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Financial Lessons For Kids That They Can Use As An Adult

group of kids around saving conceptDid you know that teaching financial lessons to your kids will help set them up to a financially successful life in the future? You need to consider how important it is to learn financial management at an early age. There are many benefits to knowing how to manage your money properly. For one, you can use financial management as a debt solution. It can also keep you from debt in the first place. This is one lesson that you want your child to have as they enter into adulthood. One bad financial decision, like student loans, may result in decades of suffering.

According to an article published on DailyFinance.com, it is revealed that the percentage of students who display responsible financial behaviour declined – at least when you look at the statistics from 2012 to 2014. These behaviours include tasks like reviewing bills, paying bills on time, following budgets, paying off credit cards and controlling their spending. The survey involved 42,000 first year college students from both four-year and two-year colleges and universities. The topics in the survey covered savings, banking, school loans and credit cards. The report is titled “Money Matters on Campus” – an initiative from Higher One and EverFi, a financial company and education technology company respectively.

The report indicated that college students are stressed financially – regardless of where they come from in life. According to the report, the thing that gives them the stress the most is their level of student loans.

It is very important that you equip your kids with the right lessons that they can use even as they get older. Truth is, this is not very hard to do. A lot of financial lessons that we got as kids can easily be applied even as we get older.

Money lessons we got as kids that can be applied when we’re older

According to Bankrate.com, there are a lot of parents who fail at teaching their kids the right financial lessons. In an article about teaching kids money lessons, it is revealed that 20% of parents have never talked to their kids about basic money concepts. This data came from a survey done by True Credit of TransUnion.

You need to do better than these parents so you can prepare your kids for a future filled with the right financial decisions. Here are 4 simple financial lessons that you can start with.

Money does not grow on trees.

Some parents think that this is a difficult concept for kids to grasp. But when you think about it, they need to learn it because it teaches them the value of money. They have to realize that you are working hard to earn the money that you are spending at home. You can discuss with them the concept of an income and how you need to spend hours in the office or your business to earn money. To illustrate this lesson, you can ask them to do extra difficult chores at home – something that they will be paid for. Choose these chores wisely. Try not to reward them for simple chores because that might make them refuse to help around the house if they will not be paid for it. If they are older, you can encourage them to find part time jobs – especially during the summer when school is over.

Just because you want it, doesn’t mean you should get it.

The next lesson that you can teach your kids is about smart spending. As a parent, it is quite difficult to say no to our children. But you know that it is never a good idea to give them everything they ask for. You need to help them get used to the idea that wanting something does not necessarily mean they should have it – especially if it is not a necessity. This lesson can serve as the foundation for smart spending habits. They can learn that even if they can afford to buy something in cash, it does not mean they should buy it.

Wait to save before you buy.

In connection with the precious lesson, you need to stress the importance of saving to your kids. Saving can help them purchase a lot of things in the future. If you have to say no to one of their requests, you can encourage them to save for it instead. If there is a toy that they want to buy, you can tell them that they can save up for it using their allowance. For younger kids, you can encourage them to help beyond their usual chores so they can earn extra money from you. They can use that to save up for the purchase that they want to make.

Spending money is fun.

While you need to encourage them to save, it is also important for you to teach your kids to enjoy spending the money that they have. This is especially true if they worked hard for that money. Have them commit to save a portion of it and then let them enjoy spending that money. They deserve whatever it is that they will spend it on. Try not to teach them to feel guilty if they do not save everything they earned. That is a mistake because they deserve to know that they can spend their money anyway they wish – as long as it is done in a smart way that will not jeopardize their financial standing.

Teaching kids smart money management skills is easy if you practice what you preach. Living by example is a lot better than hours of talking to your children about money management. Even if you spend hours teaching your kids, if they see that you are practicing something else, they are more inclined to follow what you are doing.

Money quotes from famous cartoons

If you feel like teaching your kids financial lessons seems daunting, you should know that there are a lot of tools that you can use to help you get the message across. For instance, Time for Kids and the financial editor of the “Today” show came up with a magazine that is intended to teach children money lessons. An article published on NYTimes.com explained that this magazine will target fourth, fifth and sixth graders. The publication will be distributed to schools nationwide.

There are also story books that you can use to teach your children about money. There are even cartoon shows that can teach financial lessons – if you know how to use them properly.

You should know that some famous cartoon characters have some pretty impressive quotes that you can use while teaching your kids money lessons. Here are some of them.

The past can hurt. But you can either run from it or learn from it. – Rafiki, The Lion King. This simply means it is okay to make mistakes when it comes to your money. As long as you know the lesson that you need to learn from it and you will avoid committing the same mistakes again.

Venture outside your comfort zone. The rewards are worth it. – Rapunzel, Tangled. This is a great quote that you can relate to investing. The simple rule in investing is this: the higher the risk, the higher potential there is to earn more.

The future is worth it. All the pain. All the tears. The future is worth the fight. – Martian Manhunter, DC Universe. The lesson you can connect here is about saving – specifically retirement savings. Although your kids will have to sacrifice and let go of some expenses, it will all be worth it if they end up saving a lot for their retirement.

You control your destiny – you don’t need magic to do it. And there are no magical shortcuts to solving your problems. – Merida, Brave. Merida here is telling us that when it comes to your financial problems, the shortcut is not the best way to solve them. For instance, when it comes to debt, bankruptcy may be the fastest way to solve it, but it is not always the best way for you to get out of debt. If a solution seems too easy and too good to be true, then it probably is.

Fairy tales can come true. You gotta make them happen, it all depends on you. – Tiana, Princess and the Frog. This means if you want to be rich, you need to work hard for it. Those get-rich-quick schemes are rarely true. You need to work hard to become rich. It all depends on how much you want to improve your finances – if you want it bad enough, you will do your best to reach your goal.

Do not be fooled by its commonplace appearance. Like so many things, it is not what’s outside, but what is inside that counts. – Aladdin, Aladdin. This young thief can be quoted when you are trying to teach your child about financial decisions. Just because a lot of people are doing something, buying a product or something similar, it does not mean they should follow suit. Teach your child to trust their judgement and stay true to what they want out of their finances.

There are other quotes that you can use to help teach your kids important financial lessons. You know your child best so you are in the best position to figure out the best way to teach them these important concepts.

7 Things Your Employer Won’t Tell You About Your 401(k) Plan

You have a job, you’re getting a steady paycheck and your company just gave you a form to sign up for something called a 401(k) plan. You give it a casual glance, see that you’d have to fund the account with money out of your paycheck, turn the form over and go on with your work.Video thumbnail for youtube video 6 Tips For Simplifying Your Financial Life

Bad mistake.

1. Sign up regardless

Some companies will match the money you put into your 401(k) account up to a certain percentage. Others won’t. If you work for a company that doesn’t provide matching dollars you should still sign up for a 401(k) account because it’s an almost painless way to get started on your retirement saving. And yes, the money will be taken out of your paycheck every pay period but you’re less likely to miss the money because you never actually see it. Even if you start out by saving just $15 or $25 out of every paycheck this will eventually add up to a fairly serious amount.

If your employer does match your contribution you absolutely must sign up for a 401(k)account or you’re basically throwing away free money. As an example of this let’s suppose you contribute $142 a month. If your employer matches to the maximum it will have added another $1704 by the end of a year.

2. Establish automatic increases

Experts at this sort of thing say that your 401(k) contribution plus whatever your company matches should add up to at least 15% of your annual income. If you don’t feel comfortable starting out at that level set up annual automatic increases. For example, you might increase your contribution by 1% a year. If you change your mind for some reason, you can always remove that automatic increase and there won’t be any penalty.

3. Take time to understand the alternatives

Most 401(k) plans limit your alternatives or how you can invest your money. For example, you might be limited to certain mutual funds, stocks and bonds. You may also be allowed to invest only a certain percentage of your contributions in stocks. Take some time to review your alternatives and to do some research. Make sure you understand the differences between stocks, mutual funds and bonds. Mutual funds can be a good choice because they spread the risk as you’re essentially investing in a number of companies. As a general these funds neither increase nor decrease in value as rapidly as do stocks. Bonds pay guaranteed annual dividends. This makes them a very stable investment. If you’ve ever heard the financial expression “coupon clippers” this refers to bonds because in some cases you literally clip a coupon each year and exchange it for cash.

4. Don’t be scared of stocks

You should put some of your money into stocks and some into mutual funds or bonds. If you’re in your 20s or early 30s you might want to heavy up on stocks. Yes, they will go up and down but you probably have close to 40 years before you retire and blue ribbon stocks always increase in value over the long term. Since you have a long-term before you retire don’t be afraid to take a risk at this time. But again do your homework. Choose stocks that are not likely to be terribly volatile. It might be okay to buy stock in some of the high-flying tech companies such as Google or Apple but you might want to balance that off by investing in companies like UPS, Honda and General Mills. These companies might not have the flashy track record of an Apple or a Facebook but they are good value stocks that are almost sure to steadily increase in value over the years to come.

5. Learn what it’s costing you

We don’t know of a single 401(k) plan where there is not an annual administrative fee charged. You should be able to see this on your account statement. However, there may also be fees based on the funds in which you invest. You probably won’t see this on your statement because it’s subtracted from your investment. You may have to call your plan administrator to learn what this fee or fees are. For example, you might find you’re being charged $3.17 for every $1000 you invest in a particular fund. That would be okay because it’s below the average 401(k) fund, which is $5.80 for every $1000 invested. If you find you’re paying more than the $5.80 you might want to take a hard look at the funds in which you’re investing.

6. Think before you leave

Most companies have what’s called a “vesting” date”. If you leave before this date you may lose your employer’s matching contribution. If you consider your current job to be just a steppingstone on your career path make sure to learn if there is a vesting date and when it is before you decide to leave. While this might not keep you cemented to your job it’s something valuable to know. After all, you might learn that if you were to stay just another month you’d get the full amount of your employer’s matching contribution.

7. You can take it with youstack of cash

There’s the old saying about money that “you can’t take it with you” when you die. However, in the case of a 401(k) you can take the money with you. However, don’t use it for a great island vacation or a new car. If you spend it before age 59 1/2 you will pay a tax penalty of 10%, plus you’ll have to pay regular income tax on the full amount. If your new employer offers a 401(k) plan your best option would be to roll over the money into it. If not, put it in an IRA. Alternately, you could leave the money where it is with your current employer where it will continue to grow although you can’t, of course, add any more money to it. Just make sure you keep some kind of a reminder so that 10 years from now you won’t have completely forgotten about that money. And yes, many people actually do this.

If you’d like to know more about 401(k) plans here’s a video courtesy of National Debt Relief with details about them and how employer matching works …

Tips For Everyone That Wants To Get Their Personal Finances Under Control

couple discussing finances

Couple calculating their budget

Are you tired of struggling to make ends meet? Do you constantly worry about running out of money before your next paycheck? Do you find yourself juggling bills to make sure that you at least get the important ones paid?

You don’t have to live like this.

There are simple things you could do to get your personal finances under control. Where it begins is understanding how much you spend versus how much you earn. If you’re having problems financially the root cause is because you’re spending more than you earn. So, the first thing you need to do is change your spending habits so that you are earning more than you spend. This may seem obvious but it’s the foundation of smart money management.

Make a budget

Step two on your road to getting your personal finances under control is to create a budget so that you can build your savings. A study by Bankrate.com recently revealed that more than 60% of us don’t even have a couple of hundred bucks in an emergency fund. If this is true of you, you need to do better. The way you do it is by creating a monthly budget where you build up savings. Ideally you should have the equivalent of six months of your living expenses in savings. If this doesn’t feel realistic at least try for three months’ worth.

Create a plan

If you’re typical your most troublesome debts are probably unsecured ones such as credit card debts. If so, you need to make a plan to get them under control. One of the most popular ways to do this is by “snowballing” those debts. This is a strategy developed by Dave Ramsey and it’s worked for thousands of people. Just make a list of your debts ranging from the one with the lowest balance down the one with the largest. Then focus all of your efforts on paying off the debt with the lowest balance – while continuing to make at least the minimum payments on your other debts. You should be able to get that first debt paid off fairly quickly, which will free up money you can use to pay off the debt with the second smallest balance and so on.

hand with cashUse cash

You don’t need to close your credit card accounts but you should stick your credit cards away in a drawer somewhere and use cash for your everyday expenses. Now that you have a budget you should have a handle on your everyday spending. Calculate the amount you spend each month, divide it in half and then take that amount in cash when you are next paid. The odds are overwhelming that you’ll end up spending less because psychologically it’s just a lot harder to take out the cash to pay for something than to swipe a credit card. If there is some reason why you can’t use cash for your everyday expenses then at least use a debit card rather than a credit card. While it’s easier to swipe a debit card then to pay cash for something it will at least keep your spending in check because when you zero out your checking account that’s it. You just can’t spend anymore without going into overdraft, which is also a bad thing.

Work on your credit score

Having a low credit score will cost you money in the form of increased interest rates and higher insurance premiums. If you don’t know your credit score you need to learn what it is. You can get it free from any of the three credit reporting bureaus – Experian, TransUnion or Equifax – or from a site such as CreditKarma. You’ll probably find you have a low credit score of 600 or less. If this is the case you need to get to work improving it. Your credit score is made up of five components. The biggest, which accounts for 35% of your score, is your credit history and you can’t do anything about it. However, the second largest factor – credit utilization –, which accounts for 30% of your score – is something you could work on. The way it’s calculated is by dividing the amount of credit you’ve used by the total amount of credit you have available. For example, if you have total credit limits of $10,000 and have used up $5000 of it your credit utilization would be 50%, which is way too high. Do the math to see what’s your credit utilization ratio. If it’s higher than 30% this is something you could affect by paying down some of your debts or by getting an increase in your credit limits although this is much easier said than done.

Review your credit reports for errors

You can get your credit reports free once a year from the three credit bureaus or on the site www.annualcreditreport.com. Review your reports very carefully as they could contain errors that are dragging down your credit score. A study done last year by the Consumer Financial Protection Bureau found that at least 5% of us have errors in our credit reports that are dragging down our credit scores. And who knows? You might be one of that 5%. If you do find errors it’s important to dispute them by writing a letter to the appropriate credit bureau. If you have documentation supporting your claim the credit bureau must by law contact the institution that provided the information and ask that it be verified. If it can’t verify the information or if it fails to respond within 30 days the credit bureau is required to remove the item from your credit report – which could cause it to take a healthy bump up.

Find the negative items

The other thing to look for on your credit reports are negative items such as late payments, charge-offs and accounts that have gone to collection. Then do what you can about them. If you have late payments try to catch them up. Charged off accounts may have been charged off but you still owe the balances. If you pay them off it will improve your credit score. The same is true of accounts that have gone to collection. You will need to contact the debt collection agency to see what you can do to get the balance paid off or to negotiate a settlement.

Get some counseling

If all of this seems a bit overwhelming you might try consumer credit counseling. You should be able to find a credit counseling agency where you live or, failing that, on the Internet. In either case you’ll have a counselor who will review your finances and help you create a budget and a Debt Management Plan (DMP). Your counselor will present this plan to your creditors. If they accept the plan you won’t be required to pay them. Instead, you will send a check each month to the credit-counseling agency. You will have to give up any credit cards that are in your DMP and not take on any new debt until you complete your plan, which typically takes five years. However, at the end of those five years you would be debt-free and should have learned to be a very smart money manager.

If you’re unfamiliar with consumer credit counseling here’s a short video, courtesy of National Debt Relief, that explains what it is and how it works.

5 Times When It’s Okay To Borrow Money

If you’ve spent more than 10 minutes reading about personal finance you know it’s a really bad idea to borrow money. Almost the first thing every book on personal finance preaches is “don’t borrow money”, “don’t get in debt,” “shun debt like the plague“ etc. and etc. And in most cases this is good advice. When you borrow money you’re really borrowing from a future you. You get to use the money now but it won’t seem like such a good idea several years from now when you’re still trying to repay it. Debt is basically a financial parasite that sucks money out of your future earnings leaving you with less to save or spend.

couple discussing finances

Couple calculating their budget

But the fact is that there are times when it’s okay to borrow money. Of course, you should have a plan for repaying it.

#1. When you can’t pay big medical bills

No matter how diligently you plan your finances a medical emergency can cause them to spiral out of control. The three credit bureaus recently changed the way they handle medical bills, as they now will give you up to 180 days to address them before they add them to your credit reports. If you simply can’t pay those medical bills and can’t work out some kind of a repayment plan with your healthcare provider then the 180 days would at least give you enough time to get a personal loan and pay them off. Of course, you would want to try to find a loan that has a low interest rate. Borrowing money might not be an optimal solution to those medical bills but it would be much better than seeing them go on your credit reports as unpaid. You’ll want to make the payments on that personal loan on time and in full because if you don’t your credit score will be seriously damaged.

#2. When you can’t afford your moving costs

Moving can be one of the most stressful events in your life. This is especially true when you consider the expenses associated with a move. In addition to paying a mover there will be issues having to do with boxes, storage, transportation and those little unexpected costs that always pop up. If you’re making an intrastate move and you total all the costs associated with it you can easily end up spending $1000 to $1100. And if you’re moving interstate the cost might be as high as $5000. If you take out a personal loan to cover your moving costs it will save you money versus putting them on a credit card. The reason for this is because a personal loan will have a much lower interest cost than your credit cards. Get out your most recent credit card statement, check the interest rate and you may find that it’s 15% or even higher. In comparison, you should be able to get a small personal loan that has a lower interest rate and simple interest – so that the interest is calculated only on the principal amount.

#3. When you’re saving money but carrying debt

If you’re carrying debt but trying to save money at the same time it’s a losing proposition. One website recently published a list of the 10 best savings accounts for 2015 and the best one offered an APR of 1.10%. Now compare that with what you’re paying on your credit card debts, which probably averages 15% or more. This suggests that a better solution would be to take out a personal loan and use the money to pay off those credit card debts. Then, at least for the time being, you should quit worrying about saving money and focus instead on paying off that personal loan. Get it paid off in a year or 18 months and you would then have a lot more money to stick away in a savings account or to invest.

smartphone anxiety#4. When you can’t pay a car repair bill

It’s tough to earn a living if you don’t have access to an automobile that you can rely on. If you‘ve had a car accident that wasn’t covered by your insurance or a major repair bill that you didn’t expect your access to reliable transportation could be seriously affected. If you’re your unable to work out an affordable repayment plan with the car repair shop then a better option could be to take out a personal loan to pay for the work. Again, this could be a much better option than putting the repair bill on a credit card because that loan should have a lower interest rate than your credit card. In addition, when you charge things on a credit card and can’t pay off the balance at the end of the month, you become the victim of compounding interest. This is where the credit card companies make the real money because you’re paying interest on interest. In comparison, most personal loans are based on simple interest, which is a much better deal.

#5. When you want to make home improvements but don’t have enough equity

How much equity do you have in your home? If you’re not familiar with equity it’s the difference between what your home is worth and what you owe on your mortgage. As an example of this, if your house were worth $100,000 but you owed only $80,000 on your mortgage, you would have $20,000 in equity. If this were the case you could take out a home equity loan or homeowner equity line of credit to finance the home improvements you would like to make. For example, you might want to update your kitchen, add outdoor features or replace your roof. Taking out a personal loan to finance these additions or renovations could be a good idea because they should add value to your home.

If you must use a credit care

If you find it necessary to put medical bills, an interstate move or a car repair bill on a credit card the critical thing is to not make just the minimum payment as this is where compounding interest will cost you big money … as explained in this video.

A tool for managing your finances

A personal loan when used for the right reasons that has a low interest rate and fair terms can actually be a great tool that can help you manage your personal finances. However, it’s important to think things through carefully and maybe even sit down with a lender to discus your options before taking out a personal loan. And it’s critical that you get a loan with payments you can afford and then make those payments on time every time.

Survey Says: Almost Half Of Workers Do Not Have Enough Emergency Funds

piggy bankWhen it comes to saving money, financial experts have always encouraged consumers to think about their emergency funds. This is the amount of money that you will put aside so you have the funds to get you out of unexpected expenses in the future. The use for this money can range between the trivial (e.g. busted transmission in your car) to the serious (e.g. medical illness) expenses.

The irony about living is you will never know what will happen in the future. No matter how careful you are, something is always bound to happen that will get you off track. Even the most careful individual could suddenly end up with an illness or without a job. It is better to be prepared for these events. Apart from being physically, mentally, and emotionally strong, you also have to be ready financially. And the only way you can do the latter is by building up emergency funds.

According the pulse survey results from Bankrate.com, 28% of their respondents will resort to credit in order to pay for unexpected expenses amounting to $500 to $1,000. 16% of the respondents said that they will borrow money from family and friends. This is a great option because these people usually do not have to worry about high interest rates. The same survey also revealed that 12% of their respondents would use credit cards to finance an unexpected expense. This is a dangerous habit because of the high interest rates that oftentimes accompany credit card debt.

If you want to be prepared for emergency expenses, it is important that you save up for it. You do not want to be caught unprepared at the wrong time.

Survey says Americans are not prepared for unexpected expenses

In a separate survey published on Principal.com, it is revealed that almost half of their respondents will find it difficult to find financial resources for an unexpected expense that amounts to $1,000. The survey was initiated by the Principal Financial Group and conducted by Harris Poll among 1,111 employees. These workers come from small to mid-sized businesses. The survey was done to gauge the financial well-being of workers.

The results of the survey revealed that 17% said that it is difficult to produce this amount, 13% said it is very difficult and 17% said it is extremely difficult. That means 47% of the respondents in this survey said that they will have a difficult time getting the resources for an emergency that will cost them $1,000. Imagine if they were faced with a bigger expense – that could very well lead them to a financial crisis.

To prevent this from happening, you need to build up emergency funds that will give you the resources to pay off unexpected financial needs. There are four important reasons why you need this savings.

Emergency funds can help you avoid a crisis.

If you have the financial resources to spend on an unexpected expense, you may very well be able to avoid going into a financial crisis. Instead of letting a situation get out of hand, you can immediately use the funds that you have to quickly solve a problem. Of course, you can only do this if the cause of the crisis is something that you can control. For instance, if you get sick, you will not hesitate to get treated because you know that you have the funds to spend for it. That can keep you from developing a more serious illness.

Emergency funds can help you survive a crisis.

In case you are faced with a financial crisis that you have no control over, your emergency funds will help you survive a financial crisis. An example of this is a job loss because of an economic situation.  Your emergency fund will give you the resources you will need in order to get through the tough situation that you are currently in.

Emergency funds can keep you from debts.

Another reason why you need to save for an emergency fund is to keep yourself from debts. Going back to the Bankrate survey, people who do not have savings usually resort to credit. It is okay if you can borrow money without interest. But what if you have no choice but to loan an amount with a high interest rate? You will be wasting a lot of money paying for that interest amount. You can avoid debt if you have the amount to spend from your savings in the first place.

Emergency funds can give you peace of mind.

Lastly, you need to build up your emergency funds because it will help you life a life that is free from stress. At the very least, you know that your financial situation is one thing that you do not have to worry about – regardless of what the future may bring. This is probably the most important thing that an emergency fund can give you. Even if you are already immersed in problems, you do not have to panic because you have the resources to spend in the meantime. You can concentrate on solving your problems while you continue to have the finances to spend on your needs.

Tips to build your reserve fund fast

According to an article published on NYTimes.com, more than 5 out of 10 American households have less than one month’s worth of income in their savings account. That means if something happens to their job, they can only survive for barely a month before their finances expire. You do not want this to happen so you must be prepared to build your emergency fund fast. The article mentioned that it is possible to build up your savings even if you have a limited income. The thing that you need to overcome is sometimes, psychological. People think that saving up for 6 month’s worth of income is impossible and they give up on the task even before they have started.

You need to overcome this negativity and concentrate on the target amount that you need to reach. There are rules that you need to follow when building your emergency fund and here are some of them.

  • Compute how much you need for emergency and reserve funds. Calculate the amount that you need to save for your emergency funds and your reserve funds. The emergency fund is the savings that will be spent for very serious expenses like job loss, etc. The reserve fund is for the more trivial expenses that you did not plan for. For instance, the gift that you need to buy for the wedding of your cousin, etc.
  • Review your budget plan. It is also important to review your budget plan so you can include the amount that you need to put aside for your savings. It is best to treat your savings like a bill so that you will put money into it no matter what.
  • Downsize your lifestyle. To increase the amount in your emergency funds, you may want to downsize your lifestyle so that you can lower your expenses. At least, this is true if you really want to grow your savings quickly. The more you can sacrifice from your usual expenses, the more you can put aside in your savings.
  • Increase your income. While you are saving on your expenses, you may want to boost that by increasing your income too. Try to earn more by setting up a passive income. You can also sell off some of the things that you no longer need so the profits can be added to your emergency fund.

Want To Increase Your Savings? Live On One Income

couple discussing finances

Couple calculating their budget

You would think that in order to increase your savings, you need to have at least 2 earning individuals at home. In fact, in most households, both couples are forced to have a job so they can make ends meet. Having both husband and wife earning may seem like the family will be better off financially. But did you know that it is possible to grow your savings even if only one person is earning an income?

Unless you are both career-driven, you probably have thought about quitting and staying at home to take care of the fort. If you feel like you are not getting paid what you are worth anyway, this may be a great option for you. A young couple who want to start a family would be talking about this too. Someone needs to stay at home to take care of the kids – especially while they are young. This would be a very good reason to live on one income.

But if you have dreams of buying something big in the future, you know that you need to increase your savings. And if you want to maximize what you can save, you know that the most logical thing to do is to have both you and your partner or spouse working.

According to a the daily consumer spending found at Gallup.com, Americans spend an average of $90 each day. That makes $2,700 a month. That amount does not include any payments made towards the house like mortgages, and household bills. Any expense on cars or vehicles are also not included here. So you can see that this amount is actually higher. That means the average household needs to spend at least $3,000 to $3,500 each month.

Do you think your home can afford to meet this expense with just one person earning a living? And what if you want to increase your savings? Would it be possible with this spending statistic and one income?

It will honestly not be a walk in the park but it is very much possible.

Saving benefits of having one stay-at-home parent

Believe it or not, there are saving benefits if you have a stay-at-home parent in your household. Do not frown upon those who decided to quit their job to take care of their career. They may be saving more money by staying at home instead of working for someone else. If you have the right situation, it may be more feasible to just quit your job.

There was an article that went viral a few months ago that indicated how much a stay at home mom is really worth. This was an article written by a husband with a stay-at-home wife. This article published on WeAreGlory.com gave specific figures that will give you an idea about how much a stay-at-home parent would be earning if we paid them for the work they do at home. Let us enumerate what was indicated in the article.

  • Child caring services. The author started by stating how his wife cares for their son every day. Changing diapers, feeding, playing, comforting, putting to sleep – all of these are tasks that his wife does day in and day out. If you hire a full time nanny to care for your child that way, you have to spend $705 a week or $2,820 a month. In essence, your wife (or husband), would be worth more because they care for your child 24/7.
  • Cleaning services. The one staying at home is usually the one cleaning the house too. This costs $50-$100 per visit – depending on the size of the house and how thorough you want the cleaning to go. If you have pets too – that will cost more. This is easily $100 a week – or $400 a month.
  • Personal shopper. Whenever your wife goes out to run errands like doing the groceries, buying gifts for family and friends, and going to the dry cleaners, that is a career too. The people who do this professionally are called personal shoppers. And they can cost you around $65 hour, for 4 hours a week, that is $260 a week or $1,040 a month.
  • Personal chef. Now this can be costly. A chef preparing 5 meals with 2 servings each can cost $400 or more. To be conservative, the author of the article gave an amount to $240 a week. That is $960 a month.
  • Financial assistant. Most of the time, the one staying at home is the one handling the finances because they know how much money is needed to keep the house stocked and in order. Whoever stays at home will most likely do the budgeting, paying of bills, etc. That sound like the work of a financial assistant who earns around $15 an hour. Assuming this will take around 5 hours a week to organize financial matters at home, that means $300 each month – at the very least.
  • Washer/Dryer personnel. Doing the laundry costs $25 a week. This will means it will cost you $100 a month to have all the dirty laundry in the house taken cared of.

We could go on and on because there are other things that a stay-at-home parent does around the house. But if we stop here, we are looking at a monthly salary of $5,620 or $67,440 a year. If you think about it, that is the amount that you are saving if one of you stays at home. Who would have thought that living on one income is actually a great saving tip?

If one of you earns less than this amount, then quitting your job could make sense. You would be able to increase your savings for future purchases.

How to transition into a one income household

According to the PewSocialTrends.org, there are more stay at home moms in 2012. In 1999, 23% of moms do not work outside. In 2012, that percentage went up to 29%. A lot of those who chose to stay at home are married and thus have husbands who are financially supporting them. These are the women who have consciously decided to stop working to care for their kids. Most of the single or unmarried mothers who are staying at home have done so because they could not find a job – and not because they decided to.

Of course, you have to deal with having a low monthly budget when only one of you is earning at home. While it may seem like a difficult task, it is possible to be happy while in a low income household. You just have to know how to transition to it properly.

  • Visualize how your budget will be like with one income. Before you go ahead and quit your job, create a budget and see how the household will fare with only one income. That way, you can discuss with your spouse if it is feasible or not. Here is a video that you can watch for some tips when creating a budget for a one income household.

  • Make sure you have an emergency fund. Increase your savings first before you quit your job. That way, any unexpected expense will not cripple your budget immediately.
  • Identify the expenses that you can get rid of. Definitely, you need to lower your expenses so you can increase your savings despite a lower monthly cash flow. Try not to sacrifice your savings. You need to have savings so try to sacrifice your expenses instead of your emergency fund. If you have to downsize your lifestyle, that could be arranged. Selling some of your stuff could help increase your emergency fund.
  • Have a plan for your debt. In case you have debts, you need to get rid of them before you live on one income. When you get rid of debt, it is one way to increase your savings too. You are wasting money on the interest amount that you pay towards your debts. Eliminate that and living on one income will be easier.
  • Try to find part-time work that you can do at home. Of course, staying at home does not really mean no income can be generated. There are so many work from home careers out there. You may be able to generate some income by becoming an online freelancer.

With some great financial management skills, it is possible to increase your savings even if you are living on one income in your household. Once you get the trick of budgeting and smart spending, it should all come easily. Not only will you be financially smarter, you have a better chance at creating a high quality home for you and your kids.

How To Disaster Proof Your Personal Finances

stack of cashWe’ve had tornado alerts for the eastern part of our state as well as flash flood warnings. Large parts of Texas and Oklahoma are currently underwater. And, of course, we all saw what happened to much of New Orleans when Hurricane Katrina hit it. Our state also has something in common with California – the danger of wildfires in the summer. In fact, no matter where you live there’s always the possibility you’ll be hit by some kind of a catastrophe.

Doomsday preppers

When you think of a doomsday prepper you probably think of someone preparing for the end of the world that has an underground room with several years’ worth of foodstuffs. While you might think these preppers are a touch on the paranoid side it is possible to learn lessons from them that could tide you over in the case of a flood, fire, hurricane or tornado.

The most neglected

Whether it’s being hit by a natural disaster, a pandemic or the loss of the family’s breadwinner, you’ll be glad you spent time preparing for it. Unfortunately, what most people neglect is to make financial preparations as well the physical ones. We all get busy and hassled and tend to forget the essential tasks. But if you follow these guidelines you’ll also have your personal finances prepped for a disaster.

Get organized

The first thing you need to do is get your finances organized. Divide your documents into three categories: Crucial, important and nice to have. Crucial documents would typically include the title to your home or car, your will, your power of attorney and your medical directive. Make copies of these documents and back them up digitally either on a hard drive you can remove or a flash drive. Store the originals of these documents in a very safe place like a safe deposit box. Make sure you know where your “important” documents are so you could quickly grab them and get out of the house with them in a hurry. If you have some warning about a pending disaster you might have enough time to gather up and put your “nice to have” documents someplace where you think they’d be safe.

Put away some cash

It can be very helpful to keep some cash on hand. Our society today runs on electricity, which means all your electronic devices are at risk. This also makes us very vulnerable, as there are very few things that will work if there is a big power outage. ATMs will go down and some store clerks won’t be able to run your credit cards. Make sure to keep some cash in small bills in your wallet or purse in the event you need to put gas in the car or buy some supplies And don’t forget to keep some cash stashed away at home.

The essentials

Two things that are essential to survival are food and water. This means it’s smart to have enough of these on hand to survive any Katrina-like event. According to doomsday preppers the basic survival elements are first aid, self-protection, hygiene and temperature regulation in addition to food and water. Most experts say you should have stored at least one gallon of water per day for each person in your family and each pet. You should also try to store at least a three-days’ supply of water for each person and each pet. Of course, the best thing would be to store a two-week’s supply. Make sure that you keep track of the expiration dates for any store-bought water and it’s important to replace your stored water at least every six months.

Food and first aid

It’s a good idea to keep at least one month’s worth of food on hand if you can. If you can’t do this all at once start with a small amount and then work your way up. For example, you might spend an extra $10 a week on things that store well such as canned goods and then work your way up to a month’s worth. Once you get a month’s worth of food stored up be sure to rotate some of these items into your menu periodically and then replace them so they don’t expire. A first aid kit is a must-have and even though this might be unpleasant to think about you need to consider how you would protect yourself and your family in dangerous situations. As we have all seen catastrophes such as Hurricane Katrina can bring out the worst in some of us.

Knowledge is the keyCouple Using Laptop And Discussing Household Bills Sitting On Sofa At Home

Sometimes what you know is more important than what you have. For example, do you know what to do about water purification and disinfection? After a disaster it’s likely that your water will be contaminated and not fit to drink until you treat it. You could purchase a water filter and tuck it away in a closet. But this comes with the risk that it might not work, could be damaged or just fails when you really need it. In comparison there are at least six ways to disinfect suspect water. If you know how to do this such as boiling the water or using chlorine breach, iodine or ultraviolet light to disinfect it you will know what to do in a worst-case scenario.

Another example of where knowledge is critical is that first aid kit. Just having one isn’t enough if you don’t know how to use its supplies. It’s just critically important to know how to treat injured or sick people. All the first aid supplies in the world won’t help you if you don’t know how to use them. If you don’t have the required skills you could likely take a course in first aid from at your local Red Cross chapter. Barring this there is a huge number of books available on first aid that you should read and have available close to your first aid kit. Two of the best of these are the U.S. Army First Aid Manual and the Living Ready Pocket Manual – First Aid: Fundamentals for Survival.

The thing is when you have skills and know how to do things you can always improvise and develop solutions to almost any problem.

Finally, it’s important to know when to stay put and when to get out. This means watching your TV for updates and bulletins as to what’s happening. And it’s not a bad idea to have one of those portable, hand-cranked radios available so that if your electricity were to fail you could still keep up with the news.

6 Important Pieces Of Financial Advice For Recent College Grads

student loan debtCongratulations! You’ve done it! Those four (or more) years of college are now in your rearview mirror. You’re excited and ready to start your new life. If you’re fortunate you already have a job or one lined up or maybe an internship. You’ll soon be making more money than ever before in your life. But before you charge off to start buying stuff it’s important to draft a financial plan. If you do this now you’ll have a much better chance of avoiding the common financial problems that plague many new graduates.

Following are six pieces of financial advice that can help smooth out your transition from college to the “real world.”

#1. Start saving

The first important tip in financial awdvice is to determine how you could live below your means. When you do this you will have extra money that you could set aside as an emergency fund. And trust us, you will ultimately have an emergency. This is even more crucial if you graduated owing on student loans. If so, this would at least put you in good company as roughly 69% of graduating college seniors in 2013 had student debt that averaged $28,400.

If you are now making a salary of, say, $2000 or $3000 a month your best move would be to try to live on $1000 a month and bank the rest. This would give you money you could use each month to pay off your debt. When you become debt-free you will have money you could save for retirement, to buy a house or to get a new car.

#2. Keep your spending to the minimum

It’s best to sit down, calculate your earnings and expenses and then put a limit on your spending. This is critical if you just snagged a new job. When you practice good financial habits now they will stand you in good stead the rest of your life. There are many smart phone apps available that would make it simple for you to do this. The best idea is to continue living as if you were still a broke college student. You survived on that tiny income for four years and there’s no reason why you couldn’t continue to do so for a couple more years and get a real head start on your savings or investing.

#3. Work on your money management skills

When you start your first job make sure to carefully review your employee benefits such as health insurance, retirement accounts, disability insurance and so on. You should also begin educating yourself on smart money management by reading a few books or even scheduling a one-on-one meeting with a financial planner. The important thing is to treat your finances as if they were yet another college course and do a lot of reading and research. The more you understand about personal finance the simpler and less stressful your financial life will be.

Girl looking at a laptop#4. Don’t forget those student loans

Don’t forget that if you have student loans your first payment or payments are due in October. If you fail to make a payment or if you are late in making one you will be in default and trust us that’s something you don’t want to happen. Technically you are in default on a student loan the day after you miss a payment. However, it will be 90 days before this will be reported to the credit bureaus and more than a year before your account might be turned over to a debt collection agency.

If you believe you’re going to have a tough time making your payments, go on the
U. S. Department of Education’s website and check out the repayment options available. There is one very popular plan called Graduated Repayment where your payments start low and then increase every two years. This can be an excellent choice if you have a job where you can see that your income will also increase in the years ahead. There are also three income-driven repayment plans. This is where your payments are tied directly to your income. The best of these is Pay As You Earn, which would cap your monthly payments at 15% of your adjusted earnings. This means that if you were out of work and earning nothing your monthly payments would be the same – nothing.

You should also contact your lender or loan servicer if you believe you’re not going to be able to make your payments. The sooner you make that call the sooner you will be able to get some help.

#5. Don’t fall prey to lifestyle inflation

When you get a big boost in your income it’s very tempting to go out and start buying things like a new car or to rent that two-bedroom luxury apartment. It can also be tempting to use your credit cards to pay for the furniture you’ll need for that apartment. Some people even take on credit card debt before their student loan repayments begin and then find that when they kick in they don’t even have enough money to buy groceries. This can lead to an endless cycle of default and deferment. And yes, it’s okay to upgrade your life somewhat after graduation so that you can say goodbye to those Ramen noodles but just don’t get carried away. Remember that those student loan repayments will soon come due and plan accordingly.

#6. Negotiate for a better salary

There’s nothing wrong with haggling over your salary and benefits – even when it’s your first job. For that matter, this demonstrates a sign of professionalism because even though you graduated recently you do understand how the working world works. You should, of course, express enthusiasm and appreciation for the job offer but remember that if you were able to negotiate just a small increase in your salary this will pay off in thousands of dollars over your working life. It’s also a good idea to practice your job offer conversation before you talk to that potential employer. Make sure to research your field so you will know what is a fair salary. If the salary is indeed fixed and you can’t negotiate anything better, focus on the other benefits, which can be worth as much as 33% of your salary. These are things that many first timers overlook. Make sure to ask about health care benefits, retirement accounts, vacation days, the flexibility to work at home and so forth. Just sit down, decide what’s important to you and then prepare for some professional haggling. You’ll probably find it just takes one round of negotiations.

Financial Therapist? I don’t Need No Financial Therapist

You’ve undoubtedly heard of financial counselors but did you know there are also financial therapists?Video thumbnail for youtube video Don’t Let The Ghosts Of Old Debt Hurt Your Credit Score

Unless you’re a member of that fortunate 1% you probably find yourself stressed out over money issues at least periodically. But for some people financial issues go way beyond this and become an essential psychological problem. And this is what financial therapists can help with.

A new field

As you might guess, this is a comparatively new field. According to the APA (American Psychological Association) money is the number one cause of stress in people’s lives. Given this it’s relatively surprising that the Financial Therapy Association didn’t come into existence until 2010. It currently has 250 members while there are 1100 accredited financial counselors.

What’s the difference between therapists and counselors?

The biggest difference between a financial counselor and a therapist is that the therapist focuses entirely on money. And while financial counselors are accredited financial therapists aren’t.

Why financial therapists?

People generally tend to seek out a counselor when they are having a financial emergency such as bankruptcy or a serious dispute between partners or spouses. In comparison, financial therapists are trained to help people – whether they are big spenders or thrift obsessive – develop financial well-being through an understanding of the cognitive, behavioral and emotional aspects of their financial problems.

In some cases, a financial therapist and counselor will work together in tandem to give a client a more holistic approach.

We know it but we don’t do

You already know you should be saving more money and spending less. However, the odds are that you aren’t. What financial therapists say is that reading more information about how you should spend your money is not going to help and that what needs to be addressed are the emotional issues underlying your problem.

man looking tired with workCommon money disorders

Financial therapists have identified five common money disorders. They are frugality, enabling, denial, dependency and rejection. How could you know if you’re suffering from one or more of these disorders? Here are the major red flags that say you might benefit from working with a financial therapist.

1. You’re avoiding your financial problems

There are times when we all feel reluctant about opening a bill. However, if you let your bills just pile up on your desk or a table this could mean you’re suffering from financial denial. Almost all of us have a low level of anxiety over money but for “deniers” the anxiety is so overwhelming that they just basically check out.

Here are the warning signs that you might be a denier.

  • You borrow money constantly or are always getting new credit cards
  • You have no idea how much you’re in debt
  • You either can’t open your bills or just check out the minimum payments.
  • You continue to hold onto the idea that somehow things will just work out.
  • You either avoid talking about money with your spouse or partner or just tell her or him that everything is okay.

2. You’re obsessed with the idea of being frugal?

Of course, it’s good to be careful about how you spend your money but frugality can get out of hand. If you are chronically “underspending” and neglecting your needs it might be because it’s just too hard for you to part with the money. People who are severe underspenders tend to neglect basic taking care of themselves. For example, they won’t go to a doctor or dentist because they simply don’t want to spend the money. The warning signs that you may be frugal excessive are:

  • You just can’t bring yourself to pay for basic necessities like home repairs or the dentist
  • You have a healthy savings account and a minimal amount of debt but are still constantly worried about money
  • You avoid going to the doctor so that you won’t have to make small co-pay
  • You refuse to invest any of your money even in a low-risk option such as a CD.
  • You’re willing to take advantage of other people if it means you would be getting something free or saving money.

3. You enable an adult child

If you are a financial enabler you’re sharing your money in a way that keeps your child from taking responsibility or becoming independent. Financial therapists see this most often with the parents of adult children. And yes, it’s okay to provide some assistance to an adult child but too much can create problems for both the giver and the receiver. If this is true of you, you might think you’re being altruistic and helping your child but what you’re really doing is satisfying your own needs. Here are the red flags that you may be a financial enabler.

  • You give your child money even though you can’t really afford it
  • You have provided so much financial assistance to your child that he or she has stopped trying to be independent
  • You find yourself struggling with your finances but then watch your adult child go on a shopping spree – on your money
  • You feel resentful when your child asks for money but you just can’t imagine saying “no.”

4. Do you totally rely on someone else to handle your finances?

You could be a stay-at-home mom that lets your spouse or partner handle all of the family’s finances. However, there are situations where people become too dependent on that partner or spouse and much of this probably has to do with gender role problems. One therapist has reported that people who totally rely on someone else to handle their finances often have issues with drugs and alcohol or end up in abusive relationships. When a person has everything given to him or her and another person is managing the money, that person can end up with no self-esteem or a sense of self-worth. Here are the danger signs that you have become too dependent on your spouse or partner.

  • You’ve never supported yourself on your own
  • You resent the feeling that the money you’re given comes with strings attached
  • You have no basic financial knowledge
  • While your relationship is an unhappy one you’re scared of the idea of leaving and having to support yourself
  • You have little or no self-esteem
  • You have absolutely no idea as to how much debt or how much money you have

5. You are uncomfortable with the idea of accumulating money

If you have a serious aversion to the idea of accumulating wealth this can signal a serious disorder called financial rejection. This sometimes happens to people who’ve won a lottery or received a lot of money due from a settlement. Some people actually feel that earning big money is a sign that you’re either a bad person or exploiting others. The warning signs of this are:

  • You don’t feel entitled to money so you give it away
  • You turn down opportunities to increase your financial security or to get a promotion
  • You earn less money than you should given your skills and education
  • You either under charge for your services or work free
  • You feel virtuous about not having much money.

9 Ways To Earn Extra Money to Pay Down Debt You’ve Never Thought Of

College student catching money in the airWhen you think about earning extra money to pay down debt, what do you think of? Most people would think about things such as having a garage sale, selling stuff on eBay or horror of horrors, getting a second job. The problem with options like garage or estate sales or selling stuff on eBay is that you probably have a limited number of items available to sell. So what would you do when you run out of that stuff?

Getting a second job is one of the best ways to earn extra money to pay down debt but it just doesn’t work for everyone. We live pretty much in a 24/7 world now and the hours you’re working at your primary job just might preclude you from getting a second gig. For example, we know of tech support people that work shifts like 10 AM to 6 PM or even 10 PM to 6 AM. It’s just not possible for people like that to take on second jobs. Even if you have a traditional 8 AM to 5 PM job you might find that there are many days of the week when the job just doesn’t end at 5 PM.

So if you fall into one of these categories what could do to earn extra money?

#1. Put your car to work

If you own your car you could put it to work earning money for you. In today’s sharing economy there are numerous people looking to rent other people’s cars instead of purchasing their own. There are sites such as RelayRides and GetAround where you could connect with people that might be interested in renting your car by the day or even a week. If you’re not in a position where you could rent your car you could pick up extra money through Lyft or Uber where it’s possible to earn up to $35 an hour by taxiing people around. Plus, you get to set your own hours.

#2. Do mystery shopping

Here’s another part-time gig you could do where you get to choose your own hours. If you’re not familiar with mystery shopping it’s where you go into restaurants, stores and other places of business and then report on your experiences to help the companies determine how well they’re doing in customer service. You not only make your own schedule as a mystery shopper but you could take on as many or as few assignments as you chose. Some people who do mystery shopping take just a few assignments a week and make maybe $100. If you were to treat mystery shopping more like a full-time job you could earn up to $500 a week.

#3. Become an eBay drop shipper

If you don’t have stuff of your own to sell on eBay you could become a drop shipper or middleman. This can be a great gig because you don’t even have to ship stuff yourself. You find companies that are willing to use drop shippers and then list their products on eBay along with some good sales copy. When you make a sale, you notify the company that has the product and it ships it to your buyer for you. There is an online wholesale directory called SaleHoo that has listings for more than 8000 prescreened suppliers including companies like Playskool and Gap. Sign up for some of these companies and you would then become a storefront selling their products. The money you earn would be the difference between their wholesale prices and what ever it is you sell the merchandise for.

#4. Do affiliate marketing

Many different companies including well-known ones such as Amazon and Starbucks are looking for new customers and are willing to pay to get them. The way affiliate marketing works is that you promote a company’s’ products or services using a unique URL. When a person uses that link to buy the company’s products, you get a commission. Sites such as Share a Sale and Rakuten Affiliate Network are affiliate consolidators where you can find many different companies willing to pay you a commission to help sell their products or services. If you’d like to know more about affiliate marketing, go to the website Affilorama where you’ll find training information that could help you be successful.

#5. Become a direct seller

Thousands of people make extra money by direct selling for companies such as Avon and Mary Kay. Direct selling has earned a sort of poor reputation but does offer the opportunity to make an enviable amount of money while still working a full-time job. Direct selling isn’t just about cosmetics, either. You could earn a nice extra piece of change selling wellness products like Advocare, pet products, Tupperware or accessories.

#6. Join focus groups

Companies that would like to improve their marketing and advertising periodically conduct focus groups consisting of potential customers to help them understand what’s working and what’s not working. If you have the time necessary to participate it’s a good way to earn extra money. There are many companies that are actually anxious to pay you for your insights as a consumer and in some cases they’ll even come to your home. One company recently held a focus group that lasted two hours and consisted of talking with just several people about snack foods and tasting some cookies. The person hosting this group earned $250. The website FindFocusGroups.com has listings of companies looking for people that would like to participate in focus groups. Alternately you might search Craigslist using keywords like “paid study,” “market research” or “surveys.”

#7. Become a consultant

Many small companies need help but can’t afford to work with one of the big, well-known consulting groups. Instead, they look for individuals like maybe you where they can get the same skills cheaper and on an ala Carte basis. For example, HourlyNerd connects well-educated professionals with small companies that need consulting help. If you have skills in areas such as marketing, social networking, search engine optimization or program management you could pick up a nice bit of change by consulting with companies that need these types of skills.

#8. Be an online jurist

There are trial attorneys that look for people to judge cases that haven’t gone to court yet. They use online jurors to help figure out what an average group of people might think about the merits of their cases or how they might respond to the attorney’s concepts or tactics. Companies such as Online Verdict enable attorneys to access regular people to serve as online jurors. If you meet the criteria to sit on one of these juries you would likely earn between $10 and $60 for your time.

#9. Rent out a room or your househouse with cash in it

If you have a spare room in your house why not rent it out using a site like Airbnb that connects travelers with people that are willing to rent out a room or an entire house. There are also sites such as the VRBO (Vacation Rentals by Owner) and HomeAway where you could rent your house to paying guests when you’re away from home. In the event you have a friend that would let you sleep on his or her couch you could rent your house for a period of time without even leaving town.

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