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January 20, 2021

What All Early Retirees Have in Common

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3 Strategies to Increase Your Credit Score

January 18, 2021

3 Strategies to Increase Your Credit Score

Is your credit score costing you money?

A recent survey found that increasing a credit score from “Fair” to “Very Good” could save borrowers an average of $56,400 across five common loan types like credit cards, auto loans, and mortgages.¹ That’s roughly $316 in extra monthly cash flow!

If your credit score is anything but “Very Good,” keep reading. You’ll discover some simple strategies that may seriously help improve your credit score and increase your cash flow.

Pay your bills at the strategic time.
Credit utilization makes up a big portion of your credit score, sometimes up to 30%.¹ The closer your balance is to your credit limit, the higher your credit utilization. The lower your utilization, the less you’re using your available credit. Creditors view a lower utilization as an indicator that you’re responsible with managing your credit.

Here’s a simple way to lower your credit utilization–ask your creditors for when your balance is shared with credit reporting agencies. Then, automate your bill payments to just before that day. When credit reporting agencies review your balances, they’ll see lower numbers because you just paid them down. That can result in a lower credit utilization and a higher credit score!

Automate debt and bill payments.
Late payments for your credit card bill, phone bill, and utilities can negatively affect your credit score. If you have a habit of paying your bills late, consider automating as many of your payments as possible. It’s a convenient and simple way to make your finances more manageable and help increase your credit score in a single swoop!

Leave old credit accounts open.
So long as they don’t require a monthly fee, leave old and unused credit accounts open. Any open line of credit, even if it’s unused, increases the amount of available credit you have at your disposal. And not using that credit lowers your overall credit utilization, which can help increase your credit score.

Closing unused credit accounts does the opposite. It lowers your available credit and spikes your credit utilization, especially if you have large balances in other accounts. So if you have credit cards you don’t use anymore, leave those accounts open and hide the cards in a place where they won’t tempt you to start spending!

The best part about these strategies? You can act on them all today. Ask your creditors when your balance is shared with credit reporting agencies, then automate your deposits to go through right before that day.

When you’re done automating your payments, put your unused credit cards into a plastic bag and put them deep into your freezer. In just a few hours, you’ll have set yourself up to increase your credit score and save money!

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A New Year's Resolution You Can Subscribe To

A New Year's Resolution You Can Subscribe To

“Are you sure you want to cancel?” Click yes.

“Are you sure you’re sure?” Click Yes.

“Like, 100% sure?” Click YES.

“For a free month of service, can you define ‘sure’ for me?” …

When you cancel a subscription to a service, the number of times you have to assure the company that you’re really, actually, truly canceling your service might be directly related to a rise in your blood pressure – or to rage-quitting the cancellation process and telling yourself you’ll come back to it later… Will you really come back to it before they charge you for another month?

Here’s a suggestion for a New Years Resolution: Get off of as many automatic renewal plans as you can. At the beginning of a new year, pushing through that annoying cancellation process has the potential to yield some pretty incredible results for your financial strategy.

Why? Because making the decision to take your cash flow back from a piece of plastic can open up more avenues in your financial strategy. When a credit card is involved, all it takes is a quick swipe here or an online purchase or two there before you find yourself in serious debt. Being conscious of the money you bring in and where it’s going can make it easier to save and spend more wisely.

Set yourself up for success in the New Year. Which services show up once a month and raise that number on your credit card bill? Haven’t read a single issue of that magazine since June? What about that meditation app that you keep meaning to use but don’t make the time to? Nix all of those empty charges that are not helping you reach your financial goals.

There are some subscriptions worth keeping, though, like your subscription to a service that provides anti-virus software to your computer. Even in this case, it might be worth it to check around and see if you can get comparable coverage for a more competitive price.

And beware the non-refunders. If you’re subscribed to a service that won’t give you a refund for the remainder of the subscription period, one option is waiting until a day or two before the next auto-payment. But this can be a little risky, especially if you forget to go back and cancel the service before it renews. If you do choose to wring out all the benefits of the non-refunded service, set a calendar reminder or two (maybe three, just to be safe!) on your phone to be sure you go back and cancel before you’re in the hole for another month.

Some companies may try to lure you back in with the promise of a free month or discounted pricing if you don’t cancel right away. Don’t buy into it unless you immediately reset that calendar alarm on your phone. If you can do without the service, push through the temptation and just say no. The benefits of canceling the charge that will continue to come up month after month if you forget to return and cancel outweigh one free month of use.

So pour yourself a cup of chamomile tea and diffuse some lavender essential oil to help you relax. The process of canceling all of those subscriptions could push anyone’s buttons, but just settle into a rhythm of assuring the company a few times that you want out, and you’ll be fine – and potentially better off financially because of it. Even though it may not feel like much to turn off a couple of subscriptions to save $20 a month, it can really add up. At the end of a year, you’d have $240 dollars that you wouldn’t have if you’d left those auto-renewals in place. That’s $240 dollars that could fit elsewhere in your financial strategy.

With a little work and subscribing to a new idea or two instead, 2018 has the potential to be the year you take back control of your finances.

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Handling Debt Efficiently – Until It’s Gone

December 23, 2020

Handling Debt Efficiently – Until It’s Gone

It’s no secret that making purchases on credit cards will result in paying more for those items over time if you’re paying interest charges from month-to-month.

Despite this well-known fact, credit card debt is at an all-time high, rising another 3% this past year. The average American now owes over $6,300 in credit card debt. For households, the number is much higher, at nearly $16,000 per household. Add in an average mortgage of over $200,000, plus nearly $25,000 of non-mortgage debt (car loans, college loans, or other loans) and the molehill really is starting to look like a mountain.

The good news? You have the potential to handle your debt efficiently and deal with a molehill-sized molehill instead of a mountain-sized one.

Focus on the easiest target first.
Some types of debt don’t have an easy solution. While it’s possible to sell your home and find more affordable housing, actually following through with this might not be a great option. Selling your home is a huge decision and one that comes with expenses associated with the sale – it’s possible to lose money. Unless you find yourself with a job loss or similar long-term setback, often the best solution to paying down debt is to go after higher interest debt first. Then examine ways to cut your housing costs last.

Freeze your spending (literally, if it helps).
Due to its higher interest rate, credit card debt is usually the first thing to tackle when you decide to start eliminating debt. Let’s be honest, most of us might not even know where that money goes, but our credit card statement is a monthly reminder that it went somewhere. If credit card balances are a problem in your household, the first step is to cut back on your purchases made with credit, or stop paying with credit altogether. Some people cut up their cards to enforce discipline. Ever heard the recommendation to freeze your cards in a block of ice as a visual reminder of your commitment to quit credit? Another thing to do is to remove your card information from online shopping sites to help ensure you don’t make mindless purchases.

Set payment goals.
Paying the minimum amount on your credit card keeps the credit card company happy for 2 reasons. First, they’re happy that you made a payment on time. Second, they’re happy if you’re only paying the minimum because you might never pay off the balance, so they can keep collecting interest indefinitely. Reducing or stopping your spending with credit was the first step. The second step is to pay more than the minimum so that those balances start going down. Examine your budget to see where there’s room to reduce spending further, which will allow you to make higher payments on your credit cards and other types of debt. In most households, an honest look at the bank statement will reveal at least a few ways you might free up some money each month.

Have a sale. To get a jump-start if money is still tight, you might want to turn some unused household items into cash. Having a community yard sale or selling your items online through eBay or Offerup can turn your dust collectors into cash that you can then use toward reducing your balances.

Transfer balances prudently.
Consider balance transfers for small balances with high interest rates that you think you’ll be able to pay off quickly. Transferring that balance to a lower interest or no interest card can save on interest costs, freeing up more money to pay down the balances. The interest rates on balance transfers don’t stay low forever, however – typically for a year or less – so it’s important to make sure you can pay transferred balances off quickly. Also, check if there’s a balance transfer fee. Depending on the fee, moving those funds might not make sense.

Don’t punish yourself.
Getting serious about paying down debt may seem to require draconian measures. But there likely isn’t a need to just stay home eating tuna fish sandwiches with all the lights turned off. Often, all that’s required is an adjustment of old spending habits. If your drive home takes you past a mall where it would be too tempting to “just pick a little something up”, take a different route home. But it’s important to have a small treat occasionally as well. If you’re making progress on your debt, you deserve to reward yourself sometimes. All within your budget, of course!

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Save Money This Holiday Season

December 16, 2020

Save Money This Holiday Season

Have you ever looked at your wish list and thought you heard a muffled scream coming from your wallet?

Inevitably, someone you love will wish for a $1,000 t-shirt or a chocolate fountain. And because you love them, you might go with it. But when December 26th rolls around and the ripped up wrapping paper settles, your wallet might feel a little battered and bruised!

The holidays don’t have to derail your financial future. Here are some straightforward tips that will help keep you on track during your annual shopping spree.

Establish a holiday budget
Entering a department store without a cap on how much you’re willing to spend is like walking into a bakery when you’re on a diet. Could you resist picking up a dozen donuts “for the family” or a couple of fresh baked loaves of bread “to make sandwiches later”?

A gift list and realistic budget can cut through the feverish fog of free-for-all shopping and impulse buys. They help you focus as you navigate aisle upon aisle of half-off sales and shiny things you don’t really need but feel like you do.

A budget can also help curtail extravagant gift requests. Telling someone that you want to buy them a gift that’s under $50 can hedge against extravagant designer clothes or the latest technological gadget.

Use cash!
Part of the power of cash is that it works in tandem with your budget. Walking into a store with no cards and just $50 limits your spending and forces you to buy only what you intended.

Cash also reduces your reliance on credit. Unleashing your cards to cover Christmas shopping is an easy way to enter the New Year with extra debt. Plus, the interest payments can add up and make your holiday shopping even more expensive in the long run. Stick with cash and save yourself the headache!

Play Secret Santa
Secret Santa has long been a staple of huge families that don’t have the time or money to get gifts for two parents, nine siblings, the in-laws, and all the cousins, nieces, and nephews. Everyone still gets a gift or two, but it helps the whole family out on their holiday budgets. Here’s how it works!

Have everyone write their names on scraps of paper. Include some highly specific gift ideas with the names. Then, put all the paper into a hat and shake it up. Have the secret Santas choose names from the hat one at a time. You get to buy gifts for ONLY the person you select!

What’s great about Secret Santa is that the mystery of the game offsets the expectation of getting tons of presents. It’s a fun way to save some extra cash!

So let chance decide who’s been naughty and nice, make a budget and list and check them twice, remember that some cash will suffice, and do some holiday shopping that won’t make you think twice (about derailing your financial dreams)!

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4 Insights Into Paying Off Debt

November 30, 2020

4 Insights Into Paying Off Debt

On paper, paying off debt seems simple. But that doesn’t mean it’s always easy.

In fact, it can get downright discouraging if you don’t see any progress on your balances, especially if you feel like your finances are already stretched.

Fortunately, there are ways to take your debt escape plan to the next level. Here are a few insightful tips for anyone who feels like their wheels are spinning.

You must create a plan
Planning is one of the most important steps towards eliminating debt. Studies show that creating detailed plans increases our follow-through.¹ It also frees up our mental resources to focus on other pressing issues.²

Those are essential components of overcoming debt. A plan helps you stick to your guns when you’re tempted to make an impulse buy on your credit card or consider taking that last-minute weekend trip. And tackling problems that have nothing to do with debt can be a breath of fresh air for your mental health.

You have to stop borrowing
Seems obvious, right? But it might be easier said than done. Credit cards can seem like a convenient way to cover emergency expenses if you’re strapped for cash. Plus, spending money can feel therapeutic. Kicking the habit of borrowing to buy can be hard!

That’s why it’s so important to fortify your financial house with an emergency fund before you start eliminating debt. Save up enough money to cover 3 months of expenses. Then quit borrowing cold turkey. You should always have enough cash in reserve to cover car repairs and doctor visits without using your credit card.

Your lifestyle has to change
But, as mentioned before, debt can embed itself into lifestyles. You can’t get rid of debt without cutting back on spending, and you can’t cut back on spending without transforming your lifestyle.

When you’re making your escape plan, identify your highest spending categories. How important are they to your quality of life? Some of them might be essential. But you may realize that others exist just out of habit. Be willing to sacrifice some of your favorite activities, at least until you’re debt free.

You can still do the things you want
This does NOT mean that you have to be miserable. You can still enjoy a vacation, buy an awesome gadget, or treat your partner to a romantic dinner. You just have to prepare for those events differently.

Create a “fun fund” that you contribute money to every month. Budget a specific amount to put in it and dedicate it to a specific item. This allows you to have some fun every now and then without derailing your journey to financial freedom.

Debt doesn’t have to be overwhelming. These insights can help you stay the course as you eliminate debt from your financial house and start pursuing your dreams. Let me know if you’re interested in learning more about debt-destroying strategies!

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¹ “Making the Best Laid Plans Better: How Plan-Making Prompts Increase Follow-Through,” Todd Rogers, Katherine L. Milkman, Leslie K. John and Michael I. Norton, Behavioral Science and Policy, 2016, https://scholar.harvard.edu/files/todd_rogers/files/making_0.pdf

² “The Power of a Plan,” Timothy A Pychyl Ph.D., Psychology Today, Nov 17, 2011, https://www.psychologytoday.com/us/blog/dont-delay/201111/the-power-plan

How Much Should You Pay For a Car?

November 11, 2020

How Much Should You Pay For a Car?

Cars will drain your wealth.

In 2019, Americans were spending about $773.40 per month on their vehicles, or $9,281 annually.¹ That’s like owning a tiny house whose value nosedives the instant you buy it!

That’s not even counting the opportunity cost of throwing that money at a car. How much could that cash grow if it were invested or saved?

That’s why you should follow this simple rule for guarding your wealth from a car.

It’s called the 20/4/10 rule, and it’s composed of three parts. Let’s explore them one by one.

Start with at least a 20% downpayment.

Committing a hefty downpayment to a car curbs how much you’ll lose in interest later down the road. It’s always best to cover as much as you can up front with cash.

Finance the car for no more than 4 years.

How long would you want to dump money into an “investment” that doesn’t grow in value? Not long! Keep your financing period short and sweet and then get back to saving for your future.

Dedicate no more than 10% of your income to car expenses.

Your cash flow is a powerful wealth building tool if it keeps, well, flowing. Don’t let a car divert it somewhere else that it won’t grow and won’t build wealth.

Remember, this is not a bulletproof strategy.

You might be facing substantial mortgage or credit card debt obligations that make it difficult to afford the car you want. It’s always a good idea to meet with a licensed financial professional before you commit to buying a new vehicle.

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Identify Your Ideal Mentor

October 21, 2020

Identify Your Ideal Mentor

Mentorship is a key to success.

The numbers confirm what we already know. Students who regularly met with a mentor were 52% less likely to skip school and 46% more likely to say no to drugs.¹ At-risk adults with mentorship expressed more interest in pursuing higher education. It makes sense; a mentor can offer a unique perspective on your circumstances and also help you talk through the situations you face. There isn’t a person on the planet who wouldn’t benefit from having a mentor at some stage in their life.

But finding the perfect mentor for you? That’s where the challenge begins.

Building a mentoring relationship with someone can be time consuming work that shouldn’t be taken lightly. Here are three essential indicators to help you identify the right person to be your mentor.

Do you want to be like this person?
There are plenty of high-achieving, high-earning individuals that you probably wouldn’t want in your life. That’s not to say you can’t learn from someone who doesn’t share your values, has totally different interests, and works in a field you find less than stimulating. But a mentor should be a person who you strive to imitate. Ask yourself these questions… Who inspires you to work harder and smarter? Who do you admire for their integrity and kindness? Who do you find yourself emulating and feeling good about it? That’s the person you want as a mentor.

Can you develop a friendship with this person?
Mentorship is NOT just having an older buddy around you can swap jokes with. There must be a real bond of friendship for it to actually work. It’s worth considering what you look for in a friend. Do you seek someone who respects your decisions and opinions? Are you comfortable with appropriate and constructive criticism? Or do you surround yourself just with video game partners and rec league teammates? Nothing wrong with those friends or acquaintances, but a mentor must also have the interpersonal skills and emotional maturity to achieve a deeper level of connection. It’s the only way they’ll be able to speak into your life, challenge you, and help you level up.

Will this person challenge you?
Ultimately, a mentor is someone who pushes you to be better. Someone who fuels your personal growth and accelerates your maturing process. That means they can’t shy away from taking you to task for your failures. But they’ll also celebrate your victories with you and won’t take credit for your accomplishments. They’re not afraid of pointing out your weaknesses, while at the same time giving you tools to overcome them and move on. The right mentor for you realizes that the truth is a powerful tool of change, that encouragement is the best motivator, and that accomplishment is the ultimate reward.

Let’s be clear; there’s nothing wrong with casual, relaxed friends. Not every hangout has to be an intense brainstorming session or motivational seminar. But don’t neglect the relationships that will push and challenge you to grow. Look for the people in your life who inspire you and start a conversation. Ask if they want to grab some coffee and talk about how they do it. Put in the legwork building a real mentorship with someone you want to be like and watch the fruits of that friendship flourish!

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Bankruptcy – Consequences and Aftermath

Bankruptcy – Consequences and Aftermath

If you or a loved one is at (or think you may be at) the place where you’re wondering if declaring bankruptcy[i] may be the path to take, there are several serious consequences to be aware of.

Depending on the type of bankruptcy (Chapter 7 or Chapter 13)[ii], debts may be eliminated, reduced, or restructured into a less burdensome repayment plan.

But what about the consequences that arise during the process itself, and what is the aftermath?

Before and During Filing
Before you even file there are consequences that can arise from bankruptcy proceedings: the law requires that the filer undergo credit counseling [iii] by a government-approved entity to ensure the filer understands what will take place during the process and have a chance to look at other options. If bankruptcy still seems to be the only viable option, the filer will then have to file in federal court, paying a filing fee of hundreds of dollars.[iv]

During the process, a schedule of assets and liabilities must be submitted for review by the court. That means the creditors and court will be able to look into your private financial life. Furthermore, the bankruptcy will become part of the public record, and therefore your financial details will be exposed to public scrutiny. Next, in Chapter 7, nonexempt assets will be sold by the trustee to help pay creditors. For Chapter 13, the court, creditors, and debtor will work out a repayment plan based on the financial situation of the debtor.

Discharge usually occurs for Chapter 7 within a few months, and the debtor will be free of the debts. In Chapter 13, discharge comes as a result of successfully completing the repayment plan. If the schedule of assets and liabilities is not filed in a timely manner, the request may be dismissed. If the repayment plan is not strictly followed, the court may dismiss the process and decide in favor of the creditors (who may repossess assets).

Impact on Your Credit Report
Once discharge occurs, the debtor will have escaped from the shadow of debt. However, the ghosts of the filing will remain on the credit report for several years.[v] A Chapter 13 filing will stay for seven years, while a Chapter 7 filing will remain for ten years. It should be no surprise that a bankruptcy, regardless of type, will negatively impact your credit score.[vi] However, over time if an applicant can show a good faith attempt to repay the debts, and begin to develop good credit habits, creditors may be more willing to cooperate.

Successive Filings
One important point to consider is the ability to refile. Because Chapter 7 completely erases debts, possibly with very little partial payment required if the debtor’s nonexempt assets are minimal, the debtor must wait eight years before another discharge would be granted. (One may file bankruptcy before this time, but a discharge – the actual debt elimination – would not be granted.) On the other hand, a restructuring under Chapter 13 is less detrimental to creditors, so another discharge may be granted in a bankruptcy that is filed just two years after the first bankruptcy is filed.

The concurrent and subsequent, long lasting consequences of filing bankruptcy are significant, and those who can avoid bankruptcy should certainly consider all the alternatives. If bankruptcy seems to be the only option, filers should thoroughly understand the consequences of the process before committing to that course of action.

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This article is for informational purposes only and is not intended to offer legal advice or promote any certain plans or strategies that may be available to you. Always seek the advice of a financial professional, accountant, attorney, and/or tax expert to discuss your options.

[i] https://www.uscourts.gov/services-forms/bankruptcy
[ii] https://www.nolo.com/legal-encyclopedia/what-is-the-difference-between-chapter-7-chapter-13-bankrutpcy.html
[iii] https://www.consumer.ftc.gov/articles/0224-filing-bankruptcy-what-know#counseling
[iv] https://www.nolo.com/legal-encyclopedia/bankruptcy-filing-fees-costs.html
[v] https://www.experian.com/blogs/ask-experian/removing-bankruptcy-from-your-credit-report/
[vi] https://www.moneycrashers.com/bankruptcy-affect-credit-score/

So You Want to Buy Life Insurance for Your Parents...

September 28, 2020

So You Want to Buy Life Insurance for Your Parents...

Playing Monopoly as a young kid might have given you some strange ideas about money.

Take the life insurance card in the Community Chest for instance. That might give the impression that life insurance is free money to burn on whatever the next roll of the dice calls for.

In grown-up reality, life insurance proceeds are often committed long before a policy holder or beneficiary receives the check they’re waiting for. Final expenses, estate taxes, loan balances, and medical bills all compete for whatever money is paid out on the policy.

If your parents don’t have a policy or if you think their coverage won’t be enough, you can plan ahead and buy a life insurance policy for them. Your parents would be the insured, but you would be the policy owner and beneficiary.

A few extra considerations when buying a life insurance policy for your parents:

  • Insurable interest still applies. If your parents already have a significant amount of life insurance coverage, you may find that some insurers are reluctant to issue more coverage. Insurable interest requires that the amount of coverage doesn’t exceed the potential financial loss. (In other words, if your parents already have enough coverage, a company may not want to insure them for more.)
  • Age can limit coverage amounts. Assuming that your parents are older and no longer generating income, coverage amounts will be limited. If your parents are younger and still have 20 or more years ahead of them before they retire, they can qualify for a higher amount of coverage.
  • Age can limit policy types. Certain types of life insurance aren’t available when we get older, or will be limited in regard to length of coverage. Term life insurance is a good example. Your options for term life insurance will be fewer once your parents are into their sixties. The available term lengths will also be shorter. Policies with a 30-year term aren’t commonly available over the age of 50.

How Can I Use The Life Insurance For My Parents?

Depending on the amount of coverage you buy – or can buy (remember, it may be limited), you could use the policy to plan for any of the following:

  • Final expenses: You can expect funeral costs to run from $10,000 to $15,000, maybe more.
  • Estate taxes: Estate taxes and so-called death taxes can be an unpleasant surprise in many states. A life insurance policy can help you plan for this expense which could come at a time when you’re not flush with cash.

Can Life Insurance Pay The Mortgage Or Car Loans?

It isn’t uncommon for parents to pass away with some remaining debt. This might be in the form of a mortgage, car loans, or even credit card debt. These loan balances can be covered in whole or in part with a life insurance policy.

In fact, outstanding loan balances are a very big consideration. Often, people who inherit a house or a car may also inherit an additional mortgage payment or car payment. It might be wonderful to receive such a generous and sentimental gift, but if you’re like many families, you might not have the extra money for the payments in your budget.

Even if the policy doesn’t provide sufficient coverage to retire the debt completely, a life insurance policy can give you some breathing room until you can make other arrangements – like selling your parents’ house, for example.

You Control The Premium Payments.

If you buy a life insurance policy for your parents, you’ll know if the premiums are being paid because you’re the one paying them. You probably wouldn’t want your parents to be burdened with a life insurance premium obligation if they’re living on a fixed income.

Buying insurance for your parents is a great idea, but many people don’t consider it until it’s too late. That’s when you might wish you’d had the idea years ago. It’s one of the wisest things you can do, particularly if your parents are underinsured or have no life insurance at all.

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Who Needs Life Insurance?

September 23, 2020

Who Needs Life Insurance?

Life insurance is important… or so you’ve been told.

But do you really need it? And how can you know? Let’s take a look at who does and doesn’t need the family and legacy protecting power of life insurance and some specific examples of both.

Protecting your dependants
Is there anyone in your life who would suffer financially if your income were to vanish? If so, then you have dependents. And anyone with financial dependents should buy life insurance. Those are the people you’re aiming to protect with a life insurance policy.

On the other hand, if you live alone, aren’t helping anyone pay bills, and no one relies on you financially to pursue their dreams, then you still might need coverage. Let’s look at some specific examples below.

Young singles
Let’s say you’ve just graduated from college, you’ve started your first job, and you’re living in a new city. Your parents don’t need you to help support them, and you’re on your own financially. Should you get life insurance? If you have serious amounts of student or credit card debt that would get moved to your parents in the event of your passing, then it’s a consideration. You also might think about if you have saved enough in emergency funds to cover potential funeral expenses. Now would also potentially be a better time to buy a policy early while rates are low, especially if you’re considering starting a family in the near future.

Married without children
What if your family is just you and your spouse? Do either of you need life insurance? Remember, your goal is to protect the people who depend on your income. You and your spouse have built a life together that’s probably supported by both of your incomes. A life insurance policy could protect your loved one’s lifestyle if something were to happen to you. It would also help them meet lingering financial obligations like car payments, credit card debt, and a mortgage, even if they still have their income.

Single or married parents
Anyone with children must consider life insurance. No one relies on your income quite like your kids. It’s what clothes them and feeds them. Later on, it can empower them to pursue their educational dreams. Life insurance can help give you peace of mind that all of those needs will be protected. Even a stay-at-home parent should consider a policy. They often provide for needs like childcare and education that would be costly to replace. Life insurance is an essential line of defense for your family’s dreams and lifestyle.

Business owners
No one wants to think about what would happen to their business without them. But entrepreneurs and small business owners can use life insurance to protect their hard work. A policy can help protect your family if you took out loans to start your business and are still paying down debt. More importantly, it can help offset the losses if your family can’t operate the business without you and has to sell in poor market conditions.

Not everyone needs life insurance right now. But it’s a vital line of defense for the people you care about most and should be on everyone’s radar. The need might not be as urgent for a young, debt-free single person, but it’s still worth it to start making plans to protect your future family. Contact a financial professional today to begin the process of preparing!

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How to Avoid Financial Infidelity

How to Avoid Financial Infidelity

If you or your partner have ever spent (a lot of) money without telling the other, you’re not alone.

This has become such a widespread problem for couples that there’s even a term for it: Financial Infidelity.

Calling it infidelity might seem a bit dramatic, but it makes sense when you consider that finances are the leading cause of relationship stress. Each couple has their own definition of “a lot of money,” but as you can imagine, or may have even experienced yourself, making assumptions or hiding purchases from your partner can be damaging to both your finances AND your relationship.

Here’s a strategy to help avoid financial infidelity, and hopefully lessen some stress in your household:

Set up “Fun Funds” accounts.

A “Fun Fund” is a personal bank account for each partner which is separate from your main savings or checking account (which may be shared).

Here’s how it works: Each time you pay your bills or review your whole budget together, set aside an equal amount of any leftover money for each partner. That goes in your Fun Fund.

The agreement is that the money in this account can be spent on anything without having to consult your significant other. For instance, you may immediately take some of your Fun Funds and buy that low-budget, made-for-tv movie that you love but your partner hates. And they can’t be upset that you spent the money! It was yours to spend! (They might be a little upset when you suggest watching that movie they hate on a quiet night at home, but you’re on your own for that one!)

Your partner on the other hand may wait and save up the money in their Fun Fund to buy $1,000 worth of those “Add water and watch them grow to 400x their size!” dinosaurs. You may see it as a total waste, but it was their money to spend! Plus, this isn’t $1,000 taken away from paying your bills, buying food, or putting your kids through school. (And it’ll give them something to do while you’re watching your movie.)

It might be a little easier to set up Fun Funds for the both of you when you have a strategy for financial independence. Contact me today, and we can work together to get you and your loved one closer to those beloved B movies and magic growing dinosaurs.

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Your credit score – 4 things you need to know

August 26, 2020

Your credit score – 4 things you need to know

You’re probably aware that your credit score is usually accessed when you apply for new credit, such as a credit card or an auto loan.

But you may not know it might also be requested by landlords, employers, and even romantic partners.[i]

So what are your credit score and report, what are the factors that determine them, and why do so many diverse parties request to see them?

What is a credit score and what is a credit report?
Your credit score is simply a number that encapsulates your ability to repay debt. It isn’t the only way interested parties can assess your creditworthiness, but it’s certainly often used as a preliminary factor. Having a higher score may lead to lower interest rates, more successful credit applications, and possibly more trust in general.

Your credit report is much more comprehensive and shows your outstanding debts, how well you pay them, the age of the accounts, and so forth. A single bad account on your credit report might damage your score, but your counterparty may be willing to work with you if you can show a strong history with your other accounts – and can justify the problem account.

What constitutes your credit score?
Credit reports are maintained by the three main credit reporting agencies: TransUnion, Equifax, and Experian. A credit score is generated by FICO, VantageScore, and some financial institutions may have their own proprietary algorithms to determine their own scores.

In general, scores are determined by the variously-weighted categories of payment history, the amount owed (credit utilization), the age of the accounts, how much new credit you’ve requested recently, and the types of accounts (revolving, mortgage, student loans, etc.).[ii] Of course proprietary scores may take many other factors into consideration.

Who wants to see your credit score?
Lenders may screen you based on your credit score, then use other factors to determine if they’ll give you a loan. Instant-approval lenders, like credit card companies, may just use your credit score to determine your creditworthiness. For large, long-term loans, like mortgages, you can expect to have to turn over your credit report as well.

Landlords may ask for a report, but might also request your credit score as well. They have the obvious financial interest in relying on you to pay your rent from month to month, but they also may have in mind that if you’re responsible with your money, perhaps you’ll also be responsible to take care of your rented living quarters.

Employers may ask to see your credit report. They may make hiring decisions based on the report, but some states have disallowed the practice.[iii] The chance that financial hardship may prompt employee theft is one reason they may ask, as well as wanting to see your consistency in paying debts over time, which may correlate with your punctuality and persistence at work.

How to improve your score
Those with poor credit may want to improve their credit history, which may in turn improve their credit scores. Payment history makes up 35% of the FICO scoring factors, and this will take time to improve. However, 30% of the score is determined by how much you owe, which can quickly be improved by paying down your debt. The 15% determinant that is credit age can, of course, only improve with time, but the 10% of your score attributed to new requests and 10% to types of credit can be managed in a short timeframe, too; try to avoid applying for a lot of new credit and, when you do, try to get different types of credit.[iv]

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Good Debt?

August 24, 2020

Good Debt?

Debt is often seen as something you don’t want.

Monthly payments can be a huge drain on your bank account and can seriously lower your saving and investing power. That’s why eliminating debt is often an early step in most financial strategies.

But does good debt exist?

Are there situations where it’s acceptable or even wise to borrow money? Let’s explore what makes debt “good” or “bad” and some examples of both!

What makes debt good?
Not many would argue that living within your means isn’t good. But there are opportunities that you might not be able to afford with your basic income. It turns out that it sometimes takes money to make money! Taking out a loan to pursue those opportunities might be considered good debt. Sure, you might be in the hole for a little while, but you’re hoping you’ll increase your income and net worth further down the line.

Good debt
Most of us simply can’t afford a house or college education with money from our checking account, so we have to borrow those funds. But we’re expecting that those investments will pay off. Higher education paid for with student loans will hopefully equip you to land a better paying job that will help you pay down your debt and make you more money long-term. A wise real estate investment might be pricey, but you hope that your property will increase in value and you can make a profit when you sell. Taking out a loan to launch your entrepreneurial dreams is considered an example of good debt. Starting a business, while risky and expensive, can increase your value over the long-term. You’re taking the calculated risk that your long-haul earnings will heavily outweigh your short-term debts.

Bad debt
It’s important to remember that bad debt still exists. Most of what we buy loses value very quickly. Try reselling lunch meat a few days after you buy it to see what I mean! Cars depreciate by about 60% in the first 5 years of ownership.(1) And while it might be worth going into some debt to get a reliable vehicle, you shouldn’t typically treat a car purchase as an investment.

It’s also worth considering that even what appears to be good debt might come back to bite you. Neighborhoods and real estate markets change, and a once solid property might end up losing value over the long haul. And while a better education is usually a good thing, going into huge amounts of debt at a private school to study a non-lucrative field might not pay off.

Debt should never be taken lightly. Whether it’s a credit card, a personal loan, or a mortgage, make sure you do your homework to figure out the best move for you. Some of those decisions might be easy (not buying a high-end sports car) but others might take some serious consideration and research (starting a business). Figure out the costs and the earning potential and then make your decision!

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Dig yourself out of debt

August 17, 2020

Dig yourself out of debt

I hate to break it to you, but no matter what generation you are – Baby Boomer, Generation X, or Millennial – you’re probably in debt.

If you’re not – good on you! Keep doing what you’re doing.

But if you are in debt, you’re not alone. A study[i] by the financial organization, Comet, found:

  • 80.9 percent of Baby Boomers are in debt
  • 79.9 percent of Generation X is in debt
  • 81.5 percent of Millennials are in debt

There are some folks whose goal is to eliminate all debt – and if that’s yours, great! But one thing to keep in mind while you’re working towards that finish line is that not all debt is created equal. Carrying a mortgage, for example, may be considered a “healthy” debt. Student loan debt may feel like an encumbrance, but hopefully, your education has given you more earning power in the workforce. A car loan may even be considered a healthy debt. So, there are some types of debt that may offer you advantages.

Any credit card debt you have, however, should be dealt with asap. Credit card debt can cost money every month in the form of interest, and it gives you nothing in return – no equity, no education, no increase in earning potential. It’s like throwing money down the drain.

So, let’s get to work and look at some of the best tips for paying down credit card debt.

1. Get to know your debt
Make a commitment to be honest with yourself. If you’re in denial, it’s going to be hard to make positive changes. So take a good, hard look at your debt. Examine your credit card statements and note balances, interest rates, minimum monthly payment amounts, and due dates. Once you have this information down in black and white you can start to create a repayment strategy.

2. Get motivated
Taking on your debt isn’t easy. Most of us would rather not confront it. We may make half-hearted attempts to pay it off but never truly get anywhere. Need a little motivation? Getting rid of your credit card debt may make you happier. The Comet study asked respondents to rate their happiness on a scale of one to seven.[ii] It turns out that those who selected the lowest rating also carried the highest amounts of credit card debt. Want to be happier? It seems like paying off your credit card debt may help!

3. Develop your strategy
There are many strategies for paying off your credit card debt. Once you understand all your debt and have found your motivation, it’s time to pick a strategy. There are two main strategies for debt repayment. One focuses on knocking out the highest interest debt first, and the other method begins with tackling the smallest principal balances first. Here’s how they work:

  • Start with the highest interest rate: One of the items you should have noted when you did your debt overview is the interest rate for each account. With this method, you’ll throw the largest payment you can at your highest interest rate debt every month, while paying the minimum payments on your other debts. Utilizing this method may help you pay less interest over time.

  • Start with the smallest balance: As opposed to comparing interest rates, this method requires you to look at your balances. With this strategy, you’ll begin paying the smallest balance off first. Continue to make the minimum payments on your other accounts and put as much money as you can towards the smallest balance. Once you have that one paid off, combine the amount you were paying on that balance with the minimum you were paying on your next smallest balance, and so on. This strategy can help keep you motivated and encouraged since you should start to see some results right away.

Either strategy can work well. Pick the one that seems best for you, execute, and most importantly – don’t give up!

4. Live by a budget
As you begin chipping away at your credit card debt, it’s important to watch your spending. If you continue to charge purchases, you won’t see the progress you’re making, so watch your spending closely. If you don’t have a budget already, now would be a good time to create one.

5. Think extra payments
Once you are committed to paying off your debt and have developed your strategy, keep it top of mind. Make it your number one financial priority. So when you come across “found” money – like work bonuses or gifts – see it as an opportunity to make an extra credit card payment. The more of those little extra payments you make, the better. Make them while the cash is in hand, so you aren’t tempted to spend it on something else.

6. Celebrate your victories
Living on a budget and paying off debt can feel tedious. Paying off debt takes time. Don’t forget to take pride in what you’re trying to accomplish. Celebrate your milestones. Do something special when you get that first small balance paid off, but try to make the occasion free or at least cheap! The point is to reward yourself for your hard financial work. (Hint: Try putting up a chart or calendar in your kitchen and marking off your progress as you go!)

Reward yourself with a debt-free life Getting out of debt is a great reward in and of itself. It takes discipline, persistence, and patience, but it can be done. Come to terms with your debt, formulate a strategy, and stick to it. Your financial future will thank you!

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Credit Card Self-Control

August 5, 2020

Credit Card Self-Control

Have you ever fallen under the spell of a credit card?

We don’t think of those little pieces of plastic as having magical properties, but they certainly have a way of making our money vanish! And what’s more, they seem to hold a mystical power over our spending habits. What starts as innocent online window shopping can suddenly become a credit fueled buying bender.

But credit cards aren’t sorcery. There are actually some very simple steps you can take to help achieve credit card self-control!

Review your spending habits
The first step to controlling your credit card habit is to acknowledge that you need to change it. And there’s no better way of doing this than by facing the numbers and confronting yourself with how much you’re actually spending. It’s not always easy to do! Avoiding looking at your bank account or monthly statement is something that many of us have done at some point in our lives. Sweeping the issue under the rug is much easier than confronting the problem!

That’s all well and good until you’ve dug yourself into a debt hole. Take a deep breath, find the information you need, and survey the damage. The shock of seeing those numbers might be enough to cool your spending habits.

Hide your credit cards
But you might need to take more direct measures. Perhaps just the sight of a credit card is all it takes for you to unleash a torrent of foolish spending. Consider physically separating yourself from your cards if this is the case. There are several ways to accomplish this. You can take your cards out of your wallet and leave them on the bedside table. Erase your cards from your preferred browser. There are even stories of people placing their cards in a bowl of water and placing that in the freezer! Find whatever method works best for you.

Visit a store without your card
Like it or not, you can’t hide from credit card temptation forever. You’ll eventually find yourself in a setting where you feel the itch to make a wild purchase on your card. But there are ways to head those desires off at the pass. Try visiting one of your favorite stores without the card. Bring a little bit of cash for an emergency, but not enough to be dangerous. Walk around, take it all in, then walk out. This ritual will remind you that you don’t have to buy something every time you visit a store. You can also try visiting with an accountability buddy who can inspire you to use self-control.

Your credit card spending habit might feel like it has magical power to control your actions. But it doesn’t! You actually have much more power than you might think. Try out a few of these tips and see if they make a difference in how much you spend each month.

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Should You Only Use Cash?

July 6, 2020

Should You Only Use Cash?

Bills and coins are outdated.

Who actually forks over cash when they’re out and about anymore? Paper money and copper coins are a relic of the past that are useless in a world of credit cards and tap-to-pay…

Except when they’re not.

Using cards and digital payment systems actually comes with some pretty serious drawbacks. Here’s a case for considering going cash only, at least for a little while!

The card convenience (and curse)
Plastic cards can make spending (a little too) easy. See an awesome pair of shoes in the store? No problem! Just swipe at the counter and you’re good to go. Online shopping is even more frictionless. Everything from new clothes to lawn chairs is a few clicks away from delivery right to your front door.

And that’s the problem.

You might not notice the effect of swiping your card until it’s too late. Those shoes were a breeze to buy until you check your bank account and see you’re in the red, or you get your credit card bill. It’s easy to find yourself in a hopeless cycle of overspending when buying things just feels so easy.

The pain of spending cash
Handing over cash can be a different phenomenon. Paying with actual dollars and cents helps you connect your hard-earned money with what you’re buying. It makes you more likely to question if you really need those shoes or clothes or lawn chairs. Studies show that people who pay with cash spend less, buy healthier foods, and have better relationships with their purchases than those who use credit cards.(1) That’s why going with cash only might be a winning strategy if you find yourself constantly in credit card debt or just buying too much unnecessary stuff every month.

Security
To be fair, cash does have some safety concerns. It can be much more useful to a criminal than a credit card. You can’t call your bank to lock down that $20 bill someone picked out of your pocket on the subway! That being said, cards expose you to the threat of identity theft. A criminal could potentially have access to all of your money. There are potential dangers either way, and it really comes down to what you feel comfortable with.

In the end, going cash only is a personal decision. Maybe you rock at only buying what you need and you can dodge the dangers of overspending with your cards. But if you feel like your budget isn’t working like it should, or you have difficulty resisting busting out the plastic when you’re shopping, you may want to consider a cash solution. Try it for a few weeks and see if it makes a difference!

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Considering a home equity loan?

July 1, 2020

Considering a home equity loan?

Home prices may be leveling off in some areas but they’ve had a healthy recovery nationwide, leading to massive amounts of untapped equity.

According to a recent report, the average homeowner gained nearly $15,000 in equity in the past year and has nearly $115,000 available to draw.[i]

This can be good news if you need to increase your cash flow to pay for a special project or unusual expense.

Home equity risks It might be obvious, but a home equity loan is secured by your home, based on the equity you’ve built. Your eligibility for a home equity loan involves several factors, but a primary consideration is going to be the difference between your home’s market value and the remaining balance on the mortgage. Keep in mind that missed payments due to a job loss, illness, or another financial setback may put your home at risk from two loans – the original mortgage and the home equity loan. Before you take out this type of loan, make sure you have a solid strategy in place for repayment.

Home equity loan costs Funds acquired through a home equity loan can feel like found money, but keep in mind that a home equity loan takes an asset and converts it to debt – often for up to 30 years. As such, you’ll be paying certain fees to use the money.

Home equity loans often have closing costs of 2% to 5% of the loan amount.[ii] It might be worth it to shop around, however, to see if you can find a lender who won’t bury you in fees and loan charges. Interest rates may vary depending on your credit rating and other factors, but you can expect to pay about 6% or higher. If you were to borrow $100,000 of the $115,000 the average homeowner now has in equity, the interest costs over 30 years would be $115,000 – $15,000 more than you borrowed. If you can manage a 15-year term instead, this would drop the interest costs down to about $52,000.[iii] Carefully consider what you’ll use the funds to purchase. A new patio addition to your home or a pool with a deck may not add enough value to your home to offset the interest costs.

Tax benefits Once upon a time, the interest for a home equity loan was tax deductible, much like the interest on a primary mortgage. Now, there are some rules attached to the tax benefit. If you use the loan funds to make improvements to the home you’re borrowing against, you can usually deduct the interest. In the past, the tax benefit didn’t consider how the funds were used.[iv]

Home equity loans can be a powerful financial tool. But as with many tools, it’s important to exercise caution. Before signing on the dotted line, be sure you understand the long-term cost of the loan. With interest rates climbing, a home equity loan isn’t as attractive a source of funding as it once was.

Depending on how the funds are used, a home equity loan can make sense. If you’re buried in high-interest debt, like credit cards, the math might work to your favor. However, if the money is spent on a shiny, red sports car and a trip to Vegas, it might be tough to make a financial argument for that – unless you win big.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.cnbc.com/2018/07/09/homeowners-sitting-on-record-amount-of-cash-and-not-tapping-it.html
[ii] https://www.lendingtree.com/home/home-equity/home-equity-loan-closing-costs/
[iii] https://www.mortgageloan.com/calculator/loan-line-payment-calculator
[iv] https://www.cnbc.com/2018/05/21/5-things-to-know-before-taking-out-a-home-equity-loan.html

Read this before you walk down the aisle

June 24, 2020

Read this before you walk down the aisle

Don’t let financial trouble ruin your future wedded bliss.

Most newlyweds have a lot to get used to. You may be living together for the first time, spending a lot of time with your new in-laws, and dealing with dual finances. Financial troubles can plague even the most compatible pairs, so read on for some tips on how to get your newlywed finances off to the best possible start.

Talk it out If you haven’t done this already, the time is ripe for a heart to heart talk about what your financial picture is going to look like. This is the time to lay it all out. Not only should you and your fiancé discuss your upcoming combined financial situation, but it can be beneficial to take a deep dive into your past too. Our financial histories and backgrounds can influence current spending and saving habits. Take some time to get to know one another’s history and perspective when it comes to how they think about money, debt, budgeting, etc.

Newlyweds need a budget Everyone needs a budget, but a budget can be particularly helpful for newlyweds. A reasonable, working household budget can go a long way in helping ease financial stress and overcoming challenges. Money differences can be a big cause of marital strife, but a solid, mutually-agreed-upon budget can help avoid potential arguments. A budget will help you manage student loans or new household expenses that must be dealt with. Come up with a budget together and make sure it’s something you both can stick with.

Create financial goals Financial goal setting can actually be fun. True, some goals may not seem all that exciting – like paying off credit cards or student loans. But formulating financial goals is important.

Financial goal setting should start with a conversation with your new fiancé. This is the time to think about your future as a married couple and work out a financial strategy to help make your financial dreams a reality. For example, if you want to buy a house, you’ll need to prepare for that. A good start is to minimize debt and start saving for a down payment.

Maybe you two want to start a business. In that case, your financial goals may include raising capital, establishing business credit, or qualifying for a small business loan.

Face your debt head on
It’s not unusual for individuals to start married life facing new debt that came along with their partner – possibly student loans or personal credit card debt. You may also have combined debt if you’re planning on financing your wedding. Maybe you’re going to take your dream honeymoon and put it on a credit card.

Create a strategy to pay off your debt and stick to it. There are two common ways to tackle it – begin with the highest interest rate debt, or begin with the smallest balance. There are many good strategies – the key is to develop one and put it into action.

Invest for the future Part of your financial strategy should include preparing for retirement, even though it might seem light years away now. Make sure you work a retirement strategy into your other financial goals. Take advantage of employer-sponsored retirement accounts and earmark savings for retirement.

Purchase life insurance Life insurance is essential to help ensure your new spouse will be taken care of should you die prematurely. Even though many married couples today are dual earners, there is still a need for life insurance. Ask yourself if your new spouse could afford to pay their living expenses if something happened to you. Consider purchasing a life insurance policy to help cover things like funeral costs, medical expenses, or replacement income for your spouse.

Newlywed finances can be fun Newlywed life is fun and exciting, and finances can be too. Talk deeply and often about finances with your fiancé. Share your dreams and goals so you can create financial habits together that will help you realize them. Here’s to you and many years of wedded bliss!

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Pros and Cons of Simple Interest

Pros and Cons of Simple Interest

Brace yourself: You’ve been brought here under false pretenses.

This post is not so much about a list of pros and cons as it is about one big pro and one big con concerning simple interest accounts. There are many fine-tooth details you could get into when looking for the best ways to use your money. But when you’re just beginning your journey to financial independence, the big YES and NO below are important to keep in mind concerning your unique goals. In a nutshell, interest will either cost you money or earn you money. Here’s how…

The Pro of Simple Interest: Paying Back Money
Credit cards, mortgages, car loans, student debt – odds are that you’re familiar with at least one of these loans at this point. When you take out a loan, look for one that lets you pay back your principal amount with simple interest. This means that the overall amount you’ll owe will be interest calculated against the principal, or initial amount, that was loaned to you. And the principle decreases as you pay back the loan. So the sooner you pay off your loan, you’re actually lowering the amount of money in interest that you’re required to pay back as part of your loan agreement.

The Con of Simple Interest: Growing Money
When you want to grow your money, an account based on simple interest is not the way to go. Setting your money aside in an account with compound interest shows infinitely better results for growing your money.

For example, if you wanted to grow $10,000 for 10 years in an account at 3% simple interest, the first few years would look like this:

  • Year 1: $10,000 + 300 = $10,300
  • Year 2: $10,300 + 300 = $10,600
  • Year 3: $10,600 + 300 = $10,900

In a simple interest account, the 3% interest you’ll earn is a fixed sum taken from the principal amount added to the account. And this is the amount that is added annually. After a full 10 years, the amount in the account would be $13,000. Not very impressive.

But what if you put your money in an account that was less “simple”?

If you take the same $10,000 and grow it in an account for 10 years at a 3% rate of interest that compounds, you can see the difference beginning to show in the first few years:

  • Year 1: $10,000 + 300 = $10,300
  • Year 2: $10,300 + 309 = $10,609
  • Year 3: $10,609 + 318 = $10,927

At the end of 10 years, this type of account will have earned $429 more! And that’s even at a typically lower 3% rate and without continuing regular contributions to the account! Just imagine the possibilities with a higher interest rate and a financial plan for your future.

Don’t forget: Simple isn’t always the way to go, and that can be a good thing.

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3 Ways to Shift from Indulgence to Independence

June 17, 2020

3 Ways to Shift from Indulgence to Independence

On Monday mornings, we’re all faced with a difficult choice.

Get up a few minutes early to brew our own coffee? Or sleep a little later and whip through a coffee chain drive-thru, hair askew and a drool trail still drying against our cheek?

When that caffeine hits our bloodstream, how we got the coffee doesn’t seem to matter too much. But each time you pull through a drive thru for that cup o’ joe, just picture your financial strategy shouting and waving its metaphorical arms to get your attention.

Why? Each time you indulge in a luxury that has a less expensive substitute, you’re potentially delaying your financial independence. It’s strange how that can happen one $5 peppermint mocha at a time, but that’s how it happens – incrementally and without too much warning. Then comes the credit card bill… This isn’t to say that you can’t enjoy yourself every once in a while. Just be sure that you’re sticking with your strategy and saving wherever possible. You’ll thank yourself later.

Here are 3 ways to shift from indulgence to independence:

1. Make coffee at home. Reducing your expenses can start as simply as making your morning coffee at home. And you might not even have to get up earlier to do it. Why not invest in a coffee pot with a delay brew function? It’ll start brewing at the time you preset, and what’s a better alarm clock than the scent of freshly-brewed coffee wafting from the kitchen? Or from your bedside table… (No judgement here – Do what you need to do to get up in the morning.)

Get started:Here’s a huge list of copycat Starbucks drinks that you can make at home.

2. Workout at home. A couple of questions to get this one going:

1) Is an expensive gym membership really worth it? 2) How often have you gone to the gym in the last few months?

If your answers are somewhere between “No” and “…I’d rather not say,” then maybe it’s time to ditch the membership in favor of working out at home. Or perhaps you are a certified Gym Rat who faithfully wrings every dollar out of their gym membership each month. Ask yourself if you really need all the bells and whistles that an expensive gym offers. Elliptical, dumbbells, and machines with clearly printed how-tos? Yes, please. But a hot tub, sauna, and an out-of-pocket juice bar? Maybe not. If you can continue to workout without a few of those pricey luxuries, your body and your wallet will thank you.

Get started: Take a 30-minute walk around your local park each day and reap the positive results – it’s completely free! And if you’d prefer to workout at a gym, look into month-to-month memberships instead of paying a hefty price for a year-long membership up front.

3. Ditch cable and use a video streaming service instead. Cable may give you access to more channels and more shows, but if any of your favorite shows end up gathering digital dust in your DVR most of the time, waiting a little longer for them to be available on a streaming service like Netflix or Hulu might not be a bad idea. (Plus, who doesn’t love using a 3-day weekend to binge-watch an entire season of a show?) There’s also the bonus of how easy it is to cancel/reactivate a streaming service. With cable, you may be locked into a multi-year contract, installation can be a hassle, and you can forget about knowing when the cable guy is actually going to show up. The affordability and ease of use of a video streaming service makes it a more attractive option for your journey to financial independence.

Get started: Check out PCMag’s “Best Video Streaming Services of 2018” for a comparison of several options. Keep in mind that plenty of streaming services offer free trial periods. Go ahead and give any of them a try, but be careful: You may have to enter your credit card number to access the free trial; do not forget to cancel before your trial is over, or you will be charged.

Taking the time to address what kinds of luxuries can you live without (or enjoy less often) has the potential to make a huge impact on your journey to financial independence. Cutting back here and investing in yourself there – who knows where you’ll be this time next year.

Where are you going to start indulging less?

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