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Facts and Myths about Money

Facts and Myths about Money

by | Nov 7, 2018 | How to Save Money, Insurance, Investing, Make Extra Money, Paying off Debt, Retirement

Facts and Myths about Money

#1 My spouse or my significant other will take care of me.

It is certainly possible that you could be in a position where your spouse or significant other is the “Bread-Winner.”  It’s a dream come true for someone else to handle all the finances and there are relationships that operate this way. Unfortunately, in this day and time, many households suffer financial turmoil with only one income. With the divorce rates skyrocketing and money being one of the top reasons for divorce, it’s in a couple’s best interest to get on top of their finances from the very beginning. The term couple means 2 people. Therefore, you must be an active participant in the financial part of your relationship. Just understand that clear communication and transparency will play a vital role. Each person needs to be completely honest about his or her earnings and spending habits to put a detailed financial plan in place. We haven’t even mentioned adding savings and investments to the equation. So let’s take off the shield and realize it’s not practical or even a safe move to assume your spouse or significant other can be counted on to take care of your finances.

To be quite honest, we can not control the future.  So what happens if your spouse passes away? Let that sink in for a minute. 

#2 If I made more money I would be able to do better 

Although this may be a partial truth, how many times has the income of a person increased and they only seemed to continue to struggle financially. Many times it’s not the income, it’s how you spend what you earn.  Haven’t we all heard of super stars that make millions and go broke. People have won millions in the lottery only to return to a less than millionaire lifestyle years later. On the other hand, there are financially sound-minded people that make $60K -$75K yearly, live a modest lifestyle, and manage to acquire a nice sum in their savings and retirement fund. Check out the statistics: 55% of Americans don’t have enough savings to cover essential living expenses.  What’s the difference? Spending more than you make and having really bad habits will create serious problems no matter what your earning or “gifted” income level. Therefore, start where you are currently. Become disciplined and develop good financial habits, which we will talk about in another blog. 

#3 I am too young to worry about money

Wrong, wrong, wrong!! It’s never too early to learn about finances. As a matter of fact, the US school system should incorporate a class on finances. This could positively impact the financial illiteracy that plagues our society. In addition, Most times 20 – 30 year olds only know about checking and savings accounts. Neither one of these accounts will secure your future retirement. But if 20 year olds would learn about investing and apply the knowledge, they would have a significant jump financially. At this age, there’s the greatest benefit in compounding interest. It’s really worth your time!!

#4 I am too old to start thinking about money

This is Wrong, Wrong Wrong! Even though precious years may have been lost, start just where you are. There is not a better time than the present. Learn and Apply pretty quickly. There are many books, podcast, blogs, websites, youtube videos, and seminars that teach financial literacy. There’s really no excuse. If all else fails, you can get a financial advisor to help you. Make sure you ask about fees upfront. This could be a deal breaker. 

#5  I have made such a financial mess of my life and I can’t get over it

First of all, let’s dispel this belief. Haven’t we all had times when we were a child, and we made a mess? The number one resolve was that we were told to clean it up. Well think back to when you had to clean it up. Piece by piece, section by section, or area by area we would clean it up until it was all done. So If you made a mess financially then lets clean it up. 

QUICK FINANCIAL CLEAN UP 101

No matter what your situation, just remember, If you DILIGENTLY seek the knowledge, it will come to you. Now keep reading and learning. Time is of the essence!!

PS: If you don’t know a word that may be used while exploring, use your phone for more than social media. Ask Siri, google, Alexa or search the word.

How to Master Personal Finances

How to Master Personal Finances

by | Nov 7, 2018 | How to Save Money, Insurance, Investing, Make Extra Money, Paying off Debt, Retirement

Mastering your personal finances can be tough and Accounting terms can be confusing. You will need to get comfortable with financial terms and tracking your spending. Here are some tips to take control of your personal finances and plan for the future.

1.Make The Decision To Learn Financial Terms

Taking control of your finances means making a commitment to learn. Here are some basic financial definitions you need to know:

  • Assets: Any item you own that has intrinsic value. That could be your car, your home, even in the cash in your bank account.
  • Liabilities: A legal claim against your assets. This could be a mortgage, credit card debt, or even a phone bill.
  • Interest Rate: The percentage a lender will charge you to borrow money. This normally quoted on an annual basis.
  • Net Worth: The difference between the sum of your assets and the sum of your liabilities.
  • Savings Account: A bank account that earns interest. Usually, very low interest rate are offered.
  • Checking Account: A bank account that normally does not earn interest. Funds are frequently added and withdrawn for daily expenses.
  • Investment Account: An account where funds are invested into a variety of assets and may not be withdrawn on short notice.
  • Personal Credit: There are 3 credit bureaus: Experian, Equifax, and Transunion. Each of them lists all of your debtors you currently owe, or may have paid off, and your payment history. This makes up your credit history that tells creditors of your ability to borrow from a bank or other institution. Your personal credit history may also include a FICO Score that is represented as a numerical three-digit credit score to rate your credit worthiness.

2. Develop Good Finance Habits And Make A Plan

Good finance habits start with knowing your current financial situation.

  • You need to calculate your total household income and your total household spending.
  • Develop a spending plan that allocates portions of your income to specific expenses, such as rent, food, and transportation. Write this down and eventually transfer to a budget spreadsheet. If expenses are consistently high you may need to re-access your “needs” from your “wants”. This becomes very helpful so that you can see where you are wasting money.
  • You also need to commit to saving for retirement. You can make saving automatic by creating a monthly recurring deposit to a savings or investment account.

3.Execute Your Plan

Let’s put it into action.

  • Make a short-term plan (6-12 months) and a long-term plan (2-5 years). Your short-term plan will start off by keeping your expenses less than income. You can start attaining small goals and then you can focus on the long-term plan of building your net worth. This may involve investing in a 401k or other investment or retirement accounts.
  • Separate Daily use accounts from your “savings account.” If you don’t have these, get one. If you have made some mistakes and cannot obtain an account with some of the major banks, there are second chance banks, online banks (please make sure they are reputable and FDIC insured), and credit unions. This is about getting your finances together so if you owe a “bank” money, you need to pay it off.  Also, many banks have accounts where you can separate your daily use funds from your “goal funds” by naming the account accordingly. Thus, you will less likely intermingle the allocated amount and you can see it grow.
  • Put all of your financial information into a spreadsheet and check your progress each month. You can download an app on your phone or a free budget spreadsheet. This will help you track your spending and see if you are consistently overspending in certain categories. If you keep overspending on food, for example, see if you can save money by using coupons or do comparison shopping.
  • Executing your plan requires constantly checking your progress and sometimes making adjustments.

4. Adjust Your Plan

You need to make sure you’re flexible when developing your financial plan. The following developments can force you to adjust your plan:

  • Your income can change
  • You might face an unexpected bill
  • Your home value could rise or fall

These developments may mean you have to take out a loan or adjust your monthly budget. Always make sure to leave some “cushion” in your budget in case things go wrong.

5. Stay Committed

When times are tight, you need to adjust your plan. Those unexpected expenses might require some belt tightening. The reverse is also true; you might see a financial “want” that’s out of your budget. Once you’ve set your budget, you need to stick with it. Sticking to your plan provides stability to make long-term financial decisions. That discipline will pay off as you gradually grow your net worth.

6.Preserve Cash

You may make great investments and control you expenses but liquidity is key. Liquidity means being able quickly convert your assets (usually cash) into other assets. For example, you might buy your home at the right time and see it significantly appreciate in value. However, if you don’t have cash on hand to pay rent it doesn’t matter how well your investments are doing. Also make sure you have cash on hand to pay your usual day-to-day expenses.