Discussing Family Wealth

The topic of family wealth often brings a fair amount of apprehension with it. Openly discussing wealth feels like a taboo subject and one that should be avoided at all costs. The talk may feel daunting, but it’s an important one to have with your kids. If they are not prepared to inherit a large sum of money, then they are bound to make mistakes. Here’s a few tips on starting the conversation and what the younger generation needs to know about the family’s wealth.

Rip off the Band-Aid

The first step to opening a money dialogue is initiating the conversation. It may be uncomfortable and family opinions may vary, but no matter what, the discussion needs to happen. It will be easier on everyone if the topic is laid out on the table at once and intelligently discussed. At the end of the day, you will feel better for speaking about it and your children will feel much more prepared for the future.

Use Teachable Moments

The inheritance and financial planning conversation will not feel as daunting if your children are exposed to the idea in small, real life increments. These teachable moments will feel less like a hard and fast talk about the family money and much more about the idea of money. For instance, the birth of a new family member is the perfect time to organically discuss inheritance. Your children will understand inheritance, but may not directly apply it to themselves yet. That’s perfectly okay! At the very least, the building blocks will be there come time for the “big talk.”

Keep the Dialogue Open

The money talk should not be an open and closed conversation. Family wealth is complex and evolves over time – so should your conversation. Closing the door after the initial conversation will cause confusion and potentially leaves a lot of questions unanswered. The transition of wealth is a delicate matter and should be treated as such. Be an open book for your children and let them openly discuss wealth. They will develop ideas on their own about how to best use the family wealth and you need to be open to that. By doing so, you ensure that less mistakes are made down the line. Trial by fire, especially with money, is not always the best way to learn.

Money Goals

People all too often talk about the importance of setting financial goals but do not actually talk about what those goals look like. Goals will inevitably vary from person to person, but there are some general goals that apply to the majority. If you find yourself being tasked with setting financial goals, but have no idea where to start, look no further. Pick out some goals that work for you or use these as a springboard for your own. No matter what, it’s great to be thinking about what you want out of your finances so you can start making plans and adjustments to get there.

Get out of Debt

If you have debt, this should be your ultimate goal. Debt is a financial burden you don’t need to carry. Think about all the good you could do for yourself financially if you were not already allocating a certain amount to paying down your debt. Aggressively tackle the problem and then stay out of debt. You’ll be happy when it’s behind you – trust me.

Commitment to Budgeting

Budgeting is awesome for so many reasons. You can track your spending, optimize your saving, and have a better grasp on how your money comes and goes. Set a goal of committing to a budget. It’s easy to stop putting in the effort to budget, but setting it as a goal can help push you to stick to it.

Plan Ahead

Thinking to the financial future leaves a lot of room open for goal making. You might set a goal for retirement, want to have a substantial emergency fund, or pay off your student loans at a quicker pace. No matter what you decide, even it it’s all three, just do it. It can be difficult to think to the future, but it’s necessary when it comes to finances. Life only gets more expensive the older you get. The sooner you are thinking to the future, the less worry you’ll have down the line.

Cut Down Spending

Set a goal to cut down on unnecessary spending. We all can get out of control with spending, but some people have a bigger problem with it than others. If you identify as big spender, but you want to save more money, it may be time to make a commitment to yourself. Curb the spending habit and start banking more money each month.

Make Investments in Yourself

Something people don’t often think about when financial goal planning involved taking care of themselves. Invest in your future. Spend some money for continued education classes that will beef up your resume, purchase a gym membership to take care of your health, or look out skill strengthening opportunities. Becoming the best version of yourself will ultimately lead to an enhanced career path and more money over time.

Buying Secondhand: Saving Money Without Sacrificing Quality

When attempting to save money, people often don’t think about making secondhand purchases. There are plenty of used items that we all want or need that can be bought at a cheaper price. Just because these items are used, does not necessarily mean they are of poor quality. With a little hunting and luck, you can find what you’re looking for cheaper from someone else. Check yard sales, thrift stores, eBay, and craigslist to find exceptional deals. To get you started, here’s a list of the easiest items to find secondhand for cheap without sacrificing overall quality.

Tools

Power tool and hand tools alike are the perfect secondhand item. You can find used tools everywhere – craigslist, estate sales, yard sales, and thrift stores are just a few places. People sell or donate their tools for many reasons, but mostly it’s either they don’t have a use for them anymore or they need more space. Why buy brand new tools when someone is selling their tools for a fraction of the price?

Clothing

Purchasing brand names and designer clothing is still possible for those who are frugal. Stores like Plato’s closet and various consignment shops are popping up all over. These store purchase gently used garments and sell them for a much cheaper price than the original retail cost. You won’t have an enormous selection like you would in the brand name stores, but you will be able to find things you’re looking for or love.

Vehicles

You should always buy a used car! Buying secondhand cars is immensely cheaper than buying new. If you look around enough, you can easily find used cars in new car condition. Bringing along a mechanic friend or someone who is good with cars is a good way to double check everything is in tip top shape. If it is, you’ll be driving away in a car that will last for years at a fraction of the price you were originally willing to pay.

Furniture

People are constantly selling their used furniture. As people move or want to upgrade their houses, furniture is normally the first to go. Grabbing yourself used furniture saves a ton of money. Furniture, in general, is expensive, but even gently used furniture is not worth the same thing as when you bought it. Additionally, since most furniture is large and people don’t always have the storage for it, they practically give it away.

Sports Equipment

Need a new pair of golf clubs? Instead of dropping a fortune on a brand new set, check the internet first. Much like anything, when we upgrade for ourselves, we normally try to sell off the old. Sporting equipment is no different. People sell balls, gloves, bats, bikes, and everything else under the sun once they no longer have a use for it. Scoop up great secondhand finds for a low price without sacrificing quality.

Young Adults Need Financial Role Models

Navigating finances on your own for the first time can be a difficult pill to swallow. Many young adults feel unprepared for handling their own finances in a productive way. In order to make for a smoother transition into full-fledged adulthood, Millennials need to call on a financial role model to help them. This can be a family member or anyone you feel comfortable talking finances with. Either way, seek out help to get you on your own two feet. Below are some areas that cause young adults the most stress.

Student Loans

Coming to grips with taking on all that debt was hard enough, but now it’s time to face the reality of paying them back. A financial role model can assist you in coming up with a plan of attack. Tackling students loans is a huge undertaking and shouldn’t be left for you alone to make decisions on. Someone more financially savvy than you may be able to help you formulate a plan for both the short term and long term.

Retirement

You barely just got your first full-time job and you’re already given options for retirement. Discussing an IRA and 401(k) may make your head spin, but once you understand it, you’ll be thankful you’re making contributions. A financial mentor can help you come up with the best retirement plan to set you up later on down the road.

Gaining Control

Getting a grip on your overall finances is another area where a financial mentor can help you out. This can be anything from budgeting to buying investments. Whatever the case may be, taking charge of your finances is the first step to success. The more financially stable you become, the better equipped you’ll be for all life has to throw at you.

Ask for Help

Finally, do not be afraid to ask for help in the first place. Becoming financially aware takes time and energy, but you shouldn’t have to deal with it alone. If things get tough and you feel overwhelmed, be sure to reach back out to your financial role model. They are there to help you, so use them as a resource.
Too many young adults are unprepared for taking care of their finances after college. This is why it is important to seek out a financial role model. They can show you right from wrong, how to turn your finances around, and begin planning for retirement. Take the time to gain a better understanding of your finances before you make disastrous decisions. You’ll be thankful you did.

Tips For Retiring Early

As Market Watch calls it, retirement just means being financially independent. Many people live decades reminiscing about a day that they won’t have to work so hard to pay their bills. Many can’t wait to retire so that they can start living. As the living costs grow, so does the retirement age, but here are some tips to help you reach your goal of financial freedom.

1. Understand Numbers
The first thing to do when you want to retire early, is understand how much money you’ll be able to live off. Typically, if you’re retiring, all of your bills and mortgages are paid off. You’ll have to calculate your monthly living and emergency expenses and figure out how much money you can actually live off while saving the rest of your income in long-term investments such as 401k or Roth IRA. One couple saved $1 million dollars in four years to retire at age 43.

2. Spend Less, Save More
It seems simple enough, but the key to having money in the bank is to spend less and save more. A majority of Americans spend money left and right on things that they don’t actually need, but want. For example, Americans spend half their food budget on eating out at restaurants. Groceries have also gone up in price over the years, and retail has been booming. In March 2010, families spent over $500 a month on shopping alone. The key point is that Americans are spending their income on unnecessary things rather than investing their money for saving. The best ways to save money is to be thrifty, including groceries are much cheaper (and healthier) at your local farmer’s market. Stores such as Aldi and Trader Joe’s are also great for saving money on food because they have healthy choices at the lowest prices they can sell at. Starting with changing your household spending is a great way to begin your early retirement process.

3. Invest
You don’t have to have a finance degree in order to invest your money. For one, every person who works full-time should have some sort of savings plan, whether through a Roth IRA or 401K. Another popular form of investment is housing. Owning a house will allow you to raise equity, but also have a backup plan in case of emergencies. As long as your mortgage is paid off, you can always sell your investment and get the cash for it, especially because housing typically goes up in price value. This is the easiest form of investment.

4. Income
It’s a good idea to have multiple sources of income for your early retirement.The current prediction is that most of us will never see a social security income, and if we do, we won’t be able to receive it until at least age 65. One typical way of creating income is owning a home. As the price value goes up, so will your equity. As mentioned this will allow you to sell your home, but other people choose the route of residential rentals for consistent income. The truth is that many places in the United States don’t have enough housing available, therefore there will always be a need for housing rentals. Another source of income would be starting a side business. Many people find ways to make money off their hobbies, such as landscaping, art, or sales.

5. Understand Your Values
Saving enough money for a retirement can be a lot easier than most people think: the hard part is changing your lifestyle. If you want to retire early in your life, it’s crucial to create a plan that you can stick to. This does mean becoming frugal with your lifestyle choices and decisions, but you will soon be able to realize what your life values are. When you learn how to live a simple life, you’re able to understand the difference between your wants and needs, and can see a different perspective when it comes to your financial choices.

What NOT to Do With Your Money

Sometimes it can be helpful to be told what not to do with your money rather than being told what you should be doing. That’s what we are going to take a look at today. Knowing what not to do can save you from costly mistakes or financial crisis. I’ve provided a list of a few of the big things you’ll want to stay away from doing with your money.

Never shop when you’re feeling down

A little retail therapy never hurt anyone, right? Well, it doesn’t really help your finances. Shopping while emotional will only lead to unnecessary spending. Also, shopping when you’re feeling under the weather makes you more susceptible to pushy salespeople. Their flattery might make you feel better, but give too much into that and you may end up making a purchase you can’t afford. Their goal is to get you to spend as much money as possible, don’t allow their hollow compliments to sway you.

Forgoing a budget

If you don’t have some kind of budget in place, you’re asking for trouble. Without a budget how are you supposed to keep track of your spending? Your budget doesn’t need to be overly involved to be effective. A simple budget that puts a cap on spending in all major areas will go a long way. A budget will keep you accountable to yourself and your wallet.

Having an inadequate emergency fund

It is a huge mistake to have an inadequate emergency fund. Ask yourself these questions:

Do you have six months of your salary saved?
Is that money separate from your regular savings?

If you’re jaw just dropped at the idea of having six months worth of your salary saved, pick it up and I’ll explain why it’s important. An emergency fund if for, you guessed it – emergencies. Things like losing your job, expensive car repairs, or unexpected medical bills. These things generally tend to cost a lot and can be detrimental to your finances.

If you answered yes to the first question, but not the second, you’re not out of the woods yet. Your emergency fund needs to be a separate account from your checking and regular saving accounts. The reason for this is because you should treat it differently than your ordinary savings. That money is for vacations, gifts, and any other “wants” you have. You should not be dipping into your emergency funds for a guys weekend away.

Don’t lend money to people you can’t trust

It will be very tempting to help out those in need – especially family and friends. If you are going to lend money out, make sure you can trust them. An untrustworthy person will have no problem asking for a loan with zero intention of paying it back.

A little bonus on this topic: Even if you can trust the person who’s asking for a loan, make sure you can afford it. Loaning money you don’t actually have to loan out will be a hit to your finances.
Managing your money is no easy task, but hopefully knowing what not to do has given you a different perspective. Overall, setting guidelines for your money will shed light on what’s important and push aside the things that aren’t.

Money: The difference between right and wrong

People do not always use their money wisely, some of it is easier to see than others. There is a grey area of what are the right and wrong things to do with your money. Of course, these things all depend on where you are in life and how much (or little) money you have. The list below documents some of the more applicable guides of how to handle your money.

Gifting money

There is nothing wrong with helping out people in need, especially deserving family members. It really all comes down to where you stand financially. People run into trouble when they gift more money than they can afford, if they can afford it at all. If you can cover all past, present, and future expenses and then have some expendable money, by all means help. The real issue is if you do not have it. If gifting money to a loved one will help them, but puts you in financial trouble, nobody wins.

Saying yes…to everything

There is nothing wrong with doing fun things, but where the problems come up is when you can’t say no. You won’t be able to afford going out every weekend and you won’t be able to afford big trips all the time. Saying no to save your wallet is a good skill to learn. Plus, you will eventually get really good at picking the most exciting and fun things to do.

Withdrawing from retirement accounts too early

Retirement accounts are supposed to be reserved for, wait for it, retirement! If you are withdrawing from a 401(k) or an IRA before 59 and a half, you are quite literally short changing yourself. Any withdrawals that are not for qualified reasons are subject to tax and a 10% penalty. Do yourself a favor and leave this money alone.

There are a few exceptions to the rules, but be careful when doing so. You can dip into this money early for purchasing your first home, if you become disabled, or to fund education, but make sure you look into other options before dipping into your retirement – your older, wiser self with thank you.

Credit Cards

Credit cards are a great thing to have and great credit is even better. You can’t have one without the other, so be smart. Credit card debt weighs a lot of people down and is an unnecessary expense that adds up rather quickly. Having these cards around for emergencies or paying bills is a great thing, as long as you can pay off the debt rather quickly.

Managing your money can be tough, especially when it is tied to literally everything you do. It’s important to realize where you fall short and try to clean up your finances before you get yourself into too much trouble. Spending some time learning about what is good for you financially and what is not can save you a world of worry

Managing Student Loan Debt

Student loans are on the minds of all college grads – recent or not. It is important to have an understanding of your loans and the ways to make them work best with your current and future situations.

Know Your Options

Most lenders offer different repayment options. After all, everyone is not on the same financial ground after school. Discussing repayment options with your lender let’s them know you are serious about paying your loans back in a way that works best for you. Some options are income based repayment plans, graduated plans that increase the monthly payment at different stages, and even consolidating loans. You will not know your options without exploring them first. Become an expert in your debt to make it work with you – not against.

Make Larger Payments

When possible, pay more than the minimum on your monthly payment. It won’t always happen, but when possible it’s a great investment in yourself. Additionally, larger payments cut into your overall debt and save you money on interest in the long run. The sooner you pay off your loans, the less interest can accrue.

Tax Breaks

There are often tax breaks associated with student loan interest. In the U.S. for example, a tax credit is applied for the amount of interest paid the following year. Do yourself a favor and take that amount and apply it directly to your debt. It may be tempting to spend that money, but it’s money you wouldn’t have without your debt. Additionally, using all or some of tax returns can be a great way to take a chunk out your loans. You have already lived without the money, why not pay down your debt with it.

Pay On Time, Every time

Paying consistently and on time is extremely important. Ignoring payments can be extremely detrimental to your credit and will pose other issues down the road. Bad credit can prevent you from buying a car or house. Plus, consistent on time payments provide you with reassurance that your debt is being tackled bit by bit.

Avoid Additional Debt

If you can, try to avoid any additional debt – especially credit card debt. Accruing more debt can only cause more headaches and normally higher interest rates. By keeping your debt down, you are able to tackle one piece of debt before accruing more. It will be inevitable, buying a house or a new car will add onto your debt, but keeping it down for as long as possible will only benefit you in the long run.

Student loans can be a large issue for some people and is important to know what you can do. Stay on top of your debt and it won’t cripple you. Make your debt work with you – not against.