Saving

Daylight Saving Time

Use Daylight Saving Time To Super Charge Your Finances

Money Maroon

Each year, many countries go through the process of setting clocks forward in the spring and falling back in the fall. This is the normal progression of observing daylight saving time. This time manipulation invention was put in place to save energy.  By moving clocks forward, people could take advantage of the extra evening daylight rather than wasting energy on lighting. As we try to save energy with daylight saving time, use this yearly interruption to fine tune your financial strategy and retirement. 

The Opportunity

Daylight saving time has a way of catching us off guard each year. When we spring forward, it usually greets us with one hour less sleep. Further, it typically takes weeks for your body to adjust to the new time. Springing forward also leads to longer days and in some parts of the country, the sun will set past 9pm at night in the middle of summer.

However, we are resilient. Overtime, this one hour shift becomes normalize and we continue on with our lives. But there is an opportunity here. The opportunity here is to use daylight saving time as a trigger. A trigger to assess your financial situation. As the time is moved forward in early spring, think financially. Think about getting your taxes completed and filed. Review your financial plan for the year. Look at what you are presently contributing to your 401k, monthly savings, IRA, and brokerage accounts. Adjust your contributions as necessary to put your financial plan in motion to reach your goals.

Use daylight saving time to turbo charge your finances

Daylight Saving Time Recalibration

As we approach the winter months and have to fall back one hour, this component of daylight saving time can be used as a recalibration point. Just as the springing forward can be used as an opportunity to set goals, the falling back period can be used as a trigger to recalibrate. Are you on schedule to achieve your goals? Can you recalibrate to achieve your goals before the year ends? As you fall back in the fall, it is a good time to make adjustments to your financial plan based on life events. The one constant in life is its unpredictability, use the falling back period of daylight saving time as a trigger for financial recalibration.

Fall also provides a time for you to begin to think about the begining of the next year. Get a financial jump start on the next year.

Adjust Your Routine

While daylight saving time has become a routine event, make your financial check ups routine as well. When you spring forward one hour, use this disruption to think about the financial year ahead. When you fall back one hour in fall, think about recalibration. Adjusting your financial plans such that you are able to achieve your goals by year end. If your plans change based on life events, adjust and refine accordingly. Further, a fall financial check up also allows you to plan for the coming year. The earlier you are able to take your financial situation in your own hands and plan ahead, the more rewarding the journey.

Use the disruptive nature of daylight saving time to your advantage. Use this disruption as a trigger to review your financial wellbeing.

Conclusion

Each year, many countries go through the process of setting clocks forward in the spring and falling back in the fall. This is the normal progression of observing daylight saving time. This time manipulation invention was put in place to save energy.  By moving clocks forward, people could take advantage of the extra evening daylight rather than wasting energy on lighting. As we try to save energy with daylight saving, use this yearly interruption to fine tune your financial strategy and retirement. Journey to financial independence.

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Investing to riches

How To Become Rich

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So you want to know how to become rich. Well, who doesn’t. If you perform a quick search, you will find that there are countless discussions and advice for getting rich. While there are ways such as inheriting money or winning something akin to a lottery, becoming rich takes repetitive actions over time. To become rich, you must incrementally increase your riches through actions over time. That’s right, sorry to disappoint, but it will likely not occur over night. Becoming rich is likely a long term endeavor.

Do You Really Want To Be Rich?

How to become rich
Being rich vs being wealthy – Know the difference

Before we jump into how to become rich, do you actually want to become rich? One of the biggest error people make is not noticing the subtle difference between being rich and being wealthy. 

According to Merriam Webster’s online dictionary, rich is “having abundant possessions and especially material wealth.” Notice that that definition says nothing about time and value. As such, you can be rich today and broke tomorrow. However, wealth according to Merriam Webster’s online dictionary is “abundance of valuable material possessions or resources.” Do you see the difference. An abundance of valuable material possession or resources. Therefore, wealth is unlikely to be lost as fast as riches. So, are you seeking wealth or riches?

So You Want To Be Rich

If riches is what you want, as mentioned above, it takes action over time. For example, it is a matter of getting from 50 cents to a dollar and amplifying this effect over time. The more the increase from baseline (in the example, 50 cents) and the more time allowed for compounding, the richer you will become. Typically, to achieve this effect, it requires earning more.

Earning More By Investing 

How to become rich: invest
How to become rich – invest

How do you earn more? To earn more, you need to invest. On a basic level, whether you are an entrepreneur or a salaried employee, to increase your take home pay you must invest in yourself.

To earn more, you can invest your time in finding a higher paying job or take the path of investing in your education. In both cases, you are investing your time and potentially money to increase your chances of obtaining a higher paying job. 

You also have the option of investing in being better at your current place of employment. While there are no guarantees that this will lead to a promotion, performing well in your current role does increase your chances for a promotion and an increased salary.

There are also external opportunities to invest and grow your riches. Whether this is in the stock market or in real estate, it becomes a matter of allowing your money to work for you while you are doing something else. This provides an additive benefit to whatever it is that you are earning from current/future employment.

The Take Home Message

The simple answer to how to become rich is to take small steps everyday to increase your riches and over time you will achieve your goal. That is it. 

Of course, the underlying actions that you take are situational and are up to you. The simple math is riches = assets – debts. As such, if you are able to earn more while lowering costs over time, you will have an abundance. However, we must impress upon you that on this journey, rarely are there short cuts.

Conclusion

While there are many discussions and advice on the topic of how to become rich, do not lose sight of the fact that achieving this goal likely takes repetitive actions over time. To have an abundance, incrementally increase your riches through small actions over time.

Always keep in mind that accumulating riches will likely not occur over night. Becoming rich is likely a long term endeavor. Do not get discourage. Stay the course.

To conclude, becoming rich is a stop on your journey to financial independence, but having wealth may be your ultimate goal.

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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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Teaching Kids About Money

Teaching Kids About Money

Money Maroon

One of the most important things that you can do in life is teaching your kids about money. Teaching kids about money is a proactive way to ensure that the next generation is financially literate. It may seem like another thing on the list to do as a parent, however, teaching kids about money can be as easy as playing a game or just including them in day to day activities. To teach your kids about money, take your kids on your daily money adventures.

Teaching Kids About Money Must Start Early

Having a financial foundation is all about starting early. While you may quickly accumulate wealth in some instances, the magic of compounding requires time. As such, start saving early. 

The easiest avenue to teaching kids about money is to start saving early. Yes, the good ole piggy bank. This is one of the earliest and easiest ways to get your kids to think about money.  Even kids love to see their money grow.

The piggy bank provides for a lot of teaching opportunities. For example, the piggy bank can be used to teach the concept of saving toward a goal. If your kid wants to buy something, have them understand how long it will take for them to save that amount based on their standard allowance. It need not be a big purchase, for example, if they want to buy candy, you can mention that they will need to save/take an amount from their piggy bank. This will no doubt trigger an internal conflict of money vs candy. They will have to decide whether or not the candy is really worth their money.

But most importantly, the piggy bank forces kids to adapt a habit of saving. Saving is a habit that can be beneficial if learned early.

Teaching kids about money
Our kids are the future

Making Purchases

Your kids like new gadgets, so does everyone. How do you pay for it? Typically with a credit card? Teaching kids about money involves teaching them about your purchases. Show them the bill and how much things costs. Show them how you purchased it, cash or credit. If you are using a credit card, this is the perfect time to discuss interest rates.  You can further venture into the concept of paying off credit card bills early such that you do not have to pay interest payments.  The magic of compounding and how this can work to your benefit in saving but to your detriment on money you owe will no doubt hold their attention. Importantly, the concept of not purchasing things that you cannot afford will be a natural progression.

Going To The Bank

Like many other things as a parent, get your kids involved in your financial decisions. They may not understand, however, the act of going through the process will be built in. When old enough, they will begin to understand. Teaching kids about money is about sparking financial curiosity and planting a financial seed that will flourish and pay dividends in the future.

For example, on each journey to the bank, consider taking your child. Kids are curious creatures and they will ask numerous questions about the bank. Why are you going to the bank? Why are you depositing money? Where did you get the money from? Do you get it back? These are all questions that will spark a conversation with regard to earning money, using money, and saving money.

These early conversations with your 3-5 year old will begin to inform their concept of money. Have you ever taken money from your kids piggy bank and try to deposit it in the bank? If you have not, this process is likely to create a mental break down for any child. They become very attached to their money. However, this process provides the perfect opportunity to have a discussion with regard to the function of a bank, interest rates, and possibly inflation. No kid wants to have their money taken away. By explaining why their money will earn more if it is put to work (in the bank/investment account) will put them at ease and be a great benefit in the future.

Monopoly Money

Teaching kids about money at times can be a simple matter of playing a game. In many ways, monopoly is the perfect game. Monopoly can accomplish multiple things. Monopoly is not only a fun game for family time. Playing monopoly can also help kids learn to add, subtract, and also teach your child to handle or at the very least begin to get an appreciation of money.

Think about it, where else would a kid learn about charging rent, bankruptcy, going to jail, getting paid a scheduled salary, trading property, and transacting with a bank? Monopoly teaches simple concepts in game form. (1) If you own property, you can charge rent. (2) If you invest in your property, by building a hotel, you can charge even more. (3) If you over extend yourself financially, you can go bankrupt. The concepts are all there, and your kids will learn them all without trying.

Conclusion

One of the most important things that you can do is teaching your kids about money. Teaching kids about money is a proactive way to ensure that the next generation is financially literate. It may seem like another thing on the list to do as a parent, however, teaching kids about money can be as easy as playing a game or just including them in day to day activities. To teach your kids about money, take your kids on your daily money adventures. Help your kids get on the journey to financial independence early.

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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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How to become a millionaire

How To Become A Millionaire

Money Maroon

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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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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Saving Money Starts Now

Saving Money Starts Now

Money Maroon

Saving money begins with first having at least one income stream. Second, saving money requires spending less than your income, not spending in excess and doing so consistently over time. Saving is the first step towards financial independence and while saving money is a simple concept, consistently saving over time is difficult for many.

Assess Your Current Financials

If you truly would like to begin saving money, it is important to know where you are financially. It is important to take stock of your financials right at this moment. It is time to know what your monthly expenses are and how much you are bringing in each month.  By making a list of your monthly income and monthly expenses, you get a clear picture of why you are getting in debt or not saving enough.

Determine How Much You Can Save

When it comes to saving money, the math will never work if your expense are higher than your income. Once you make a list of your monthly income and your monthly expenses, it is time to take a close look at your list of monthly expenses. Now ask yourself, what can be reduced or cut out? It may be: moving to a smaller home to reduce rent/mortgage, moving closer to work to reduce the cost of commuting, bringing your lunch to work, stop/reduce eating out, cut your cable or other subscription costs. Make your list, however, whatever the cost cutting measure may be, it is important to review your list of expenses and be honest with yourself. While it is great to say that you will cut or reduce your expenses, you must be able to actually implement your plan of reducing cost.  

Increase Your Income

Now, turn to the income side of your list. How can you increase your income? This increase need not be immediate, but must be doable. For example, you can request a raise, change jobs, invest in your education and return to school/learn a skill to get a better position or research a side hustle that may provided additional income? The goal is to increase your income such that your income is higher than your expenses.

Begin Saving Money

Once you are able to get your income higher than your expenses, you have done the hard work and you are 90% there. But you must take the next critical step and perform the act of saving money. Now that your income is higher than your expenses, you must save that money. Many fall into the trap of spending their disposable income each month. Do not fall into this trap, remember, your goal is not to simply reduce your expenses and increasing your income. Your goal is to save money. So save your money.

There are a number of tools available that facilitates saving money. For example you can automate your savings by automatically transferring money from your pay to a savings account or you may save in a high yield savings account that provides higher interest rates than the typical brick and mortar banks. Research the options available to maximize and grow your savings. Further, to consistently save, while it is not required, a budget may provide a financial guide.

Saving Money And Your Future

Now that you are saving money, do look towards the future and your financial health. Look to paying off debts, investing, and contributing to your retirement. Saving is only the first step on the path to growing financially and financial independence.

Conclusion

Saving money begins with first having at least one income stream. Second, saving money requires spending less than your income, not spending in excess and doing so consistently over time. Saving is the first step towards financial independence and while saving money is a simple concept, consistently saving money over time is difficult for many. Take your first steps to financial independence today.

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