Budget

US Debt credit card

US Debt Is Rapidly Growing

Money Maroon

As the US debt level continues to rise, it is an interesting sight to see it happen first hand. If you are a manager, you will see this everyday. Specifically from new hires. This is the easiest way to find out what is going on with US Debt. The attitude of new junior hires tell it all. You can watch the attitudes of those with children and family, and those without. For the most part, there is no difference. It is very obvious that the masses have been programmed to spend. Rarely do junior hires save and invest first.

The Drive To Spend

From new junior hires, it is simply amazing to hear their thoughts on money. When many obtain  a job that pays more than they have made before, the first thought is how to spend their money. Not how to save. It is shocking. Even when there is a constant drumbeat of a recession in the near feature, the vast majority of new junior hires have a spending mindset. As such, as soon as the money comes in, it is let go on frivolous things. 

It is actually amazing. For some of these new hirers, I am somewhat jealous of the naivety. For example, how free they are with money. No thought of what could happen if they lose their jobs. They are taking vacations, buying new cars, buying new homes and attending far away music festivals. You only live once they say.

US Debt Is Growing And It Is Scary

The scary part of this is because of the high wages that these new junior hires are making, the thought is that they can pay off debt whenever. As such, they accumulate debt with the thought that in the next few months it can be paid off. This is a problem. Without adequate funds in an emergency fund, the lost of a job or any hick ups or simply life can cause issues. With high salaries, in a high costs of living area, and financial illiteracy, debt can accumulate very fast.

This all goes to show how US debt continues to grow. There is such a mass of financially illiterate folks that no matter the salary, no matter how high the income, many in the US are simply trained or programed to spend and to continue to do so until they have nothing left.

Those With Families

The interesting thing is that even as we move toward a possible recession, it really does not matter if folks have families or not.  The spending continues on. Whether it is a weekend trip to Europe or traveling to another State for a music festival. It is simply amazing. Those individuals with families are spending more than those without. For most, you would actually expect the opposite. But coming out of the pandemic, this is where we are. There is a pent up demand to travel and it does not matter if a recession is around the corner. Caution is being thrown to the wind and folks are spending and the debt load is rising. 

US debt is not the only debt rising. Debt is raising in other countries as well. As the labor market tightens, as layoffs increase, there will be fiscal pain. Are you planing ahead or are you apart of this group that is driving US debt to new heights?

Conclusion

As the US debt level continues to rise, it is an interesting sight to see it happen first hand. If you are a manager, you will see this everyday. Specifically from new hires. This is the easiest way to find out what is going on with US Debt. The attitude of new junior hires tell it all. You can watch the attitudes of those with children and family, and those without. For the most part there is no difference. It is very obvious that the masses have been programmed to spend. Rarely do junior hires save and invest first. Or for that matter, save at all. For financial independence, start saving and investing early.

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Have you seen CD rates lately

Have You Seen CD Rates Lately?

Money Maroon

Have you seen certificate of deposit (CD) rates lately? I will give you a hint, they are high and expected to get a bit higher in 2023 in view of predicted rate increases by the federal reserve. As of the start of the new year, you can get 12 month to 24 month CDs in the 4-5 percent range. If you look hard enough, I am confident that you can find rates in the 5-6 percent range as well. This is in stark contrast to only a year earlier, when rates hovered around 1 percent. On your financial journey, it is important to assess whether or not CDs should be apart of your holdings.

The Stock Market

In 2022, the stock market did not do so well. All the indexes were in the toilet. The Nasdaq was down 31.1 percent. S&P 500 was down 19.4 percent. The Dow Jones was down the least but was down 8.8 percent. The massacre is expected to continue into 2023. This will provide an epic buying opportunity in 2023-2024, but we will discuss this buying opportunity in another post. While the stock market was going down in 2022, do you know what was not down? Savings and CD rates. Both started 2022 ridiculously low. However, as the federal reserve began to fight inflation by increasing interest rates, both savings and CD rates became more favorable.

CDs

A CD is essentially a savings product that earns interest on a lump sum for a period of time. The time period ranges from three months to about five years. Unlike a savings account, with a CD, the money must remain untouched for the entirety of the term or risk penalty fees or lost interest. Because of this lost of liquidity, CDs usually have higher interest rates as compared to savings accounts.  As compared to stocks and bonds, CDs are safer and more conservative and offers lower opportunity for growth. However, unlike stocks and bonds, CDs, if allowed to run the term, have a  guaranteed rate of return.

CD Rates In 2023

At the start of 2023, CDs are paying 4-5 percent for eighteen month to twenty-four month term. For example, Marcus’ 12 month CD pays 4.3 percent and the 18 month CD pays 4.4 percent. Ally CD rates are 4.25 percent for 18 month, 3 years and the 5 year term. Synchrony on the other hand is offering a 4.6 percent rate for their 14 month term CDs.

Diversify

In life, it is usually best to diversify. By now, you are likely aware that it is likely best to diversify your income streams. You also may know that it is probably best to diversify your investment portfolio. While saving accounts are not necessarily the growth vehicle of the stock market, you should consider diversifying your money beyond investing in the stock market and having a savings account. In view of the current CD rates, investigate if CDs would be beneficial to your bottomline. If a CD is, open one. As the market tanks, instead of losing money, CDs may provide a reprieve. Instead of losing 20 percent in the stock market, gain 4-5 percent in a CD.

Conclusion

CD rates are high and expected to get a bit higher in 2023. These increases are in view of predicted rate increases by the federal reserve. As of the start of the new year, you can get 12 month to 24 month CDs in the 4-5 percent range. If you look hard enough, I am confident that you can find rates in the 5-6 percent range as well. This is in stark contrast to only a year earlier, when rates hovered around 1 percent. On your financial journey, it is important to assess whether or not CDs should be apart of your holdings.

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praying for student loan forgiveness

Is Student Loan Forgiveness Fair?

Money Maroon

It does not matter how much is forgiven and it really does not matter the reason. Forgiving student loans is a divisive issue. There is one main group that will directly benefit from student loan forgiveness. This group includes those for whom student loans are forgiven. On the other hand, there will aways be a number of groups that will be aggrieved. This group of the aggrieved includes at least those who have paid off their student loans, those who never took out student loans and those who did not have the opportunity to take out student loans because they did not attend college.

Student Loan Forgiveness

There is a student loan problem. Some students were victims of predatory lending from opportunist institutions. In some cases, students were given loans and then obtained worthless degrees. In some cases, the institutions were not up to par academically. For some, the college was closed down and students were stuck with student loans but no degree. For others, student loan terms were not clearly explained and students now owe more than they borrowed. In all cases, for those affected, it is likely that they are stuck with a mountain of student loans and no true path to ever pay off the borrowed amount plus the accruing interest.

On balance, should these students have done their due diligence? Should these students have read the fine print and better understood what they were signing up for? Also, should there have been more government oversight to prevent institutions from selling these subprime student loans to vulnerable students? Something to think about.

Students Who Paid Back Their Student Loans

There are some students and adults who have now paid back their student loans. Essentially, they made it a priority to not take out more than they needed during their school years. Many of these individuals did not attend their dream school because of the cost. Instead, they settled for a less expensive option. They may have also worked extra jobs. Some did not take fancy spring break trips while in college. Others have forgone buying nicer homes or cars. Instead of spending, these students were cost conscious. They buckled down and payed back their student loans.

How would you feel if you were one of these students when you hear of others getting student loan forgiveness? You will likely feel robbed. You have made the sacrifices and paid back what you owed. Now, you are being penalized for your diligence, being proactive and responsible. Would you view this a being fair?

Students Who Did Not Take Out Student Loans

Let’s face it, we live in an unequal society. There are a group of students who attended college and did not have the need to take out student loans. This could have been a result of their parents saving over time and allocating funds specifically for college. For others, their parents were in the position to pay their tuition as they went through college. Still, there are many who simply worked during college and were able to make enough to pay their costs or obtained scholarships.

For those who prepaid for college, those who worked multiple jobs to pay their tuition, and those who studied and obtained scholarships, how is student loan forgiveness viewed? Will they view student loan forgiveness as a penalty? Why work hard during college and forgo all the parties, why prepay for college, why work hard and obtain scholarships when the student loans will be forgiven anyway? 

Those Who Did Not Attend College

Of the groups that will likely view student loan forgiveness in a bad light, those who did not attend college will likely be the most upset. They are the most likely to be upset because as tax payers, they may view student loan forgiveness as paying for something they did not have the opportunity to part take in. These individuals are essentially paying for someone else’s college education or mistake. They may also see student loan forgiveness being applied to college educated citizens as causing a further divide between the have and the have nots. Some who will be helped by student loan forgiveness, where they attended reputable colleges, may end up earning more than those who did not attend college. So in effect, as a tax payer, those who did not attend college would be further subsidizing these individual’s lifestyle. For many, this will be viewed as being unfair. 

The Greater Good

No matter your stance on student loan forgiveness, one thing to consider in this student loan forgiveness debate is the greater good. Will forgiving a portion of student loans help the overall society in general terms. If citizens are not buried by student loan payments, will this translate into increase economic activity as more funds will be available to spend. If this works perfectly, all of society will benefit. However, will this affect personal responsibility and the motivation to live within ones means if there is a possibility that your debt will be forgiven?

Whatever the decision with regard to student loan forgiveness, one thing is for sure, the debate will continue.

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Video Summary

Tithe Yourself

Tithe Yourself Now

Money Maroon

Let us start by saying that this posting has nothing to do with religion. This posting focuses on tithing yourself. More specifically, from every paycheck, pay yourself first. Tithe yourself. Ensure that you are taking at least 10% from your paycheck and directing that portion to a personal account. If you do not tithe yourself, someone else will have a claim to your money. You work hard for your paycheck, why have others take a share before you do?

Tithe Yourself

The word tithe in Hebrew literally means tenth. By tithing yourself, we mean automatically taking at least 10% of your paycheck off the top and directing this amount to a personal account. Some folks religiously tithe to a church but often forget about tithing to themselves. It is important for your financial future that you tithe yourself.

When beginning on a journey to save or to establish an emergency fund, you may not be able to tithe 10% to yourself. Start small and build from there. The first step is to start. Once you start and begin to build a habit of tithing yourself, move on from just tithing yourself to tithing as much as you can to yourself. Aim to increase your tithing percentage up to 10% and once you hit the 10% mark, aim for 15% and beyond.

Tithe Yourself – Pay Yourself First

Tithe yourself is to encourage you to pay yourself first. You should pay yourself first because if you do not, you run the risk of not paying yourself at all. For example, after paying your bills and spending discretionarily, how much of your paycheck do you have remaining? If you have money left over, it does not take much for all that money to disappear due to frivolous spending? 

Many times, living above your means and going into debt can result when you do not pay yourself first. If you do not pay yourself first, it is likely that you will not budget and over spend, or you will simply spend what you have because you have not assigned a task to that money.

By paying yourself first, you will force yourself to live below your means and budget accordingly. By paying yourself first, you are assigning a task to every dollar that you make. Imagine upfront knowing that 10% of your paycheck is off limits. By reframing your paycheck this way, you know that you are limited to 90% of your paycheck. This means that all of your bills must be paid by this amount. Can you pay rent/mortgage, phone, cable, internet, subscriptions, power, and whatever other bills you may have from this amount? If the answer is yes, increase the amount of your paycheck that you are paying yourself. If the answer is no, you will be forced to cut back. You will be forced to make hard decisions. But trust me, it is worth it. Saving for your financial future is worth it. Tithing yourself is worth it.

Money in hand. Tithe yourself. Pay yourself first

You Are Not Being Selfish

It may sound selfish when it is said to pay yourself first or to tithe yourself. However, if you do not pay yourself first, you are always putting yourself behind someone else. You are putting your bills ahead of your financial future. You are also putting the temptation of instant gratification ahead of the delay gratification that will benefit your future. Instead of having others having a claim to your money, claim it as your own. You worked hard for it, so keep it and grow it to the betterment of you and your family.

If you still think that tithing yourself is selfish, then sometimes in life, you need to look out for yourself and your financial future. Because the simple fact is, if you fall on hard times, it is unlikely that there will be many people lining up to pay your bills or to house your family.

Conclusion

This posting focuses on tithing yourself. More specifically, from every paycheck, pay yourself first. Tithe yourself. Ensure that you are taking at least 10% from your paycheck and directing that portion to a personal account. For example, a personal investment account or a personal savings account. If you do not tithe yourself, someone else will have a claim to your money. You work hard for your paycheck, why have others take a share before you do? Reward yourself for your hard work by saving for your financial future.

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Why Lottery Winners Go Broke

Why Lottery Winners Go Broke

Money Maroon

Ever since I understood the concept that buying a lottery ticket gives you the chance of winning millions, I wanted to win the lottery. As I got older, I realized that the probability of winning was extremely low, as such, I rarely ever play. When I do play, I see it as a donation to the State’s education system as a percentage of the lottery usually funds education. For the lucky few who plays and wins, congratulations. However, for winners there is happiness, that is typically followed by sorrow and many times tragedy. It makes you wonder, why does such tragedy follow many lottery winners? Looking at the financial side, why do lottery winners go broke?

Lottery Winners Go Broke Because Of Inexperience Money

A lot of lottery winners are not math or financial whiz. The fact is, the more educated you are, the less likely you are to play the lottery. It is simple, you understand that the odds of winning is extremely low and as such you do not play.

Those who win the lottery, tends to be those playing the lottery which is in effect proportionally not the most educated with regard to finances. Most lottery winners have the issue of having a large sum of money and not knowing how to maintain it. 

Many lottery winners fall prey to their wildest financial dreams. The dream of having one or more mac mansions, new expensive cars and other toys that are wanted but not needed. With a scarcity mentality, many lottery winners are frivolous with lottery winnings. Some winners see their winnings as “free money” to be spent. While individual purchases may not put a dent in the overall winnings, they can quickly add up if winners don’t keep a close eye on what they are spending. A bigger home comes with a bigger bill to upkeep. Luxury cars come with larger insurance and repair bills.

lottery check - why lottery winners go broke

The Payout Is Not As Much As You Think

When taking the payout from the lottery, winners usually have a choice. The choice is typically between taking a lump-sum or a fixed payment overtime. If you take the lump-sum, sometimes it is only around 60-75% of the advertised prize. This can leave winners with a lot less money than they expected. Then do not forget about the taxes. In most jurisdictions, lottery winnings are taxed. As such, in the end, while you will have a huge sum of money, the sum may not be as large as others think it is. Therefore, it may be bit more difficult to rebuff family and friends when they falsely believe that you have a lot more than you actually do.

Lottery Winners Go Broke Because Everyone Knows That You Won

In many places, a condition of winning the lottery is that your name is made public. Many lotteries do require that basic information about winners are made public. For example, name, city and the amount won.

When every one knows that you won millions of dollars, you will have long lost friends and family coming out of the woodwork. They will all come calling.  Many new lottery winners will not be well equipped to say no to friends and family. Once family and friends learn of the windfall, they will have expectations of what they should be entitled to.

But also, there are complete strangers who targets lottery winners. Some with sad stories, others with investment ideas and still others who aims to rob, maim or kill lottery winners.

Typically, lottery winners go broke as a result of a million cuts. One bad investment idea or falling for one sad story will likely not completely deplete the millions won. However, not paying attention and learning to manage your money will eventually lead to bankruptcy or worst.

Addiction

There is the saying that money does not buy happiness, it only amplifies who you are. A jerk before having a lot of money, will likely be a jerk with lots of money after winning the lottery. If you were previously prone to addiction prior to winning the lottery, now you are a wealthy individual who is prone to addition with the financial means to support that addiction. If you were an alcoholic before winning the lottery, you are now a very rich alcoholic. For those with addition issues or tendencies, winning the lottery and having the financial resources to support an addition habit is dangerous and can be deadly.

For those who cannot handle stress, winning the lottery will add a lot of stress. There is some stress that comes with having the money. You will like be stressed about how to maintain it, how to manage it, how to handle the constant requests for handouts, and how to face resentment (because it will come from family and friends). For many, alcohol and drugs are the remedies often sought with stress. It is not uncommon for many lottery winners to blow huge sums of their winnings on drugs and alcohol. At times, this is in an attempt to cope with their new lives as lottery winners.

Not Asking For Help

As mentioned above, many lottery winners were not finance majors in college. As such it is probably in their best interest to seek advice from qualified financial professionals. However, despite the fact that sudden wealth can cause lots of financial complications, very few lottery winners seek professional help. Very few lottery winners seek out professional advice on how to grow and or maintain their wealth. Without the requisite knowledge of how to manage such an instant inflow of funds, many lottery winners mismanage their money and go broke.

Conclusion

With winning the lottery or with any other instant financial windfall, be careful what you wish for. Many lottery winners go broke. By not being able to handle the stresses of winning the lottery, you could end up being a lottery winner that goes broke or worst.

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Video Summary

Amazon prime day

On Amazon Prime Day, Ask These Three Questions

Money Maroon

It is back. Yes, it is that time of the year again, it is amazon prime day. The annual two day deal event that is exclusively for prime members. But before you hit the checkout button and reach into your wallet or bag for your credit card, ask yourself the following three questions. Do I really need this item? Can I afford it? How many days will I have to work to pay for this item. Do not buy just to buy, be intentional and logical with your purchases. It is your hard earned money after all. 

Amazon prime day
On amazon prime day, think before you spend

Do I Really Need This Item

So often we buy items because we think we need it. But do we really understand what is a need versus a want? Generally, a need is something that is a necessity or essentially required for life. For example, food, water, and shelter are needs. In some instances, the list can be much broader depending on your specific situation. But if you are hoping to take advantage of an amazon prime day deal, it is likely that the item you are planing to buy is in the category of a want. 

A want is something unnecessary but desired. For example, while you may need a car, do you need a luxury car? We all need shelter, but do you need the home that is at the top of your budget? Do you really need the new fancy gadget for your grill or your car? The answer is no. It is not a need, just a want. What is actually interesting is that a lot of times, we may desire an item, but once we have that item, we will rarely use that item.

Many factors contribute to your wants. Did you fall victim to a commercial or was it something you saw in your neighbor’s yard? Your want for an item may also be a matter of the fear of missing out. The fear of missing out will at times push us to buy when we need not do so. Before pulling the trigger on a purchase, remember not to buy just because something is on sale. Assess whether or not the item is a need. Does it make sense? For all you know, next week, the special sale that appears on amazon prime day will be back. Do not allow a manufacture sense of scarcity and pressure force you to make a purchase.

Can I Afford Amazon Prime Day

When thinking about taking advantage of amazon prime day, always ask the question of can I afford it. No matter what the sale prize is or the discount percentage, ensure that you can afford it. Being able to afford something is very different from being able to purchase the item. You can use credit to purchase just about anything. But can you actually afford what you are buying.

Do not be tempted to put something on a credit card that you cannot afford. You do not want to have an amazon prime day purchase made this year that is not paid in full next amazon prime day. Credit cards are expensive. Take a look at your interest rate. Ensure that if you make a purchase on credit, you are able to pay it off in full without having to pay interest.

Can you afford your next purchase? Be honest with yourself. If the answer is no, know that it is ok. Because there is a sale does not mean that you have to buy. Keep your financial future in mind.

How Many Days Will I Have To Work To Pay For Amazon Prime Day

It is a question that is rarely asked but should be asked before every major purchase, especially on amazon prime day. The question is, how many days will I need to work to pay for this item? For example, if the item costs $500, and you are paid $30 an hour, it will take you 16 hours of work to pay off the item, two days of work. If you are making significantly less than $30 an hour, you may have to work for over a week to pay for the item. Now consider if the item or items total over $500, it may take you a lot longer than a week.

Now, is this item that you are thinking of purchasing worth a week of work? Is it worth it? If the item is a need, then it likely is. However, if you are about to purchase a want, take into account the costs. With regard to costs, consider not only the money, but also your time.

Before you consider making a purchase on amazon prime day, ensure that you are not succumbing to a manufacture sense of scarcity and pressure.

Amazon prime day
On amazon prime day, don’t forget that it’s your money

Conclusion

Amazon prime day is here again. The annual two day deal event that is exclusively for prime members. Before you hit the checkout button and reach into your wallet or bag for your credit card, ask yourself the following three questions. Do I really need this item? Can I afford it? How many days will I have to work to pay for this item. Do not buy just to buy, be intentional and logical with your purchases. After all, it is your hard earned money. 

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Pay yourself first

It’s Best To Pay Yourself First

Money Maroon

If you are working and cannot afford to save, it may be time to take a step back and pay yourself first. From any pay check, no matter the value, it is incumbent upon you to ensure that a first portion of your pay check goes into your personal account. If you cannot trust yourself to perform this task consistently, automate. The simple fact is, if you are not paying yourself,  you are working to pay others. You are essentially building another person’s empire while neglecting your own.

Why Pay Yourself First

You should pay yourself first because if you do not, you run the risk of not paying yourself at all. Have you ever received a paycheck and after paying all your bills, you have a zero or a negative balance? Have you had money in your account after paying your bills, and that money quickly disappears due to frivolous spending? 

These situations occur when you do not pay yourself first. If you do not pay yourself first, it is likely that you will end up not budgeting and over spending, or you will simply spend what you have because you have not assign a task to that money.

By paying yourself first, it forces you to budget. For example, if your monthly salary is  $5000, and you automatically pay yourself by saving $1000, you really have $4000 to spend for that month. That $1000 makes a huge difference. You will no doubt adjust to having $4000 and will stop thinking about making $5000 per month. By having this mindset shift, you will live on $4000 and not $5000. By paying yourself first, you will force yourself to live below your means and budget accordingly.

Pay yourself first
If you are not paying yourself first,  you are working to pay others. Stop building another person’s empire while neglecting your own.

Force Budgeting

For many of us, budgeting can be difficult. It is difficult not because it is a mentally difficult task. It is typically difficult because if forces us to track our spending over a long period of time. Budgeting forces us to itemize what we are doing and forces us to be conscious of every purchasing decision. 

By paying yourself first, we are pushed to budget without actually making a budget. In the example above, if you are paying yourself $1000 per month on a $5000 monthly salary, you must now live on $4000 per month. You are in a force budget situation. You are forced to curb your lifestyle from one that spends $5000 per month to one that spends $4000 per month. This is not an easy feat for many, but it can be done. By cutting out a few items, you will be surprise by how much you can save.

If you do not budget and live beyond your means, paying yourself first becomes a moot point. The interest on your debts will easily out pace your savings. To get ahead on your financial journey, it is important to live below your means. Paying yourself first helps facilitate this mindset change.

Pay Yourself First And Build Your Empire

Let us not forget, if you pay yourself first, you are building your financial legacy and not someone else’s. Think about shopping at Walmart, buying a car, or any other consumer goods, by making that purchase your are making someone else’s family rich. If it is not the Waltons, it’s the Porsche’s or the Cargill’s, by spending you may be enriching the Dell’s or the Knight’s. You may get a fleeting enjoyment from your purchase, but someone else’s family just got your money. Your temporary satisfaction is building another family’s permanent wealth.

However, if you pay yourself first, your are building your own empire and not someone else’s. Pay yourself first and you are growing wealth. Money that you typically spend on consumer goods go to your investment/savings account. You are growing, you are opening up opportunities and will be afforded all the advantages that comes with being financially secure. Pay yourself first and lay the foundation for a financially secure future.

Conclusion

If you are working and cannot afford to save, it may be time to take a step back and pay yourself first. From any pay check, no matter the value, it is incumbent upon you to ensure that a first portion of your pay check goes into your personal account. If you cannot trust yourself to perform this task consistently, automate. The simple fact is, if you are not paying yourself,  you are working to pay others. You are essentially building another person’s empire while neglecting your own.

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Financial Mistake

This Financial Mistake Is Making You Poor

Money Maroon

When asked what their biggest money mistake was, many people will respond that their biggest financial mistake is something they bought. Whether it is a house, a car or their education, the answer typically given is an active financial act that has been taken. But the question is not what is the biggest purchase that you have made that you now regret. The question is, what is your biggest money mistake. The biggest financial mistake that you likely have made and may continue to make is not what you have purchased, it is what you have not yet done.

Lost Opportunity

Your biggest financial mistake is likely not a purchase that you have made. Surprisingly, your greatest financial mistake is typically a decision that you did not make. It is, lost opportunity. 

If the opportunity was taken and worked out in your favor, it is not a mistake and as such the decision would not fall into the category of a financial mistake. On the other hand, if a lost opportunity is a mistake, the size of the mistake only grows. The reason for this is the opportunity cost and the compounding of that mistake. For example, think about not taking a job or not continuing your education. 

If these decisions worked in your favor, it would have been a boon. However, if these decisions were in fact a mistake, when looking back, you will see the opportunity lost in your career earnings, relationships, status and financial security. These losses will only compound over time. The mistake will only grow. 

But do understand that this works in the other direction as well. By doing your research, due diligence and making a good decision, the benefits here only compound. Make a great financial decision today and enjoy the compounding benefits over your life time.

The Financial Mistake Of Not Saving Earlier

Financially, your biggest mistake is likely that you did not begin saving earlier. With regard to saving, consider the opportunities that you have missed out on because of lack of funds. Think of the turmoil that you may have experienced during one of the many financial downturns over the last number of decades. How different would that have been if you had been saving earlier?

Saving is the basis of any financial plan. Without effectively saving, you will not build an emergency fund to ride out the financial bumps in life. Sadly, the importance of saving usually dawns on us during a financially rocky situation. For example, it is only when you lose a high paying job that you think of how much you have wasted on nonsense. Think of professional athletes, lawyers and doctors. The financial regrets only comes after going through a financial rut.

Did you lose a house or other financial possessions? Think of what you could have done with an emergency fund. If you have not yet began saving, do not allow this financial mistake to compound. Begin saving today.

The Financial Mistake Of Not Investing Earlier

Consider if you had only knew then what you know today. What would you have done differently? If there were no time machine, as there current is not, how can you implement your learnings today and benefit going forward.

On average, over the last 30 years, the stock market has given a return of between 7-10%. Imagine if you had place a portion of your money 20 years ago into the stock market and continually did so. You would have most likely been a millionaire at this time.

The fact is, with compounding, it really does not take that much. It only a little money but a lot of time. Use the many financial calculators that they currently have. You will notice that with an average of investing  let us say for simplicity about $100 per month for 20 years, the amount that you gain overtime is remarkable to put it lightly. 

Your biggest financial mistake is not investing earlier.

Financial Mistake
Invest in your financial education

The Financial Mistake Of Not Investing In Your Financial Education Earlier

Knowing that you should save, invest, and reduce debt is the basis of long term financial success. This is in fact the basis of financial education. You must save to have money to invest.  Without saving and investing, your money does not grow. Further, no matter how much you may save or invest, you will not get financially far if your funds are going to interest payments on debt.

Somewhere along the way we all have a financial wake up call. It could be by learning through others or learning a tough financial lesson ourselves. But, at some  point or another, we will realize that we should save more, invest more, and have less debt. I did not say that we will all act upon this realization. Some of us do while others do not.

This is like anything else in life. While we know what is best for us, we may never act. For example, at a certain time in our lives we will realize that we are getting older and need to start thinking about retirement. In this case, many of us continue living it up while others make a change. As another example, at a certain time in our lives, we realize that we should get healthy. Some of us make changes while others continue to have an unhealthy lifestyle. 

Financially, it is the same. We know that the more we invest in our financial education, the more likely we are to succeed financially. Yet, most of us rate having a chat about money as near the bottom of the events that we want to do. Most of us refuse to learn about debt and compounding. Most of us engage in keeping up with the Jones instead of focusing on our financial reality. Yes, a lot of us are stuck in the “fake it till you make it” phase of life. This does not work in the long run.

Take hold of your financial situation and invest in your financial education today. The more you learn today, the greater your potential for tomorrow. Your future self will thank you.

Conclusion

When asked what their biggest money mistake is, many people will respond that their biggest financial mistake is something they bought. Whether it is a house, a car or their education, the answer typically given is an active financial act that has been taken. But the question is not what is the biggest purchase that you have made that you now regret. The question is, what is your biggest money mistake. The biggest financial mistake that you likely have made and may continue to make is not what you have purchased, it is what you have not yet done. Stop making financial mistakes and journey to financial independence.

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Financial Mental Health

Financial Mental Health Is Important

Money Maroon

When we think about health, we typically think about our physical health. We think of muscle vs fat vs cardio. But within health, we must also address our mental health. We can replace a hip and a heart, but we cannot replace our brain (at least not yet). So we must take care of what is happening in our mental space, both consciously and unconsciously. Within our mental health, it is important not to forget that our financial situation affects our mental health. When addressing health, we must address our financial mental health. Without good financial mental health, you cannot have great overall health. Work on your overall health by getting your finances in order.

Your Financial Mental Health

You can work out all you want, and eat correctly too, but if you are stressed and having anxiety about paying your mortgage/rent or affording your next meal, you cannot achieve your best health. Let us face it, when it comes to health, mental health is typically an after thought. With  millions in debt and financial literacy at a low, financial health is even further removed from our consciousness.

Your Financial Mental Health
Your financial mental health is important

Improve Your Finances, Improve Your Mental Health

To improve your financial health, improve your financial security. This basically means that you should become more comfortable with your finances. Become more comfortable with your assets and your liabilities. In a simpler form, know the amount you owe and the amount of money you have. 

Next, to improve your financial security, increase your wealth beyond what it is today. This can be done by increasing your funds and/or decreasing your debts. By increasing your wealth, we mean increase your wealth to the point of being able to handle unexpected costs. Yes, building an emergency fund. This act of having a safety net has an indirected effect on your mental wellbeing. It is a stress relief knowing that you are able to handle unexpected costs. You need not worry about being homeless, hungry or the effect of a car breaking down. Having an emergency fund frees up your mental space to do other things that can further improve your life. 

Comfort Before Millions

While the goal for many is to be rich and have millions in the bank, you do not need millions to improve your financial mental health. Just building an emergency fund will substantially impact  your mental state. In a recent study, it was found that the ideal income point for individuals is about $95,000 for life satisfaction and about $60,000 – $75,000 for emotional well-being. You do not need millions to be happy.

Start Small

To improve your financial health, start small. By making small incremental financial changes, you are most likely to stick with the process and achieve your goals. Slow and steady wins the race.

To increase your wealth, begin small by saving a portion of your income. Start slow. Aim to save at least about 1% of your take home income. Slowly increase the total over time to the point where you can begin to confidently build an emergency fund. Take a similar approach with your debts, begin small. Begin by aiming to owe less next week than you do today (for example, credit card debt and student loans). This can be achieved by buying only what you need and consistently reduce your spending over time. Think about your wants and needs before each purchase. Also, consider using a budget and track your spending. These are the initial steps on a journey to a better financial mental state and financial independence.

Conclusion

When we think about health, we typically think about our physical health. We think of muscle vs fat vs cardio. But within health, we must also address our mental health. We can replace a hip, and a heart, but we cannot replace our brain (at least not yet). So we must take care of what is happening in our mental space, both consciously and unconsciously. Within our mental health, it is important not to forget that our financial situation affects our mental health. When addressing health, we must address our financial mental health. Without good financial mental health, you cannot have great overall health. Work on your overall health by getting your finances in order.

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Optional Spending

Discretionary Spending And Your Financial Future

Money Maroon

Discretionary spending refers to optional spending. Spending for wants and not needs. As we get closer to another holiday, whether religious or market created, you must decide how to spend your income. Will you fall prey to the mountains of commercials advertising different deals, or will you keep your discretionary spending to a limit? Whatever your decision, your financial future depends on it.

Before Discretionary Spending, Wait

It is your money, you don’t have to part with it. Consider that you have worked many hours for what you have. After paying for the necessities, you may have a certain amount remaining. You may even have accumulated a certain amount of money over time. With this backdrop, why would you so easily part with your money because of an advertisement, black Friday, small business Saturday, cyber Monday or another commercial holiday? Why would you part with your hard earned money to impress people who likely do not have a second thought about your financial future?

Stop throwing away your money

When you are thinking of parting with your money, discretionary spending, just remember that the spending is optional. You will be spending on a want, and not a need. You do not have to buy that new TV, shoe, computer or car. Do you really need that new subscription or membership? Do you really have to take that expensive vacation? If you think you do, it is best to wait, press pause and think about that next purchase. 

Give yourself at least a week before you spend your money. Think not only of the cost of the purchase, but the true cost of ownership. What other costs are associated with your purchase. Can you really afford it? Think of how many hours you would need to work to earn the amount that you would like to spend.

Think About Saving

During your week of thinking about your next discretionary spending binge, think of what would happen if you saved or invested instead of spending that money. If instead of spending the money you save it in a high yield saving account or invest the money and receive standard rate of return, how much would this money mean to your financial future?

Now, is your discretionary spending worth it? Is it worth the cost of the purchase and related costs plus the additional lost of return on savings and/or investment?

Further, if you were thinking of discretionary spending to impress someone, think of where that purchase will be in two, three or four years – most likely forgotten. Do not spend to impress others. You are responsible for your financial future. Take control, set  your goals and achieve them.

Your Decision Your Future

After delaying your discretionary spending to reflect, if you choose to go ahead with the discretionary spending, at the very least  you have thought about it and have justified the spending. By delaying the purchase and having an understanding of the true costs associated with a purchase, you will be able to make an informed decision. Whatever your decision, let this moment of financial reflection change your money mindset for the future.

Conclusion

Discretionary spending refers to optional spending. Spending for wants and not needs. As we get closer to another holiday, whether religious or market created, you must decide how to spend your income. Will you fall prey to the mountains of commercials advertising different deals, or will you keep your discretionary spending to a limit? Whatever your decision, your financial future depends on it.

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