2020 witnessed home prices soar by 15% to average more than $320,000–a prohibitive price for many seeking to buy their first house.¹
But even if you aren’t 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. That’s 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 reasons…
First, actions that increase your credit score–debt management and paying your bills on time–can 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 they’re 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 home’s value saved before the home buying process begins.
Why? Because paying more up front and borrowing less to buy your home reduces the interest you’ll 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 won’t break the bank!
¹ “U.S. home prices hit a record high in 2020. Is home buying still affordable?,” 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 “Raising a ‘Fair’ Credit Score to ‘Very Good’ Could Save Over $56,000,” Kali McFadden, LendingTree, Jan 7, 2020, https://www.lendingtree.com/personal/study-raising-credit-score-saves-money/
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,
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 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
You’ve 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, there’s a large group of people who continue to work past 65.¹ Two motivations that could be contributing to this situation are:
It’s apparent that the first option might be preferable to the latter – even if you love what you do.
Here’s 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 there’s 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 – whatever that may be – there could be other things in your life that matter to you that come into conflict with the job you love. Some of these “other things” may include (but aren’t limited to) spending time with family, volunteering at an organization you’re passionate about, traveling the world, etc. Except for a lucky few, most can’t both traveling around the world AND work the job they love. That’s when having the resources to choose comes in handy.
It’s important to have a strategy to reach your retirement goals, whether it’s retiring at age 65 or earlier. Having a plan in place doesn’t mean you absolutely have to retire. But at least you’ll have the flexibility to do so!
¹ “Average Retirement Age In The United States,” Dana Anspach, The Balance, Jul 31, 2020, http://bit.ly/2nW9AWJ.
There’s something liberating about closing one chapter of your life and beginning a new one. You realize that this year doesn’t 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!
That’s 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. It’s like making a year’s worth of wise financial decisions in one fell swoop!
Give your debt the cold shoulder
Debt doesn’t 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 strategies…
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 you’ve cleared it, use the extra resources you’ve freed up to crush the next one even faster. This strategy is called the Debt Avalanche.
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 you’re 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 year’s 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, you’ll have set yourself up for a year full of potential for financial success!
But not all goals are created equal. Planning to win the lottery is a foolish objective that won’t help you fulfill your dreams. Spending hours clipping coupons worth a few dollars is probably a waste of time.
Fortunately, establishing proper goals is actually incredibly straightforward. You want to pursue objectives that are SMART—specific, measurable, achievable, realistic, and timely. Formulating these types of goals can radically focus your energy and increase your ability to get things done. Let’s start with the first criteria!
The more specific your goal, the more clearly you’ll understand exactly what you need to do to achieve it. It’s the difference between a vague daydream and a solid plan.
When writing out your financial goals, be crystal clear on exactly what you want to accomplish and why. Outline the steps and people needed to bring about your vision. Something like “I want to make more money” becomes “I want to earn a raise at work by taking on more responsibility.”
How will you know if you’ve accomplished, exceeded, or failed your goal? Including a clear metric gives you insight into how close or far you are from completing your objective.
Decide on a clear numeric goal you can shoot for. Take a vague notion like “I want to save more money” and transform it into “I want to save 15% of my income this year for retirement.” You’ll have a clearer idea of what steps you need to take to meet that benchmark and feel a deep sense of reward once you hit the target.
Trying to attain an ill-defined, pie-in-the-sky goal will only lead to crazy behavior, incredible discouragement, or both. If you’re aiming for something huge (which is admirable), break it down into mini goals and focus on one at a time. Achieving a goal like “I want to start a multi-million dollar business” takes careful planning, a lot of research, and loads of help, but there are many, many people in the world who have done just that. How do you eat an elephant? (One bite at a time!)
Are your goals appropriate? That seems like an obvious question, but it’s a critical one to ask when establishing objectives. For instance, saving up $1,000 so you can buy your new niece a Swarovski crystal, gold-plated baby rattle (yes, that’s a real thing) might be really memorable, but do you have an emergency fund in place? Make sure you’re meeting those practical, basic financial goals before you start aiming for the non-essential ones.
Knowing that the clock is ticking is one of the most powerful motivators on the planet. You’ll want to establish a realistic time-frame, but deciding that you want to buy a house in two years or be debt free in six months can increase your intensity, narrow your focus, and inspire you to start working on your goals as soon as possible!
Do your financial goals meet these criteria? If not, don’t sweat it! Spend 15 minutes reviewing your objectives and work in specific details or break down some of your more ambitious targets. Remember, I’m here to help if you hit a financial goal roadblock and need some professional insight and clarity!
Setting goals has the power to change your life. Research has shown that people who write down their goals are 33% more successful in accomplishing them than those who don’t.¹ That data seems to verify what we instinctively know. Is there anything worse than working on a project that has no clear objective or outcome defined?
But here’s the million dollar question: Have you written down your financial goals?
It’s one of those simple things that we tell ourselves we’re going to do or that we’ll get around to later, but we tend to leave undone. And that results in our earning, saving, and spending money aimlessly, without purpose. No wonder the majority of 40-somethings and almost a third of people in their 60s are woefully short of having enough for their retirements!²
In case you still need convincing, here are three reasons why you should write down your financial goals the second you’re done reading this article!
Financial goals bring clarity
Imagine trying to build a house without a blueprint. Where would you start? Would you know what supplies you’d need? What color paint you’d want? Would you end up with a basement? Who knows?
Your finances are the same way. Until you have a clear financial goal for your lifestyle and retirement, you’ll never truly know what to do with your money and how it can help you. Once you’re locked in on a vision of your future, you can start exploring the actions necessary to make your dreams become realities.
Financial goals create intensity
Discovering the steps you need to take to achieve your goals cuts away distractions. You’re no longer as susceptible to distractions and temptations because you’re laser-focused on creating an outcome. You can focus all of your mental and financial energy on bringing your vision to life. Clarity leads to focus. Focus creates intensity. Intensity accomplishes goals.
Financial goals are rewarding
There are few better feelings than the one that comes after a day of hard, productive work. That’s because your brain knows that you accomplished what you set out to do.
Your finances are no different.
Setting goals for your money gives you the opportunity to feel that deep sense of reward and accomplishment. It provides your life with a source of gratification that isn’t shallow and instantaneous.
So what are you waiting for? Grab a piece of paper or pull up your note taking app and write down a few financial goals! Be realistic and hyper specific. Let’s talk about what comes to your mind and what it would take to bring that vision of your life into reality!
¹ “Goal-Setting Is Linked to Higher Achievement,” Marilyn Price-Mitchell Ph.D., Psychology Today, Mar 14, 2018, https://www.psychologytoday.com/us/blog/the-moment-youth/201803/goal-setting-is-linked-higher-achievement
² “Here’s how much Americans have saved for retirement at different ages,” Kathleen Elkins, CNBC Make It, Jan 23, 2020, https://www.cnbc.com/2020/01/23/heres-how-much-americans-have-saved-for-retirement-at-different-ages.html
“No” is a common answer to that question, often with serious consequences. One study found that financial disagreements were the leading predictor of divorce.¹
And they seem hard to fix. A research paper published on the National Center for Biotechnology Information, U.S. National Library of Medicine website proposes that “compared to non-money issues, marital conflicts about money were more pervasive, problematic, and recurrent, and remained unresolved, despite including more attempts at problem solving.”²
Fortunately, creating financial unity with your partner is possible. Here are some ideas to bridge the gap with your partner and start working with your money as a team.
Know thyself (and thy partner)
What would you do if you stumbled upon $1 million? Your answer will help you discover your financial values. For instance, if you would use your new-found cash to create your dream business, you might be a natural investor.
But here are two bigger questions: Do you know your partner’s financial values? And how do they align with yours?
The only way to answer those questions is to start conversations with your partner about money. Ask them how finances were handled in their home growing up and what they want money to do for them. Then, look for a middle ground and develop a set of goals you can work towards together.
Discover how money works together
Those first awkward conversations might reveal an uncomfortable truth— if either one of you has any clue what you’re doing with your finances! Ignorance about how money works is the farthest thing from bliss in a relationship. Without knowledge, it’s impossible to set realistic goals and achieve them. You’ll both find yourselves wasting money on what makes you happy in the moment and delaying achieving your goals.
But when you discover how money works as a couple, two magical things happen.
First, you get a sense of what you can accomplish as a team. Suddenly, there’s a vision for your future together that you can work towards.
Second, you notice that you’re communicating more. You swap knowledge, insight, hopes and dreams with each other. You talk about your ideal life together and how to achieve it. That alone is a game-changer for any relationship!
Meet with a professional
It’s impossible to overemphasize the importance of working on your relationship and your finances with professionals. Communicating your feelings and having productive conversations isn’t always easy! A professional counselor can give you and your partner the emotional tools you need to transform constant conflict into cooperative problem solving.
Once you have communication squared away, meet with a licensed and certified financial professional. They’ll provide guidance and insights that can help you make decisions with your money. You might be surprised by the level of peace that appears in your relationship once the stress of your finances is alleviated!
While these steps appear easy on paper, in practice they might push you outside your comfort zone. That’s a good thing! Working together as a couple to create financial unity has the potential to grow you as a person and deepen your relationship with your partner. Start having conversations about your financial values and see where your path leads you!
¹ “This common behavior is the No. 1 predictor of whether you’ll get divorced,” Catey Hill, MarketWatch Jan 10, 2018, https://www.marketwatch.com/story/this-common-behavior-is-the-no-1-predictor-of-whether-youll-get-divorced-2018-01-10#:~:text=Smart%20money%20says%20this%20argument%20could%20lead%20to%20divorce.&text=%E2%80%9CFinancial%20disagreements%20did%20predict%20divorce,together%2C%E2%80%9D%20the%20authors%20concluded
² “For Richer, for Poorer: Money as a Topic of Marital Conflict in the Home,” Lauren M. Papp, E. Mark Cummings, and Marcie C. Goeke-Morey, NCBI, Dec 6, 2011, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3230928/
Operating at your full potential consistently sounds too good to be true. We all want to accomplish more at our jobs and around the house. But a million little distractions always seem to throw us off course. Sure, we all have flashes of inspiration, but many of us settle for a fraction of our true capabilities.
But there’s a better way.
Researchers have discovered that high productivity doesn’t have to be limited to short bursts. There’s actually a very specific state of mind that results in stunning levels of output that’s triggered by certain psychological factors. It’s called flow, and understanding how it works may change your life.
What is flow?
Technically speaking, “Flow is a cognitive state where one is completely immersed in an activity… It involves intense focus, creative engagement, and the loss of awareness of the self.”¹ Think of it like this: what’s your favorite quarterback thinking about when he’s making a game winning play? Almost nothing else besides what he’s doing in the moment. That state of total concentration on the task at hand is what defines flow. Other sensations follow. Decisions seem to make themselves. You lose awareness of what’s going on around you. Time either seems to fly by or you see things in slow motion. And, most importantly, you feel awesome. You’re “in the zone.”
You’ve almost certainly achieved this flow state at least once in your life. But it probably doesn’t seem replicable. You were just on during that highschool football championship game or playing that local show with your buddies or giving that presentation. Fortunately, research hasn’t just described flow; it’s discovered a few factors that contribute to achieving peak performance.
The first flow key is to establish goals. Your brain loves objectives. It loves feeling like it’s accomplishing things. Having a clear outcome in mind will help you tune out the distractions that don’t matter and hone in on what does. Identify your desired goal, outline in detail how you’ll accomplish it, and then proceed to the second flow key.
The second flow key is the balance between challenge and boredom. Very often, facing a difficult task doesn’t naturally induce deep focus. It actually can make us feel anxious, scared, and avoidant. However, a mundane and simple activity, like washing dishes, doesn’t require the brainpower to trigger intense concentration. Flow lives in the happy medium between those extremes of crushing anxiety and mind-melting boredom. You have to have the confidence that you can actually crush the challenge at hand, but also not find it too easy or boring. Dial in your ideal difficulty level before you start a project. Expect more from your mundane responsibilities and get help for the daunting ones. Raise the stakes for your performance but make sure you don’t drown in the process!
The third flow key is immediate feedback. Let’s say you’ve hired a coach to help you master a skill. Would you prefer them to write up an annual review on your progress or give you tips, critiques, and advice as often as possible? Think about all the bad habits and practices you would develop without their regular oversight. You might discover you’ve been doing things wrong for a whole year if you’re only getting an annual checkup! Instant feedback allows you to constantly refine your process and execution while also setting up micro goals for you to accomplish. It’s a simple way to add a dash of challenge to your daily routine that locks you in and helps you achieve peak performance. Seek out frequent feedback. Ask your boss or co-workers or coach to give you critiques as often as possible. That constant stream of input will either make you feel good about what you’ve accomplished or give you new obstacles to overcome!
Achieving this state of peak performance isn’t always easy. There’s a cycle to entering flow that includes a difficult first phase. It’s hard work for our brain to enter into total focus and concentration. This first barrier is where most of us quit because intense concentration doesn’t feel great at first. But overcoming that initial resistance can open up a whole new world of productivity and performance. Use the three flow keys, push past the opening waves of discomfort and get into your zone!
¹ “Flow,” Psychology Today, accessed Sept. 24, 2020, https://www.psychologytoday.com/us/basics/flow
Accountants, hedge fund managers, and even some attorneys fall under the umbrella of “financial professional”. But you don’t have to be a mega-corporation or global bank to use the services of a money expert. For any family, a financial professional can serve as an educator who assesses your financial health, a planner who can help you prepare for the future, and a trusted advisor who offers high-quality counsel as you navigate life.
Financial professionals as educators
Money management can be difficult. It’s full of confusing terminology, big numbers, and the constant fear that someone’s trying to take advantage of you. Financial professionals specialize in many different fields, but at the end of the day they’re all educators. An investment advisor has to teach you about different strategies and products so that you can make informed decisions about your future. A financial professional can show you how to make a budget and attack debt.
Don’t settle for a professional who just wants to manage your money. Look for someone with the patience and expertise to educate you about how money works.
Financial professionals as planners
There’s a significant debate in the financial service industry about the difference between a financial advisor and a financial planner. But the simple fact of the matter is that you should seek out a financial professional who will help you prepare for the future, regardless of their title. You want a professional who will help you map out a long term investment strategy. Someone who considers insurance, long term care, and estate planning. The best professionals, regardless of their speciality, help you gain some perspective and give you the tools to map out your retirement. Talk with your professional about your wealth and goals so you can draw up a financial blueprint for your retirement and beyond.
Financial professionals as advisors
The financial services industry used the term “advisor” in a specific way, but a high-quality financial professional has wisdom to offer you in any situation. Challenges like credit card debt and student loans can seem overwhelming, especially when unexpected expenses pop up. It’s easy to lose focus and have your debt strategy get derailed. But an advisor can give you the wisdom and insight you need to prepare for a crisis and stay the course of financial independence. They can encourage you to build an emergency fund that will protect your financial strategy from unexpected expenses. When the economy takes a dip, they can give you the perspective you need to not make hasty or emotional moves that could seriously impact your retirement timeline. The financial professional you want by your side is the one with the wisdom and expertise to advise you through all of life’s storms.
When your car breaks down, you turn to a car mechanic. When you’re planning an event, you turn to an event planner. The same should be true of your money. When you set out on the path of financial independence, be sure to look for a financial professional with the know-how to educate you, to help you prepare, and to advise you through the obstacles of life.
You may not have thought much about that type of insurance before, or even knew it existed. But joint policies, especially survivorship policies, are important to consider because they can provide for heirs, settle estates, and pay for final expenses after both spouses have passed.
Most joint life insurance policies are what’s known as “first to die” policies. As the unambiguous nickname suggests, a first to die policy is designed to provide for the remaining spouse after the first passes.
A joint life insurance policy is a time-tested way of providing for a remaining spouse. But without careful planning, a typical joint life policy might leave a burden for surviving children or other family members.
A survivorship life insurance policy works differently than a first to die policy. Also called a “last to die” policy, a survivorship policy provides a death benefit only when both insured spouses have passed. A survivorship policy doesn’t pay a death benefit to either spouse but rather to a separate named beneficiary.
You’ll find survivorship life insurance referred to as:
Survivorship life insurance policies are sometimes referred to by different names, but the structure is the same in that the policy only pays a benefit after both people insured by the policy have died.
Reasons to Buy Survivorship Life Insurance
We all have our reasons for buying a life insurance policy, and often have someone in mind who we want to protect and provide for. Those reasons often dictate the best type of policy – or the best combination of policies – that can meet our goals.
A survivorship policy is well-suited to any of the following considerations, perhaps in combination with other policies:
It’s also most common for a survivorship life insurance policy to be a permanent life insurance policy. This is because the reasons for using a survivorship policy, including transfer of wealth, are usually better served by a permanent life policy than by a term insurance policy. (A term life insurance policy is only in force for a limited time and doesn’t build any cash value.)
Benefits of Survivorship Life Insurance
The good news is that life insurance rates are more affordable now than in the past. That’s great! But keep in mind, your life insurance policy – of any type – will probably cost less now than if you wait for another birthday to pass for either spouse insured by the policy.
World Financial Group, Inc., its affiliated companies and its independent associates do not offer tax and legal advice. Please consult with your personal tax and/or legal professional for further guidance.
It makes up nearly a quarter of the global economy and has a GDP of roughly $21.44 trillion.¹ But that statistic doesn’t tell the whole story. The truth is that only a few Americans have truly mastered how money works and the rest are lagging behind. Despite having the largest economy, the U.S. ranks 13th in GDP per capita.²
And it all begins with the state of financial literacy.
Knowing how money works has never been more important. But it’s becoming an increasingly rare skill among Americans. Here’s a quick look at the significance of financial literacy in the modern world and how ignorance is hampering our ability to build wealth.
The importance of financial literacy is increasing.
Americans are faced with a complex world. We have access to unlimited information on everything under the sun, endless opinions on every issue, and infinite options for entertainment. Money is no exception. The two tried and true safety nets of the past—social security and pension plans—can fall short, so we need to figure out how to provide for our own futures. The options for how to save and grow our money are myriad. Now it’s on us to figure out how to build wealth, save for retirement, and leave money behind for our kids.
Understanding how money works isn’t just helpful for achieving those goals. It’s absolutely mandatory. Saving, budgeting, and the power of compound interest are just a few of the concepts that you’ll need to master before you can start building your financial future.
Financial literacy is decreasing.
Americans are less able to plan and provide for their futures than ever. Financial literacy slid from 42% to 34% between 2009 and 2018.³ And that number is significantly lower for Millennials than for the rest of the population, with only 17% able to answer 4 out of 5 basic questions about finances.⁴ That ignorance shows in our decision making and our inability to build wealth. A stunning 33% of Americans have nothing set aside for retirement.⁵ 44% don’t have enough saved to cover a $1,000 emergency.⁶ We’re surrounded by money and opportunity but don’t have the knowledge to convert them into personal wealth.
There are several reasons why financial literacy could be decreasing. Financial education is not widely taught in public schools, with less than half of states requiring a personal finance course for a highschool diploma.⁷ Perhaps we’ve just been slow to keep up with the rapid changes in the global economy. Or maybe some people benefit from having a large chunk of the population stay in financial ignorance. The lack of financial literacy is most likely a combination of all these reasons! The real question is, do you know how money works? And if not, where will you learn?
¹ Caleb Silver, “The Top 20 Economies in the World,” Investopdia, Updated Mar. 18, 2020,https://www.investopedia.com/insights/worlds-top-economies/
² “GDP per Capita,” Worldometers,https://www.worldometers.info/gdp/gdp-per-capita/
³ Andrew Keshner, “Financial literacy skills have taken a nose dive since the Great Recession,” MarketWatch, June 27, 2019,https://www.marketwatch.com/story/americans-financial-literacy-skills-have-plummeted-since-the-great-recession-2019-06-26
⁴ Keshner, “Financial literacy skills have taken a nose dive,” MarketWatch.
⁵ Dani Pascarella, “4 Stats That Reveal How Badly America Is Failing At Financial Literacy,” Forbes, Apr. 3, 2018,https://www.forbes.com/sites/danipascarella/2018/04/03/4-stats-that-reveal-how-badly-america-is-failing-at-financial-literacy/#69cecb072bb7
⁶ Pascarella, “4 Stats That Reveal How Badly America Is Failing At Financial Literacy,” Forbes.
⁷ Ann Carrns, “More States Require Students to Learn About Money Matters,” The New York Times, Feb. 8, 2020,https://www.nytimes.com/2020/02/07/your-money/states-financial-education.html
Here’s the breakdown:
Nearly every type of debt can interfere with your financial goals, making you feel like a hamster on a wheel – constantly running but never actually getting anywhere. If you’ve been trying to dig yourself out of a debt hole, it’s time to take a break and look at the bigger picture.
Did you know there are often advantages to paying off certain types of debt before other types? What the simple list above doesn’t include is the average interest rates or any tax benefits to a given type of debt, which can change your priorities. Let’s check them out!
Credit card interest rates now average over 17%, and interest rates are on the rise.³ For most households, credit card debt is the place to start – stop spending on credit and start making extra payments whenever possible. Think of it as an investment in your future!
Interest rates for auto loans are usually much lower than credit card debt, often under 5% on newer loans. Interest rates aren’t the only consideration for auto loans though. New cars depreciate nearly 20% in the first year. In years 2 and 3, you can expect the value to drop another 15% each year. The moral of the story is that cars are a terrible investment but offer great utility. There’s also no tax benefit for auto loan interest. Eliminating debt as fast as possible on a rapidly depreciating asset is a sound decision.
Like auto loans, student loans are usually in the range of 5% to 10% interest. While interest rates are similar to car loans, student loan interest is often tax deductible, which can lower your effective rate. Auto loans can usually be paid off faster than student loan debt, allowing more cash flow to apply to student debt, emergency funds, or other needs.
In many cases, mortgage debt is the last type of debt to pay down. Mortgage rates are usually lower than the interest rates for credit card debt, auto loans, or student loans, and the interest is usually tax deductible. If mortgage debt keeps you awake at night, paying off other types of debt first will give you greater cash flow each month so you can begin paying down your mortgage.
When you’ve paid off your other debt and are ready to start tackling your mortgage, try paying bi-monthly (every two weeks). This simple strategy has the effect of adding one extra mortgage payment each year, reducing a 30-year loan term by several years. Because the payments are spread out instead of making one (large) 13th payment, it’s likely you won’t even notice the extra expense.
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!
It makes sense. Lines are long, traffic is bad, and situations don’t always conform to our expectations. Staying calm in the face of difficulties isn’t easy. We get angry and upset and vent those feelings to anyone who will listen.
But there’s a reason patience is considered a virtue. Here’s a quick case for practicing patience in your personal and professional life!
What is patience?
Merriam-Webster defines patience as “bearing pains or trials calmly or without complaint.”(1) Also: “not hasty or impetuous.” Let’s unpack those definitions!
Patience is basically a calm response when things don’t go your way or meet your expectations. Is a project taking longer than you want? A patient response would be to not get angry, maintain your composure, and keep working your best at it.
The benefits of patience
We don’t always have the luxury of making decisions in a stress-free environment. But patience comes with a variety of positives. First, it gives us a degree of clarity when we’re making tough choices. Enacting a bit of patience can prevent you from making an emotional call when you unexpectedly feel the heat!
Second, patience can help us achieve our goals. It can be easier to do things with short-term benefits. But doing something today that will help us a year down the road? That can be much harder. Patience can help us accomplish things now that will benefit us later in life. It helps us tolerate discomfort with grace and wait to reap the rewards of hard work later down the line!
Finally, patience towards others can encourage them to be patient towards us. There’s nothing more alienating than getting snapped out by someone who loses their temper when things don’t go their way. But responding graciously and calmly to a person’s disappointing behavior can make a huge difference in their lives and may help them improve. It might also make them think twice before they treat you poorly the next time!
How to practice patience
Recognizing the benefits of patience is one thing, but actually being patient? That’s a whole different ball game! Here are some tips for the next time you feel yourself growing impatient with a person or situation:
- Breathe deeply. It’s one of the simplest ways of calming yourself down when you feel frustration starting to bubble! Take a few deep breaths and reassess the situation with a fresh perspective.
- Empathize. Try to understand the perspective of the people who are upsetting you. What’s the best possible reason that they might be doing this annoying thing? Does it make some sense from their point of view and given their experience? Are they legitimately being malicious or do they have understandable motives for their actions?
- Be grateful! You probably have much more to be thankful for than you realize. Take some time to count your blessings and remember the good things in life. You might be surprised by how much that reframes your experience and makes you more patient!
One last thing: Don’t confuse patience with weakness! We’re so used to a go get ‘em, hustle mentality that patiently working and waiting can seem counter-intuitive and downright dumb. But patience has always been a virtue, and it can make a big difference in your personal life and your business!
Our lives are full of actions that we’re almost unaware of. Many of them just help us get little things done more efficiently. But some habits can have a huge impact on our lives in either a positive or negative way. Here’s a quick breakdown of how habits work and ways to “trick yourself” into better behavior patterns.
We’ve looked at why the brain likes habits in a previous article, but it’s worth reviewing again!
Your brain craves efficiency. It looks for the path of least resistance when it comes to using energy. Making decisions takes a lot of brain power. Too many choices in a day can leave you feeling mentally exhausted, so your brain looks for ways to cut corners. It starts automating little decisions that you make repeatedly. Brushing your teeth, tying your shoes, and checking your social media are choices you’ve made so often that your brain stops consciously weighing in and seems to just spontaneously make you do them.
So that’s why your brain likes forming habits. But the mechanics of how a habit forms is essential if you’re trying to upgrade your unconscious behaviors!
Cues, Routines, and Rewards
A habit can be broken down into three basic components. It starts with a cue. That’s any kind of trigger that makes you want to do something. Actually performing the action suggested by the cue is called a routine. Following the routine usually results in some kind of reward, either physical or psychological.
So let’s say you’ve developed a habit of eating a cookie with your morning coffee. You wake up, put on the pot, and brew a delicious cup of joe. You instantly start craving the cookie when you smell that medium roast goodness. That’s the cue. You reach into the jar, grab the biggest chocolate chip cookie you can get your hands on, and take a bite. That’s the routine. And the tingling joy and comfort you feel when that life-giving treat hits your tongue? That’s the reward that brings you back morning after morning. But the consequence might be that you’ve put on a few unwanted pounds in the last couple of months.
How to use the habit pattern
It’s easy to see how certain habits can lead to some undesirable outcomes. We tend to form habits around anything that rewards our brains, whether it’s junk food, caffeine, or dangerous substances. But our brains also like things such as observing progress and accomplishing goals.
How can we use this to encourage good habits? Here are a few ideas: Start really small: Break your desired habit down into pieces and try to regularly perform each one. You might be surprised by how good it feels to accomplish something, which can prompt you to make more and more progress. Reward yourself: Some activities are very rewarding in the moment. But not everything that’s good for you leaves you feeling accomplished right away. Try something like only playing video games after 30 minutes of reading! Be patient: Habits don’t form overnight. You’ll probably mess up before it sticks. Don’t sweat the little failures and keep trying until that habit becomes second nature!
You can also use this knowledge to break bad habits. Try to identify the cues associated with the habit and avoid or eliminate them. Also, consider ways that you might actually be rewarding yourself for bad behavior. It’s worth asking friends and sometimes professionals for insights into your habits!
We live in a world of dollars and cents, ones and zeros, and cold, hard facts. Dreams and hopes are great, but results will always be our number one priority.
But what if your imagination mattered?
What if your mind’s eye actually held the key to success? There’s strong evidence that actually visualizing certain outcomes can reduce stress and empower you to achieve your goals and dreams. It might sound like voodoo, but it’s actually not! Here’s how it works.
Mind and Muscle
Your brain is connected to your body. Your brain registers things that happen to your arms and legs and ears and lets you know if they’re good or bad. A soft blanket? Good! Stubbing your toe? Bad!
But the connection between your brain and body goes both ways. Imagining an action in your mind can actually improve your performance in real life. There’s plenty of anecdotal evidence for this; legends like Arnold Schwarzenegger and Muhammad Ali were big believers in imagining specific outcomes.(1&2) But there’s also research to back it up. People who imagined exercising certain muscles gained almost as much strength as people who physically exercised!(3)
Visualization can also reduce stress. Studies have found that novice surgeons and police officers who receive imagery training feel less stress and have less objective stress.(4)
Some visualization tips
Imagining yourself on a generic island paradise in 15 years is just daydreaming. The key to effective visualization is specificity. Be as precise as possible. Break down how you’ll achieve your goal or throw that game-winning pass into as many tiny movements as possible, and imagine how you’ll execute each one. Incorporate your senses; what will you smell and hear when you finally achieve that goal?
Verbal affirmations can also help with this visualization process. Take a page from Muhammad Ali, and tell yourself that you’re the greatest every morning before you get breakfast! Even better, say your goal out loud before you go to bed or eat lunch. Writing up a mission statement that you read daily or making a vision board of images that inspire you are also ways to boost your visualization!
Just remember that one of the key strengths of visualization is that you can do it anywhere. Develop your goals, make them as specific as possible, and then start imagining!
It’s the end of nearly two decades of classrooms, tests, essays, late nights, and early mornings, but it’s the start of your full-fledged independence.
That move isn’t always easy. We face a huge number of unknowns when we leave the hallowed halls of the university and enter the dog-eat-dog “real world.” What kind of job will I end up with? Where will I live? What will my coworkers be like? How well will I adjust to a totally new routine? Those are important questions that don’t always have clear answers. However, there are some things you can do that will help navigate your post-graduation world. These aren’t magic antidotes, just helpful steps that might bring some stability and order to your experience!
Create a vision
Having a career vision is essential. It can provide structure and a sense of purpose. Decisions can be weighed by how much they move you towards realizing your goals, which can help give you clarity when making tough calls.
Keep your vision as specific and precise as possible. That dream of working at a prestigious law firm and wearing designer suits every day? Take it and drill down on the details. What kind of law do you want to practice? What’s your dream city? How high up on the ladder do you want to climb? Be honest with yourself about what you really want.
It’s also important to develop a time frame for your goals. Think about a 5 to 10 year time frame and see what you think is realistic!
Map out your path
Now it’s time to map out how you’ll make your vision a reality. What needs to happen for you to get that promotion or end up in the city you want to experience?
The first step is research. Your dream position might require a master’s degree or special licensing that you can’t afford just yet. Maybe you need some time in the field before moving up. Break down exactly what needs to happen, and when, for you to achieve your goal. Sometimes it’s best to start with the goal itself and deconstruct it into smaller and smaller pieces that are easier to manage. Start checking off those little steps until your goal looks more and more achievable!
It’s also a good idea to find a mentor to guide you. Ideally this would be someone who’s undertaken this journey themselves! They’ll have insights into roadblocks that you’ll face and little tips that can make all the difference.
No plan is perfect. We’ll always overlook a detail, not factor in a risk, or overestimate our ability to handle something. It’s easy to get discouraged when those things go wrong. It can make your dream feel unattainable, and you might start to doubt yourself. But rolling with those punches and not getting discouraged by setbacks is essential to achieving your goal. Take a step back, assess the situation, learn from your mistakes, and get back to the grind. You might have to adjust your expectations and even re-evaluate your process. That’s fine! Do what you need to do and get back to work once you’ve hammered out the details.
Remember that flexibility is key. Your passion for a certain type of work or field of study might cool off as the years go by. You might find that your goal of becoming an alpha executive conflicts with your goal of being an available parent. Don’t push those hard decisions off until tomorrow. Do some serious soul searching about what matters to you today, make some goals, figure out a process, and don’t let little failures get you down!
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!
One time budget
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!
Many of us treat it like a guilty pleasure and almost take a little pride in our extravagant purchases, even seeing it as “self-care”. But there’s also a part of us that knows we’re not being wise when we senselessly spend money.
So how do we resolve that tension between having fun and making good decisions? Here are a few ideas to help you splurge responsibly!
Budget in advance
“Responsible splurging” might seem like a contradiction, but the key to enjoying yourself once in a while and staying on track with your financial strategy is budgeting. Maintaining a budget gives you the power to see where your money is going and if you can afford to make a big/last-minute/frivolous purchase. And when you decide that you’re going to take the plunge, a budget is your compass for how much you can spend now, or if you need to wait a little longer and save a little more.
Beware of impulse purchasing
The opposite of budgeting for a splurge is impulse buying. We’ve all been there; you’re scrolling through your favorite shopping site and you see it. That thing you didn’t know you always wanted—and it’s on sale. Just a few clicks and it could be yours!
Tempting as impulse buying might be, especially when there’s a good deal, it’s often better to pause and review your finances before adding those cute shoes to your cart. Check your budget, remember your goals, and then see if that purchase is something you can really afford!
Do your research
Have you ever spent your hard-earned money on a dream item, even if you budgeted for it, only to have it break or malfunction after a few weeks? Even worse, it might have been something as significant as a car that you wound up trying to keep alive with thousands of dollars in maintenance and repairs!
That’s why research is so important. It’s not a guarantee that your purchase will last longer, but it can help narrow your options and reduce the chance of wasting your money.
Responsible splurging is possible. Just make sure you’re financially prepared and well-researched before making those purchases!
It’s in style; and it makes sense—and cents? Gigs are now just a click or tap away on most of our devices, and a little extra money never hurts! Here are a few things to consider when starting up a side hustle.
What are your side hustle goals? We typically think of a side hustle as being an easy way to score a little extra cash. But they can sometimes be gateways into bigger things. Do you have skills that you’d like to develop into a full time career? A passion that you can turn into a business? Or do you just need some serious additional income to pay down debt? These considerations can help you determine how much time and money you invest into your gig and what gigs to pursue.
What are your marketable skills? Some gigs don’t require many skills beyond a serviceable car and a driver’s license. But others can be great outlets for your hobbies and skills. Love writing? Start freelancing on your weekends. Got massive gains from hours at the gym and love the outdoors? Start doing moving jobs in your spare time. You might be surprised by the demand for your passions!
Keep it reasonable Burnout is no joke. Some people thrive on 80 hour work weeks between jobs and side hustles, but don’t feel pressured to bite off more than you can chew. Consider how much you’re willing to commit to your gigs and don’t exceed that limit.
One great thing about side hustles is their flexibility. You choose your level of commitment, you find the work, and your success can depend on how much you put in. Consider your goals and inventory your skills to get there—and start hustling!