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Monthly Archives: November 2018
With Money Goals, Multitasking Pays Off
Tackling money goals one at a time cost financial literacy expert Barbara O’Neill at least $1 million.
That’s how much O’Neill, a distinguished professor at Rutgers University, figures she lost by starting saving for retirement only after she had created an emergency fund, bought a car with cash and purchased a home.
“I tell students that eventually, 30 years later, I hit the million-dollar mark, but I could’ve had $2 million,” O’Neill says.
Too often, financial experts say, people want to attack their money goals one at a time: “As soon as I pay off my credit card debt, then I’ll start saving for a home,” or, “As soon as I pay off my student loan debt, then I’ll start saving for retirement.”
These folks don’t realize how costly the words “as soon as” can be. Paying off debt is a worthy goal, but it shouldn’t come at the expense of other goals, particularly saving for retirement. Company matches and tax breaks are not retroactive. And the sooner money is contributed, the longer it can benefit from compounded returns. Compounded returns are when your investment gains earn their own gains, which can dramatically increase your balances over time.
“By putting off saving for the future, you are really inhibiting yourself from benefiting from that wonderful magic,” says Kimberly Zimmerman Rand, an accredited financial counselor and principal at Dragonfly Financial Solutions in Boston. “If you can start saving today … you are going to have a lot more five years from now than if you decide to pay off debt for three years and start saving in year four.”
Why people tackle one goal at a time
The desire to laser-focus on one goal at a time is understandable, says financial coach Linda Matthew. People see faster results if they put every spare dollar toward paying down debt, for example.
But much of life requires multitasking, and money is no different, she says.
“I’ve got to take care of the kids, and stay in a relationship with my husband, and keep the house clean, and earn some money,” says Matthew, an accredited financial counselor and owner of Money Mindful, a financial coaching service based in Davis, California. “I can’t get into a relationship with my husband after I finish raising the kids; that’s called divorce.”
Busy lives make it tempting to try to focus on one goal at a time, Rand says. People may pay the most attention to their most immediate need or something that is causing them pain, ignoring the rest of their financial life.
“If you’ve got a bill collector calling, they’ve got your attention,” she says.
“As soon as” thinking can delay progress on any financial goal, Matthew adds. One woman told her the reason her family hadn’t saved was that they planned to start as soon as they had extra money, and they never did.
“You can’t wait for that,” Matthew says.
How to multitask
Financial experts recommend starting and maintaining a regular savings habit, even if it’s only $5 a week.
“I work with very low-income consumers, and I think most people can do this,” Rand says. “And then once your hours start to get more regular, maybe you’ve got a better job, now you can boost that amount.”
Rand also is a fan of making transfers automatic whenever possible.
“Setting it and forgetting it is actually a good thing when it comes to savings because then you don’t have to make that active decision every month,” she says.
O’Neill, who’s co-writing a research paper called “‘As Soon As’ Finances: A Study of Financial Decision-Making,” suggests dividing savings among different “buckets”: one for retirement, one for emergency funds, perhaps one for a home down payment. At the same time, target high-interest debt, such as credit card bills.
Once the system is in place, stick with it, O’Neill says. If a goal is achieved, or an expense such as an auto payment or child care ends, redirect that money to one of the other goals.
“You’re already used to paying that child care or whatever, and it’ll just fund everything a lot faster,” O’Neill says.
Inexpensive gift ideas for everyone on your list
Everyone knows that holiday shopping can be difficult. Whether you’re a part of a family that’s big, picky, or on a tight budget, getting the best gift can be trying. Here’s a quick list of inexpensive gifts to think about giving to a loved one this holiday season.
Sound. A set of Bluetooth earphones is always a good option. Bluetooth earphones can range from about $15 to over $200, so keep things cheap and search for the best deal with good quality. Any of your friends can use these, especially if they’re frequently on the go.
Scent. The classic candle is always a good choice, especially during the holidays when the seasonal scents range from a cozy gingerbread to a sweet candy cane smell.
Sips. If you know someone who must have a cup of hot tea every day, consider gifting a novelty tea infuser. The designs can be holiday themed, have meaningful quotes on the sides, or be a simple color. It’s a unique gift that won’t empty your wallet.
And where there is a tea drinker, there’s a coffee addict. For the coffee lover, a new mug is always a safe bet, and the creativity is endless. Buy a mug in a store, online, or even decorate a mug yourself! Simply buy a solid-colored coffee mug and use permanent markers to make a pattern and design it however you wish. If you mess up your design, put some rubbing alcohol on a cotton swab to erase. To ensure that the design doesn’t fade after washing, place your creation in the oven for 30 minutes at 350°F.
Even if coffee or tea are not your choice of beverage, a sturdy water bottle is another option. It’s easy to find inexpensive water bottles that will keep drinks cold for hours or even days! If you want to make it a more personal gift, go to a local store to get it engraved with their name or a cute phrase.
Succulents. If you’re loving the DIY activities, consider creating a trendy, DIY succulent display. The first step is to find a cute pot for the succulent or cactus. You can even create your own by following the same steps used to make handmade mug but choose a different container. Most craft stores sell small arrangements for your succulents. It’s fun to add plastic figurines like reindeer, decorative grass, rocks, and everything in between. It’s a chance to be creative and give a handmade gift.
Safety. If DIY isn’t your thing, give the gift of safety! Since many states are now hands-free, give a cell phone mount to a new driver or traveler for GPS purposes. They’ll really appreciate it, and it’ll keep them safe on the roads.
What are your favorite inexpensive gift ideas? Let us know in the comments!
Thumbs Up, Bucks Up 2018
10 Top money mistakes not to make in your 30s
So you’ve graduated from your carefree 20s into your responsible 30s. While you’ve matured over the last decade and gained some valuable experiences, you’ve still got chances to take and mistakes to make—some of them more costly than others.
You’re likely thinking about your relationships, your career, buying a home, or even starting a family. It’s an exciting time, but it’s also a critical time for money management. A new decade brings new challenges, so we’re here to spell out some of the financial oversights that can keep you down for the count.
Here are 10 of the top mistakes people make in their 30s and how to avoid them.
1. Planning for your senior status
It seems like it’s 100 years away. You’ve started to climb the corporate ladder or have just taken the first step towards making your first million. The secret to saving for retirement is recurring contributions and compounding—small deposits that will grow over a long period of time. Be sure you take advantage of your company’s retirement plan and maximize the company match, or open a traditional or Roth IRA and commit to regular investments. Consider this: If you invest $1,000 at the age of 30, make monthly deposits of $100, and earn 7% interest over the next 35 years, you’d have more than $192,000 when you reach age 65. Amazing, right?
2. Putting all of your eggs in one basket
Your retirement account, however, is not the only place you should invest your money. It’s important to diversify your savings. In your 30s there are sure to be some big ticket items, like paying for a wedding or buying a home or a new car. Open a savings account or a brokerage account and think about your long-term and short-term financial needs. Diversify your assets among, stocks, bonds, mutual funds, and cash to reduce your risk and be strategic with your liquidity.
3. Doubling down on debt
Your 30s are the prime time for promotions. You’re earning more and likely spending more, too. You can afford nicer things, but sometimes this can be a slippery slope. “Keeping up with the Jones” is a real thing, and once you get caught up in that world, it’s difficult to get out.
Using a credit card is an easy solution, and it can help when money is a little tight, or you need to make online purchases. When you can’t pay it off at the end of the month, however, you need to reevaluate your budget and your spending. Debt is a useful tool that can help establish your credit, but when you’re paying astronomical interest on your purchases month after month, you’re creating a burden that can wreak havoc on your finances.
4. Setting yourself up to be house poor
Now that you’re making more money, you might consider buying a home. Hopefully, you’ve saved some money for a down payment and have analyzed your monthly expenses to determine how much you can realistically spend. A mortgage is a long-term commitment. Sitting on the floor eating ramen noodles so you can “afford” the biggest house in the best neighborhood is no way to live. How can you save for your future if all of your financial efforts are spent on paying your mortgage every month? It’s not a purchase you can easily return, so shop smart. You’ll be happier in a home where you can live within your means.
5. Living on the uninsured edge
Insurance can feel like a waste of money, especially if you don’t have to use it. When you do, however, it pays off big time. No one wants to think about a health issue or a home disaster, but it happens. Generally, insurance in your 30s should include health, disability, life, home (or renter’s) and an umbrella policy. Insurance is largely personal, so talk with a trusted advisor to help determine your needs. Keep in mind, too, that the younger you are, the less you’ll pay for life insurance and the healthier you are, the less expensive your health coverage will cost. Buying insurance now can save you money in the long run.
6. Delaying discussions about money
When you’re dating, finances are not a fun topic, and when you’re engaged, no one wants to ruin the excitement by talking about money. Financial differences between partners can be a serious issue if it’s discussed too late in the relationship. If you’re already walking down the aisle, it’s easy to say you’ll figure it out later, but it’s the number one reason couples argue and a path that can quickly lead to divorce.
You may come from different financial backgrounds or have different ways of making financial decisions. While they don’t have to match perfectly, you should be able to come to a mutually agreeable system to manage your household finances. Once you merge your assets, it becomes a much more difficult conversation. Don’t bring it up on your first date, but start thinking about it before you’re head over heels.
7. Splurging on your first born
Everyone parent wants their child to have the best of everything, but too many times that translates to a house full of toys, clothes, accessories, and top-of-the line items. We get it. With all the excitement and lack of sleep, it’s hard to make smart financial decisions. But, if you don’t take the time to check your spending, you’re savings, and your sanity will be gone before you know it.
Do you need the elaborate carriage-style stroller or the Gucci footie pajamas? Should you order the custom crib bumpers or buy those cute little Ugg booties? Think about the necessities, how long you’ll use them, and what your budget can handle. Your sweet little bundle of joy will be loved no matter how much you spend.
8. Giving into the need for a new car
Years ago, people used to keep their cars until they ran them into the ground. Now they buy a new one every two or three years. While you can rationalize it all you want it’s still a huge depreciating asset and making a purchase every few years leaves you with a never-ending car payment. Today’s experts recommend spacing your new cars 10 years apart. Buy a new one, pay it off in five years, and for the next five years, start saving for your next car’s down payment. If you take good care of it, you may even get a few bucks when you trade it in.
Given the frequent turnover rate of cars these days, you might also consider a used car, or “pre-owned” if that makes you feel better. It’s already depreciated at someone else’s expense, and if you buy from a reputable dealer, you could save some serious cash. Before you head out for a test drive though, check Kelley Blue Book to get an idea of how much you should pay.
9. Looking at your career in the short-term
You probably have 10+ years of work experience by now. If you’re not loving your job or there’s no opportunity for long-term growth opportunities, now is the time to switch gears. With your knowledge and experience, it’s the opportune time to update your resume and see what else is available. Chance are you’ll be more valuable to the competition and should be able to negotiate a higher salary and more responsibility.
This is the time to position yourself for your peak earning years. With new job offers, strongly consider the company’s benefits, like health insurance, life insurance, a dental plan, and 401(k) plan. Do they offer telecommuting, a flexible schedule, or a car allowance? While your salary is important, your entire compensation package, which includes your benefits, should be the real measure.
10. Not being prepared for the worst
People lose their jobs, homes need expensive repairs, family members get sick. No one really expects those things to happen, but they do. You need to be financially prepared for emergencies. A few hundred dollars won’t cut it these days, so make sure you have a plan. Experts say that you should have at least 6 months worth of living expenses tucked away in a place where you won’t be tempted to dip into unnecessarily.
All that you’ve worked for could easily be swept away during a crisis and recovering financially may not be easy. If you haven’t been saving for something like this, start now. It may be the most important things you do to protect you and your family.
The time to get serious is in your 30s. You’re getting ready for a lot of life change, and you need to set yourself up well. Surround yourself with people you trust who can advise you and keep you accountable. Avoiding the pitfalls by keeping your finances in order and focused on the future because the here and now will be gone tomorrow.
How to start your career without a college degree
Not everyone heads to college after high school. Some jump straight into the workforce. You might think they’re at a disadvantage because they don’t have a college education, but there are many well-paying and satisfying careers they can pursue. Some opportunities are even higher paying than those that require a degree.
If college isn’t the next step for you, here are some tips for starting your successful career on the right foot:
Opt for on-the-job training
The best way to hone your skills is on-the-job training. It’s real-life experience that presents you with the normal day-to-day activity and the unique challenges that you won’t encounter in the classroom. Maybe you followed the technical or vocational training path in high school and can work as an apprentice in your field of interest. You could also opt to voluntarily shadow a skilled professional who can show you what an average workday entails.
Contact some professionals in your community and set up a time to meet. Even if it doesn’t result in a position, you’ve earned some networking experience and the chance that you’ll be top of mind in the future. The U.S. Department of Labor website can also help you find an apprenticeship in your area.
Take your idea to the bank
Innovative ideas for products and services happen every day. If you’ve got an idea for something unique, a product that fills a need or makes life easier, you could be the next Mark Zuckerberg, Bill Gates, or Steve Jobs. They’ve proven that you don’t need a college degree to change the world.
David Green is the founder of Hobby Lobby. He was also a high school graduate who started the company with $600. Steve Madden, shoe designer, dropped out of college, Wolfgang Puck, chef and restaurant owner, left high school at the age of 14, and Wally “Famous” Amos, founder of Famous Amos Cookies, joined the Air Force at 17. Clearly, a college degree isn’t the golden ticket to success.
Consider the military
In addition to serving your country, joining any one of the military branches can also be a jumpstart to a successful career. Whether it’s Army, Navy, Air Force, Marine, or Coast Guard, they all provide educational benefits and job-placement programs. Moreover, all tuition and fees for trade schools or public in-state colleges are covered by the U.S. government. If you’re interested, check out each branch’s website for more information or contact your local recruiter.
Earn a training certificate
A popular alternative to a degree program is a short-term certificate training program. From healthcare to web design, and court reporting to information technology, these programs can help you develop the skills you need and increase your chances of finding a well-paying job. With a few months of hard work and commitment, you’ll be better prepared and more qualified for the opportunities in your field. Here’s a list of high-paying certification programs that offer the potential for advancement.
The governance structure and policy and program priorities differ for each state. The Association for Career and Technical Education has a database that includes details about the system for each state’s technical schools.
Think about law enforcement and firefighting
Some law enforcement agencies require 60 hours of college credits, but many only require a high school diploma or GED. Detention officers, police officers, police dispatchers, and U.S. border patrol agents, are just a few. Many people pursue a career in the criminology or criminal justice field in order to serve their community. Not only can it be interesting and exciting, but especially rewarding, too.
Another career in courageous service is firefighting. Although it does not require any post-secondary education, recruits must participate in vigorous physical training exercises. Nearly all U. S. firefighters must also be certified as emergency medical technicians (EMTs) before they’re allowed in the field. This training can take up to one year to complete and also results in EMT-Basic certification.
In today’s job market, there are many opportunities for those who don’t choose the college route. While it may not be in the classroom setting, you can still continue to learn, sharpen your skills, and rise to the top of your field.