Financial knowledge isn't built into our DNA. It has to be learned. Unlike long division and gymnastics, personal finance is not properly covered in school (if covered at all). So it falls upon parents to impart financial knowledge to their children. Unfortunately it's easy to slip up and make mistakes. In this article, we'll look at five ways you may be stunting your child's financial growth.
A lot of funding has been put into researching why kids fall into particular traps. Teen pregnancy, drug use, underage drinking and many other early problems have been traced back to a lack of communication – hence, the "if you're not teaching your kids about ____, then who is?" campaigns. A lack of financial education doesn't seem as serious as a drug addiction, but its long-term consequences are quite severe. Remaining mum on financial matters sends the message that either money is not important, or it's something to fear and never mention. Neither of these are lessons that help with the financial realities children will face as they grow up.
If you're not willing to teach good financial habits to your children, the school system and the media are the main information sources by default. If you need motivation to take your child's financial guidance upon yourself, watch TV with your child and consciously try to spot the image of personal finance they might be getting from both the shows and the commercials they see – it is, quite frankly, terrifying.
Ranking second only to remaining silent about financial matters is the tendency for people only to talk about them when things are going well. Personal finance and the financial world as a whole is not a Disney movie where cats and birds break out in spontaneous songs of joy – it is fraught with problems. It's far better to be honest about problems – late bills, flat stocks, bad decisions, etc. – and engage the family in solving them. Looking at financial matters as a problem-solving exercise for the family will also lessen the stress traditionally felt by people trying to "keep the household budget (or portfolio)" all by themselves. It will also teach your child to approach financial problems as just that – problems. Problems can be challenging, but there are always solutions if you're creatively searching for them.
I've long held the position that even though we live in one of the wealthiest, most financially blessed countries ever, as a society, we also live a life of serious financial stress. I often joke that it's probably less stressful to live in the rainforests of South America, hunting and gathering, than to live in our modern, tech-savvy society, paycheck to paycheck. A lot of this stress stems from the fact that, as a society, we just don't save money very well. According to a past Marketwatch article, almost 69% of Americans have less than $1000 saved. That is an astonishing amount of us that are basically one paycheck away from homelessness, or at least raiding our retirement funds in case of an emergency.
There is a plethora of reasons behind our insufficient savings habits, such as a lack of discipline and making bad financial decisions. Maybe, it is simply that good jobs and hourly rates just don't exist anymore for the lower and middle class (which I would argue as a legitimate factor). We can even rationalize that the value of the dollar doesn't go as far as it used to, therefore, neither will our paychecks. Regardless of the validity of these arguments, our financial habits have a direct impact on our ability to save and our overall financial well-being, regardless of the inflation rate or our income level.
Gym membership – these can easily cost $600-800 per year, depending upon how swanky the establishment and package that was chosen. With YouTube and DVDs, it's so easy to get a quality workout at home without having a ton of money worked out of your wallet. Eliminate the membership, not the exercise.
Side hustle – I have always been a huge proponent of a side hustle, or part-time gig. During my transition of leaving corporate America to go independent, I also had a part-time job while I built my practice. Even if you have a stable job or career and feel you could save more, find a good side hustle. Do something you enjoy and make some extra cash while doing it.
If you are feeling the monetary strain, downsizing your car, getting rid of cable and the gym membership, and finding a side hustle can have a dramatic impact on your budget. It takes a bit of courage, but one can transition from living check-to-check to having a net surplus per month, depending upon your situation. If you are having debt and/or budgetary concerns and you want to make some positive changes but are not sure where to start, reach out to a qualified financial advisor. If you change nothing, then nothing changes!
As the second-largest city in the United States, Los Angeles attracts residents from across the country and around the globe. As the epicenter of the multibillion-dollar entertainment industry, the city is a magnet for aspiring actors, directors and screenwriters. With idyllic weather year-round, beautiful beaches and a diversity of scenery, it is possible, during some months, for an Angeleno to snow ski in the morning and surf in the afternoon.
Los Angeles is a perfect study in how the demand curve works. When demand for something is high, prices rise. There is plenty of demand to live in Los Angeles. As a result, everything including rent, food, gas, and utilities is expensive. When considering a move to LA, the first order of business is understanding how much money it is going to take to pay the bills.
The following information is detailed in averages, but keep in mind Los Angeles is a huge, sprawling city. Prices vary wildly depending on where you plant roots. Rents in Santa Monica are not comparable to rents in South Central LA. By understanding the average cost of rent, utilities, food and transportation in Los Angeles, and then making adjustments based on your unique circumstances, you can narrow down the range of how much money you need to live there.
As of March 2017, based on figures from Numbeo.com, the average cost for a one-bedroom apartment in the city center sits at approximately $1900 per month. If you are looking to get roommates, a three-bedroom apartment averages slightly over $3,420. The good news is that while these averages may seem scary to a new resident, they are skewed upward by the presence of extravagant luxury rentals in the wealthy areas of town. You can find plenty of Los Angeles rentals for under $1,500 per month if you go outside of the city center, though it is advisable when you find something that seems cheap for the area, to investigate the neighborhood and the apartment to ensure it is somewhere you are willing to live.
If you can afford to buy in Los Angeles, prepare yourself for stiff competition and sky-high prices. According to real estate website Trulia, the average price of a home per square feet in Los Angeles is $554 as of March 2017, and current trends indicate this number will soar this year. Currently, the average cost of an LA home is hovering at $699,000. If you're considering buying in the LA area, it is beneficial to get pre-approved for a mortgage as this will assist you tremendously when closing a deal with the seller. You can research current mortgages available for a home in LA using a tool like a mortgage calculator.
Like many parts of California, the Los Angeles region does not have a monolithic climate. Several micro-climates comprise the area. For example, the San Fernando Valley regularly reaches the triple-digits during the summer and can be quite cold for Southern California during the winter. Malibu, by contrast, rarely exceeds 80 degrees and has only dipped into the 30s a handful of times. Your utility bill can vary greatly based on the specific climate in your neighborhood. Citywide, the average utility bill is $133.50 per month for an 85m2 apartment. This figure fluctuates throughout the year and will vary according to the size of your home, but you can use it as a benchmark.
Food in Los Angeles is significantly more expensive than the national average. A gallon of milk costs $3.79, and a loaf of bread costs $2.50. A dozen large eggs is $3.62. For a pound of boneless, skinless chicken breasts, the cost is $4.54. Even a frugal consumer, to be safe, should build $500 into his monthly budget for food costs in Los Angeles.
Here are four budgeting software systems that meet those criteria. Each system is distinguished by how it could best fit your personal approach to managing your finances.
This browser-based subscription system runs on both Windows and Mac computers. Android and iPhone apps are available and are able to sync data back to your desktop. YNAB also connects to bank and credit card accounts to download transactions, but it does not offer a way to track investments. Following a 34-day free trial, YNAB costs $50, billed annually.
At it's core Mvelopes provides you with a familiar system of using envelopes on a digital platform, but that is not all the software service provides. It is also able to link to bank and credit card accounts, allowing you to see past spending and assign money to future "mvelopes." You can set up the system to move money out of your spending envelope into a credit card payment envelope so that you don't run up your credit card balance.
Mvelopes Basic is the simplest offering from the budgeting site and costs only $4 per month. Pricing ranges as high as $79 per month for Mvelopes Complete, the software's premier service. The system is online and works with both Macs and PCs. Android and iPhone apps let you manage your accounts, add and edit transactions, adjust your budget and monitor expenses on the go.
For decades, educators have encouraged young people to get increasingly expensive post-secondary degrees that provide arguably decreasing real returns in the labor market, and to take out large subsidized loans, regardless of their career choices.
In 2016, the average college graduate borrowed between $26,450 and $31,200. Fortunately, some borrowers may find relief. There are many programs in place, some old and some new, through which debt forgiveness is possible, and we should expect more programs to surface in the near future, as untenable student debt burdens become a larger political topic.
Debt forgiveness programs are exactly what they sound like. In a student loan forgiveness program, qualifying borrowers may have some or all of their public student debt forgiven, either immediately or over a period of time. Unfortunately, none of these programs forgive private loans. The only known methods of discharging or removing private loan amounts is through bankruptcy or a one-off restructuring with the borrower's private lender.
Currently, there are four major programs and several other minor programs that might cancel or significantly reduce your federal student loan balance. The major ones are Public Service Loan Forgiveness, Perkins loan cancellation, income-based repayment and Teacher Loan Forgiveness. The catch is these may not apply if the debtor is in default status, meaning the loan has gone unpaid for more than nine months.
Each plan has very strict requirements which must be met before student loans may be forgiven. Many require annual submission of official paperwork to student loan servicers, and any missteps might disqualify an otherwise eligible borrower. If you are considering or currently in the process of trying to have your loans forgiven, it is crucial that you understand the necessary steps and follow them diligently.
Depending on the state in which you reside, there may be occupation-based forgiveness programs available. These are typically designed for doctors, attorneys or other professionals who pay above-average amounts for advanced degrees. Borrowers who used Perkins loans may actually have their entire debt forgiven after just five years. This mostly depends on your occupation, especially for those who serve full-time in a public or non-profit school. This program is used to entice teachers to work in low-income schools and in states where there are shortages of qualified teachers in a given field. Potential specialties range from speech pathologists and preschool teachers to high school math and science teachers.
Nationwide, however, the most common are the Public Service and Teacher Loan Forgiveness plans. Full-time public servants can have their entire federal loan balances forgiven within 10 years. Teachers at qualifying low-income schools may receive partial forgiveness ranging between $5,000 and $17,500, excluding those who only have PLUS loans.
There is a fifth option, popularly referred to as the Obama Student Loan Forgiveness Plan, which came into existence after the Health Care and Education Reconciliation Act of 2010. It might be identified more correctly as a debt restructuring program with possible forgiveness in the future.
Borrowers who qualify may consolidate all of their federal student loans into one single loan, at which point the borrower may choose from five different repayment options. These options — standard, graduated, income-contingent, income-based and Pay As You Earn (PAYE) — offer a wide range of attractive reconstructions.
The graduated repayment plan, for example, allows the borrower to make lower-than-standard payments at first, and every two years, the monthly payment amount increases. This is designed to spread more of the loan amount into the future, when the borrower would ostensibly earn a higher income. The PAYE plan typically offers the lowest monthly payment, including payments as low as $0, though many borrowers have a difficult time qualifying for these plans.
Those enrolled in the income-contingent, income-based or PAYE plans must pay their loans during a term lasting between 20 to 25 years. If, at the end of the term, the borrower still has an outstanding balance, such a balance could be forgiven. Anyone who makes payments in one of these three plans and who also works in the public sector can count his or her Obama Loan Forgiveness payments as qualifying payments for their Public Service or Teacher forgiveness programs.
The Department of Education (DoE) also offers relief to those who have significant physical or mental impairments and are unable to engage in "substantial gainful activity," which is the official government term for a real job. Those individuals interested in applying for permanent disability status must work through the DoE process to prove their disability. To prove that you have a disability, you need a letter from a qualified physician and other required supporting documentation. Applications typically take between three and six months before a decision is rendered. If your application is accepted, you're unable to apply for any other student loans until you receive another letter that deems you able to engage in gainful activity.
I've followed the Baby Steps for about six years now, and I've become an absolute die-hard fan.
Note that if you're on Steps 1, 2, or 3, you shouldn't be investing OR paying your house off early. Before you even consider either option, you should be debt free except your home and have a fully-funded emergency fund.
Pay Off Your Mortgage Early? Absolutely.
If given the choice between investing extra money in the stock market (beyond the standard 15%) and paying off my mortgage, I'd choose paying off the mortgage every. single. time.
You know that 4% interest rate that you've got on your mortgage loan? If you pay off your mortgage early, you don't ever have to pay it! Basically, it's like locking in an investment for 4% that has absolutely no chance of going down…ever. If you pay off a $150,000, 30 year mortgage, that equates to over $100,000 in guaranteed "earnings"! (the other suckers end up paying $250,000 for a $150,000 house).
When you invest, you're taking on the risk of losing money…which everyone fails to mention for some reason. Sure, you might earn 8%, but there might also be a downturn and you lose 20%. If that happens, I bet you'd start wishing that you paid down your house!
Oh, and as for the tax savings, it really doesn't amount to much…especially in the later years of your loan. If you're lucky, you save 0.5% with this incentive, which is hardly enough to keep me from being 100% debt free!
Are you sick of being cash poor all the time? With money going toward your bills, food, kids, and YOUR HOUSE, it's pretty easy to feel strapped. But what if you didn't have your house payment? What if, instead of having that $1,500 go to the bank every month, it went into your own pocket?
That would be pretty sweet, huh?
Well it's absolutely possible. Pay off your mortgage early and your bank account will fill up faster than you ever thought possible! Plus, you'll have options that you never even considered before.
Escaping from our mortgage payment each month has been nothing short of excellent. I can't ever imagine going into debt over a house again.
Our house is ours and nobody else's. If we lose our job and find ourselves short on cash for a stretch of time, we don't have to worry about the bank coming and taking our house away from us.
If you owe more than $1 (yes, that's one dollar) on your home, then the bank has every right to take it from you. Their name is still on the deed.
Don't think for a second that you're invincible. Foreclosures happen to regular people every single day.
I've saved the best for last. This is the reason that disproves every single investment brainiac out there.
If you remember from earlier, advisors often state that the stock market averages 7-8% and your mortgage interest only costs you 4%, so ignoring the mortgage and investing in the market is the obvious answer…. yeah, I don't think so.
When my wife (now ex-wife) left me in 2012, I wanted nothing more than to break all ties with her. I didn't want to see her, I didn't want to hear from her, and I certainly didn't want to owe her any money!
This is when I waged war on debt. I paid her the decreed $21,000 in just six months, and then I paid off my $54,000 mortgage in under a year!
This is the power of emotion (in my case, anger).
If my financial advisor told me to invest $75,000 in two years, do you think I would have done it?
I would have told him he was nuts and that it was impossible. I never would have even tried.
How much would I have invested instead? If I were fairly aggressive, I maybe would have put $20,000 away.
BOOM! Thanks to the power of emotions, paying off debt can absolutely be more advantageous than investing in the stock market!
I write about this stuff all the time, and I can affirm the fact that being out of debt is an incredible place to be, but I can't get out of debt for you. This decision and action has to come from you.