Retirement

Holiday season

Holiday Season Tips For Saving

Money Maroon

Each year, Americans spend an inconceivable amount of money during the holiday season. As we approach the holiday season, be conscious of your spending. Financially, do not undo your hard work and the sacrifices of the year. Do not veer off your path to financial independence. Be intentional in your spending.

Holiday Spending

The holiday season is the one time of the year where culturally, it is acceptable to spend what we do not have. In some cases, we are spending on people we do not like, and people we do not like to be around. 

Studies have shown that it is not uncommon for a large percentage of people to not only overspend during the holiday season, but to spend to such an extreme that they are not able to pay off their sending in the month following the holiday season. In many cases, payment of the debt generated in the holiday season is carried over for a year or more.

Worst yet, much of the accumulated debt is on credit cards. According to wallet hub, the average credit card interest rate is 19.21% for new offers and 15.10% for existing credit cards. 

Holiday season
Happy Holidays!!

Holiday Saving Tips:

Have a plan

Treat your holiday shopping like every other spending occasion. Evaluate where you are financially, know how much you are willing to spend, make a budget and stick to it. 

Where Are You Financially

As the end of the year approaches, evaluate where you are. Do you have a savings or an investment goal? Did you plan to pay down debt? Are you planing to make a big purchase in the next year? These are all factors that should impact your spending. If you have goals, and you are on track, keep moving forward toward your goals. If you are off track, get back on track. Do not allow the holiday season to impede your progress.

Budget How Much You Are Willing To Spend

Once you have evaluated your financial position, determine how much you are willing to spend. Do not underestimate your possible budget, be realistic. Are you traveling for thanksgiving? Are you traveling for the winter break? Do your family members expect gifts? Have you set expectations? Are you hosting? Are you hosting a party? Budget accordingly.

It is not uncommon for us to not include the cost of travel in our budgets for the holidays, however, the vast majority of us travel during the holiday season. This is an important consideration especially with the increasing cost of air travel. Consider the cost differential of traveling to Time Square for new years eve vs watching the ball drop at home.

Whether for thanksgiving or later in December or for new years, consider the cost of travel, cost of gifts and any related recreation activities. Further, set expectations based on what you can afford.

Stick To It

Once you have reviewed your financials and made a budget, stick to it. Make travel arrangements early, take advantage of sales, set expectations and spend within your means.

Conclusion

As the holiday season approaches, continue on your journey to financial independence. Evaluate where you are financially, know how much you are willing to spend, make a budget and stick to it. 

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First Generation Immigrant: Guide To Financial Independence

First Generation Immigrant: Guide To Financial Independence

Money Maroon

Journey to Financial Independence

Financial independence is predicated on the simple formula of money in vs. money out. If you have more money in (salary, passive income, gifts, investments etc.) than money out (bills), you have discretionary income. With discretionary income, you may save, invest or spend. When you invest and save, you are moving forward on your journey to financial independence. Spending most or all of your discretionary income hinders your march toward financial independence. In the first generation money guide to financial independence, whether you have expenses in home country or new country, move forward on your financial journey by ensuring that your financials are secured.

Challenges

For first generation immigrants, the journey to financial independence can be daunting. When a family immigrates to another country, they typically do not have the family or community support they had in their home country. This exposes first generation immigrants to a number of new financial challenges. These financial challenges include financially supporting family members both in new country and home country.

Lack Of Community Support

For most first generation immigrants, with regard to childcare, there is no grandparents, sisters or brothers to help. Natives also encounter this issue, however, to a lesser extent. Natives have family in country, whereas immigrants may not. On the financial front, for immigrants there is no or very little inherited land, business or assets in new country. Immigrants, especially those who are the first to enter a new country, have to build wealth from scratch. 

Immigrant Money: Remittance

A more challenging issue is remittance. Many first generation immigrants have or feel obligated to send money back home to support family members. It could be to support studies or general home life. Remittance represents a large transfer of funds each year. For example, according to The World Bank, in 2017, individuals sent over $689 billion to their home country. 

Immigrant Money: Hyper Savers

To financially support multiple households (new country and home country), immigrants tend to be hyper savers. As such, although in the aggregate, immigrants may have a lower amount of money in (salary) than most natives, many immigrants are hyper savers and have a higher savings rate than natives. This does not mean that immigrants have more saved. As noted above, immigrant salaries tend to be lower than natives and immigrants may have more financial responsibilities as compared to natives. This hyper saving tendency may result at least in part on circumstances and necessity. However, because of financial constrains, in most cases, hyper saving does not lead to financial independence for many immigrants.

The Journey To Financial Independence

To move forward on the journey to financial independence, one must save and invest. While we are not advocating that one should not support family in home country, cutting back on the amount sent must be considered. It is important to ensure that your financial situation is secure before aiding others, yes, including family. Think back to the safety instructions given before a plane takes off.  In an emergency, put on your oxygen mask before your child’s.

If your financial situation is not secure at home, your family’s (home country and new country) financial situation will also not be secure. 

Consider the following: 

  • (1) you save very little while supporting your family in home country and loose your job. In this situation, not only will you be in a bad situation, but so will your family in home country. 
  • (2) you cut back on the amount of support you provide to family in home country and save a small sum in your emergency fund. If you loose your job, both you and your family in home country have a bit more runway to deal with issues that appear. This is the same principle that should be applied if you have adult children. First, address your financial situation and where there is addition or left over funds, aid your adult child.

Conclusion

In the first generation immigrant money guide to financial independence, whether you have expenses in home country or new country, move forward on your financial journey by ensuring that your financials are secured.

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Video Summary

Income and expenses

Understanding Income and Expenses

Money Maroon

On a basic level, financial independence requires an understanding of your income and expenses. Without a full understanding of what you are taking home and what you are spending, you will remain financially lost.

Asking The Questions

If you are thinking about financial independence, you have asked certain questions and have come to certain realizations. When did you realize that you may have to work the rest of your life? When did you realize that there are families who could relax and not lift a finger and their wealth would continue to grow? Upon the realization of the first thought, you will almost certainly think of the second.

Was it in school? Were you visiting a friend? Did you overhear a conversation? Were you on vacation? Was it after viewing a facebook picture? Was it following the purchase of a big-ticket item (home or vehicle)?  Were you checking your account balance, reviewing a bank statement, or looking at your paycheck? Were you paying a bill or a portion thereof? Was a purchase declined?

The Calculation

At one point or another, we all do the calculation. If my salary/yearly income after taxes is $X, and my expenses are $Y, $X-$Y = working forever.

At this point, one has a choice: (1) continue down the same path or (2) make a change. You are reading this because you want to/have made a change.

On a basic level, to change the above in your favor requires an increase in $X and/or a decrease in $Y. While this is a basic concept understood by all, the above is easier said than done.

Increasing Income

With regard to increasing $X, you may:

  • Save
  • Request a raise at work, 
  • Start your own business, 
  • Invest,
  • Begin one or more side hustles, 
  • Go back to school, or
  • Change jobs. 

Decreasing Expenses

With regard to decreasing $Y, you may:

  • Give up coffee and avocados (or whatever your daily morning pleasure may be),
  • Downsize your life (reduce the size of your home, or vehicle)
  • Bring your lunch to work, 
  • Cut back on purchases (shoe, clothing), 
  • Move closer to work, 
  • Change modes of transportation (buy a bicycle, take public transportation), 
  • Change living conditions (get a roommate, move in with mom), 
  • Paying down debt, or
  • Decrease the number of vacations/ stay at an air bnb rather than at a five star hotel.

Taking action to improve your financial situation is harder said than done, especially if your financials are impacted by your education level, children, health or student loans. The combination of any two of these will significantly impact your saving rate, and thus your retirement plans. However, the fact that you are thinking about your financial future means that you are ahead of the crowd. Continue on your journey to financial independence by understanding and tracking your income and expenses.

Conclusion

Financial independence requires an understanding of your income and expenses. Without a full understanding of what you are taking home and what you are spending, you will remain financially lost. We will tackle paths to financial independence here at JoToFI.com. Journey to early retirement and financial independence.

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Video Summary

Financial Independence: Income and Expenses