You haven’t spent that much money this month. There should be plenty left over to cover this, right?
Before long, the bank has sent you the alert—your account is in the red. You’ve overdrafted. Now you’ll almost certainly face two consequences…
1. Overdraft fees. The bank’s favorite way to slap you on the wrist for overspending. These are, on average, $33.58 per overdraft as of 2021.¹
2. Interest. The only reason you can keep purchasing once you’re in the negative is because the bank loans you money. And with every loan comes interest.
It may not seem significant, but these add up. In 2020, Americans spent 12.4 billion in fees alone.²
Here are some strategies to help your bank account stay above water…
This way, purchases that push your bank account past zero will be denied. Overdrafting becomes impossible. There are, however, two serious drawbacks…
You may feel silly if you try to make a purchase and it doesn’t go through. You may need to make a legitimate emergency purchase that exceeds the amount in your account.
Fortunately, there are other strategies at your disposal.
If you have an emergency fund, you can link it directly to your spending account. That way, if you overdraft, your emergency fund will automatically make up the difference.
This works well for covering emergency expenses. But if your regular spending overdrafts your account, you may squander your emergency fund on non-emergencies.
Consistent overdrafting may mean that you have a spending problem. If that’s the case, the time has come to cut back. Set up a budget that keeps your spending above water each month. That way, you won’t come close to the dangers of overdraft.
It all comes down to why you’re overdrafting. If you overdraft on occasion because of emergencies, simply link your emergency fund to cover the difference. But if it’s the symptom of a deeper issue, it may be time to seek help.
¹ “Overdraft fees hit another record high this year—here’s how to avoid them,” Alicia Adamczyk, CNBC, Oct 20, 2021, https://www.cnbc.com/2021/10/20/overdraft-fees-hit-another-record-highheres-how-to-avoid-them.html
² “Banks Charged Low-Income Americans Billions In Overdraft Fees In 2020,” Kelly Anne Smith, Forbes, Apr 21, 2021, https://www.forbes.com/advisor/personal-finance/how-to-prevent-overdraft-fees/
Some downturns can be seen from a mile away. Others, like the Great Recession and the Coronavirus lockdowns, are black swan events—they catch even the experts off guard.
But they don’t have to find YOU unprepared.
Here’s a quick checklist to help you assess your recession readiness.
Without well-stocked emergency savings, losing your job could spell disaster for your finances—you’d be forced to rely on credit to cover even basic expenses. When you re-enter the workforce, a huge chunk of your income would go straight towards paying down debt instead of building wealth.
That’s why it’s critical to save three to six months of income asap. It may be the cushion you need to soften the blow of unemployment, should it come your way.
Recessions don’t discriminate. They affect everyone from the poorest to the wealthiest. But one group weathers downturns better than most—those with multiple streams of income.
If you have more than one source of income, you’re less likely to feel the full brunt of a recession. If one stream dries up, ideally you would have others to fall back on.
What does that look like? For many, it means a side hustle. Some create products like books, online guides, etc., or they might do something like acquire rental properties. These types of businesses typically only require a one-time effort to produce or purchase but will yield recurring income.
If you’re ambitious, you could create a business to generate income that far exceeds your personal labor. It’s not for the faint of heart. But with the right strategy and mentorship, it could lend your finances an extra layer of protection.
Just as you diversify your income streams, you should also diversify your savings. That way, if one account loses value, you have others to fall back on.
What could that look like? That depends on your situation. It’s why talking to a licensed and qualified financial professional is a must—they can help tailor your strategy to meet your specific goals.
The wealthy have long known that recessions can be opportunities. With the right strategy, you may actually come out ahead financially.
But in order to take advantage of those opportunities, you need to have cash on hand. That way, when others are forced to sell at a discount, you can scoop up assets at a fraction of their true value.
So if you want to be in a position to take advantage of a downturn, make sure you have ample cash on hand. That way, when an opportunity comes knocking, you’ll be ready to answer.
No one can predict the future. But by following these tips, you can prepare your finances for whatever the economy throws your way.
So why does it feel like you have so little control? How many people feel financially helpless? Like there is barely enough to make ends meet and never enough to prepare for the future?
78% of Americans were living paycheck to paycheck before the pandemic hit.¹ That means most of us weren’t in control of our finances. We were just riding the coattails of a fabulous economy.
So what does it take to achieve financial control?
Here are some basic ways to grab the reins of your personal finances!
You should know how much you make. But do you know how much you spend and on what? Discovering that your bank account is empty at the end of each month is one thing. But figuring out where your money is going—that’s something else entirely. This knowledge is what will help equip you to create a strategy and take control of your life.
Start by figuring out how much you spend in total and subtracting that number from how much you make. Then, break down your spending into categories like rent, gas, eating out, entertainment, streaming services, and anything else that takes a chunk out of your normal expenses. It might feel like homework, but hang in there.
Goals are the key to creating an effective financial strategy. You have to know what you’re building towards if you want to develop the best steps and strategies. It’s okay to think simple. Maybe you’re just trying to get out of debt. Perhaps you’re trying to save enough to start a business or buy a home. Or you might be a bit more ambitious and have an eye on a dream retirement that you want to start preparing for now.
Figure out what it is you want and how much it will cost. From there you can use your budget to start cutting back in categories where you spend too much. You might discover that you need to increase your income to accomplish your goals. Map out a few steps that will move you closer to making your dream a reality.
Once you’ve built a strategy based on your goals and budget-fueled insights, the only thing left is to follow through and take action. This isn’t a grandiose, one-time maneuver. This is about little decisions day in and day out that will help make your dreams a reality. That means making small moves like meal prepping at home instead of eating out, or avoiding clothing boutiques in favor of thrift shop finds. Those little acts of discipline are the building blocks of success. You might fall off the wagon every now and again, but that’s okay! Pick yourself up and keep pushing forward.
It’s important to have each of these three components operating together at once. Knowing your financial situation and not doing anything about it may not do anything but cause anxiety. Cutting your spending without an overall vision can lead to pointless frugality and meaningless deprivation. And a goal without insight or action? That’s called a fantasy. Let’s talk about how we can implement all three of these elements into a financial strategy today!
¹ “78% Of Workers Live Paycheck To Paycheck,” Zack Friedman, Forbes, Jan 11, 2019, https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/#3305f4cb4f10
And it can be helpful—if properly structured, consolidation can noticeably lower your interest rate.
But if you’re serious about getting out of debt, it shouldn’t be the only tool in your arsenal. Why? Because debt consolidation doesn’t do anything to attack your balance.
Let’s say you have three debts…
■ $3,000 personal loan at 7% interest
■ $15,000 car loan at 5% interest
■ $8,000 credit card balance at 15% interest
That comes out to a total monthly debt payment of $2,160. That’s a lot of money!
But what if you consolidate those debts into a single $26,000 loan with a 7% interest rate? Your new monthly payment would be $1,820. Not bad!
Now consider another scenario—what if instead of consolidating your debts, you could slice your total debt burden in half?
Your monthly payment would plummet from $2,160 to $1,080. And because you’re paying less each month, you’d have more money available to put towards building wealth, ASAP.
That’s important because the sooner you start building wealth, the better. The longer your money can grow via compound interest, the wealthier you can become.
So while debt consolidation can be helpful, it shouldn’t be your only strategy for getting out of debt. It’s just one tool in the arsenal.
If you’re not sure where to start with debt, meet with a debt relief specialist. They can point you towards the strategies and relief programs you need to get out of debt—for good.
This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Any examples used in this article are hypothetical. Before taking out a loan, enacting a funding strategy, or setting up debt consolidation, seek the advice of a licensed and qualified financial professional, accountant, debt expert, and/or tax expert to discuss your options.
Even though it’s not always obvious, we carry lots of assumptions and attitudes about money that might not be grounded in reality. How we perceive wealth and finances can impact how we make decisions, prioritize, and handle the money that we have. Here are a few common money mindsets that might be holding you back from reaching your full potential!
It’s simple, right? The rich are swimming in cash, so they’re able to save. They get to build businesses and live out their dreams. The rest of us have to live paycheck to paycheck, shelling out our hard earned money on rent, groceries, and other essentials.
That couldn’t be further from the truth! Sure, you might not be able to save half your income. But you might be surprised by how much you can actually stash away if you put your mind to it. And however much you can save right now, little as it might be, is much better than putting away nothing at all!
On the other side of the coin (get it?) is the notion that you have to save every last penny and dime that comes your way. There are definitely people in difficult financial situations who go to incredible lengths to make ends meet. Just ask someone who survived the Great Depression! But most of us don’t need to haggle down the price of an apple or forage around for firewood. And sometimes, the corners we cut to save a buck can come back to bite us. Set spending rules and boundaries for yourself, but make sure you’re not just eating ramen noodles and ketchup soup!
There are definitely times when you might not feel like you need to be proactive with your finances. You don’t feel like you’re spending too much, debt collectors aren’t pounding down your door, and everything seems comfortable. Budgeting is for folks with a spending problem, right?
The fact of the matter is that everyone should have a budget. It might not feel important now, but a budget is your most powerful tool for understanding where your money goes, areas where you can cut back, and how much you can put away for the future. It gives you the knowledge you need to take control of your finances!
Breaking mediocre money mindsets can be difficult. But it’s an important step on your journey towards financial independence. Once you understand money and how it works, you’re on the path to take control of your future and make your dreams a reality.
That’s because you’ve done it—you’re going to be earning a lot more money with that raise. The first thing that pops in your head? All the fancy new things you can afford.
Dates. Your apartment. Vacation. They’re all going to be better now that you’ve got that extra money coming in.
And to be fair, all of those things CAN get substantially fancier after your income increases.
Why? Because your lifestyle became more extravagant as your income increased. Instead of using the boost in cash flow to build wealth, it all went to new toys.
This phenomenon is called “lifestyle inflation”. It’s why you might know people who earn plenty of money and have nice houses, but still seem to struggle with their finances. The greater the income, the higher the stress. As Biggie put it, “Mo’ Money, Mo’ Problems.”
The takeaway? The next time you get a raise, do nothing. Act like nothing has changed. Go celebrate at your favorite restaurant. Keep saving for your new treat. But you’ll thank yourself if you devote the lion’s share of your new income to either reducing debt or building wealth.
Rest assured, there will be plenty of time to enjoy the fruits of your labor in the future. But for now, keep your eyes on the most important prize—building wealth for you and your family’s future.
Maybe your numbers never add up or too many expenses are coming “out of the blue”. You might also feel a sense of dread every time you make a purchase. No matter what you do, this whole budgeting thing doesn’t seem to be working.
Hang in there! Here are a few budgeting potholes that might be slowing down your financial goals and how to avoid them!
Budgets are supposed to help you use your money wisely. They should be a positive part of your life—they’re not supposed to make you feel like you’re constantly failing. But sometimes our passion to save money and get our financial house in order gets the better of us, and we set up budgets that are too restrictive. While coming from good intentions, an overly thrifty budget can actually make it harder to achieve your goals. An impossible to follow plan can make you feel discouraged and resentful. You might even decide that it’s not worth the hassle! Try starting with a more reasonable strategy and then build from there!
Sometimes our budgets are just too complicated to actually be useful. Not everyone loves working with numbers, and sometimes fiddling with spreadsheets can get so overwhelming that we just want to quit. Plus, there’s plenty of room for human error! A good option is to investigate free budgeting sites or apps. All you do is punch in the correct numbers and the magic of technology will do the rest!
Life is constantly changing. Your simple, streamlined budget might be perfect for the life of a young single professional, but will it still hold up in five years? Where will the portion of your paycheck that works down your student loans go once you’re debt free? And when will you start saving for a house?
Take some time every few months to review your budget and see what’s changed. Evaluate what you’ve accomplished and areas that need improvement. Ask yourself what your next milestones should be and if those line up with your long-term goals!
Budgeting takes work. But it shouldn’t be a burden. Cut yourself some slack, prune your process, and stay consistent. You might be surprised by the difference filling in budgeting potholes can make in your financial life!
Recently, that dream became a reality for dozens of former students when the U.S. government gave $17 billion of debt relief to 725,000 borrowers.¹
Still, that hardly puts a dent in the $1.6 trillion in student loan debt collectively owed by 43 million Americans.²
So, what are the chances that your loans will be forgiven, and how do you know if you qualify?
Here are three ways to qualify for student loan forgiveness…
Work for a qualifying non-profit or public organization? Then you qualify for the Public Service Loan Forgiveness (PSLF) program.
Under this program, your remaining loan balance will be forgiven after you make 10 years’ worth of payments.³
And fortunately, it just got far easier to qualify—before recent reforms, the denial rate for the PSLF program was up to 99%.⁴
So if you’re a public servant, head over to the Federal Student Aid website and click Manage Loans.
Similar to the PSLF program, the Teacher Loan Forgiveness program is available for educators. If you’ve taught in a classroom for 5 years and meet the basic qualifications, you could be eligible for up to $17,500 of debt forgiveness.⁵
But be warned—there are some highly specific qualifications. From the Federal Aid website:
“You must not have had an outstanding balance on Direct Loans or Federal Family Education Loan (FFEL) Program loans as of Oct. 1, 1998, or on the date that you obtained a Direct Loan or FFEL Program loan after Oct. 1, 1998.”⁶
Sound complicated? That’s because it is. As with most financial moves, meet with a debt professional or financial planner to see if you qualify.
If you’re totally and permanently disabled, you may be eligible for a complete discharge of your student loan debt.
You’ll need to submit proof of your disability to your loan servicer. The proof can come in many forms, such as a doctor’s letter, a Social Security Administration notice, or documentation from the U.S. Department of Veterans Affairs.
As with everything involving bureaucracy and disability, you may quickly find yourself mired in red tape and conflicting phone numbers. That’s why it’s always wise to seek out professional help if you think you might qualify.
The sad truth is that few actually qualify for these programs. If you work in the private sector, are healthy, and face significant debt, you’ll need to find alternative strategies for moving from debt to wealth.
Still, it’s good to know that there are options out there for those who qualify. So if you think you might be eligible for one of these programs, don’t hesitate to explore your options.
¹ “Here’s who has qualified for student loan forgiveness under Biden,” Erika Giovanetti, Fox Business, Apr 26, https://www.foxbusiness.com/personal-finance/student-loan-forgiveness-programs-biden-administration
² “Student Loan Debt Statistics: 2022,” Anna Helhoski, Ryan Lane, Nerdwallet, May 19, 2022 https://www.nerdwallet.com/article/loans/student-loans/student-loan-debt
³ “Want Student Loan Forgiveness? To Qualify, Borrowers May Need To Do This First,” Adam S. Minsky, Forbes, May 16, 2022, https://www.forbes.com/sites/adamminsky/2022/05/16/want-student-loan-forgiveness-to-qualify-borrowers-may-need-to-do-this-first/?sh=6aa44a617cdb
⁴ “Want Student Loan Forgiveness?” Minsky, Forbes, 2022
⁵ “Teacher Loan Forgiveness,” Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher
⁶ “Teacher Loan Forgiveness,” Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher
These words have been plastered all over the news and social media feeds for the last two years. And there’s no sign of it stopping.
As individuals and as businesses, we can’t control the economy.
But what we can control is how we respond to it.
The key is to stay focused on your long-term goals, and make sure your actions align with them.
Here are a few tips on how to navigate economic volatility…
1. Check your emotions. Fear is the natural response to economic volatility. What will happen to your job? What will happen to your business? What will happen to your retirement savings?
Know this—one of the worst mistakes you can potentially make is acting rashly on those fears. Volatility creates opportunity. Don’t lose out on potential because of headlines you read. Instead, assess your situation, what you stand to lose, and opportunities you might have.
2. Stay focused on your goals. It’s easy to get caught up in the day-to-day noise of the news. But if you want to help your sanity—and make sound financial decisions—it’s important to keep things in perspective.
How far are you from retirement? What kind of lifestyle do you want in retirement? What’s your strategy for protecting against long-term losses?
If your goals are in line with your current reality, take a deep breath and ride out the storm. If not, it’s time to reevaluate where things stand and make adjustments as necessary.
3. Review your budget and financial strategy. Once you’ve gotten past the initial emotional reaction, it’s time to take a clear-eyed look at your budget and finances.
There are two critical components to examine here—your emergency fund and your debt.
If you have an adequate emergency fund in place, keep it intact. Resist the temptation to tap into your savings to cover short-term losses. You’ll need your emergency fund for different expenses, like emergencies.
As for debt, make sure you’re not overextending yourself with credit cards and loans that only might make sense when the economy is booming. If you lose your job in a downturn, the last thing you want is high-interest debt hanging over you.
4. Meet with your financial professional. It’s simple—a licensed and qualified financial professional can help stop rash financial decision making in its tracks.
A financial professional can help you see the big picture, keep things in perspective, and develop a strategy that can help you stay on track—no matter what the economy throws your way.
While economic volatility can feel frightening, it’s important to stay focused on your long-term goals. Having the right mindset and guidance can help you navigate a crisis with confidence.
But what exactly is a credit score? And how is it different from a credit report? It turns out the two have a close relationship. Let’s explore what they are and how they relate to each other.
Credit Report. Your credit report is simply a record of your credit history. Let’s break that down.
Many of us carry some form of debt. It might be a mortgage, student loans, or credit card debt (or all three!). Some people are really disciplined about paying down debt. Others fall on hard times or use debt to fuel frivolous spending and then aren’t able to return the borrowed money. As a result, lenders typically want to know how reliable, or credit worthy, someone is before giving out a loan.
But predicting if someone will be able to pay off a loan is tricky business. Lenders can’t look into the future, so they have to look at a potential borrower’s past regarding debt. They’re interested in late payments, defaulted loans, bankruptcies, and more, to determine if they can trust someone to pay them back. All of this information is compiled into a document that we know as a credit report.
Credit Score. All of the information from someone’s credit report gets plugged into an algorithm. It’s goal? Rate how likely they are to pay back their creditors. The number that the algorithm spits out after crunching the numbers on the credit report is the credit score. Lenders can check your score to get an idea of whether (or not) you’ll be able to pay them back.
Think of a credit report like a test and the credit score as your grade. The test contains the actual details of how you’ve performed. It’s the record of right and wrong answers that you’ve written down. The grade is just a shorthand way to evaluate your performance.
So are credit reports and credit scores the same thing? No. Are they closely related? Yes! A bulletproof credit report will lead to a higher credit score, while a report plagued by late payments will torpedo your final grade. And that number can make all the difference in your financial well-being!
¹ “The Side Effects of Bad Credit,” Latoya Irby, The Balance, Mar 4, 2021, https://www.thebalance.com/side-effects-of-bad-credit-960383
² “The Side Effects of Bad Credit,” Latoya Irby.
Sure, it’s a source of value and a medium of exchange. But above all, it’s a symbol.
What is a symbol? It’s a visible representation of something that’s invisible.
Think about it—can you see success? Not really. It’s an abstract idea. So money is largely how people evaluate if they’re succeeding or failing.
What do you see when you imagine a successful person? Expensive cars, big houses, fancy clothes, and lots of zeros in a bank account.
Those are the symbols of success. And make no mistake—money is the central symbol of success.
How do you feel when your bank account looks full? You probably feel awesome! You get a quick rush, and your steps are just a touch lighter.
But what about when you’re in debt or when you can’t make ends meet? Maybe you feel not so great. You might become stressed and anxious, and feel like you’re not good enough.
That’s because money is a visible representation of your success or failure. It’s a way to keep score.
You see that loaded bank account, and you think “Everything looks good! I’ve really got my act together.”
You see an empty bank account, and you think “What have I been doing? I’ve really messed up my finances.”
Here’s the sticking point—the symbolic nature of money is great for motivation. But it’s terrible for guiding decisions.
Why? Because chasing the symbol can easily lead you to making moves that give you the appearance of wealth without being wealthy. You start buying things far beyond your budget to represent wealth you don’t actually have. This is the fast-track to living paycheck-to-paycheck.
But as motivation? That’s where the power of the symbol lies. Think about that bump you get when you see your net worth climb. Use that feeling as fuel to keep pushing when you hit roadblocks and obstacles.
So what does money mean to you? Is it a scorecard? A way to motivate yourself? Or something else entirely?
How you answer those questions will determine whether money is a powerful tool or a dangerous weapon in your life.
That’s the question that divides intrinsic motivation from extrinsic motivation. And learning the difference could salvage your career from disaster.
Why? Because different motivation types are useful in different circumstances.
Intrinsic motivation is process focused. It comes from the sense of satisfaction from a job well done. It’s why you keep coming back to hobbies you love, or why you’re compelled to work on that project even when it’s not required. You do it for the love of the game.
Extrinsic motivation is reward focused. It comes from the anticipation or acquisition of something tangible, like a trophy, a raise, praise, or a bonus. It’s the reason you put up with a high paying job you hate, or why you grind out those extra reps at the gym. You do it for the payoff.
Intrinsic motivation is internal, while extrinsic motivation is external.
Here’s the strategic difference—intrinsic motivation is powerful long-term, extrinsic motivation is powerful short-term.
Think about it. How long can you really tolerate that awful job? Eventually, it’ll wear you down, no matter the pay. It will tax your mental health, your relationships, and your quality of life. Trying to leverage reward motivation over the long-term is a recipe for burnout.
That being said, it’s excellent if you need a burst of energy. “Just a few more months, and then I’ll be debt free. I can make it.” Extrinsic motivation is often what we rely on to push through short-term challenges.
By contrast, intrinsic motivation can provide powerful groundwork for planning long-term goals. What are the hobbies and activities you find inherently rewarding? Are they career oriented? Family focused? That’s where you should focus your long-term energy.
The average household owes $6,000 in credit card debt alone, and the total amount of outstanding consumer debt in the US totals over $15.24 trillion.¹ It’s a burden, both financially—and emotionally. Debt can be linked to fatigue, anxiety, and depression.²
So it’s completely understandable that people want to get rid of their debt, no matter the cost.
But the story doesn’t end when you pay off your last credit card. In fact, it’s only the beginning.
Sure, it feels great to be debt-free. You no longer have to worry about making minimum payments or being late on a payment. You can finally start saving for your future and taking care of yourself. But being debt-free doesn’t mean you’re “free” to do whatever you want and get back into debt again. It means you’re ready to start building wealth, and chasing true financial independence.
For example, when you first beat debt, are you instantly prepared to cover emergencies? Most likely not. And that means you’re still vulnerable to more debt in the future—without cash to cover expenses, you run the risk of needing credit.
The same is likely true for retirement. Simply eliminating debt doesn’t mean you’ll retire wealthy. When you become debt-free, you can put those debt payments towards saving, leveraging the power of compound interest and more to help make your dreams a reality.
But now that you’ve conquered debt, that’s exactly what you can do! You have the cash flow needed to start saving for your future. You can finally take control of your money and make it work for you, instead of the other way around.
So don’t think of being debt-free as the finish line. It’s not. It’s simply the starting point on your journey to financial independence. From here, the sky’s the limit.
¹ “2021 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 11, 2022, https://www.nerdwallet.com/blog/average-credit-card-debt-household/
² “Data Shows Strong Link Between Financial Wellness and Mental Health,” Enrich, Mar 24, 2021, https://www.enrich.org/blog/data-shows-strong-link-between-financial-wellness-and-mental-health
Is racking up credit card debt or taking out payday loans financially dangerous? Of course! But they’re obvious. Hard to miss. They’re like a voice yelling into a megaphone “Hey! Don’t do it!”
But what about money mistakes that aren’t so obvious? Or even worse, money mistakes disguised as money wisdom?
Those may not devastate your bank account in one swoop. But they often go unaddressed. And over time, they add up.
So here are some money mistakes you might not have noticed.
Penny pinching. Sure, it sounds like a great idea in theory. But when you’re constantly scrimping and saving, it’s tough to enjoy life. What’s the point of working so hard if you can’t enjoy a reasonable treat now and then?
Plus, penny pinching may stop you from taking calculated risks that could save your money from stagnation.
So instead of extreme thriftiness, try moderation instead. You may find yourself far more inspired to budget and save than if you commit to complete frugality.
Under or over filling your emergency fund. A lot of people make the mistake of not having an emergency fund at all. It leaves them vulnerable to unexpected expenses and financial emergencies.
But when you have too much money in your emergency fund, it might be tough to make any real progress on your long-term financial goals. A good chunk of your net worth could be sunk into an account that’s not growing.
The solution? Save up 3 to 6 months of income in an easily accessible account, but no more. Use that money to cover emergencies ONLY. If it runs low, refill it.
Once your emergency fund is fully stocked, you can devote the rest of your income to building wealth.
Leaving goals undefined. It’s tough to achieve a goal you don’t have. Do you know where you’ll be financially in 5 years? 10? What are some things you’d like to save towards? A nicer home? An awesome vacation? A comfortable retirement? Not sure?
That uncertainty makes it easy to fudge good financial habits. It’s hard to see how lapses in your overall strategy can impact your big picture because you don’t have one.
So when it comes to your money, be specific. Very specific. Write out your goals and make sure they’re measurable. That way, you can monitor your progress and ensure you’re on the right track.
Be on the lookout for these dangerous money mistakes. They may seem innocuous, but they can add up over time and stop you from reaching your financial goals. Stay vigilant and steer clear of these traps!
It makes sense. Life is hectic. Schedules are full. Sometimes, you feel like you hardly have a second to brush your teeth, much less have time to sit down and enjoy a heart-to-heart conversation with a friend. And so important decisions get pushed further and further into the future.
That’s fine in some cases. Do you need to decide how to organize your garage right now, at this very moment? No, probably not.
But with something like your finances, procrastination can cause disaster. Why? Because time is the secret ingredient for building wealth. The sooner you start saving, the greater your money’s growth potential. Likewise, the sooner you get your debt under control, the more manageable it becomes.
And with your money, the stakes couldn’t be higher. After all, it’s your future prosperity and well-being that could be at risk. Procrastination is downright dangerous.
That urgency, however, doesn’t make it easier to start saving. In fact, you may have noticed that finances suffer more from procrastination than anything else.
There’s a very good reason for that. Procrastination is driven, above all else, by perfectionism. Failing feels awful, especially when you know the stakes are high. Your brain sees the discomfort of trying to master your finances and failing, and decides that it would feel safer to not try at all.
It’s a critical miscalculation. Making an attempt to master your finances can at least help move you closer to your goals. Procrastinating never does.
Think of it like this—50% success is better than 0% success.
The key to beating procrastinating, then, is to conquer the perfectionist mindset and fear of failure. It’s no small feat. Those habits of mind are often deeply ingrained. They won’t vanish overnight. But there are some simple steps you can take, like…
Break big goals down into small steps. This relieves the overwhelm that many feel when facing important tasks. As you knock out those small steps, you’ll feel empowered to keep moving forward.
Don’t go it alone. Procrastination thrives in isolation. Seek out a friend, loved one, or co-worker to help hold you accountable and share the load—even if it’s just a weekly check-in to see how each other are doing.
Work in short, uninterrupted bursts. Set a timer. Put down the phone. Work. After about 15 minutes, you’ll notice something strange happening. Time starts to either speed up or slow down. Distracting thoughts vanish. The lines between you, your focus, and the task at hand start to evaporate. You feel awesome. This is called a flow state, and it’s the key to productivity. Make it your friend, and you’ll probably notice that procrastination becomes rarer and rarer.
Now that you know the cause of procrastination, try these tips for yourself. Set a 30 minute timer. Then, break your finances into tiny action steps like checking your bank account, automating saving, and budgeting. Work on each item in a quick burst until you’ve made some progress. Then, talk to a friend about your results!
Just like that, you’ve made serious headway towards beating procrastination and building wealth. Look at you go!
Ask a friend this question—“what would you do with $1 million?”
Your friend will pause, look at the ceiling for a moment, repeat the question to themselves, and then say something like…
“Well, the first thing I would do is plan a trip to Europe. I’ve always wanted to go, but I’ve never been able to afford it.”
“Down payment on a new house. Definitely. We’ve outgrown our place and we’re ready for the forever home.”
Or, if they’re really savvy…
“First, I’d knock out all my debt. Then, I’d use half of what’s left to generate compound interest. Then, I’d see about a condo down in Florida.”
These responses are well and good. But they show that your friend is no entrepreneur.
An entrepreneur would instantly respond…
“I’d use it for the business.”
Translation—they’d use the money to make more money.
Maybe they’d use the money to hire an ad agency to run a marketing campaign, driving revenue through the roof.
Maybe they’d use the money to hire more workers, exponentially increasing their ability to serve clients.
Maybe they’d use the money to purchase software or hire a third party to streamline their workflow, boosting their efficiency.
Everyone views money as a tool. It solves problems. Living in a house that’s too small? That’s a big problem. And money can easily solve it.
But entrepreneurs see money as a tool to earn even more money.
To start thinking like an entrepreneur, ask yourself this question—how can I use my money to start making more money? There are only a few answers to that question, and the right one will lead you down the path of starting your own business.
And best of all (for them), they use YOUR money to make it happen.
Here’s how it works…
You deposit money at a bank. In return, they pay you interest. It’s just above nothing—the average bank account interest rate is currently 0.06%.¹
But your money doesn’t just sit in the vault. The bank takes your money and loans it out in the form of mortgages, auto loans, credit cards, etc..
And make no mistake, they charge far greater interest than they give. The average interest rate for a mortgage is 3.56%.² That’s a 5,833% increase from what they give you for banking with them! And that’s nothing compared to what they charge for credit cards and personal loans.
So it should be no surprise that financial institutions are doing everything they can to convince you to borrow more money than perhaps you can afford.
First, they’re counting on the fact that you never learned how money works. Why? Because if you know something like the Rule of 72, you realize that banks are taking advantage of you. They use your money to build their fortunes and give you almost nothing in return.
Second, they manipulate your insecurities. They show you images and advertisements of bigger houses, faster cars, better vacations. And they strongly imply that if you don’t have these, you’re falling behind. You’re a failure. And you may hear it so much that you start to believe it.
Third, they lock you in a cycle of debt. Those hefty car loan and mortgage payments dry up your cash flow, making it harder to make ends meet. And that forces you to turn to other loans like credit cards. It’s just a matter of time before you’re spending all your money servicing debt rather than saving for the future.
So if you feel stuck or burdened by your debt, show yourself some grace. Chances are you’ve been groomed into this position by an industry that sees you as a source of income, not a human.
And take heart. Countless people have stuck it to the financial industry and achieved debt freedom. It just takes a willingness to learn and the courage to change your habits.
¹ “What is the average interest rate for savings accounts?” Matthew Goldberg, Bankrate, Feb 3, 2022 https://www.bankrate.com/banking/savings/average-savings-interest-rates/#:~:text=The%20national%20average%20interest%20rate,higher%20than%20the%20national%20average.
² “Mortgage rates hit 22-month high — here’s how you can get a low rate,” Brett Holzhauer, CNBC Select, Jan 24 2022, https://www.cnbc.com/select/mortgage-rates-hit-high-how-to-lock-a-low-rate/
It’s a common mindset, and it keeps many from reaching their financial goals. But the truth is, you don’t have to be born into money or have some special talent to create wealth. It all comes down to making a commitment to start building your fortune today.
So why do so many people put off working to create wealth until later in life? There are many reasons, but chief among them is fear.
What if you save your money in the wrong place and lose everything?
What if you can’t access money when you need it?
What if you confirm a deep-seated suspicion that you don’t really know what you’re doing?
But here’s the truth—you’re better positioned to start building wealth today than you ever will be again. That’s because your money has more time to grow and compound today than it will in the future.
That’s especially true in your 20’s and 30’s. But it’s also true if you’re 45 or 55. The best time to build wealth is right now, this very moment.
So what can you do? How can you leverage time to start building wealth? Here are a few simple financial concepts you can use right away.
Create an emergency fund. I know it seems counterintuitive, especially if your credit is in shambles or you have a lot of debt to pay off. But the truth is, building an emergency fund is one of the best ways to begin building wealth because it gives you a margin of safety. If you have money set aside for a rainy day, you won’t have to turn to credit cards or high interest loans when life throws you a curveball. Instead, you can take care of things with your own savings and move on.
Automate saving right now. The best way to start building wealth is to put something away every month. Forget about how much you’re putting away or your interest rate. For now, just put something away, even if it’s just $5. You can work with a financial professional to boost those numbers later on. The important thing is to start now.
If you want to learn more about how to start building wealth today, let’s chat. I’d love to help you set some goals and create a plan for getting there. We all deserve financial security, regardless of our age or income level. So let’s find out how you can get started today.
You’re done with the 9-to-5, and ready to transition from employee to entrepreneur.
But there’s one last hurdle—how will you pay for it?
Starting a business requires resources. Whether it’s a laptop, store front, circular saw, or musical instrument, you’ll need tools to ply your trade. You’ll also need to consider the cost of hiring employees as your business grows!
There are three common strategies entrepreneurs leverage to raise money for starting a business…
1. Raise capital. Trade ownership of your business for money.
2. Borrow money. Pay interest for money.
3. Self-fund. Cover business expenses yourself.
There’s no right way to fund your business. But there are clear pros and cons to each approach. Let’s explore them further so you can have a better idea of which may be best for you!
1. Raise capital. This strategy involves scouting out wealthy individuals and institutions to give you money to fund your business. But it’s no free lunch. In exchange for funding, investors want a slice of your company. As your business grows, so does their profit.
That gives them a powerful say in the management of your business. If you raise capital this way, you may find these stakeholders calling the shots and pulling the strings instead of you.
Plus, raising capital simply is out of reach for most entrepreneurs. Unless you’re disrupting a major industry and have extensive experience, the risk-reward situation may not make sense for potential investors.
2. Borrow money. It’s straightforward—you ask a lending institution or friend for money that you’ll pay back with interest. Both parties take a calculated risk that your business will increase its value enough to repay the loan. It’s a simple, time-tested strategy for funding a new business.
The advantage of getting a business loan is that it keeps you in full control of your business. No board of directors or controlling shareholders!
But business loans require planning to manage. Your business will need to consistently make payments, meaning you’ll need to consistently earn profit. That’s rarely a surefire proposition when you’re first starting out.
So while debt can help your business expand and hire new talent, it’s typically wise to hold off on borrowing until later.
3. Self-fund. This is far and away the most realistic strategy for most entrepreneurs. It’s exactly what it sounds like—pay the upfront costs of starting a business yourself.
No debt. No working for someone else. You’re completely free to run your business. You’re also completely financially responsible for the outcome.
Will you be able to buy a storefront outright? Or start a competitive car manufacturer? Probably not. But there are dozens, if not hundreds, of opportunities that require far less capital.
Look around. You may have the tools you need to start a business at your fingertips! In fact, if you’re reading this article on a laptop or desktop, you’re positioned to start an online business right now. All you need is a service to provide clients.
The takeaway? The funding your business needs will depend on your situation. Challenging an established industry with a revolutionary approach? Then you may need outside funding. But if you’re like many, you have all the tools and resources you need to start your business.
That’s right—with the magic of the internet, you can be in debt to faceless strangers instead of faceless institutions.
One moment while I get my tongue out of my cheek…
But seriously, peer-to-peer lending—or P2P—is exploding. It’s grown from a $3.5 billion market in 2013 to a $67.93 billion market in 2019.¹
Why? Because P2P lending seems like a decentralized alternative to traditional banks and credit unions.
Here’s how it works…
P2P lending platforms serve as a meeting point for borrowers and lenders.
Lenders give the platform cash that gets loaned out at interest.
Borrowers apply for loans to cover a variety of expenses.
Lenders earn money as borrowers pay back their debt.
No middleman. Just straightforward lending and borrowing.
Think of it as crowdfunding, but for debt.
And make no mistake—there’s a P2P lending platform for every loan type under the sun, including…
▪ Wedding loans ▪ Car loans ▪ Business loans ▪ Consolidation loans
But here’s the catch—debt is debt.
The IRS. A bookie. A banker. Your neighbor. It doesn’t matter who you owe (unless they’re criminals). What matters is how much of your cash flow is being consumed by debt.
Can P2P lending platforms offer competitive interest rates? Sure! But they can also offer ridiculous interest rates, just like everywhere else.
Can P2P lending platforms offer lenders opportunities to earn compound interest? Of course! But they also come with risks.
In other words, P2P lending is not a revolution in the financial system. In fact, two leading P2P platforms have actually become banks.²
Rather, they’re simply options for borrowing and lending to consider with your financial professional.
¹ “19 P2P Investing Statistics You Need to Know for 2021,” Swaper, Feb 22, 2021 https://swaper.com/blog/p2p-investing-statistics/
² “Peer-to-peer lending’s demise is cautionary tale,” Liam Proud, Reuters, Dec 13, 2021 https://www.reuters.com/markets/asia/peer-to-peer-lendings-demise-is-cautionary-tale-2021-12-13/