Top Ten Financial Mistakes Young People Make

Most young people dream of becoming financially independent and even rich by the time they are past middle age. However, most of the time, this depends on a host of factors, the most important of which is how financially responsible they are. The issue of financial responsibility is unfortunately very difficult for many young people to grasp, and this in turn means that they may not have a chance to put their financial life in order when they are young. There are a few mistakes that most of them make, and which often have a negative impact on their finances. Some of these include:

Not making full use of discounts

These days it’s very easy for one to use discounts to buy various goods and services. For instance, you could go online to get coupons and then use them to buy whatever you need at a much lower price. However, the problem is that most young people don’t think much of such discounts. The fact that the nominal value of each normally seems very small usually makes such individuals think that they won’t save much anyway if they used the discounts. However, this is essentially faulty reasoning, since regular use of such discounts has beneficial effects on long-term finances.

Improper use of credit cards

Most youngsters also have a difficult time using credit cards and other forms of credit. For instance, they might fall into habits of not paying off the bills on time, which could end up ruining their credit scores. This is not a good thing when you consider the fact that they do this from an early age, which means that when they reach middle age they usually have very bad credit scores. This in turn means that it would be difficult for them to get loans or other forms of credit at friendly rates.

Not getting a hang of budgeting

When you need to take control of your finances, one of the most basic yet important skills you can have is how to budget. However, most young people don’t do this right, and this means that they end up having a hard time later on. With the advent of Internet Technology and the use of apps, budgeting should be very easy to do today compared to the past. The fact that economic times are harder today compared to in the past also means that most young people have more to lose by not budgeting properly, so this is something they need to keep in mind.

Not assessing limits when getting credit

In life, it’s usually necessary to get a loan or mortgage to buy something of very high value such as a house or a car. In fact, it’s better to do this when you are young, since it means that you will have enough time to pay off the debt before you get too old to enjoy your investment. However, one problem that most young people make is not applying for such things in the right manner. For instance, they might not adequately figure out how much of a debt they can handle, and then end up chewing off more than they can swallow. This often leads to problems such as difficulty in paying back the debts.

Not keeping in mind the fact that little things do matter

Some habits count as little things, and these tend to add up over time. For instance, there are some people who make a habit of drinking coffee regularly, even if it’s evident that they would still be able to function without it. Most of the time, this is done with the idea that this habit is not very expensive. However, the costs of these little habits can add up, and with time you may end up spending a huge chunk of your income on them. It’s therefore best to take even the smallest of expenditures wisely, especially if they are regular.

Not having an emergency fund

Whenever problems that need urgent attention crop up, most people who don’t have emergency funds to handle them end up having a difficult time handling them. In some cases, they might have to borrow money at exorbitant rates in order to deal with them. Making sure that one has an emergency fund for such occurrences is wise, and ultimately cheap as well.

Using automatic payment systems

Using automatic payments seems like a good idea. The fact that they get deducted from your account automatically means that you need not focus on some of these recurring bills, which is a good thing for a busy young individual. However, some of these payment services cost money, and there are times when you may end up over drawing your account as such costs eat into your deposits. If you want to take control of your finances, it would be easier to set reminders to pay such bills manually.

Getting joint accounts

Most young people open joint accounts with their partners on a whim. However, this might turn out to be a source of trouble, since you may end up having trust issues and even having disagreements over how money is used. Before doing this, it’s wise to first iron out the fine details such as how you are going to operate the account, and who will be responsible for what expenditures.

Not understanding ATM fees

Most people draw money from ATM’s, and this might turn out to be a drain on resources if one does not understand how they work. It’s important for young people to minimize how much they spend on ATM fees, such as by always withdrawing from ATM’s of their banks, and also making sure that they minimize the number of withdrawals they make.

Having no long-term plans

In order to secure themselves, people need to have long-term plans, and also make a point of making such plans work. This is something that most young people don’t think of, mostly because they don’t find it necessary given how much time they have. However, this is an attitude that should not be used. Having long-term plans increases the chances of one being at a better place by the time they are at a more advanced age, at least in terms of finances.

The Benefits Of An International Online Money Transfer

Import and export, paying suppliers, overseas property selling or buying, and regular overseas payments – there are many instances when you have to use a firm that helps make such cash transactions overseas. There are various entities that offer a safe way to make an online money transfer to anywhere on the planet if need be. When you have a business that caters to a client residing in a country not similar to yours or you are working abroad and want to send money to your family or loved ones, it is not a problem anymore.

Fast developing technology has made the online money transfer more feasible than ever before. All you need to do is find a reputed firm offering online money transfer across the globe. These service providers offer greater security, transparency, and convenience. Let’s discuss a few other benefits of sending money online.

Comprehensive range of delivery models

Your beneficiary can choose from a wide range of delivery models depending on your beneficiary’s comfort of getting the money. The recipient will have options ranging from getting the money directly into their bank account to withdrawing the entire amount in the form of cash.

Higher foreign exchange rates

The value of the currency could increase depending on the country where it is sent and its current market rate. You could, therefore, avail the highest exchange rate for your currency and get the most out of your money.

Fast

Providers of online money transfers try to make it utterly fast and convenient for their users. You don’t have to provide liquid cash or spend long hours in a queue while the teller counts your money. You can do it directly from your account to the entity that will thereafter transfer it to the concerned beneficiary, instantly.

No hidden fees

Unlike banks, there are no hidden fees or unreasonable commission rates. These firms work under strict rules and regulations and there is complete transparency in all kinds of transactions. All you might be asked to pay is a one-time standard charge and there will be no more deductions. Your beneficiary will be able to withdraw the entire sum without worrying about any kind of absurd deductions or charges.

Security and Safety

A range of security measures are employed to ensure a secure transaction. Companies have the best firewall installed to prevent any kind of breach or data snooping activity that would pose risk to the financial exchange. Also, it is much safer way to send your money online than go to a bank physically with all that cash.

Find a company that has a global standard and is trusted by the masses. Always choose a firm that offers 24×7 service commitment for their online money transfers. Make sure you are providing all the correct details from your end so that the transaction takes the least time to conclude.

Three Steps To A Financially Secure 2016

A great way to begin the new year is by reviewing your personal financial plan. It’s a good feeling to begin another year with financial goals ready to push forward.

Using currently known variables, you can predict future cash needs for major life transitions, such as retirement. I’ve identified three quick steps to easily complete before 2016 begins.

Portfolio Checkup

Revisit your risk profile to consider how much or how little risk you’re ready to take with your money. All investments involve risk, but how you divide your investment money among asset types (stocks, bonds, short-term reserves) is important for developing your best “sleep well at night” risk level.

Matching three risk factors with your personality will help you invest long-term with best results. Commonly used risk profile surveys are found with a Google search, or your own brokerage version will help gauge your risk level.

Time horizon: This is the length of time you have in years to meet financial goals and make up losses that occur. Longer horizons allow for higher risk and time to regain losses. How long can you steadily invest before you’ll need to take income?

Cash requirements: If cash is needed to meet day-to-day expenses, you have the shortest of time horizon, and assets used will be low-risk but lower-return. Short of a major calamity, can you invest without pulling money for current expenses for more than five years?

Emotional Factors: Your emotional tolerance to risk will decide the makeup of your portfolio. As a subjective element, this factor is not difficult to calculate. We all know how we react to market ups and downs. Reflecting this in your portfolio allocation is vital to successful wealth building.

Based upon your risk profile check-up, you may need to rebalance your investments:

sell assets no longer fitting your profile and investment goals
add assets that better match investment needs and goals
simply enjoy the fact that your current portfolio still matches your risk profile

Cash Needs Analysis

Estimating how much cash you’ll need for a large personal loss and determining cash availability falls pretty much within the insured loss area, such as car, home, business, and life. The reason we carry insurance is for unanticipated life events that take a lot of cash, and it keeps us from tapping long-term investments.

Examine current coverage levels for this step. Keep your cash needs chart short and not too detailed. Check three primary areas for cash needs and cash available.

Review personal liability insurances

Auto, homeowners, small business, umbrella liability, et cetera.
Have your needs changed enough to increase, decrease or drop coverage?
Are insurance deductibles acceptable?
Can you meet a deductible with cash or would you have to use a credit card?

Review life insurance

Whether term or permanent life, the purpose is to supply immediate cash when death occurs.
Life insurance death benefits are income replacement, even if covering a stay-at-home spouse or partner. A non-working spouse or partner brings tremendous value into a home that is hard to monetize.
For example, a person earning $100,000 annually will add a million dollars to the home over 10 years, not considering increases in wages.
Coverage amount requirements are usually greater than we think.

Cash-Available-for-Use

Don’t forget to make allowances for current expenditures that will no longer be continued.
Examples could be: one less car payment, lower budget allowance in food, clothing, personal expenses, et cetera.
Consider cash received from Social Security, 401K, separate savings accounts, and other sources.
The goal is to realize that major losses impact families beyond personal finances. A major loss changes family dynamics, and the immediate need will be having the time necessary for family decision-making, readjustment and future direction.

Debt

Debt always looms in our culture, and it’s another reason we can’t seem to keep long-term financial goals on track. Begin each new year assessing your debt burden.

Debt is a double whammy of interest cost stacked on more interest cost.

The first interest cost begin when you buy using debt.
The second interest cost is the interest you’ll pay for incurring debt.
If debt in your life is revolving credit (charge cards), you’re often dealing with never-ending payoff if not managed properly.
Interest paid on debt compounds faster than income received compounds in an investment portfolio.

Finally, you can complete this check-up in about three hours. Each step is an important part to make sure future cash needs are met. Consult personal financial professionals, and keep your future on course for success. It’ll be a great start to 2016 and give you a sleep well at night financial plan.

I have been an active investor for over 35 years. My lifelong interest in personal finance has led to teaching community classes to a variety of groups. Retirement activities include travel and serving as a volunteer site coordinator with the VITA Tax Program.

Give the Gift of Financial Literacy

In this season of giving, it’s easy to get caught up in the shiny and the bright. Wouldn’t we all like the newest tech, or the trendiest outfit? But as we all know, those that are new and innovative today will be outdated and old news tomorrow. Parents, as your kids get older it becomes more and more difficult to find that perfect gift and those desired items gradually grow more and more expensive. For those kids leaving college or at the beginning of their adult lives, those needs may even include more practical items for the first time. How about this year, while showering them with gifts that may only last a season, you pass on some financial knowledge about savings and debt that will last their whole lives?

A healthy savings habit is the gift that keeps on giving. All of life’s major money milestones – whether it’s for a down payment, starting a new business, or a long period of unemployment- require having cash in the bank. For your children, the feeling of being able to tackle challenges like these without parental support is both extremely liberating and a memory they will pass onto future generations. Although everyone’s situation is different, a good rule of thumb for those starting out is to put 10% of total income toward long-term goals (like retirement) and 10% toward short-term goals (like the emergency fund or a house down payment.) To help ensure success, we recommend having these savings deductions automatically withdrawn from a paycheck into separate accounts each month. We find that it’s much easier to not spend if you don’t see the money. And for those who’re receiving holiday bonuses for the first time, save at least 50% for the future. We promise that this practice will have you remembering the holidays in a positive light for years down the road.

Every year on TV we see the Grinch who tries to ruin Christmas. But for twenty-somethings, he’s going by a different name this year – debt. As a parent you’ve known for a while that there’s no such things as free money, but this is a new concept for young adults. Tour guides don’t discuss loan repayment strategies on the campus tour and credit card companies don’t emphasize their high interest rates while they tempt kids with free t-shirts on the Quad. Credit cards are one of the best ways to help establish good credit. They can also come with great perks, travel benefits and discounts. But, all of these “benefits” are only helpful if these cards are used responsibly. If you’re comfortable, help your child open their first credit card, but discuss with them the importance of paying it off in full each month. Show them how incredibly high the interest rates are on these cards – higher than the return any investment or savings account will ever earn them. We recommend starting with a low credit limit ($500 or less) for the first year or so while they grow accustomed to paying off the card each month. If your student was one of those kids that picked up one of those free t-shirt/credit card combos, but doesn’t remember what happened to either, it also would be a good idea to check out their credit report. This report will give you the details on the card, as well as help you monitor for fraud or identity theft. Although there are many online sites that will show you your credit report, there’s only one site, annualcreditreport.com, that’s authorized by the federal government to show your credit reports from all three reporting agencies each year.

Ten Tips for Transforming Your Relationship to Money

“It’s easy to look back on the past and beat ourselves up for all the wrong turns, incorrect assumptions, and false hopes that have led us to our current financial disappointments. We label them “mistakes” and write them down in our book of life as failures, then wonder why we feel overwhelmed, oppressed, and too scared to try again.”

– Sarah Ban Breathnach, Peace and Plenty; Finding Your Path to Financial Serenity

When it comes to taboo discussion topics, personal finance is often right up there with sex.

And that’s a shame. Literally. Talking about money is usually avoided because of shame. Unfortunately, this avoidance simply tends to lead to more of the same mistakes being made. Fiscally questionable patterns arise when assumptions and habits are left… unquestioned.

I recently I took a one-day course entitled, Transforming Your Relationship to Money. The workshop was taught by Inga Michaelsen, a business coach. The day was a real eye-opener – and heart opener. I was a bit surprised at how emotional many of the participants became. Tears fell as tales were told.

When it comes to money, people are often not just ashamed of the choices they’ve made (and the impacts these choices have had on their lives and loved ones), they often also struggle to understand why they made them in the first place, never mind forgiving themselves for doing so.

But of course, before one can understand why a certain financial decision was made, one needs to first be aware that one actually was made. Oddly enough, this isn’t as obvious as it sounds. Apparently, many of our financial “decisions” are, in fact, made more or less unconsciously.

To help us better understand this, Inga started the day off with a group discussion around three common cultural myths beneath many of our beliefs, based on the teachings of Lynne Twist, author of The Soul of Money:

There isn’t enough to go around
More is better
That’s just the way it is

When it comes to money, time or love, it would seem that a real scarcity mindset exists.

Twist explains the danger of this: “When your attention is on what’s lacking and scarce – in your life, in your work, in your family, in your town – then that becomes what you’re about.”

In other words, what we focus on/pay attention to expands, so we would be wise to focus on all that we do have versus what we do not.

“What you appreciate appreciates.”

– Lynne Twist

However, in my experience and observation, we tend to dwell on what we don’t have – or don’t have enough of… particularly when it comes to money.

But what is enough?

To help us get to the heart of this rather loaded question, right before lunch Inga had us do a simple but effective exercise on gratitude. In our small groups, we each shared all that we have – or have had – in our lives to be grateful for.

After listening to myself tell the others in my group my rather extensive list of all that I’m grateful for, I laughed out loud at my bounty of blessings. I already have enough… of everything. All I have is all I need.

Another interesting concept discussed during the day was that how we spend, save and/or invest our money is connected to our story about money. And apparently we all have one.

To help us get to the root of what our story about money might be, Inga gave us homework to do over lunch. We had to think back on our life, in 5-year intervals, and recall an incident or event in each interval that had to do with money – and then see if any sort of pattern emerged.

Oh yeah.

In the afternoon we discussed spending habits and how money flows in our lives. Intentional spending refers to spending your money on what you are committed to rather than on what others want you to want. In other words, do we spend our money on things we really care about? Or on things we think we’re supposed to care about i.e. what advertisers tell us we should care about?

Inga suggested that spending our money is one way for us to express our life’s purpose in this lifetime – so to try and think of our purchases in terms of whether or not they are in line with our life values.

IS the way we spend and/or save and/or invest our money a reflection of our values? This is an interesting question because when we discussed it further as a group, it became clear that we often struggle with conflicting interests; how we spend our money may have negative impacts on others.

For example, one woman in the class raised the issue of fast fashion and how the dyes used in the garment industry pollute rivers plus millions of tonnes of clothes end up in the landfill after scarcely being worn. She also mentioned the harsh realities of child labour and the horrific working conditions for many people working in the garment factories in developing countries.

Then I brought up my personal concern about my love of travel and how I struggle to reconcile my passion for exploring new places with the reality of the significant impacts that travel has on the planet, such as greenhouse gas emissions.

All in all, the course was a resounding success: it certainly got me thinking differently about money, which is a step in the right direction towards transforming my relationship to it.

Ten Tips for Transforming Your Relationship to Money:

Ask yourself: what is your relationship to money? Love, hate or indifference?
Focus on all that you already have – people, pets, purpose, possessions, health, etc
What you appreciate appreciates
Do not dwell on what you don’t yet have i.e. what you lack
What you focus on expands
Pay attention to how money flows through your life
Think of all the good you currently do – and have done – in the world with your money
Forgive yourself for past financial decisions
Be mindful of how you spend your money: do your purchases reflect your values
Are you aware of your “story” about money? Is it serving you or holding you back?