money decisions

Your Child Could Be Heading Toward Financial Failure If…

March 28, 2014 By Guest Writer 3 Comments

By Gregg Murset

If you haven’t heard the famous stand-up comedy routine of Jeff Foxworthy I would suggest taking a few minutes to pull some one-liners up on the Internet before reading the rest of this piece. Foxworthy has worked extremely hard building a successful career by making jokes about real-life situations, as well as a particular class of people who might be called by some “Rednecks“.

As millions of YouTube videos will verify real-life can be very funny. However, it can also be very hard, especially if you aren’t prepared for it. Recently, numerous studies have come out supporting what many of us already see as parents – kids not prepared to make financial decisions they will be forced to make as adults. Add to this a growing generation of kids with a poor work ethic and growing sense of entitlement, and many believe our economic future is in deep trouble.

Right now in the U.S. kids aren’t learning enough (if anything at all) about basic finance, even though these are skills they would use the rest of their lives. Depending on where your high school kids go to school, they may be required to take a combination of foreign language, high-level math (algebra) and high-level science (anatomy) in order to graduate. Why not finance?

Is learning how to speak French more important than learning about interest rates and credit cards? Is figuring out the value of X more important than knowing how to plan a monthly budget or saving for retirement? Is dissecting a preserved animal as critical as understanding the differences between loans and how inflation affects us all?

April is National Financial Literacy Month in the U.S. providing a great opportunity for all of us to evaluate if our children are learning the basic financial information that will help them save, share, budget and make smart money decisions as adults. According to a 2013 report by The Center for Financial Literacy at Champlain College on the financial education in each state, only 20 states received a grade of A or B. A debate is now being held in almost all states over whether or not a standalone finance course and a test should be required for high school graduation. I’m not sure why it’s even debatable. Personal finance knowledge will be used more any other knowledge set throughout a persons lifetime. It’s a no-brainer!

So what if you have a child between the ages of 5 and 17 and you are concerned with what he or she knows about earning, saving, sharing, spending and budgeting money? Is there a way for a parent to tell if there is trouble ahead? Just watch out for these signs that your child could be heading toward financial failure and take corrective action at the first sign of trouble.

Your Child Could be Heading Toward Financial Failure If He or She:

Says That Buying a Lottery Ticket is Their Retirement Plan

The odds of winning the lottery is somewhere around 1 in 259 million. This is not a retirement plan, this is the worst kind of gambling- almost zero chance of winning! If your child thinks this is a good way to plan for the future, just start planning now to have them living with you during your retirement!

Spend More Time Watching TV or Playing Video Games Than Helping Around the House

Get your children off the couch or out of their room to do their share around the house. Besides building a daily routine, they will develop a good work ethic, demonstrate responsibility and make your life easier. As they develop a work ethic they will start figuring out that work equals money most of the time and will want to start earning more money.

Is Older Than 7 But Still Putting Money Into a Piggy Bank

While piggy banks can be a cute way for a youngster to learn about nickles and dimes, what purpose do they serve after that? Almost none! If your children are old enough to earn money they are old enough for their own bank account. It’s a great opportunity for them to learn how a bank works, use online banking and begin to understand interest (though it’s not what it used to be).

Thinks Credit Cards are Free Money

Some kids think that credit cards represent free money banks give away for people to buy things. As we all know now, there is nothing free about credit cards. Until your children have a clear understanding of how cash advances interest rates, penalties and fees mean, they shouldn’t have one. Be sure you are teaching your children the difference between a debit card and a credit card by discussing the ins and outs when you use them in front of your kids.

Learns About Finance From Comic Books

A year or so ago, one of the largest financial institutions offered a comic book where a well-known superhero fought a villain over bad financial decisions. As parents, are we really that afraid of communicating with our kids about financial matters that we would rather leave it up to comic books and animated characters? If your children can’t learn about this important subject in school, let them learn from your experiences. You can become the superhero.

Has a Fall Back Plan of Moving Back Home if the “College Thing” Doesn’t Work Out

OK, so this is a bad news – good news situation. The bad news is that 71% of college dropouts move back home with their parents because of money woes or inability to find a job. The good news is that 97% of these “boomerang” kids are willing to doing chores around the house to help out. They better be their options are running thin!

Thought That the Term “National Debt” was the Title of a Nicholas Cage Movie

While most teenagers have some idea what the National Debt is, a majority have no idea what it means to them. As of right now, our National Debt stands at over $16 trillion, (that’s twelve zeros people!) meaning a baby born today is $51,501 in debt. Tell your children that they owe you more than $51,000 and see what reaction you get. Helping kids to understand how this number affects them is the first step to managing it.

They Think that Budget Refers to a Rental Car Company

According to a recent Gallup Poll, 67% of American adults don’t have a monthly budget in place or a long-term financial plan. Since kids learn a great deal by watching what their parents do it’s important for you to set a good example for your children and budget. Also, share the budget with them so they have a better understanding what constraints there are and how they can help meet family goals.

Swears that the Term “Interest Rate” Means How Popular Something Is

Definition Alert…An interest rate is the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor). The best way to remember how interest rates work is the rate will most likely be high when you are paying back money and low if the bank is paying you money. Talk to your kids about interest rates in regards to credit cards and car loans since they will come in contact with those first.

They Are Over 25 and Still Getting an Allowance From You

Houston, we have a problem! If your child is about 25, living at home and still asking for an allowance, you should be telling your child one thing … move out and get a job! Of course there could always be some circumstances that provide a real reason why a grown child is at home without a job or income, but it better be a good one.

They Turn Down A Good Summer Job Waiting For The Perfect Job

While summer jobs have been more difficult to come by with the recent decline in the economy, kids who really want to work always find a way. Even though it might not be the perfect place, it’s a job. If they want more opportunities, help your child decide summer plans early since summer jobs fill up fast depending on where you live. Also, get them to understand that not all summer jobs are glamorous. To ease their pain, tell them if they are saving for college or a car, you will match their pay as an extra bonus for being responsible.

Many of these financial doom warning signs can be used to avoid a negative future if you start your children early on a routine of completing jobs around the house and rewarding them with an allowance or by another means. By starting around the age of 5, kids can learn work ethic, responsibility, accountability and how to manage money wisely. Using an educational tool like MyJobChart.com will help parents assign jobs, motivate kids and reward successfully completed jobs. Kids use the same technology (smartphone, tablet or laptop) they spend hours on now to see their daily schedule and decide how to save, share or spend their rewards.

No matter how you decide to position your children to be successful financially as they grow remember that education, communication and hard work must be part of the plan. Otherwise, we’ll end up with a generation that thinks the Debt Ceiling is the maximum amount that can be charged to their credit card. By the way, it’s not.

Gregg Murset, CFP®, is the Chief Executive Officer of My Job Chart, which was born from real life experience. Murset is a father of six children (ages 6 to 16) and needed a way to teach them about earning, saving and spending money. With no system available for a family with a large range in ages, He came up with the idea to combine modern technology with the traditional allowance system to teach responsibility, accountability and the fundamentals of financial literacy.

10 Reasons You’re Not A Millionaire

June 14, 2013 By Jeffrey Strain 28 Comments

There seems to be an impression that the only reason that people aren’t able to become millionaires is because they don’t work hard enough. The truth is that hard work has very little to do with becoming a millionaire. That’s not to say that you don’t have to work hard. You do. But you also need to avoid the many pitfalls and bad financial decisions which end up being the real cause that most people aren’t able to build wealth. The truth is that you don’t have to have a huge salary to gain assets in excess of a million dollars, but you do have to make good financial decisions (and avoid making bad ones).

It’s important to note that a single issue is likely not what’s keeping you from millionaire status, but a combination of several of the actions and decisions you’ve made. And, yes, there are exceptions to the rules, but then there are also people who win the lottery — and would you really bet your retirement on winning the lottery? Here are 10 reason that could very well be a contributing cause of why you’re not currently a millionaire:

You Spend More Than You Make

There are no secrets, and there certainly is nothing magical, when it comes to the basics of personal finance. In order to keep your finances in order, you need to spend less than you earn. If you fail to do this one simple thing, it doesn’t matter how much money you make, you’ll always find that you don’t have enough money to make ends meet. It also goes a step further than this. Spending less than you earn is not enough it itself to build wealth. You have to also actively save and invest a portion of all the money that you make. Most people recommend this amount to be 20% of your income. If you aren’t putting aside 20% of every paycheck you receive and placing it into long-term savings and investments, chances are you aren’t going to become a millionaire.

You Try To Meet Other’s Expectations

There is nothing which will keep you from reaching your financial goals faster than trying to live up to other people’s expectations instead of your own. This is more commonly known as trying to “keep up with the Joneses.” The simple fact is that if you’re trying to live like a millionaire before you have the resources of an actual millionaire, it’s not likely that you’re ever going to become a millionaire. Instead, you will simply be building up a lot of debt and wasting money on things to impress people who probably won’t be impressed anyway. Trying to keep up with the Joneses when your salary can’t compete with the Joneses is a sure way to sabotage the chance of building wealth.

You Don’t Pay Yourself First

One of the most fundamental steps that you can take to ensure that you put away money for yourself is to pay yourself before you pay anybody else. If your goal is to save 20% of your income, you need pay yourself that 20% from your paycheck before you pay any other bills or expenses that you may have. If you try to pay yourself after you pay all your other expenses, you’ll inevitably fall short at the end of the month from time to time (if not always), and fail to save as much as you had hoped. By paying yourself first, you make the commitment that wealth creation is an important part of your overall plan, and not something that hopefully gets accomplished after everything else.

You Have Kids

This probably isn’t going to be the most popular item on the list of why you’re not a millionaire, but the hard, cold truth is that children are expensive. Very expensive. The costs associated with kids can be mitigated to some degree if you have already built some wealth and have planned the cost of having children into your budget, but that often isn’t the case for many couples. Having children when you are young with a limited income will greatly affect your ability to build wealth. With compound interest being so important to wealth creation, and a cornerstone of it being that the sooner you begin saving and investing, the better, the fact is that it’s nearly impossible to put money aside when you’re young with children. When this is the case, all the extra money you have inevitably ends up going toward the children’s care instead of being invested for wealth creation.

Your House Is Too Big

Some people assume that purchasing a big house is a good investment. While this can be the case, purchasing more house than you can afford is a good way to make sure that you’re unable to create real wealth. The problem is that when you buy big, your expenses for the house are also bigger. A large house will mean bigger tax payments, more expensive upkeep, more stuff purchased to fill the house, higher insurance payments and all around more expenses than if you purchased a house that actually fits your needs. The real way to build wealth is to purchase a house that fits your needs and budget, and take all the savings that you gain from not buying the large house to invest and create wealth.

You Replace Things Too Soon

Just because there is a newer and shinier version of the gadget that you purchased a year or two ago doesn’t mean that you need to buy that new gadget. If you’re the type of person who is constantly replacing products that still have a useful life in order to buy the supposedly latest and greatest gadgets, chances are that you’ll have a difficult time building the type of wealth that you want. Those who create savings to invest do so by getting great value out of what they buy by using their purchases for the entirety of the items’ useful life. People who are able to afford the newest and shiniest things by upgrading every year are those who have already built their wealth, not those that are currently trying to.

You Let Others Take Charge Of Your Finances

There is nothing wrong with getting the opinions of others to help you lay out a plan to build your wealth, but it’s important to be an active participant in this planning. Giving full control to somebody else to handle your money is a sure way to make sure that you fail to build the wealth that you hope to create. Creating wealth and keeping it means that it’s necessary for you to understand the financial decisions which are being made, and periodically reevaluating them to make sure that they are meeting the goals that you have set. Giving full control of your finances to somebody else creates a situation where you’re no longer in control of your financial future, and the only one who you can truly trust to be looking out for your best financial interests is yourself.

You Fail To Take Care Of Your Health

There is nothing which will drain your wealth more quickly than getting sick. While you may not be able to control all aspects of your health, there are certainly steps that you can take to make sure that you’re as healthy as you can possibly be. Eating right, getting exercise, taking preventative measures, getting annual check-ups and taking care of medical problems before they become truly serious all put you in a position to live a healthier life. The better you take care of her health, the better the chance that you will be able to create wealth, and keep that wealth as you age.

You Get A Divorce

Just as getting married can be a wonderful way to help build wealth, getting a divorce usually has the exact opposite effect. In fact, getting a divorce is one of the best ways to destroy the wealth that you have built up to that point. That’s not to say that you should stay in a marriage solely for financial reasons, but it’s important to know that divorce is usually a giant wealth destroyer, and getting a divorce will hamper the best laid plans to become a millionaire.

You Have One Or More Bad Habits

A bad habit is anything that takes money away from you without giving more in return. The classics are smoking, gambling and drinking alcohol, but a bad habit could just as easily be that daily expensive cup of coffee or the three sodas that you drink each day. It doesn’t even have to be buying things. Being lazy and sitting in front of the TV five hours a day instead of working on making yourself better is also a bad habit that hurts wealth creation. Depending on the number of bad habits you have, and how much they cost you on an ongoing basis, these alone could be keeping you from becoming a millionaire.

(Photo courtesy of Enkhtuvshin)

Start Thinking

April 24, 2013 By Jennifer Derrick 3 Comments

One of the things that gets people into trouble financially (and in a lot of other areas, too) is failing to actually think about what they’re doing. We’re all guilty of putting our lives on autopilot. We buy the brands we always have because they’re what we know. We shop in the same stores we always do because we know the layout, or the salespeople, or it’s just convenient. We eat the same foods because they’re what we always get. We bank at the same bank we always have because it’s easier than switching. We subscribe to things because we’ve done it for years. And we stop for coffee on the way to work, or go out to lunch because we’ve always done it. It certainly makes life easier to go through life this if you don’t have to put much thought into things. But failing to think through your options can cost you.

I’m just as bad about this as most people. Last year, though, I found myself having to really apply some thought to one area of my life, which was watching what I ate. I got hurt and couldn’t exercise for a while. Since I’m one of those unlucky people who can quickly gain weight if I don’t exercise, I really worried about this. I didn’t want to come off of my injury with an extra thirty pounds tacked on.

For the first time, I was really thinking about what I ate. Every meal and every day. Every time I wanted to eat, I asked myself if I was really hungry. Had I already had too many calories that day? Did I need chips with my sandwich at Subway? Did I need sweet tea, or would unsweet tea, diet soda, or water do just as well? It was tiring to have to think about everything I put in my mouth, but the payoff was huge. I not only didn’t gain any weight, but thanks to better eating and an aggressive rehab schedule, I actually lost ten pounds.

All this thinking about food reminded me that I should be thinking about other areas of my life more, including money. While I try not to sink into money ruts, I know that I do. I know that I’m guilty of running into a store sometimes and just getting the brand of ketchup I always do rather than looking for a sale or comparison shopping. I know I’m guilty of shopping the same retailers because I just can’t be bothered to look for someplace new. So I vowed to apply the same amount of thinking to my money as I had to my food.

It made a difference. While I thought that we were already pretty cost-conscious and frugal, I realized that there were a lot of areas where we’d started to slip. I tightened up on my grocery shopping, paying more attention to per ounce prices and doing diligent comparisons. I really looked at our banks and insurance carriers and actively compared them with others to see if there were better deals. When I needed to buy something, I made sure to look at several retailers instead of just going to my default shops. Any time a spending or saving question arose, I put some thought into it. And I questioned everything we spent money on, from meals out, to stuff for the home, to our subscriptions.

All of that thinking meant that we increased our savings account by another $5,000 last year, over and above what we normally save. I was surprised because, like I said, we were doing pretty well as it was. But really thinking meant that a lot of things got left on store shelves, that better deals were found, and some subscriptions were cut or changed.

While I know that I’ll never be able to keep up that level of vigilance forever (it does take up a lot of mental space), doing it for a year or so reminded me just how dangerous autopilot can be. I know I’ll probably slip back into some ruts, but I know that this experience will remind me to periodically apply more thought to my money. If you want to save money, try really putting some thought into your day to day life. You might be surprised at what changes you make.

(Photo courtesy of Colin_K)

Pay Attention: Changes Affect Money

February 11, 2013 By Jennifer Derrick Leave a Comment

I wrote a few weeks ago about how many people are upset about the end of the Social Security tax holiday. Now that tax rates have returned to 6.2%, many people are struggling to readjust their budgets because they’d come to count on that money, rather than viewing it as a temporary windfall.

There’s another side to this issue and that is that many people were caught off guard by the end of the holiday. Either they didn’t know it was happening until they got that first reduced paycheck, or they didn’t find out about it until a month or so before it went into effect. Despite the fact that many in the media had been talking about it for six months or more, many people still had no idea that it was coming. Because they were unaware, they missed the chance to proactively adjust their budgets and instead had to scramble to make the bills with a reduced paycheck.

What this mess illustrates is that we, as citizens, have to pay attention to anything and everything that might affect our money. It’s tempting to tune it all out as noise and political wrangling. It’s not exciting and following the governments’ twists and turns can be detrimental to your blood pressure if party politics tend to rile you up. Well, it may be all of that and worse, but it’s essential to pay attention to it if you want to manage your money well.

The government makes many changes that affect our money, and some slip by so quietly that we don’t know they’ve happened until it’s too late. If you pay attention, though, you will be aware of what is going on. So what do you watch for? As a citizen concerned about your money, you have to watch for many things. Here are just a few.

Changes to Taxes

Are taxes going up? Down? Are certain deductions being eliminated or reduced? New ones added in? Are there programs like energy credits that you want to use before they expire? At the local level, are sales taxes changing? Are your property taxes being reassessed? Are the taxes on your retirement withdrawals going up or down? We all have to pay a lot of taxes and getting complacent about the amounts we pay and the deductions we get can hurt us. You have to stay aware of what’s changing and react accordingly.

Changes to Retirement Savings

Unless you’re one of the lucky few who’s going to get a full pension at retirement (and even then, you still need to be somewhat aware because your pension may be in danger) you have to keep abreast of the new laws and products related to funding your own retirement. Are contribution levels being raised? Are new products available like Roth IRA’s? What are the implications for your taxes if you participate in the various programs? Are deductions going up or down? Are the ages for catch up contributions changing? Are minimum withdrawal amounts changing? Every change can affect how much you can save, where you can save it, when you can withdraw it, and how much you’ll pay when you do. It’s important to understand these things.

Changes to Government Programs

Things like Social Security and Medicare will affect all of us someday. Just because you’re young doesn’t mean you don’t need to pay attention. Changes to these programs may impact how much you need to save for retirement and how you’ll have to procure health care. For those closer to or already in retirement, any changes can impact your benefits and the amount you receive. It’s better to know about changes than to be blindsided by a smaller than normal check one day.

Changes in Interest Rates

When the Federal Reserve changes interest rates, it affects everything from your borrowing costs to the interest rate on your savings account. You have to pay attention because any change can affect your debt payments if they are variable and tied to the prime interest rate. Lower rates may signal a good time to go house shopping, while higher rates signal a chance to earn more on your savings accounts and CD’s.

Domestic Money Issues

If you think that the debt ceiling or the passing of a new budget each year doesn’t affect you, you’re wrong. These things impact taxes, employers’ willingness to hire, the stock market, government programs and spending, and the availability of certain services. You have to know what’s going on with the country’s spending if you want to keep your money safe and growing.

Foreign Money Issues

Just because it doesn’t happen here doesn’t mean it doesn’t matter. You only have to look at Europe’s debt crisis to see what happened to our own stock market as a result. Any time there is unrest or trouble in other parts of the world, it trickles into our economy. Because we are all so interconnected and dependent on one another these days, a lengthy strike or a war in another country can impact our economy.

Now, none of this means that you have to become an expert on foreign and domestic policy, economics, and taxes. No one can know everything about every issue that will impact your money. But you do have to be generally informed and aware. Read a newspaper occasionally. Watch Bloomberg TV or CNBC. Read the news online. Listen to news radio while you drive to work. Just pay more attention generally to what’s going on in your local, state and federal governments.

I’ll be the first to admit that reading about this stuff isn’t as interesting as checking the sports scores or seeing which celebrity did something stupid today. It’s not even up there with watching the latest viral YouTube video. But it is something you have to do if you want to make smart money decisions. Only by knowing what’s going on can you prepare for it and change your money strategies. When you know what’s going on, you can also join the movement to lobby for change. Don’t like something the government is about to do? Speak up and get involved. At least know enough to be able to cast an informed vote for the candidate who shares your views.

You have to take an active role in managing your money if you want it to grow and work for you. That means knowing what the government is doing and how it affects you. If you just wait for things to happen, you’ll always be reacting and you’ll always be playing catch up. Those who pay attention have the chance to be proactive and to either take advantage of opportunities or limit the damage.

(Photo courtesy of R/DV/RS)

Know What Makes You Happy to Improve Your Finances

January 6, 2011 By Jeffrey Strain 4 Comments

I am a firm believer, from my own experience, that after committing to spend less than you earn, the most important thing that you can do for your finances is to truly understand what is important to you and what makes you happy. I know that at first glance this doesn’t seem like it has anything to do with finances, but I found that before I figured out what was important to me and what made me happy, I spent a lot of money on things trying to achieve these goals without knowing what they really were. Instead, I assumed that what would make me happy were the things that seemed to make other people happy (there is a reason that commercials have a lot of happy people in them).

Everyone is different and what makes one person happy won’t necessarily make another person happy. I found it difficult to accept what made me happy at first (even though it should have been obvious to me long before I did actually accept and act upon it) because it wasn’t what society was telling me was supposed to be making me happy. My financial situation began to really improve when I accepted that experiences (particularly travel) made me far happier than things did.

Once I had this fact clearly in my head, the way I approached finances completely changed. There were a lot of things that I had in my life that I didn’t want to give up because I thought that they were things that would make me happy (that societal force again) which were in reality were an image rather than what I truly wanted. When I needed to stay within a budget, this often meant that I felt I had to give up one thing over another when both seemed equally as important to me. Once I clearly knew what made me happy, the focus went from “what do I have to give up” to “what do I have to do to ensure what makes me happy happen.”

I still have to make financial sacrifices to achieve many of the goals I want, but I am more than happy to make them because the reason I am making them is to do something that I am sure will make me happier in the long run. To meet the goal of traveling 2 weeks every month in 2011, I have decided to give up many things that I believe most people view as “essential” these days. Not having them certainly makes things less convenient at times and forces me to be creative at other times, but it also means that I can do the things which I enjoy doing the most. I consider that a pretty good trade-off.

Friends and family see that I travel a lot and are often jealous that I am able to do as much as I do. What they don’t see or consider are the financial decisions I make to enable me to do so. That is what I will be writing about this year — those decisions and the consequences that result from them. I already know that some of you are going to think I am a bit crazy (don’t worry, I already have plenty of people that think of me that way), some of the decisions I make will definitely not be the ones you would have made (and that is OK because we are different and I assume what makes us happy is different) and I will make a number of mistakes along the way (I always do). What I hope is that from my financial decision making process you are able to develop your own that works for you and your financial situation.

Do you know what is important to you and what makes you happy? I mean, do you really know? It is a difficult question that can create a lot of anxiety. I know because it sure did when I was coming to terms with what made me happy. If you do, I’d love to hear what it is in the comments and how/when you found what it was. If you still aren’t sure, I truly hope that this series will help you to think a lot more about what does and what you need to do to make it happen.