You read that right: $895 billion. And that’s after decreasing in 2020 due to the pandemic.
It seems like many have ended up being owned by a tiny piece of plastic rather than the other way around.
How much have you or a loved one contributed to that number? Whether it’s $10 or $10,000, there are a couple simple tricks to get and keep yourself out of credit card debt.
The first step is to be aware of how and when you’re using your credit card. It’s so easy – especially on a night out when you’re trying to unwind – to mindlessly hand over your card to pay the bill. And for most people, paying with credit has become their preferred, if not exclusive, payment option. Dinner, drinks, Ubers, a concert, a movie, a sporting event – it’s going to add up.
And when that credit card bill comes, you could end up feeling more wound up than you did before you tried to unwind.
Paying attention to when, what for, and how often you hand over your credit card is crucial to getting out from under credit card debt.
Here are 2 tips to keep yourself on track on a night out.
1. Consider your budget. You might cringe at the word “budget”, but it’s not an enemy who never wants you to have any fun. Considering your budget doesn’t mean you can never enjoy a night out with friends or coworkers. It simply means that an evening of great food, fun activities, and making memories must be considered in the context of your long-term goals. Start thinking of your budget as a tough-loving friend who’ll be there for you for the long haul.
Before you plan a night out:
2. Cash, not plastic (wherever possible). Once you know what your budget for a night out is, get it in cash or use a debit card. When you pay your bill with cash, it’s a concrete transaction. You’re directly involved in the physical exchange of your money for goods and services. In the case that an establishment or service will only take credit, just keep track of it (app, napkin, back of your hand, etc.), and leave the cash equivalent in your wallet.
You can still enjoy a night on the town, get out from under credit card debt, and be better prepared for the future with a carefully planned financial strategy. Contact me today, and together we’ll assess where you are on your financial journey and what steps you can take to get where you want to go – hopefully by happy hour!
¹ “2020 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 12, 2021, https://www.nerdwallet.com/blog/average-credit-card-debt-household/
Excited? Afraid? Disappointed? Nothing?
Those feelings can reveal deeper truths about your relationship with money. And that relationship can influence your financial future.
That’s because, despite what people say, money is often wrapped up in feelings about…
That’s why people’s behavior with money is often not well-reasoned. Instead of making measured decisions based on the numbers, people find themselves on autopilot. In other words, they react instead of respond.
Let’s look at some examples…
Let’s say your relationship with money is primarily fear based. Maybe you saw your parents struggle with their finances, and you constantly worry about reliving their experience.
The autopilot response? Frugality and risk-aversion, even if you earn a comfortable wage.
There’s nothing wrong with either of those qualities in moderation. But taken too far, they may seriously damage your personal relationships and prevent you from taking advantage of financial opportunities.
Plus, the constant stress and fear of losing everything might impact your mental and physical health if not properly managed.
There’s also the opposite extreme. What if you use wealth to establish your social status?
You’ll be far more likely to buy things you don’t need to show off to your peers. You may even begin compulsively shopping to cope with stress.
In other words, you may be using money in unhealthy and damaging ways. And the stress and guilt that come from such behavior can seriously harm relationships and your ability to accomplish your goals.
So what’s the solution? What should your feelings toward wealth be?
The starting point must be that money is primarily a tool. It doesn’t define you. It isn’t evil. It’s simply a tool that empowers you to pursue things that you love.
Simply put, money isn’t an end unto itself. It’s a means to an end.
The question is, then what do you love? What do you want to do and see and pursue? And what role will money play in achieving those goals?
Once you reorder your relationship with wealth along those lines, a whole world of possibility may open up like…
But it all starts with understanding your current feelings towards money, and then deciding on what you want your future to look like.
If you need someone to process those feelings with, contact me! I’m here to offer you guidance and support on your journey towards financial stability.
Let’s find out!
A survey of the wealthy revealed that 76% engaged in aerobic exercises for 30 minutes per day, 4 days per week.¹ The same survey revealed that only 23% of the non-wealthy do the same.
So the question isn’t whether the wealthy work out. It’s whether exercise played a role in their journey to financial security.
The connection isn’t as clear as we may like. That’s because correlation doesn’t equal causation. Plenty of wealthy people also read a lot (see my other article on the connection between wealth and reading). But no one would claim that reading alone created their prosperity. The same could be argued for exercise—perhaps the wealthy only found the time to work out after they achieved financial independence!
There’s a host of research that demonstrates the power of exercise to…
In fact, exercise is as effective as antidepressants in some cases!³ That means exercise may help remove barriers that inhibit your ability to build your goals and achieve your dreams. It can also fuel the creativity you need to help solve problems and increase your potential market value. One study discovered that physical activity in men resulted in a 14-17% increase in income over a 15 year period.⁴
The takeaway? Imitate the wealthy and get some exercise! It’s a non-financial habit that may pave the way to better mental health and help position you to achieve greater things, wealth-related or not.
¹ “Why Is Aerobic Exercise Important to Building Wealth?” Thomas Corley, Rich Habits, Aug 25, 2020, https://richhabits.net/why-is-aerobic-exercise-so-important-to-building-wealth/ ² “The Mental Health Benefits of Exercise,” Lawrence Robinson, Jeanne Segal, Ph.D., and Melinda Smith, M.A., HelpGuide.org Oct 2020, https://www.helpguide.org/articles/healthy-living/the-mental-health-benefits-of-exercise.htm# ³ “Exercise is an all-natural treatment to fight depression,” Harvard Health Publishing, Feb 2, 2021, https://www.health.harvard.edu/mind-and-mood/exercise-is-an-all-natural-treatment-to-fight-depression ⁴ “8 Daily Rituals Most Millionaires Have In Common,” Lou Carlozo, Money Under 30, Nov 16, 2020 https://www.moneyunder30.com/millionaires-daily-rituals
One study revealed that 85% of self-made millionaires read 2 or more books per month.¹ That’s not a coincidence. Many of us have been told that reading improves our vocabulary and grammar skills, but there’s so much more to it than that! Reading can help develop traits that can provide an excellent foundation for a prosperous life and building wealth.
1. Reading expands your perspective. Think of it like a hack that grants you access to the wisdom of others. Instead of only drawing from your own experiences and resources, reading is an opportunity to discover fresh and challenging ideas. And the more connections you make between the ideas you read about, the more creative—and valuable—you become.
2. Reading can counteract negative emotions. Reading is good for your brain—it can reduce stress levels and prevent age-related cognitive decline.² But it goes deeper than that. It turns out that making new connections is good for your mental health. There’s evidence that reading can help combat struggles like depression.³
Why? It’s because reading can help people process difficult situations. Reading about other characters and different perspectives can help forge new mindsets and beliefs. And the more you process through difficulties, the better equipped you become to build a prosperous life.
3. Reading builds empathy. It’s no surprise that discovering other perspectives or exploring the inner lives of characters builds empathy.3 What might be surprising, however, are empathy’s benefits.
Not only does empathy lead to a richer emotional life, but it’s been shown to be critical for creating healthy—and productive—workplaces.⁴ Understanding the emotions and feelings of others makes you a more effective leader, coworker, and person.
Notice that none of these skills are directly financial—you won’t learn them in a finance or accounting course, and probably no one would pay you to read a book per month. But, as you can see, they can be critical for expanding your perspective and growing your career.
If you’re interested in reading more, start small and easy. Try reading for 15 to 30 minutes per day for a week on a topic that interests or excites you. Then slowly expand your reading time as you feel comfortable. At the end of the month, see how you feel! You might be surprised by how much your perspective has grown or shifted.
¹ “5 Common Traits of A Self-Made Millionaire,” Caden Strause, Medium, Oct 26, 2020, https://medium.com/frugal-friday/5-common-traits-of-a-self-made-millionaire-f6cf65c13c6c
² “5 ways reading benefits your health — and how to make reading a daily habit,” Lia Tabackman, Insider, Dec 1, 2020, https://www.insider.com/benefits-of-reading
³ “The Health Benefits of Books You Have to Read to Believe,” Madison Yauger, Shape, Oct 27, 2020, https://www.shape.com/lifestyle/mind-and-body/benefits-of-reading-books
⁴ “New Research Shows Why Business Leaders Struggle With Workplace Empathy,” Bryan Robinson, Forbes, May 17, 2021, https://www.forbes.com/sites/bryanrobinson/2021/05/17/new-research-shows-why-business-leaders-struggle-with-workplace-empathy/?sh=749a6d8684ad
You know, one where you felt as if all your energy was being drained from the moment you walked in until the moment they kicked you out. Maybe it was a bad boss, or just something about the industry or type of work.
This article will help you evaluate whether or not your current career path is worth pursuing by considering the opportunity cost of staying where you are versus leaving to pursue your dreams.
First off, what is opportunity cost? It’s an economic term which refers to the benefit that a person must give up in order to attain something else. Typically, it’s calculated in dollars. For instance, career A might pay you $50,000 while career B may pay only $30,000. The opportunity cost of choosing career B would be $20,000.
But here’s the catch—there are factors beyond pay that you must consider when choosing a career.
What if earning boatloads in your career requires dedicating all your waking hours to that endeavor? Are you sacrificing your joy, freedom, or even mental health just for a paycheck? The opportunity cost of your career and salary might be your joy, your freedom, your family, and your state of mind!
So when considering a job or a career, weigh ALL the costs. Will your career consume your time, distract you from your true passions, and impair your mental health, all in exchange for a fat paycheck? Or will it enrich your life, use your time wisely, and allow you to make enough money without sacrificing the joys of family and friends?
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, you’ll 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 doesn’t make you a failure if a career doesn’t work out like you had imagined it would. Likewise, scoring a huge sale or landing a promotion doesn’t 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.¹ It’s no wonder why. Demanding perfection from yourself and others is a surefire way to be consistently disappointed. And when you don’t 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. Don’t let life’s 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 what’s insignificant. Examine your motives. Why are you pursuing your career? Is it because you’re 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.
¹ “The Dangers of Perfectionism,” Andrea Brandt, Psychology Today, Apr 01, 2019, https://www.psychologytoday.com/us/blog/mindful-anger/201904/the-dangers-perfectionism
It turns out that all of the above can be damaging to your health. The first two may come as no surprise, but it turns out people who experience “negative wealth shock” are 50% more likely to die in the following 20 years than their neighbors.¹ That’s an insane uptick! So why are the numbers so high?
Let’s start by defining negative wealth shock.
It can happen when someone loses 75% or more of their wealth. Imagine if you woke up one day and discovered that your $100,000 nest egg had dropped to $25,000. That’s the level of loss needed to be considered negative wealth shock.
Obviously, a loss of that magnitude would be emotionally devastating.
But why does it seem to have such an impact on mortality?
Part of it might have to do with losing access to medical services. People with less money can’t visit the doctor as often and sometimes can’t afford the treatment they need.
It’s also worth considering that dangerous health conditions sometimes result in negative wealth shock.² Perhaps the statistic says more about the seriousness of staying healthy than it does staying rich!
However, there’s also a strong likelihood that losing the vast majority of one’s wealth causes dangerous levels of stress. For example, The Great Recession of 2007 to 2009 actually increased the risk for heart attacks and depression.³
Unfortunately, negative wealth shock is astoundingly common.
A survey discovered that a quarter of participants had experienced it.⁴ Americans aren’t just losing vast amounts of money. They’re experiencing devastating emotional, mental, and ultimately physical damage that could cost them their lives.
So how can you prevent a traumatic negative wealth shock?
First, determine how volatile your net worth is. Is all your wealth concentrated in one investment? What would happen if that investment crashed?
Second, discover how sturdy your protection is. How would you pay the bills if you were out of work or unable to work? Do you have the savings and insurance to protect you and your family?
Third, assess how stable your income is. Would your paycheck vanish if you couldn’t work or if your employer went belly up? Or do you have a team and system in place that could keep you financially afloat?
How did you answer these questions? Let’s talk if you feel that you’re vulnerable to a negative wealth shock. We can brainstorm strategies to insulate your wealth against the worst and protect it for your future.
¹ ⁻ ⁴ “Financial Ruin Can Be Hazardous To Your Health,” Rob Stein, NPR, April 3, 2018, https://www.npr.org/sections/health-shots/2018/04/03/598881797/financial-ruin-can-be-hazardous-to-your-health
Americans spend about 34% of their income on servicing their mortgages, car loans, and, of course, credit cards.¹
Assuming a household income of $68,703, that translates to roughly $23,359 going down the drain each and every year.²
Obviously, converting that money from debt maintenance to wealth building would be a dream come true for most Americans. But there’s more at stake here than retirement strategies.
The true cost of debt is your peace of mind.
Take the example from above. A third of your income is going towards debt and the rest is split up between everyday living and transportation expenses. You feel you can make ends meet as long as the money keeps coming in.
But what happens if a recession causes massive layoffs? Or if a pandemic shuts down the economy for months?
The sad fact is that the hamster wheel of debt prevents a huge chunk of Americans from saving enough to cover even a brief window of unemployment, let alone a shutdown!
That lack of financial security can have serious repercussions, including bankruptcy. And feeling like you’re always one unexpected emergency away from a financial crisis can result in a myriad of mental health issues. Numerous studies have shown that high levels of debt increase anxiety, depression, anger, and even divorce.³
Conquering debt isn’t about changing numbers on a page. It’s about reclaiming your peace. It’s about securing financial stability for you and your family. Your income is a powerful tool if you can protect it from lenders.
If you’re stressed about debt and seeking some relief, let me know. We can review your situation together and come up with a game plan that will recover the financial security that’s rightfully yours.
¹ “Study: Americans Spend One-Third of Their Income on Debt,” Maurie Backman, The Ascent, Mar 6, 2020, https://www.fool.com/the-ascent/credit-cards/articles/study-americans-spend-one-third-of-their-income-on-debt/#:~:text=And%20recent%20data%20from%20Northwestern,feel%20guilty%20about%20their%20predicament
² “Income and Poverty in the United States: 2019,” Jessica Semega, Melissa Kollar, Emily A. Shrider, and John Creamer, United States Census Bureau, Sept 15, 2020, https://www.census.gov/library/publications/2020/demo/p60-270.html#:~:text=Median%20household%20income%20was%20%2468%2C703,and%20Table%20A%2D1)
³ “The Emotional Effects of Debt,” Kristen Kuchar, The Simple Dollar, Oct 28, 2019, https://www.thesimpledollar.com/credit/manage-debt/the-emotional-effects-of-debt/#:~:text=In%20that%20study%2C%20Gathergood%20found,including%20depression%20and%20severe%20anxiety.&text=The%20study%20also%20reported%20that,stress%20also%20report%20severe%20anxiety.
Data found that 37% of Californians and close to 1.9 million people in Canada between 18 and 64 live with their parents (1 & 2). That might not sound ideal, but is it really that bad? Here are some pros and cons to consider before deciding to move back home.
Pros <br> Living with your parents isn’t necessarily the end of the world. For starters, it might be cheaper than renting an apartment or buying a house, depending on the deal your parents offer you. Negotiating rent with your mom is typically easier than wrangling with a landlord! On that note, at home you’ll be surrounded by people who love you. That can be a serious boost to your mental health and give you some footing for your next move. And you can’t forget that free food is awesome. (If that’s part of the deal!)
Cons <br> But moving back in might not necessarily be all rainbows and sunshine. It can be incredibly demoralizing for many people. We tend to estimate our self-worth and how much we’ve accomplished by our independence from our parents. It’s easy to see living with our parents as a step back. Plus, it can encourage laziness. Not having to hustle for food and rent can remove a sense of urgency from your work. Nothing motivates you quite like the imminent threat of bankruptcy!
If you have to move back in with your parents, do it with a plan. Maybe you give yourself six months at home to get your business off the ground. Your goal might be more long-term like caring for a parent. Just remember to take it in stride and don’t let it derail your life!
Matt Levin, “Nearly 40 Percent Of Young Adult Californians Live With Their Parents. Here’s Everything To Know About Them,” Cal Matters, August 25, 2019.
Statistics Canada, “Family Matters: Adults living with their parents.” The Daily, February 15, 2019.
The anxiety is not surprising: Members of the Class of 2017 had an average of $39,400 in student loan debt.¹
Nearly $40 grand? For that you could travel the world. Put a down payment on a house. Buy a car. Even start a new business! But instead of having the freedom to pursue their dreams, there’s a hefty financial ball and chain around millennials’ feet.
That many young people owing that much money before they even enter the workforce? It’s unbelievable!
Now just imagine adding car payments, house payments, insurance premiums, and more on top of that student debt. No wonder millennials are feeling so terrible: studies show that graduates with debt experience feelings of shame, panic, and anxiety.² Now is the time to get ahead of your debt. Not later. Not when it’s more convenient or feels less shameful. You have the potential right now to manage that debt and get out from under it.
So how do you get out from under your debt? Sometimes improving your current situation involves more than making smarter choices with the money you earn now. Getting out of that debt ditch means finding a way to make more.
There are 2 things you can monetize right now:
Both have their own challenges. You may not have spent much time in a particular field yet, so not a lot of experience. And what if you’re working a job that has nothing to do with your major? There goes education.
Two speed bumps. One right after the other. But you can still gain momentum in the direction you want your life to go!
How? A solid financial strategy. A goal you can see. A destination for financial independence.
Debts can become overwhelming – remember that stat up there? But with a strategy in mind for the quick and consistent repaying of your loans, so much of that stress and burden could be lifted.
Contact me today. A quick phone call is all we need to help get you rolling in the direction YOU want to go.
Recent studies indicate that 76% of Millennials don’t have a basic understanding of financial literacy.¹ Combine that with having little in savings and mountains of debt, and you have the ingredients for a potential financial crisis.
It’s not only Millennials that lack a sound financial education. The majority of American and Canadian adults are unable to pass a basic financial literacy test.²³ But what is financial literacy? How do you know if you’re financially literate? It’s much more than simply knowing the contents of your bank account, setting a budget, and checking in a couple times a month. Here’s a simple definition: “Financial literacy is the education and understanding of various financial areas including topics related to managing personal finance, money and investing.”⁴
Making responsible financial decisions based on knowledge and research are the foundation of understanding your finances and how to manage them. When it comes to financial literacy, you can’t afford not to be knowledgeable.
So whether you’re a master of your money or your money masters you, anyone can benefit from becoming more financially literate. Here are a few ways you can do just that.
Consider How You Think About Money
Everyone has ideas about financial management. Though we may not realize it, we often learn and absorb financial habits and mentalities about money before we’re even aware of what money is. Our ideas about money are shaped by how we grow up, where we grow up, and how our parents or guardians manage their finances. Regardless of whether you grew up rich, poor, or somewhere in between, checking in with yourself about how you think about money is the first step to becoming financially literate.
Here are a few questions to ask yourself:
Pay Some Attention to Your Spending Habits
This part of the process can be painful if you’re not used to tracking where your money goes. There can be a certain level of shame associated with spending habits, especially if you’ve collected some debt. But it’s important to understand that money is an intensely personal subject, and that if you’re working to improve your financial literacy, there is no reason to feel ashamed!
Taking a long, hard look at your spending habits is a vital step toward controlling your finances. Becoming aware of how you spend, how much you spend, and what you spend your money on will help you understand your weaknesses, your strengths, and what you need to change. Categorizing your budget into things you need, things you want, and things you have to save up for is a great place to start.
Commit to a Lifestyle of Learning
Becoming financially literate doesn’t happen overnight, so don’t feel overwhelmed if you’re just starting to make some changes. There isn’t one book, one website, or one seminar you can attend that will give you all the keys to financial literacy. Instead, think of it as a lifestyle change. Similar to transforming unhealthy eating habits into healthy ones, becoming financially literate happens over time. As you learn more, tweak parts of your financial routine that aren’t working for you, and gain more experience managing your money, you’ll improve your financial literacy. Commit to learning how to handle your finances, and continuously look for ways you can educate yourself and grow. It’s a lifelong process!
¹ Golden, Paul. “Millennials Show Alarming Gap Between Financial Confidence and Knowledge.” National Endowment for Financial Education, 2.9.2017, https://bit.ly/2Hu9TRV.
² Pascarella, Dani. “4 Stats That Reveal How Badly America Is Failing At Financial Literacy.” Forbes, 4.3.2018, https://bit.ly/2ANtQU5.
³ Shmuel, John. “When it comes to financial literacy, Canadians really overestimate their knowledge.” text in italic, LowestRates.ca, 6.27.2017, https://bit.ly/2nhNUnU.
⁴ “Financial Literacy.” Investopedia, 2018,https://bit.ly/2JZJUkW.
If one of them is improving your budgeting skills – or maybe just creating a budget in the first place – read on for some guidelines that may help reduce some of your expenses (including what you might call the essentials).
Start with debt and interest rates
If you have any loans in your name, rest assured there will be interest associated with those loans, unless you’ve got a really nice aunt who loaned you some money interest-free. From the borrower’s perspective, interest is simply the expense of receiving money from a creditor which you’re required to pay back over time. No one wants to pay higher interest than necessary.
In contrast to other expenses, like rent, food, or entertainment, interest itself produces absolutely no value for the borrower. The borrowed money may produce value, but the interest itself does not. For that reason, you’re going to want to pay as little interest on your loans as possible.
One strategy is to transfer credit card balances to lower APR credit cards – just beware of transfer fees. Read the fine print to make sure the new card actually carries a lower interest rate, as sometimes the rate after the introductory period may go up. If you can refinance any of your loans, like student, auto, or home, consider it. For example, there’s no reason to pay 5% if you can pay 4%. (Again, make sure you understand the terms and any fees involved.)
Slim down the essentials
This is the time when all items in your budget are going to come under consideration. Everything is on the table. For transportation, any reduction in cost you can make is going to depend on your location. If you live in a high-density urban area and you normally drive yourself or use public transit to get to work or other destinations, ask yourself if you can walk or cycle instead. These options often provide health benefits as well.
The key? Look at the essential sections of your budget and mentally run through how you obtain those essentials, like driving to the nearest grocery store or who your landlord is. Then brainstorm alternatives for paying for these items or services – anything is fair game! (For example, would your landlord reduce your rent if you help out with yard maintenance?) Finally, do a little research and analysis to see if those alternatives are cheaper (and feasible).
The next step is to look at each non-essential and determine its utility to you. If you barely think about the actual purchase, you might have simply developed the routine of purchasing that item or service (think: “monthly movie subscription service you never use anymore”). In that case, the hardest part might be combing through your credit card statement and nixing the services you never use. Another example of routine, autopilot spending might be the soda you buy with your lunch. Do you really need it? Maybe not. Switching to tea or coffee that you can brew at home may be cheaper. And water is (usually) free.
Repeat this process with every non-essential. Are you really using your 10GB/mo mobile internet plan? If not, look for a lower, more cost-effective GB plan. The key here is to try to distinguish between convenience and necessity.
Don’t discount the discount
There are discounts everywhere, from loyalty programs to manufacturers’ coupons to seasonal specials. If there is an essential that burns your budget, it may be worth checking to see if you’re eligible for a government program.[i]
Some credit cards offer rewards programs, but be very careful to pay off the full amount each month to avoid accruing interest, otherwise your rewards could be negated.
Keep the big picture in mind
Sometimes it can be hard to justify the time and effort that might be involved to save $2 per day. It’s just two dollars, right? But look at the accumulated savings. Saving $2 per day for a year translates to over $700, or about $60 per month. If you choose to brew that tea instead of buying the soda, maybe you can afford the 10GB plan instead of the 1GB plan.