.

    The The Racial Wealth Opportunity Gap Widened in 2020 conversation will occur on Tuesday, March 2, 2021, 3:00 – 4:00 p.m. EST.

    References:

    1. https://www.aboutschwab.com/ariel-schwab-black-investor-survey-2021
    2. https://blackinvestorsurvey.swoogo.com/ariel-schwab/979446?ref=swbh?SM=URO&sf243370044=1

    What Every Woman Needs To Know About Her Money

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    “The lion’s share of wealth, two-thirds of wealth in the United States, is going to end up in the hands of women by the year 2030.” Jean Chatzky

    The women that Jean Chatzky, New York Times Bestselling Author and financial editor at the NBC TODAY Show, has talked with “share a lack of confidence” regarding managing and investing their money. “Whether we’ve got one hundred, one hundred thousand, or one million dollars, we don’t always feel equipped to manage it, even when we’re doing exactly the right things,” she explained.

    In order to create a better world, Chatzky suggests women should, “…use this power that’s coming our way to improve not just our lives, but the lives of the people that we love and care about, and the causes that  we believe in. We really do have an opportunity through giving and investing to create the world we want.”

    Women…”have an opportunity through giving and investing to create the world we want.” Jean Chatzky

    Chatzky offers 15 tips to help you get a handle on your finances and to create the financial future you want for yourself.  A future that aligns with your goals, values and purpose in life.

    1. Talk openly about money

    Chatzky explains, “We gather groups of women who don’t make a habit of talking about money with the specific purpose of talking about money…and it’s really freeing.” One open ended question she asks is, “What do you want your money to do for you?”.

    2. Track your spending to see what you really value

    Do you want a clear picture of your spending? More so, do you want to uncover whether or not what you say are priorities are aligned with your expenditures?

    3. Determine what your ideal life actually costs

    “What do you want from your life?” This is a question Chatzky believe you need to consider so that you can determine what your ideal life actually costs. Write down what you want and next to each item, list the price to do or have it.

    4. Use money as a resource to buy you more time

    Money is a tool which creates freedom of time and choice. Chatzy shares, “The most important thing to realize is the opportunity that you’re wasting. Money we can get more of. Time, you absolutely can’t get more of…But by moving around some of our money, we can restructure our time in a way that feels much better, much more fulfilling, and much less stressful. We are so stressed, and using our money to swap for a little bit of extra time is one great way to reduce some of that stress.”

    5. Identify your money scripts

    “We all have stories around money which became ingrained as children. In some cases we mimic them, in others we rebel against them. In order to know where you’re going with your financial future, it’s helpful to identify the scripts that are overtly or subliminally impacting your views and habits around money,” advises Chatzky.

    6. Find financial harmony in your primary relationship

    Chatzy suggests, “Listening is the key to success within a relationship. You have to understand why your partner needs what they need as much as they need to understand what you need.”

    7. Don’t let money injure your friendships

    “Listen and read between the lines. We know an awful lot about our friends’ financial situations, even if they tell us not one thing. We see how they spend. We see how they manage. We know if they’re stressed financially. We just have to be a little bit empathetic and open-minded about the fact that they may not have the same choices or priorities that we have. And that doesn’t mean that we can’t be great friends,” shares Chatzky.

    8. Teach your kids early

    It can feel scary to talk to your kids about money, especially if you feel tentative about your own financial skills. Fortunately, it doesn’t have to be challenging: “Kids have to have money in order to learn to manage money.”

    9. Get paid what you deserve

    To charge or get paid what you deserve, “First, you must know what you deserve and once you know what that number is, you have to ask for it:

    10. Negotiating won’t hurt your outcomes

    The person on the other side of the table, they are waiting for you to negotiate, according to Chatzky. They’re not going to punish you for negotiating. You may not get the money. But asking is not going to hurt you.

    11. To be or not to be (an entrepreneur)

    30% of US businesses are women-owned, and that number is rising steadily.

    12. Spend on others

    Studies show that when you do for others, you’re guaranteed to feel happier. This includes when you spend on others. “There’s no sense in feeling guilty for spending money that’s not sabotaging our financial life”, says Chatzky.

    13. Talk with aging parents

    “If you haven’t had a conversation with your parents before you’ve hit age forty or they hit age seventy, it’s time”, she comments

    14. Have a little fun with your money

    Chatzky comes from a judgment-free zone when it comes to how you spend your money. But, “know how much it costs” since you earned that money and yours to do with as you want.

    15. Consider your legacy

    “You have to think about what’s important to you. That’s where a lot of us fall down when it comes to charitable giving”, Chatzky says.

    Building wealth

    If you want to build wealth, you need only do four things, according to Chatzky:

    1. Make a decent living.
    2. Spend less than you make.
    3. Invest the money you donʼt spend.
    4. Protect the financial world you build so that a disaster doesnʼt take it all away from you.

    Building wealth sounds easy, so why is it so hard, particularly for women?  “Because women according to Chatzky, “make excuses”. We tell ourselves that we’re “just not good with money,” or that our husbands “like taking care of the finances.”

    In short, “what successful women want from their money are: independence, security, choices, a better world, and–oh yes–way less stress, not just for themselves but for their kids, partners, parents, and friends.”

    To read more: https://www.vunela.com/jean-chatzky-on-the-top-15-things-every-woman-needs-to-know-about-her-money/

    References:

    1. https://www.vunela.com/jean-chatzky-on-the-top-15-things-every-woman-needs-to-know-about-her-money/
    2. https://www.jeanchatzky.com/books/