Emergency Fund

US Debt credit card

US Debt Is Rapidly Growing

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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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quiet quitting, quiet hiring quiet firing, person with finger to the mouth

Quiet Quitting, Quiet Firing & Now Quiet Hiring, Please Stop!

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It is amazing how fast someone discovers something that is new to that person, push it as being new to all, coin a new name and then it is pushed by the media. Think about quiet quitting. It is not new. We have all known folks who simply do not give 100% on the job. Once employees realize that they are not being compensated appropriately, this is what employees do. Quiet firing, is old, not new. Employers have always done this. Now we are hearing about quiet hiring. Quiet hiring is not new. Employers have always done this. I am now waiting for quiet studying, quiet retiring, and quiet dating, oh I guest that is already called ghosting. The point is, do not get caught up in the phraseology, focus on your goals.

Quiet Quitting

The term quiet quitting has come to generally refer to when an employee withdraws from their organization. Quiet quitting manifests itself as an unengaged employee and may be a result of having poor work-life balance.  Meaning an overworked and underpaid employee. One of the biggest causes of quiet quitting is an employee believing that they are not compensated appropriately or that their efforts do not matter. Generally, quiet quitters do not actually leave the organization, instead, they show up but do not give their best effort.

While quiet quitting has entered the lexicon of many in recent years, it is not new. We all know individuals who have always done this. Once they realize that they are not being compensated appropriately, they disengage. They work up to what they are compensated, or up to the point where they will not be fired and stop. I can bet you know of co workers who are like this. If the job description is a 9-5, by 5 they are out the door. If the job description calls for specific activities, anything additional, these employees push back. They will not go above and beyond.

The funny thing is that many quiet quitters know that they will not be promoted for their activities or lack thereof. But that is the point. If they are not promoted, they are ok because they did not go above and beyond. If they are promoted, they know how little they will have to do and no more. Again, nothing new, employees having been doing this for decades

Quiet Firing

Quit firing is essentially when managers fail to engage an employee and slowly push them out of the organization. At times, this is intentional, other times it is a result of a manager’s neglect. When it is intentional, managers will not provide coaching, support or guidance to an employee. This then results in the employee performing at a low level. If the employee is paying attention, they will quietly leave the organization as they know that they may be fired. On the other hand, if the employee is not paying attention, for each low performance, the manager will build a case and inform the employee of this low performance. The aim here is to have the employee finally get the point and leave voluntarily or be fired. 

Again, this is not new. Managers have always been inept. Managers have always trim numbers by building a case against an employee. Quiet firing is nothing new.

Quiet Hiring

The latest in the list of new jargons is quiet hiring. Quiet hiring is when an employer acquires new skills without actually hiring new full-time employees. This is essential an employer hiring contractors and not full staff or moving current employees to new roles while not changing title. When quiet hiring is utilize, the full time employee number does not change. if executed perfectly, your current employee will take on a new role and not be paid anything additional. This is how organizations get an employee to take on dual roles while not being adequately compensated. At times, this is done with the promise of a promotion.

Again, nothing new to see here. Employers have been doing this for centuries. Anything to not pay employees the wage that they deserve.

Conclusion

It is amazing how fast someone discovers something that is new to that person, push it as being new to all, coin a new name and then it is pushed by the media. Think about quiet quitting. It is not new. We have all known folks who simply do not give 100% on the job. Once employees realize that they are not being compensated appropriately, this is what employees do. Quiet firing, is old, not new. Employers have always done this. Now we are hearing about quiet hiring. Quiet hiring is not new. Employers have always done this. 

To ensure that you can live the life that you want to live, journey to financial independence. With financial independence, it does not matter if your employer quiet hires or quiet fires. You can live the life that you want and put in the effort that you choose.

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Have you seen CD rates lately

Have You Seen CD Rates Lately?

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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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Financial literacy

Financial Literacy Is Important

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Without a basic understanding of simple financial concepts, good luck. It will be almost impossible to achieve your financial objectives. Everyday we make decisions about banking, budgeting, saving, credit, debt, and investing. Financial literacy enables you to make informed financial decisions that will propel you toward financial stability and achieving your financial goals.

Financial Literacy

There is currently no one definition for financial literacy. However, generally, financial literacy is the ability to understand and use personal financial management, budgeting, and investing to your financial advantage.  Simply put, financial literacy is having the knowledge to know what to do in a financial sense. This does not necessarily mean that every financial decision will result in success. But over time, it is likely that you will improve your financial situation.

Why Is Financial Literacy Important

Financial literacy is important because it results in budgeting, being prepared for emergencies, and limiting debt. These are the financial forces that we deal with on a daily basis. But more importunely, the financial decisions we make today compounds. The decisions we make today are more important than ever because of the limited safety net available for retirement. 

Most pension plans have been replaced by 401Ks. Unlike pension plans, 401K plans leave the bulk of the decision making and planning to the employee. Without proper financial knowledge, many will be saddled with debt and be ill-prepared for retirement. 

Lack Of Financial Literacy Is Expensive

Not being financially literate is expensive. Some consequences of lacking financial literacy appears in everyday life. These consequences show themselves in increase costs that can be locked in for decades. For example, higher transaction fees, banking charges, higher interest rates on debt, and loses in the stock market. Financial ignorance also compounds as you will not understanding the concept of  compounding. Compounding in view of debt and also in view of income/interest. In a recent survey, it is estimated that financial illiteracy costed Americans about $353 Billion in 2021 alone. That is a crazy amount of money. That is a nontrivial amount of funds.

The Solution

The solution to lack of financial literacy is simple, educate yourself. It is to you and your family’s benefit to be financially literate. Financial decisions not only affect you, but also those around you. 

Financial education resources are available. Best of all, a lot of the information is free. You have this blog as an example and hundreds of others that you can subscribe to or follow. If you want to learn the thoughts of the biggest financial titans in the world today, just search for it. Financial literacy comes down to how important it is to you. Believe me, it should be at the top of your to do list.

For the same reasons why a coach is likely not the best player on a team, financial literacy alone will not be enough to win the financial game of life. Knowledge alone is not enough.

Financial Literacy Alone Is Not Enough

While financial literacy is important, it is not enough. To achieve your financial goals, you need a climate that facilitates wealth generation. This means that the country/jurisdiction that you are in has to facilitate wealth generation. You have to have access to tools and resources to build wealth.  For example, in starting a business,  you need to have/have access to capital, general money management, supply chain and transportation infrastructure. Financial literacy alone will not overcome infrastructure deficiencies.

Financial education is important, but you must also tackle your beliefs and attitude toward money. Having the financial knowledge alone will not change your attitude.

Additionally, having knowledge does not mean taking action. You, yes you have to take action. You have to put your plans in motion. Start today. Take action. Use money  as a tool and other resources around you to move toward your financial goals.

Conclusion

Everyday we make decisions about banking, budgeting, saving, credit, debt, and investing. Financial literacy enables you to make informed financial decisions that will propel you toward financial stability and achieving your financial goals.

Below, is the reproduced S&P Global FinLit Survey. Take the test. Answers are given below. Are you financially literate?

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Financial Literacy Test (S&P Global FinLit Survey)

RISK DIVERSIFICATION

  • 1. Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments? 
    1. one business or investment; 
    2. multiple businesses or investments; 
    3. don’t know

INFLATION

  • 2. Suppose over the next 10 years the prices of the things you buy double. If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today, or more than you can buy today? 
    1. less; 
    2. the same; 
    3. more; 
    4. don’t know

NUMERACY (INTEREST)

  • 3. Suppose you need to borrow 100 US dollars. Which is the lower amount to pay back: 105 US dollars or 100 US dollars plus three percent? 
    1. 105 US dollars; 
    2. 100 US dollars plus three percent; 
    3. don’t know

COMPOUND INTEREST

  • 4. Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add more money to your account the second year than it did the first year, or will it add the same amount of money both years? 
    1. more; 
    2. the same; 
    3. don’t know
  • 5. Suppose you had 100 US dollars in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account? 
    1. more than 150 dollars; 
    2. exactly 150 dollars; 
    3. less than 150 dollars; 
    4. don’t know.

A person is typically defined as financially literate when he or she correctly answers at least three out of the four financial concepts described above. What was your result?

Answers: 1(2), 2(2), 3(2), 4(1), 5(1).

Video Summary

Financial Mistake

This Financial Mistake Is Making You Poor

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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

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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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How to become a millionaire

How To Become A Millionaire

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At one time or another, we have all asked ourselves this question, how to become a millionaire? It may seem impossible, but becoming a millionaire is not. As of December 2020, it was estimated that there are over 46 million millionaires in the world. In the United States alone, there are over 18 million millionaires. To achieve this status, you need to know the steps that will increase your likelihood of becoming a millionaire and consistently apply these steps overtime. 

How To Become A Millionaire?

Whether they realize it or not, every year many individuals take steps to become a millionaire. However, these same individuals also take many steps to prevent  or hinder achievement of this goal. If you are asking how to become a millionaire, consider saving, reducing debt, investing, earning more and repeat.

Save to become a millionaire

Save

On any financial journey, to achieve that goal, you must save. Saving is the basis of any financial plan. If you are wondering how to become a millionaire, generally, you must keep more than you spend. You must save!

Build A Habit

If you are able to save a lot, do so. But if you are struggling to save, start small. Start by saving $50 per pay check if you can. When you can save $75, do so. At first, saving is not about the amount that you save, it is about building a saving habit. Once you build a saving habit, you will be able to easily increase your saving rate. The task is to get use to seeing your money and not spending it.

The Benefits Of Saving

There are plenty of benefits to saving. Not only does saving provide the confidence of knowing that you can handle an unforeseen financial emergency, you can watch your money grow as well. It is a great feeling to see your money grow over time. Additionally, by saving, you are able to contribute to an emergency fund. With a fully funded emergency fund, not only will you have some money on the side, you will have 6 months to a year or more of expenses saved. This will not only serve as a financial back stop, but will also enable you to take advantage of financial opportunities when they arise. 

Take Advantage Of Opportunities

By having a strong savings account, you are able to invest at opportune times (for example when there is a massive sell off in the markets). With money saved, you are able to take advantage of interest rates at an opportune time. By saving, you are able to not only slowly grow your money, you may also be able to turbo charge your money by taking advantage of opportunities because you have the funds available to do so.

Your Buying Power

When saving, also appreciate the rate of inflation and the interest being paid on your savings. Inflation can eat away the buying power of your savings. With regard to interest rates paid, the average brick and mortar bank will provide a very minuscule interest on your savings. Online banks will provide significantly more interest, as such, you should strongly consider having an online saving account.

Pay off debts and become a millionaire

Reduce Debt

One of the fastest ways to lose money is through debt interest payments. By paying off your debts, you are automatically getting rid of this cost.

In some instances, debt financing can be beneficial. For example, if you are in real estate investing, the use of debt can be useful. But most types of debts can be disastrous to your financial health.

If your debts are those of consumer debt, for example credit cards, if you want to be a millionaire, you should pay these off. You should pay off your credit card balance each month. If you cannot pay off your credit card balance at the end of each month, do not use your credit card. Your credit cards are not free. If you do not pay off your credit card balance, you will continue to ask how to become a millionaire because the chances of getting there will continue to elude you. 

The simple fact is, having a credit card balance is expensive, very expensive. The average credit card Annual Percentage Rate (APR) is about 20%.  That is about 20% per year on your credit card balance. Worst than credit cards are typically company cards. Company cards, such as department store cards generally have higher interest rates than that of credit cards. Company cards at times charge 24% APR or more. That is a lot of money.

If you use credit cards, pay them off. Get the rewards, but do not allow your credit card company to charge you. PAY THEM OFF!

Invest to become a millionaire

Invest

Saving alone will not do the job if you are trying to become a millionaire. Saving is the basis of any financial plan, but you must also invest. This could be by investing in the stock market, retirement accounts or investing in yourself. Whatever the route you take, by putting money into a vehicle with the opportunity to get a return on investment that is a multiple of what you put in is one of the best ways to grow your wealth.

Investing does leave you open to losing at least a portion of whatever you invest. As such, ensure that you are comfortable with the possibility of losing at least apportion of your investment. The more risky the investment, typically, the higher the reward. If you are investing in the stock market, note that there are different asset classes that you can invest in, from highly risky to less risky.

When investing, ensure that you do your due diligence. Whether you are investing on your own or using a financial professional. Do your research. Ensure that your financial professional is on the level. We have all heard of Bernie Madoff and others like him. Protect yourself. As always, with any investment or financial opportunity, if it sounds too good to be true, it probably is.

You may also invest in yourself. This may be in the form of your education, financial development or health. Your return on investment may not immediately be financial, but over time it will. Investing in your education may lead to a better job with a higher salary range. By investing in your financial development, you may be able to find ways to keep more of your money. Investing in your health will allow you to keep going, keep learning, less aches and pain, potentially a longer and more rich life.

Earn more and become a millionaire

Earn More

How to become a millionaire? Earn more. This sounds simple and straight forward, but it is not always the case. If you want to become a millionaire, constantly strive to earn more. Whether you are earning more through a promotion at your place of employment or by obtaining a new job, earn more. If you continue to earn more, you will be able to save more, pay off more debt and invest more. By earning more, you significantly increase your chances of achieving your financial goals earlier.

Do not limit yourself to earning more through an employer, you can build one or more side hustles or you can also become an entrepreneur. Be creative in how you earn.

It is important to note that by saving more, you can earn more through interest payments. By investing, you can earn more through a return on investment. The steps of how to become a millionaire are additive and works together to achieve your financial goals.

Repeat

Once you begin to save, pay off debts, invest and earn more, rinse and repeat. You must consistently repeat these actions to achieve your ultimate goal. If not, you may increase your wealth but may not achieve your goal. 

For example, by earning more, you may fall into the trap of lifestyle creep and spend more. The net result may not necessarily be a growth in wealth. However, by earning more, saving more, using the money to pay down debts or invest, the net result is likely to be an increase in wealth.

Conclusion

At one time or another, we have all asked ourselves this question, how to become a millionaire? It may seem impossible, but becoming a millionaire is not. As of December 2020, it was estimated that there are over 46 million millionaires in the world. In the United States alone, there are over 18 million millionaires. To achieve this status, you need to know the steps that will increase your likelihood of becoming a millionaire and consistently apply these steps overtime. Not surprisingly, the steps to become a millionaire are similar to those for achieving financial  independence. 

There are also other ways to become a millionaire, but some are less likely to occur. You may win the lottery or an inheritance from your rich uncle. While possible, these are long shots. Most millionaires became millionaires by saving, reducing debt, investing, earning more and repeating these foundational acts.

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Spend responsibly

How To Spend Your Stimulus Check

Money Maroon

The pandemic has lead to a bifurcation of fortunes. On one hand, a minority of individuals have increased their wealth beyond belief. On the other hand, the pandemic has eroded the wealth of a significant portion of the population. With the clear and far reaching economic effects of the pandemic, the U.S government has employed multiple rounds of stimulus. To those receiving stimulus funds, how you use the funds are as important as obtaining the stimulus funds. If you qualify to receive some stimulus funds, spend responsibly. Take care of your necessities and if possible, take steps toward building and securing your financial future. 

The Year 2020

We all know that we should save for a rainy day, yet, few of us do what we know to be beneficial to us in the long term. If 2020 has taught us anything, it is that life is unpredictable. We are on this rock (earth) for a short period of time and there are no guarantees. To ensure that your family is in a good position financially, building an emergency fund is crucial. Emergency funds make financial disasters routine events.

Financial Disaster 

Financial disaster is always around the corner. In 2020, financial disaster has occurred in somewhat of a snow ball effect that has build momentum as the pandemic has worsen. First came reduce demand for certain work, then came mandatory shut downs, loss of jobs, inability to pay bills including student loans, mortgage/rent and other necessities. Just take a look at your local news and the length of the food lines. People have exhausted the little reserves they had and some have become completely reliant on government stimulus.

Spend your stimulus responsibly
Do not set your money on fire by spending frivolously

Stimulus

If you qualify to receive government aid, whether in the form of stimulus or in another form, how you spend the funds are more important than just receiving the funds. Yes, the amount provided may not go very far, but every little helps. If you are in desperate need for the funds, use the funds to handle your necessities. This includes food, clothing and shelter.  Really think about how you will use your stimulus check. Keep in mind, based on the current political situation, it is unlikely that more stimulus will be on the way. However, If another stimulus bill is passed by congress, it will likely be less than what you have received to this point.

If you happen to be in a situation where you are not in desperate need of the stimulus but have qualified for receiving the funds, it is not time to spend. While some encourage spending to help the economy, to the contrary, it is time to save. Yes, we now have vaccines, however, it is unlikely that life will return to pre-pandemic norms any time soon. As such, the job market will continue to be in flux. Spend time to think of how you can improve your physical, mental and financial health.

Physical, Mental And Financial Health

We have no idea what the year 2021 and beyond holds, but as much as you can, be prepared. Be prepared by taking care of your physical, mental and financial health one step at a time. With the stimulus funds, if you can: (a) save, build or add to your emergency fund, (b) pay down high interest debt, (c) invest and if you are in the position to do so, (d) donate to help your neighbors. 

Generally, it is time to increase your personal safety net. As the year 2020 has shown, it is important to be ready for the unknown. The best way to be ready for the unknown is to be prepare, such that you can mitigate some disruptions that may occur in the future.

Financial stability is not achieved overnight. Financial stability and to an extent financial independence requires small consistent steps over time.

Conclusion

The pandemic has lead to a bifurcation of fortunes. On one hand, a minority of individuals have increased their wealth beyond belief. On the other hand, the pandemic has eroded the wealth of a significant portion of the population. With the clear and far reaching economic effects of the pandemic, the U.S government has employed multiple rounds of stimulus. To those receiving stimulus funds, how you use the funds are as important as obtaining the stimulus funds. If you qualify to receive some stimulus funds, spend responsibly. Take care of your necessities and if possible, take steps toward building and securing your financial future. 

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Debt Free

Need A Total Money Makeover?

Money Maroon

Today, debt has become one of the tallest life hurdles to overcome. Now more than ever, for many, debt accumulation begins during the college years or earlier. The culprit is often student loans, and depending on one’s circumstances, it is a matter of when and not if credit cards will become a part of the total debt. How can this trend be stopped? First, we must understand the issue: more often than not, debt starts to accumulate in view of lack of financial education. A possible solution is education and a total money makeover.

We Act Only When Necessary

Like most issues in life, it is best to understand debt before it becomes a problem – preventative care. However as humans, we typically wait until we have a full blown problem before we attempt to remedy a situation. With regard to debt and our financial health, we approach preventive care for finances in the same manner. Unfortunately, many delay the pursuit of financial education until they already have financial issues. 

Debt, The College Years

If we look specifically at those in college, due to the lack of financial knowledge, debts are usually ignored until graduation. Upon graduation, most students are happy to reflect on what they have achieved. Years of study and hard work is rewarded with a degree, friends, memories and a mountain of student loans. The hope is that aside from the degree, new graduates have chosen a career path that allows them to financially support the life they seek. We know that this is hardly the case. For those who seek employment, getting the first job is exciting, but the salary may not be as exciting.  The average salary for an individual holding a bachelor’s degree is about $45,000-$50,000 depending on the degree and area of study. 

You’ve Got Mail

Whether or not gainful employment is obtained, within 6 months of graduation the grace period for student loans will end. The debts accumulated during college, in short, can no longer be ignored. The bills will literally be in your mailbox. Do not worry, even if you do not provide an updated address, the student loan servicers are typically very good at tracking you down to collect. 

Six months following graduation when the bills begin to hit college graduates’  mailboxes, it is a terrible time to begin learning about money, and money management. For those who could not obtain gainful employment, you could not select a worst time. Yet, when the first bill to student loan borrowers turns up in the mailbox, this is the time when many millennials usually decide to learn about money management. Not by choice, but by necessity. 

The Total Money Makeover

Graduation removes  the luxury of student loan ignorance and the steady supply of play money. Graduation brings financial reality. This reality is beginning to force many millennials to address their financial situation head on. The financial reality is so stark that many millennials are not only aiming to address their student loans, but many are taking steps to be debt-free. For many, Dave Ramsey’s total money makeover has been a go to guide. The total money makeover is a complete mind makeover and a great start to making lifelong financial changes. 

Total Money Makeover Principles

The total money makeover works by forcing you to be  aware of your finances. This includes listing your debts from smallest to largest regardless of interest rate. Below is a short summary of the method:

  • Step 1. Save $1000 for a starter emergency fund.
  • Step 2. List your debts from the smallest to the largest regardless of interest rate. Make the minimum payments on all your debts except on the smallest debt. On the smallest debt, pay as much as you can. This is the debt snowball method.
  • Step 3. Save 3-6 months of living expenses. 2020 has shown us how important it is to have at least 6 months of living expenses saved. 
  • Step 4. Invest at least 15% in a retirement account.
  • Step 5. Save for children and college. 
  • Step 6. Pay off your home 
  • Step 7. Build wealth and be generous. 

Your Situation Is Unique

As we can see with these steps, using the total money makeover, the majority of individuals after graduation will be stuck at step 2 – getting out of debt using the debt snowball method. This is completely okay because the goal is to be debt-free. Also, because you are paying off debt does not mean that you should not contribute to a 401K. This is true especially if your employer is providing a match. The total money makeover is a guide and it is best to apply it based on your situation.

The Goal To Be Debt Free

Be Debt Free - Total money makeover

Ultimately, the goal is to become debt free and pursue financial independence. Focusing on paying off debt is important, as interest payments are a detriment to wealth accumulation. How liberating would it be if you were not tied to student loans and/or credit card balances? What would you do if money was not driving all your life choices? What if you could make decisions based on your happiness and not the financials? Your freedom can be achieved by applying a method that you will adhere to over time. Try to apply the debt snowball method to your debts. Find an extra income source and put all extra income towards paying down debt. Build your emergency fund and march toward financial independence. 

Being debt free and achieving financial independence requires sacrifices. While you implement the total money makeover, for a while, you may experience no vacation, no eating out, skipping the coffee run, decrease subscription services, and may even have to cancel plans with friends. But this is a start to building the foundation for wealth accumulation. This is a journey that requires consistency. The end goal is to be financially free and financially resilient. Will you allow a night out with friends or your coffee habit get in the way of your financial progress? I think not.

Conclusion

Today, debt has become one of the tallest life hurdles to overcome. Now more than ever, for many, debt accumulation begins during the college years or earlier. The culprit is often student loans, and depending on one’s circumstances, it is a matter of when and not if credit cards will become a part of the total debt. How can this trend be stopped? First we must understand the issue: more often than not, debt starts to accumulate in view of lack of financial education. A possible solution is education and a total money makeover. Journey to financial independence with a method that works for you and your ever evolving financial situation.

Co-Authored by Paigemera A.

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