Listen in at:http://jasonhartmanfoundation.org/articles/young-wealth-show
Podcast: Download
It may come as a shock to some but big ticket items are not usually the reason young working adults miss the target when it comes to financial goals. Cars, televisions, and stereos seem to be the obvious culprits, and they can be troublesome areas when it comes to over-spending, but here’s a financial literacy tidbit to ponder.
Pay attention to the small stuff. That’s what eating your budget alive.
We’re talking about the daily morning stop at Starbucks, the Big Gulp caffeine buzz soft drink at lunch that gets you through the afternoon – and exactly how much are you spending on your cell phone bill every month? Is it absolutely necessary to be that much in touch? The reason expenses like this are so insidious is that they are such a part of your routine you don’t notice them. Probably don’t even think about them or take the time to add up how much it costs to grab a fancy morning coffee every working day of your life.
This is where so much of the financial literacy training you get in school falls woefully short. Intro to Business 101 loves to talk about the big business cycles that make the economies of the world go around but never bothers to show you where your budget is bleeding out. All the investment advice in the world won’t do you a bit of good if you have no funds to do it with.
In the beginning of your working life, it’s hard to find money to save. You owe it to yourself and to your future to stop wasting what you do earn or at least be aware of exactly where every dollar goes each month. Maybe a morning latte is more important than future financial security. If that’s your decision, so be it but make the call from a position of financial literacy and realize the price you’re paying.
The Young Wealth Team
Flickr / stephenccwu
Listen in as Jason interviews Jon Swartz about successful teens.
Podcast: Download
Is your junior or senior year in college a good time to begin investing? At Young Wealth, we’d say “Absolutely!” That assumes your bad debt is paid off first. Yes, we realize we’re beginning to sound like a broken record with this “Pay off your debt!” mantra. We don’t get paid for saying it but we do believe it’s that important. It’s a critical component of your financial education. The part you’re likely NOT to get in school.
Think of it this way. Most of your consumer debt is attached to a high interest rate. What’s the point in making a nice investment return when the new profit is running out the back door to pay for debt? Your profit is already taking a hit from inflation and taxes. Tack on debt payments and it’s the very definition of spinning your wheels.
Be patient, grasshopper. The time for investing will come. Pay off debt first, however long that takes. Throw every spare dime and penny at it until the debt beast is dead, dead, dead. Then it will be time to crank up the investments – stocks, bonds, mutual funds, real estate – go crazy with it all, though we would seriously suggest you visit http://www.JasonHartman.com to learn how we make money with our investments no matter what the economy or inflation is doing.
Use the time spent eliminating debt to learn how to invest so you’ll be ready to hit the ground running when the time arrives.
The Young Wealth Team
Flickr / alancleaver_2000
Like it or not, more and more businesses are adopting the practice of electronic check conversion. You’ve probably already seen it. You write a check and hand it to the cashier, who runs it through a machine, then hands the voided check and receipt back to you. What just happened? Did you get hit by a train?
No worries. You just experienced electronic check conversion (ECC) and now it’s time to get your financial literacy up to speed and understand it.
Stores love the process for a few reasons. First of all, they get their money faster than with a paper check transaction. Information from the check is immediately collected (account number, routing number, financial institution, check number) and used to debit funds from your account. Normally this happens more quickly than with the traditional paper check process, so be sure you have the money in the account! The second reason stores love electronic checks is they don’t have to keep track of the paper check – they give it back to you right away. It doesn’t take up space in their cash register and they don’t have to worry about losing it before it is deposited in their bank.
Any business that uses the ECC process must post notice prominently at the checkout counter. If you don’t agree to it, they’ll probably make you use another form of payment like credit/debit card or cash. Keep an eye on your account summary each month. If you find an ECC error, law requires your financial institution to investigate.
At Young Wealth, we don’t believe ECC is inherently good or bad, but it is part of the digital migration that will likely see the end of paper checks entirely before too many more years pass. The key is to be aware of how your payments are processed so you can monitor your account for errors.
The Young Wealth Team
Remember how everyone from Dad to Great Aunt Edna told you to save for a rainy day? As much as you want to pretend that’s just old fogey logic and has no place in your hipster lifestyle, stop and think about it again. That swinging carefree attitude might have worked in college but not so much when you become an adult with a job and responsibilities.
How will you get to work when your car craps out and you don’t have money for repairs? Or when the dog eats an entire chocolate Easter Bunny and needs to have his stomach pumped – quickly? When an errant pass in a spirited game of touch football in the front yard goes through the neighbor’s window? Or worse, unplanned medical expenses.
The point is that any of these and a variety of other minor/major emergencies can happen at any time. You need an emergency fund. Period. Start by saving a thousand dollars. While not a big cushion, it can handle car repairs, medical visits, and assorted life events up to a point. The ultimate goal is to have six months worth of income readily available for whatever life throws at you. If you’ve never tried it, you don’t realize how much daily stress is lifted from your shoulders when you’re not flying without a net.
Imagine you suddenly lost your job, through no fault of your own. Maybe it was downsized out of existence. No worries. You’ve got six months to find one, while your buddy Fred, who was also released and was of the opinion that your emergency fund idea was crazy, is left in shock to pick up the pieces. And he better do it quickly if he wants to keep eating.
Just our two cents worth from Young Wealth.
The Young Wealth Team
The Young Wealth Team on April - 20 - 2010
categories: Blog Articles
Tags: emergency fund, Financial Literacy
Jason interviews, Lesley Scorgie, the author of Rich by Thirty: A Young Adult’s Guide To Financial Success, a national bestselling personal finance book geared towards young people. Listen at: http://www.jasonhartmanfoundation.org/articles/young-wealth-show/. When Lesley was only 17 she was a guest on the Oprah Winfrey Show where she discussed financial strategies for young people and revealed her goal of becoming rich by thirty. Money is important because it builds a path to freedom. Without it, your choices can be limited. With it, you can pursue your dreams. Wealth is no longer just about money. It is about freedom. The sooner you start making money work for you, the more financial freedom you’ll have.
Podcast: Download
On this episode, you’ll hear the eleven commandments of financial success. Visit: http://www.youngwealth.com.
Podcast: Download
Listen in as Jason talks with credit expert Danny Rosario on how to start building your credit. Visit: http://www.youngwealth.com
Podcast: Download
Listen in as Jason interviews financial planner Jim Lowell on The Young Wealth Show. Visit http://www.jasonhartmanfoundation.org
Podcast: Download