Raising Financially Responsible Children

Creating and following a budget, saving, investing, and planning for the future are difficult topics and sometimes confusing for adults. It, therefore, can be very overwhelming to think about how to teach your children about complicated financial topics. So much so, that many people avoid talking to their kids about money which can lead to kids not being able to become financially independent adults or not knowing how live within their means. Instead of becoming overwhelmed by the amount of complicated financial topics, start small by focusing on the basics of money management and following these steps:

  1. Set a good example. Children are excellent observers and will model the behavior of their caregivers. If you are living within your means, budgeting, saving, etc., your kids will learn from your habits.
  2. Start early (or now, if your kids are older) and don’t rely on the schools to teach your kids about finances. Show your kids how to balance their checking account, the importance of saving, etc.
  3. Don’t pay your kids for regular chores. They won’t earn money for doing everyday tasks as adults. Instead, if you choose to give your kids an allowance or pay them, have your kids earn it by taking initiative and going above and beyond. For example, raking up all the leaves in the yard, helping with special tasks, etc.
  4. Show them the importance of saving. Help them set goals and encourage them to achieve those goals.
  5. As your kids grow, help them become financially independent. Have them be responsible for their cellphone costs, work to earn money to buy “wants”, etc.

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How to Recognize a Scam

Scams are becoming more and more sophisticated and sometimes difficult to recognize. Especially with advances in technology and the ability to find personal information about people online. Scammers are excellent at presenting themselves as legitimate and earning people’s trust. How can you protect yourself from falling victim to a scam? Be skeptical. Always question why someone is offering you a deal or contacting you and research them thoroughly before sending any personal or financial information. Here are a few additional tips to keep in mind to help you recognize a scam:

  1. If it sounds too good to be true, it probably is. Everybody likes to find a great deal and passing up hundreds of dollars of potential savings is hard to do but it is worth it to protect yourself from losing money or having your identity stolen by a scammer. For example, if a home security salesperson is at your door offering you a $1,000 discount on the latest system with free installation just because your address ends in the number “5” and in order to take advantage of the deal, you have to pay a down payment right then, it is probably a scam.
  2. If the salesperson is insisting that you pay immediately, it is probably a scam. Most offers do have an expiration date, but legitimate companies give customers a chance to review the offer first. Scammers pressure people to pay immediately so that they take their money before the customer realizes it is a scam.
  3. If contact is made completely out of the blue, it may be a scam. Getting a message from an old high school crush or long-lost friend is exciting but be very cautious. It is very easy to find lots of personal information online through searches and Facebook. If an “old friend” makes unexpected contact and something just doesn’t seem right (even though they know the name of your high school, former teachers, etc.), trust your instinct. Especially if this person suddenly needs money. Scammers will use your good nature against you.
  4. Never give out personal or financial information through email or on the phone to someone calling from an unknown number. If you are unsure if it is really the company calling you, tell them that you will call them back (look for their phone number on their website or card or statement).
  5. Trust your gut and resist the urge to be impulsive. If something just doesn’t feel right, trust your instinct and don’t do it. Lots of victims of scams say that they had a feeling that something wasn’t quite right, but they didn’t want to seem rude or miss out on a deal. Had they listened to their instinct they may not have fallen victim to the scam. Always take the time to make sure that you are dealing with a legitimate company and the person really is who they say they are.

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Tips on Talking to Your Spouse About Money

Money is commonly listed as one of the top reasons for divorce. It can also be the source of many arguments and stress in a relationship, especially if you and your partner have different spending habits. Most couples have difficulty discussing money because they may be ashamed of their debt, afraid of being judged by their partner, or don’t understand why their partner spends money the way they do. This results in many couples avoiding the subject all together which only makes the situation worse. So, how can you discuss finances with your spouse without it becoming an argument? Below are a few tips to approaching the topic:

  1. Be purposeful. Set aside a time specifically to discuss finances in a casual setting (i.e., over dinner, drinks, coffee, etc.). Don’t dwell on past mistakes but talk about what your personal goals are and what goals you have for the family.
  2. Make it a routine. It is important to talk about money frequently to make sure you both are on track to achieve your goals. Additionally, if you both know that on the 5th of each month, you will discuss finances, then both parties know to expect the conversation and won’t feel ambushed by the other.
  3. Listen to your partner. Most times arguments about finances come about because of a difference in values and the way we were raised. For example, one partner may value convenience (i.e., paying for delivery) over having a little more money in the bank. In order to understand why your partner spends money or doesn’t spend money a certain way, you must be willing to listen to them without judging.
  4. Be self-aware. If you feel yourself getting angry or frustrated during the talk, take a break and resume the conversation after both parties have had a chance to calm down. Also, be open about your spending habits and mistakes.
  5. Seek help. If you and your partner are not able to discuss your finances calmly or agree on how to reach your financial goals, get help from a counselor or financial adviser. Sometimes having a third party to listen and mediate the conversation can help you communicate more clearly with your spouse.
  6. Finally, don’t put off talking with your spouse. Financial problems, like all problems, only get worse if ignored.

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Spending Wisely

Everyone defines “spending wisely” differently depending on personal beliefs, likes and dislikes, and lifestyles. There are, of course, a few universal principles such as: not living beyond your means and saving money for unexpected emergencies. The differences arise in what people consider worthwhile purchases. For example, someone who hates cooking may not think of eating out as a poor decision, but a passionate cook sees it as a waste of money. The differences of opinions are fine as long as each person is able to live within their means. If you find yourself having a hard time spending less than you earn, however, you may need to reevaluate your spending habits. Sometimes the best way to take control of your spending is to change your mindset.

Managing your finances can be difficult and requires self-control just like maintaining a diet. One way that helps people maintain their diet and not eat that all-too-tempting-donut in the break room is to think about how much exercise it would take to burn off the extra calories if they did indulge in the donut. The same thought process can be applied to impulse purchases. Instead of thinking of the cup of coffee as only costing $5, think of how much time you would need to work in order to have the money to pay for the coffee. For example, if you make $20/hour, you would have to work for 15 minutes to pay for the $5 coffee. If you are buying coffee five times a week, then you are spending $25/week or one hour and fifteen minutes of work. Is that coffee worth the hour and fifteen minutes of work? Or, is it more worth your time to make coffee at home for significantly less money? If you apply this thought process to all your purchases, it may be easier to identify which ones should be eliminated and help you stick to your budget.

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Low Cost Professional Development

Getting a degree or certificate can open a world of possibilities for you. With more education, you could potentially earn more at your current job, qualify for a promotion, or find a new job that pays more and is more suited to your interests. Going to a traditional college or university is time consuming and expensive, however.  Most people who are working full-time are overwhelmed at the thought of trying to figure out how to pay for higher education and attend on-campus courses. Luckily, there are lots of less traditional opportunities available for professional development and acquiring new skills..

If you want to get a degree from a college or university, you should check with your employer to see if they offer educational assistance. Some employers will pay at least part of your tuition if the class you are taking will help you in your current job. Many universities, including Harvard, also offer open learning courses that are open to anyone. You can pay a fee if you want to receive a certificate.

If you are just looking to acquire new skills or simply don’t have the funds to pay for college, there are lots of companies such as Coursera, Udemy, or LinkedIn that offer courses online for free or at a very low-cost. Some of these companies even offer certificates that are recognized by employers. Public libraries also offer courses online and in person on a variety of subjects.

With so many low-cost learning opportunities available, everyone has the chance to acquire new skills and further their career without having to go into debt.

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Saving Money on Car Expenses

Owning a vehicle is expensive. Depending on the type of car, you can easily spend hundreds if not a thousand dollars a month on car payments, paying for gasoline, maintenance, registration, and insurance. Some people decide that owning their own car isn’t worth the expense and opt for public transportation. If you are not able to do that, there are some ways that you can save money on your vehicle expenses.

First, keep your car up to date on maintenance and do as much of the maintenance as you can yourself. Choosing not to do routine maintenance to save some money in the moment can end up costing hundreds of dollars more in the long run if a major mechanical issue arises due to poor maintenance. If you are able, do the basic maintenance (such as changing the oil) yourself. If you do not know how to do it, ask a friend or search for instructional videos on YouTube. If you do not have a space to do it, there may be a “rent a garage” in your area. These are garages that allow people to rent space by the hour to do their own maintenance. Generally, the hourly rates are much less than what you would pay to have a mechanic at a professional shop do the work.

Second, conserve gasoline whenever possible. Plan your errands so that you aren’t driving back and forth. Don’t leave your car idling. Make sure you don’t have extra unnecessary weight in your car. And, use an app like Gas Buddy to find the least expensive gasoline in your area.

Third, make sure you aren’t overpaying for insurance. Get quotes from multiple companies and research to see which is best for you. Call your insurance company and ask if you are eligible for any discounts. Review your insurance at least once a year to make sure you have adequate coverage and are still getting the best rate.

Fourth, consider using your car to earn extra income. If you are considering getting a part-time job, you may want to consider being a Uber or Lyft driver or delivering food for a restaurant or a company like door dash.

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Payday Loan Companies Remain Unregulated

We have discussed how payday loans hurt your financial situation more than help in the past in this blog. And during President Obama’s last term, a bill was passed that would regulate the predatory aspects of payday loan companies. However, the Consumer Financial Protection Bureau (CFPB) has announced that they plan to rollback these regulations. The regulations were supposed to be in place in January 2018 but have been delayed. It is now even more important for consumers to understand the risks associated with payday loans.

One major aspect that the CFPB intends to rollback is the requirement for payday loan companies to verify that a consumer can pay back the loan. According to CNBC, payday loan companies charge an average annual percentage rate of 400 percent. (A credit card company generally charges 11%-23%). CNBC also states that borrowers end up taking out multiple payday loans in order to repay their original loan and end up paying an average of $520 in finance charges. Therefore, even if you are able to get out of the cycle of continually taking out payday loans to pay off previous loans, you still end up paying exorbitant fees which may total more than your original loan.

So, how do you avoid needing to take out a payday loan? The best plan is to save each month to prepare for unexpected emergencies. Even if you are only able to invest $20 into a savings account each payday, that money will gain interest and can help you make ends meet when money gets tight. If you haven’t saved money and find yourself considering a payday loan, be sure to explore all your other options first (a personal loan from a bank or family or friend, lines of credit, credit cards, etc.). And, most importantly, before borrowing money from any source, make a plan of how to repay the money borrowed and stick to it to avoid paying even more fees and getting buried in a vicious cycle of debt!

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