So the best way to deal with one is to prepare for it in advance. Below are two extremely effective and relatively easy steps that can help you prepare so that when something does happen, your financial strategy isnât thrown into disarray because of unplanned expenses.
Start an emergency fund.
Your first goal will be to save up enough money to cover six months of expenses. Then when a small emergency crops up, youâll be able to dip into this fund. But beware! Youâll need to discern what counts as an emergencyâgoing out to eat because you donât feel like making dinner or going shopping because thereâs a great sale going on doesnât count!
Make sure you have the right insurance.
Not every issue can be solved with a simple emergency fund; serious medical issues, disability, or death can all cause financial trouble that may fall well beyond the scope of an emergency fund.
There are three things that you need to consider: health insurance, disability insurance, and life insurance. They can help provide protection for your family if you become unable to work or if hospital bills threaten your cash flow.
If you feel unprepared for a financial emergency, contact a licensed and qualified financial professional. Theyâll have insights into how you can create an emergency fund, and help you evaluate your options for financial protection.
Why? Because trust and communication form the bedrock of healthy relationships. Keeping secrets of any type and size can shatter faith in your partner. Itâs especially true of financial decisionsâfinding out your spouse has been spending money âbehind your backâ can cause a rift that may be difficult to repair.
To help avoid trouble and misunderstandings, make it a practice to regularly discuss the family finances with your partner. Set a weekly time to grab coffee and review your budget, your goals, and any changes you need to make moving forward.
It may feel awkward at first. You may learn there are surprise expenses that your partner hasnât shared until now. Thatâs perfectly normal! Be sure to create an atmosphere of trust and openness that makes your partner feel comfortable sharing. If they reveal a spending secret, donât lose your temper. Thank them for their honesty and then work towards a solution for the future!
Once youâve learned how to navigate open and honest financial conversations, apply your new conversation skills to other topics in your relationship. You might just find that your relationship drastically improves!
It may not be as daunting as you might think. In fact, there are simple steps you can take today that can help position you to retire with the wealth you desire.
Pay yourself first. Itâs simpleâschedule a recurring transfer to your retirement savings account when you get your paycheck. This transforms building wealth for your future into an effortless process that occurs without your even thinking about it.
Save your bonuses. Unexpected windfalls are exciting! But donât forget to pause for a moment before you take off for the Bahamas. If you hadnât gotten that bonus, would your life and your current financial strategy still be the same as it was last week? Consider putting (most of) that extra money away for later, and using a fraction of it for fun!
Reduce your debt. Credit cards and any high interest loans are the first priority when retiring debtâso that you can retire too someday! Do you really know how much youâre paying in interest each month? (Once you know this number, you canât âunknowâ it.) But take heart! Use this as a powerful incentive to pay those balances off as quickly as you can.
Every month you chip away at your debt, youâll owe less and pay less in interest. (Youâll feel better too.) And you know what to do with the leftover money since you knocked out that debt. Hint: Save it.
But keep this in mindâlife is about balance. Itâs okay to treat yourself once in a while. Just make sure to pay yourself first now, so you can REALLY treat yourself later in retirement.
All parents must contend with the cost of childcare, education, housing, and food. But there are some unexpected expenses that can blindside you if youâre not prepared for them. Here are some hidden costs that every parent should anticipate in advance!
The newborn utility bill spike When your baby first arrives home from the hospital (yay!), expect your utility bills to seriously increase. Chances are, your newest family member will require a cozy temperature all day to maintain their mood and sleep schedule. Plus, youâll probably run a few extra loads of laundry and dishes every week! Before your child comes home, budget in some extra cash specifically for utility bills.
Birthday parties for preschoolers Nobody loves birthday parties more than preschoolers. If youâre not careful, you may end up paying far more than you ever expected on decorations, party favors, and gifts.
Come up with a budget-friendly gift giving strategy for your family early and stick with it. That might be placing a cost limit on what you give, or developing creative and heartfelt ways to make gifts from scratch.
Date nights will temporarily increase in cost Until your kids are old enough to look after themselves, youâll need to hire a babysitter before you go on a date night.
There are responsible ways to save money on this often unexpected expense. If possible, have a family member look after your kids while you enjoy your romantic dinner. Also, consider swapping babysitting duties with a friendâyou look after their kids on their date nights, they look after your kids on your date nights!
Extracurricular activities Music lessons, sports teams, and driverâs ed are sometimes far more expensive than parents realize. In addition to the upfront costs, youâll also need to buy instruments, cleats, jerseys, and more to empower your kids to enjoy their favorite hobbies.
Create an extracurricular activities fund and start building it now. Then, decide how much you can pay each month for lessons and coaching.
Whatâs a parenting expense that caught you by surprise? Iâd love to hear what it was and how you overcame it!
By now, youâve probably noticed that thereâs a lot that goes into caring for your newest family member. Between the diaper changes, sleepless nights, and feedings, take a few moments to make these critical financial moves. They may bring you the peace of mind and financial security your family needs!
Add your child to your health insurance coverage. Once your child is born, you have between 30 and 60 days to enroll your newborn in your health insurance plan.š Fortunately, itâs not a difficult task. Have your childâs birth certificate and social security number handy, and then call your health insurance provider. Share the good news that youâve had a child and would like to add them to your plan. If your health insurance plan is through work, youâll need to contact your HR department and go through the same process.
Find the right childcare for your family. Childcare can be pricey, ranging from $9,100 to $9,600 annually.² If both you and your spouse work, youâll need to find a way to budget in this significant expense.
Review the costs of local daycare centers. Nannies are worth investigating, but can be more expensive than other forms of childcare. Consider asking your stay-at-home friends or family if they can tend to your children while youâre away from home. You might land a sweetheart deal that builds relationships and saves you money!
Protect your family with life insurance. There is no better time to consider life insurance than after the birth of your child. Raising a kid is expensive! Food, education, and clothing can require significant financial resources. The right life insurance policy can protect your familyâs financial stability even if you pass away or if you get sick or injured and can no longer earn an income. Nowâs the time to provide the financial security that your loved ones may need in the future.
The first few months of a babyâs life are crazyâthey depend on you for everything! Just be sure to take some time between caring for their physical and developmental needs to tend to your financial concerns. Itâs one of the greatest services you can offer them!
š âHow do I sign my new baby up for health insurance?,â Nikki Davis, Bernard Benefits, Sept 2, 2020, https://blog.bernardbenefits.com/how-do-i-sign-my-new-baby-up-for-health-insurance
² âChild Care Costs by State 2020,â Procare Solutions, Jun 24, 2020, https://www.procaresoftware.com/child-care-costs-by-state-2020/
As youâre probably aware by now, growing a baby comes with serious financial responsibility. Here are a few expenses to anticipate and start planning for as soon as possible!
Prenatal care costs. Keeping both the mother and baby healthy throughout the pregnancy is a top priority. That means regular checkups and ultrasounds to make sure everything is progressing safely and normally.
Investigate whatâs covered and what youâre expected to pay for beforehand. Health insurance policies will often cover prenatal care, but itâs best to find out what your expenses will be ahead of time. Out of pocket, prenatal care costs on average $2,000, so start preparing now!š
Maternity clothes. Pregnancy requires a wardrobe overhaul for women that, on average, costs about $500.² Fortunately, there are commonsense strategies to cut back on this expense. Check local thrift stores for maternity options, and even consider buying flowy dresses or tops that are a sizeâor threeâlarger than your normal size. Also, ask family members if you can borrow their spare maternity clothes. Try to avoid designer maternity clothes which can come with a hefty price tag.
Delivery expenses. The cost of giving birth varies greatlyâfrom $4,000 to $20,000 depending on your state and health insurance coverage.Âł Again, itâs critical to consult with your healthcare and insurance providers to see what youâll be expected to cover. The earlier you discover this information, the betterâit gives you time to start saving for the hospital bill!
Budgeting for doctor visits, the delivery, and the hospital stay positions you to cover those expenses without having to borrow money. And that means you can provide your child a financially stable environment in which to grow, without the stress caused by unexpected medical expenses.
š âHow Much Does it Cost to Have a Baby?,â Rickie Houston, SmartAsset, Oct 01, 2020, https://smartasset.com/financial-advisor/cost-of-having-a-baby#:~:text=The%20average%20price%20of%20having,and%20the%20hospital%20care%20fee.
² âDressing for Two,â Stephie Grob Plante, Vox, Jan 30, 2018, https://www.vox.com/2018/1/30/16928328/maternity-clothes-pregnancy-miscarriage
Âł âWhat It Costs to Have a Baby,â Heather Hatfield, WebMD, https://www.webmd.com/baby/features/cost-of-having-a-baby#1
Hereâs how that works. Items are typically cheaper in thrift stores and flea markets than they are online. That means thereâs potential to make a handsome profit if you buy something at a thrift store and then sell it on a digital marketplace.
Letâs look at an exampleâŚ
You notice an item at your local thrift store that youâre certain sells online for about $60. You check the price tagâitâs only $5. You buy it and make a listing on your favorite digital marketplace. It sells! Letâs say shipping costs and selling fees are also $5 each. Your net profit is $45. Youâve made back triple the cost of your initial investment and business expenses.
Itâs a simple, elegant, and fun business model that can potentially generate extra cash flow.
If you decide to start a thrifting business, consider these tips to maximize your profits!
Start at home. Before you send something to a landfill or thrift store, search for it on an online marketplace. You might be surprised how much of your âtrashâ is actually treasure! Make no mistakeâsome items arenât worth your time salvaging and selling. But if you have clothes, toys, and books that are in good condition, consider listing them online and see what happens!
Scout out the right locations. Whenever possible, shop at thrift stores in wealthier neighborhoods. Theyâll typically have higher-end products that fetch better prices. Also, consider using an app like Nextdoor to monitor local garage and estate salesâthose are where youâll find the real treasures at potentially deep discounts.
Prioritize the right items. Not all resale items are created equal. Books, textbooks, picture frames, and designer clothes tend to have strong returns. But always check the price of an item on eBay or another online marketplace before you buy it.
Buff up what you buy. Before you buy anything from a second-hand vendor, check it for damage or blemishes, but donât be put off by surface-level issues. You might be surprised at how many items are simple to repair, fix, or clean. Putting in a little elbow grease may substantially boost the selling price.
Remember to have fun while youâre thrifting. The beauty of the reselling business is that it allows you to make money and enjoy a hobby at the same time. Itâs perfectly fine if you donât walk out with an incredible find. Embrace the process, see whatâs out there, and make some extra cash while youâre at it!
A recent set of studies demonstrated that enjoying experiences created more anticipation, in-the-moment excitement, and longer-term satisfaction than purchasing items.š The results held true regardless of how much money was spent.
Why? Because an experience creates memories that last a lifetime. Possessions, however, can quickly become boring.
What does that mean for your budget?
Try shifting your discretionary spending from items to experiences for a month. Instead of spending your weekend at the mall, take your family on a day trip. Cut back on visiting designer stores and opt to walk through the park with a friend. Spend your time online planning exciting vacations instead of scrolling through store websites.
Then, take stock of how you feel. Has your quality of lifeâand cash flowâimproved? Let me know how this simple shift makes a difference for your family and your budget!
š âSpending on experiences rather than things is associated with greater immediate happiness, study finds,â Susan Perry, MinnPost, Mar 12, 2020, https://www.minnpost.com/second-opinion/2020/03/spending-on-experiences-rather-than-things-is-associated-with-greater-immediate-happiness-study-finds/#:~:text=coverage%3B%20learn%20why.-,Spending%20on%20experiences%20rather%20than%20things%20is,greater%20immediate%20happiness%2C%20study%20finds&text=Plenty%20of%20recent%20research%20has,such%20as%20clothing%20and%20gadgets
A recent survey revealed that 83% of respondents underestimated their subscription spending by a wide margin.š On average, they thought subscriptions only cost them $80 per month. In reality, it was over $230.
That was back in 2018. Since the COVID-19 Pandemic started in 2020, that number has dramatically increased. A 2020 survey discovered that, on average, consumers added $192 in new subscriptions after lock downs started.²
The takeaway? Subscriptions might be consuming more of your cash flow than you realize.
Scroll through the apps on your phone. Are there streaming, dating, or wellness subscriptions that you pay for but never use? Unsubscribe and uninstall them!
If you and your family regularly use a streaming service, consider cancelling your cable subscription. Theyâre expensive, and your streaming services probably carry your favorite shows as it is.
Itâs also worth investigating the value of any subscription boxes you receive. Is a monthly shipment of makeup or comic books significantly improving your life? Or do most of the items go unused? If the latter is true, consider cancelling your subscription.
Once youâve cleared out unnecessary subscriptions, you might be surprised by how much cash flow youâve freed up for reducing debt or building wealth.
š âYou probably spend more on subscriptions than you realize,â Angela Moscaritolo, Mashable, Feb 20, 2019, https://mashable.com/article/you-probably-spend-more-on-subscriptions-that-you-realize/
² âAmericans More Than Tripled Subscription Service Spending Amid Social Distancing,â David Dykes, Greenville Business Magazine, May 14, 2020, http://www.greenvillebusinessmag.com/2020/05/14/308970/americans-more-than-tripled-subscription-service-spending-amid-social-distancing
If youâre like many, that sounds exactly like what you and your family need! Who wouldnât want some extra money coming in? It might seem like pie in the sky, but itâs not a fantasy.
Earning a passive income is more achievable than you might realize. Read on to discover how passive incomes work, what makes them so advantageous, and common ways to create them.
In general, a passive income is cash flow that requires little to no regular effort to create and maintain.
Thatâs not to say that they donât require work. But the labor involved in opening a passive income stream is normally upfrontâyou spend time and/or money in the beginning to set up the income stream, then sit back and reap the rewards as time goes on.
Itâs an advantageous model because it can potentially free up your timeâwhich is the most valuable resource you have.
But be warnedânot all opportunities to create passive income are created equal. Here are a few proven strategies for you to consider!
Create digital products. EBooks, online courses, stock photos, and stock music are all passive income generators. They require initial time investments to create and publish, but then earn you money as users buy them over time.
Rent out property. Renting is a classic source of passive income. It requires money upfront to buy the propertyâand maybe time and more money for renovations. But once rent starts coming in, theyâre income sources that donât require your daily attention. (Note: Becoming a landlord may have other costs involved, like repairs or replacing old equipment or appliances.)
Build a team of sales professionals. This is the hidden gem of passive income. Thereâs a starting commitment of time to learn about your market and how to close sales. Then youâll need to create a team of salespeople. Every time they make a sale, you earn a portion of the profit. Once youâve mastered the basics, the skyâs the limit for how much passive income you can potentially earn!
If having a passive income stirs your interest, let me know. We can review your financial position, skills, and the opportunities available and see which one might work best for you!
7 out of 10 Americans over the age of 65 will need long term care at some point.š And the US National Median cost of a private room in a nursing home was $8,821 in 2020.² Thatâs $92,376 a year!
When you factor in the cost of doctor visits, medical procedures, prescriptions, etc., that number is going to keep climbing.
If your need for long-term care comes after you retire, that financial burden could fall onto your loved ones.
The right life insurance coverage has the potential to keep you living well and independently. Long-term care as a part of a tailored life insurance strategy is a great way to protect your retirement funds â and keep your loved onesâ finances protected, too.
I can help. Contact me today, and together we can explore your options for long-term care â and do what we can to help keep those Golden Years golden.
š âLife Insurance: Long-Term Care,â Nationwide, https://www.nationwide.com/personal/insurance/life/long-term-care/
² âCost of Care Survey,â Genworth, 2020, https://www.genworth.com/aging-and-you/finances/cost-of-care.html
In the years when there was an abundance of crops, it was wise to store up as much as possible in preparation for the years of famine. However, if instead of saving you ate it all up during the 7 years of abundance, the result would be starvation for you and your family during the 7 lean years. This might be an extreme example in our modern, First World society, but are you âeating it all upâ now and not storing enough away for your retirement?
The definition of retirement weâll be using is: âAn indefinite period in which one is no longer actively producing income but rather relies on income generated from pensions and/or personal savings.â
According to this definition, the âyears of plentyâ would be the years that you are still working and generating income. While you still have regular income, you can set aside a portion of it to save for retirement. This amount is called the âPersonal Savings Rate.â
According to the latest statistics, the monthly personal savings rate for Americans is approximately 13.6% of their income.š For much of the past decade itâs hovered around 7% to 8%, briefly spiking during the first months of the COVID-19 Pandemic to over 30%.
Suppose youâre looking to retire for at least 10 years (e.g., from 65 years old to 75 years old). Even if youâre planning to live on only half of the income that you were making prior to retirement, you would need to save up 5 years worth of income to last for the 10 years of your retirement. Just raw saving at average rate without the power of interest would take years before it became the wealth most people need to retire.
So unless youâve found the elixir of everlasting life, weâre going to need to do some serious âsavingâ of the personal savings rate. Is there a solution to this dilemma? Yes. If youâre looking for possible ways to store up and prepare for your retirement, Iâd be happy to have that conversation with you today.
š âPersonal Saving Rate,â U.S. Bureau of Economic Analysis, Federal Reserve Bank of St. Louis, Nov 25, 2020, http://bit.ly/2qSGrR3.
2020 witnessed home prices soar by 15% to average more than $320,000âa prohibitive price for many seeking to buy their first house.š
But even if you arenât ready to buy a house today, there are steps you can take now that may better position you to become a homeowner in the future!
Build your emergency fund
An emergency fund is a critical line of financial defense that can help lay the foundation for buying a house. Thatâs because an emergency fund provides a cash cushion while you prepare to purchase your home and then begin paying off your mortgage. The unexpected expenses of homeownership can be far less detrimental to your long-term goals when you have a dedicated fund specifically designed to cover emergencies!
Increase your credit score
An excellent credit score is imperative for first time home buyers for two reasonsâŚ
First, actions that increase your credit scoreâdebt management and paying your bills on timeâcan help create a solid financial foundation as you shoulder the responsibility of servicing a mortgage.
Second, lenders typically offer more favorable loan terms to people with high credit scores. That can result in more cash flow over the life of your mortgage. A recent survey discovered that mortgage holders with very good credit scores save more than $40,000 over the lifetime of their loan!²
Take steps to boost your credit score before you start house hunting. Automate your bill payments so theyâre always on time, and begin reducing the balances on your credit cards, student loans, and auto loans!
Start saving for your down payment ASAP
Aim to have a down payment of at least 20% of your future homeâs value saved before the home buying process begins.
Why? Because paying more up front and borrowing less to buy your home reduces the interest youâll owe over the long-term. A substantial down payment might also lower the price of closing costs and negate your need to buy private mortgage insurance. Usually, the higher your down payment, the better!
The time to lay the groundwork for buying your first house is now. Build an emergency fund, increase your credit score, and save enough for a significant down payment. Then, search for a house that meets your needs and wonât break the bank!
š âU.S. home prices hit a record high in 2020. Is home buying still affordable?,â Peter Miller, The Mortgage Reports, Oct 13, 2020, https://themortgagereports.com/70539/record-high-prices-record-low-mortgage-rates-during-covid#:~:text=Home%20values%20and%20sales%20prices,on%20record%2C%E2%80%9D%20says%20Redfin.
² âRaising a âFairâ Credit Score to âVery Goodâ Could Save Over $56,000,â Kali McFadden, LendingTree, Jan 7, 2020, https://www.lendingtree.com/personal/study-raising-credit-score-saves-money/
It might feel like every salesperson is pulling the wool over your eyes to take as much money from you as possible while delivering the least value.
Not to worry! Here are a few car buying insights that can help you get a ride that meets your transportation needs without sacrificing your financial stability.
Buy a used car
Chances are, youâll buy your first car with limited financial resources. You most likely just need a vehicle that reliably gets you around town without breaking the bank.
In terms of price, used cars beat new cars almost every time. And reliability is decreasingly an issueâused cars sometimes travel 100,000 before they need a major repair.š
As a rule of thumb, look for used cars that are three years old or more. They often can have the same features as newer models, still have many miles left before they break down, and can cost a fraction of a brand new car.
Ask for a carâs VIN before you buy it
If you decide to buy used, ask for the Vehicle Identification Number (VIN) of each car you consider. A VIN gives you access to the full history of your car, includingâŚ
Once you have the VIN, check it out on the National Highway Traffic Safety Administration and the National Motor Vehicle Title Information System. They have digital resources that allow you to search VINs and discover the history of the vehicles youâre considering.
Say no to bad deals
Donât sweat it if you find a not-so-great car at a good price. Itâs perfectly fine to walk away and keep searching. 40 million used cars were sold in 2019.² Youâll find the car you want at a price you love soon enough!
Above all, do your research. Buying a first car is a serious financial commitment. The last thing you want to do is drive off with a car that costs too much or will need constant repairs and maintenance. Check out sites like Kelley Bluebook and Consumer Reports to find information on car prices and reliability. Then, start asking around. You might be surprised by how many people in your circles are trying to unload a reliable used car!
š âHow Many Miles is Too Many on a Used Car?,â Autolist, June 27, 2017, https://www.autolist.com/guides/how-many-miles-is-too-many-used-car
² âNew and used light vehicle sales in the United States from 2010 to 2019,â I. Wagner, Statista, https://www.statista.com/statistics/183713/value-of-us-passenger-cas-sales-and-leases-since-1990/#:~:text=U.S.%20new%20and%20used%20car%20sales%202010%2D2019&text=Sales%20of%20used%20light%20vehicles,and%20automobiles%20were%20sold%20here.
It represents the time and effort you spend working to master a particular field and may span multiple individual jobs.
But, as with any journey, youâll face hazards and setbacks along the way. Here are two potentially harmful mindsets that can become roadblocks to your professional success,
Career-identity confusion
Careers are important. Excellence is important. They provide metrics to evaluate your success. But neither defines your worth as a person. It doesnât make you a failure if a career doesnât work out like you had imagined it would. Likewise, scoring a huge sale or landing a promotion doesnât increase your fundamental value.
Finding your meaning and purpose gives you the resilience to withstand temporary setbacks and keep pushing forward.
Perfectionism
Perfectionism is linked with numerous mental health issues.š Itâs no wonder why. Demanding perfection from yourself and others is a surefire way to be consistently disappointed. And when you donât meet your own self-imposed standards, it can feel absolutely devastating and paralyzing.
Instead of pushing yourself to the breaking point and berating yourself over failures, take a moment to own up to your mistakes and then forgive yourself. Donât let lifeâs hiccups define you and your life. In fact, they can be vital opportunities to learn and expand your perspective. But that wisdom is only accessible once you release the drive to be perfect.
The key to navigating a career is perspective. Perspective allows you to see what matters and whatâs insignificant. Examine your motives. Why are you pursuing your career? Is it because youâre passionate about it? Because it provides for your family? Because it can make you lots of money? Once you set your eye on your higher goals and calling, it becomes much easier to avoid toxic mindsets that may threaten your career and success.
š âThe Dangers of Perfectionism,â Andrea Brandt, Psychology Today, Apr 01, 2019, https://www.psychologytoday.com/us/blog/mindful-anger/201904/the-dangers-perfectionism
Whether youâre a highschool student working a cash register or a fresh-out-of-college graduate who just landed a cubicle, a first job often comes with a steep learning curve. But donât let that weigh you down! This is your once in a lifetime opportunity to start your financial journey strong and develop skills that will last you throughout your career.
Here are two simple steps you can take to make the most of your first job.
Start saving.
A first paycheck is a magical thing. It makes you feel like the hard work has finally paid off and youâre a real adult. You might just become unstoppable now that youâve got a regular income!
But that empowerment will be fleeting if you spend everything you earn.
Itâs absolutely critical that you begin saving money the moment your first paycheck arrives. This practice will go far in establishing healthy money habits that can last a lifetime. Plus, the sooner you start saving, the more time your money has to grow via compound interest. What seems like a pittance today can grow into the foundation of your future wealth if you steward it properly!
Evaluate your performance.
Thereâs much that you can learn about yourself by studying your job performance. Youâll get an idea of strengths that you can leverage and weaknesses that you need to work on.
But most importantly, you might discover moments when youâre âin the zoneâ. Youâll know what that means when you feel it. Time slows down (or speeds up), youâre totally focused on the task at hand, and youâre having fun.
That feeling is like a compass. It helps point you in the direction of what youâre supposed to do with your life. Do you get in the zone when youâre working on a certain task? With a group of people? Helping others succeed? Pay close attention to when youâre feeling energized at work and delivering quality results⌠and when youâre not!
Above all, keep an open mind. Your first job might introduce a passion youâll pursue for the rest of your life⌠or it might not. And thatâs okay! Whatever it is and wherever it leads, be sure to save as much as you can and to pay attention to what you like. Youâll be better positioned both financially and personally to pursue your dreams when the time comes to make your next move!
Youâve probably daydreamed about what you want to do when you no longer have to withstand the 9-to-5 routine. But do you know when you want retirement to become a reality?
The average retirement age for people in the US is about 63. However, thereâs a large group of people who continue to work past 65.š Two motivations that could be contributing to this situation are:
Itâs apparent that the first option might be preferable to the latter â even if you love what you do.
Hereâs why: having the choice is better than having no choice at all.
Imagine that as you approach the time when you want to retire that you love your job and experience a lot of satisfaction in what you do. But thereâs no option for you to stop even if you wanted to because of bills or obligations to yourself or your family.
As you approach retirement age â whatever that may be â there could be other things in your life that matter to you that come into conflict with the job you love. Some of these âother thingsâ may include (but arenât limited to) spending time with family, volunteering at an organization youâre passionate about, traveling the world, etc. Except for a lucky few, most canât both traveling around the world AND work the job they love. Thatâs when having the resources to choose comes in handy.
Itâs important to have a strategy to reach your retirement goals, whether itâs retiring at age 65 or earlier. Having a plan in place doesnât mean you absolutely have to retire. But at least youâll have the flexibility to do so!
š âAverage Retirement Age In The United States,â Dana Anspach, The Balance, Jul 31, 2020, http://bit.ly/2nW9AWJ.
Before they might know what a 401(k) or mortgage even are, their financial future is already starting to take shape. Itâs never too early to teach your kids the wisdom of budgeting, limiting their spending, and paying themselves first. So the sooner you can instill those lessons, the deeper theyâll sink in!
Fortunately, teaching your kids about saving is quite simple. Here are two common-sense strategies that can help you instill financial wisdom in your children from the moment they can tell a dollar from a dime!
Give your child an allowance
The easiest way for your child to learn how money works is actually for them to have money. If itâs within your budget, set up a system for your child to earn an allowance. The more closely it relates to their work, the better. Set up a list of family chores that are mandatory, and then come up with some jobs and projects around the house that pay different amounts.
What does this have to do with saving? The simple fact is that spending money you receive as a gift can feel totally different than spending money that you earn. Teaching your children the connection between work and money instills a sense of the value of their time and that spending isnât something to be taken lightly!
Teach your child how to budget
Budgeting is one of the most essential life skills your child will ever learn. And thereâs no better time for them to start learning the difference between saving and spending than now! The same study that revealed children solidify their spending habits at age 7 also suggested they can grasp basic financial concepts by age 3!
So when your kid earns that first 5 dollar bill for working in the yard, help them figure out what to do with it! Encourage them to set aside a portion of what they earn in a place where it will grow via compound interest. Explain that the longer their money compounds, the more potential it has to grow! If theyâre natural spenders, help them determine how long it will take them to save up enough to buy the new toy or game they want and that itâs worth the wait.
Start saving for yourself
Remember thisâthe most important lessons you teach your children are unconscious. Your kids are smart. They watch everything you do. Relentlessly enforce spending limits on your kids but splurge on a vacation or new car? Theyâll notice. Thatâs why one of the most critical means of teaching your kids how to save is to establish a savings strategy yourself. When you make and review your monthly budget, invite the kids to join! When they ask why you havenât gone on vacation abroad for a while, calmly inform them that itâs not in the family budget right now. Model wise financial decision making, and your children will be far more receptive to learning how money works for themselves!
The time to start teaching your kids how to save is today. Whether theyâre 2, 8, or 18, offer them opportunities to work so they can earn some money and give them the knowledge and resources they need to use it wisely. And the sooner your kids discover concepts like the power of compound interest and the time value of money, the more potential they have to transform what they earn into a foundation for future wealth.
âThe 5 Most Important Money Lessons To Teach Your Kids,â Laura Shin, Forbes, Oct 15, 2013, https://www.forbes.com/sites/laurashin/2013/10/15/the-5-most-important-money-lessons-to-teach-your-kids/?sh=2c01a4956826
Thereâs something liberating about closing one chapter of your life and beginning a new one. You realize that this year doesnât have to be like last year, and that there are countless possibilities for growth.
Now is the perfect time to write a new financial chapter of your life.
In the mindset of new beginnings, the first thing is to forgive yourself for the mistakes of the past and start fresh. Now is your chance to set yourself up for financial success this year and potentially for years to come. Here are three simple steps you can take starting January 1st that might make this new chapter of your life the best one yet!
Automate wise money decisions ASAP
What if there were a way to go to the gym once that somehow made you steadily stronger throughout the year? One workout would be all you need to achieve your lifting goals!
Thatâs exactly what automating savings and bill payments does for your finances.
All you have to do is determine how much you want to save and where, set up automatic deposits, and watch your savings grow. Itâs like making a yearâs worth of wise financial decisions in one fell swoop!
Give your debt the cold shoulder
Debt doesnât have to dictate your story in the new year. You can reclaim your cash flow from monthly payments and devote it to building wealth. Resolve to reduce how much you owe over the next 12 months, and then implement one of these two powerful debt strategiesâŚ
Arrange your debts on a sheet of paper, starting with the highest interest rate and working down. Direct as much financial firepower as you can at that first debt. Once youâve cleared it, use the extra resources youâve freed up to crush the next one even faster. This strategy is called the Debt Avalanche.
-Or-
Arrange your debts on a sheet paper, starting with the smallest debt and working up to the largest. Eliminate the smallest debt first and then work up to the largest debt. This is called the Debt Snowball. It can be a slower strategy over the long-haul, but it can sometimes provide more motivation to keep going because youâre knocking out smaller goals faster.
Start a side hustle
You might not have thought much about this before, but you may have what it takes to create a successful side hustle. Just take a moment and think about your hobbies and skills. Love playing guitar? Start teaching lessons, or see if you can start gigging at weddings or events. Are you an embroidery master? Start selling your creations online. Your potential to transform your existing talents into income streams is only limited by your imagination!
Start this new year strong. Automate a yearâs worth of wise financial decisions ASAP, and then evaluate what your next steps should be. You may even want to meet with a qualified and licensed financial professional to help you uncover strategies and techniques that can further reduce your debt and increase your cash flow. Whatever you choose, youâll have set yourself up for a year full of potential for financial success!
For example, how much would you spend on a meal at a restaurant before it moves into lifestyles-of-the-rich-and-famous territory? $100? $50? $20? To some, enjoying a daily made-to-order burrito might be par for the course, but to others, spending $10 every day on a tortilla, a scoop of chicken, and a dollop of guacamole might seem extravagant. Chances are, there may be some areas where youâre more in line with the average person and some areas where youâre atypical â but donât let that worry you!
In case you were wondering, the top 3 things that Americans spend their money on in a year are housing ($20,091), transportation ($9,761), and food ($7,923).š
Those top 3 expenses might very well be about the same as your top 3, but everything else after that is a mixed bag. Your lifestyle and the unique things that make you, well you, greatly influence where you spend your money and how you should budget.
For example, letâs say the average expenditure on a pet is $600 annually, but that may lump in hamsters, guinea pigs, all the way to Siberian Huskies. As you can imagine, each could come with a very different yearly cost associated with keeping that type of pet healthy. So although the average might be $600, your actual cost could be well above $3,000 for the husky! That definitely wouldnât be seen as ânormalâ by any means. And thatâs okay!
What are we getting at here? Itâs perfectly fine to be âabnormalâ in some areas of your spending. You donât need to make your budget look exactly like other peopleâs budgets. What matters to them might not be the same as what matters to you.
So go ahead and buy that organic, gluten-free, grass-fed kibble for Fido â he deserves it (if he didnât pee on the carpet while you were away, that is)! If Fidoâs happiness makes you happy, then more power to you. Just make sure that at the end of the day, Fidoâs food bill wonât bust your budget.
š âAmerican Spending Habits in 2020,â Lexington Law, Jan 6, 2020, https://www.lexingtonlaw.com/blog/credit-cards/american-spending-habits.html