financial goals

Everyone Needs an Emergency Savings Fund (and How to Start One)

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ID-100237370Sometimes our plans go awry and the unexpected happens. You lose your job. You take a pay cut when your employer trims the budget. You’re out of work for months recovering from surgery. Your roof leaked (or, in our case, our septic system backed up!) while you were on a long vacation. Your washer and dryer went out. You dropped your smart phone in a puddle. What will you do?
Hopefully, you’ve planned for emergencies and contingencies.
According to a 2011 survey by the National Foundation for Credit Counseling, 64% of Americans don’t have enough cash on-hand to handle a $1,000 emergency. This means that if a crisis strikes, big or small, and you DON’T have money put away for emergencies—they’re in for a world of hurt. They’ll realize the hard way that they needed a special fund for life’s unexpected lemons.
An “emergency fund” is an account set aside with money earmarked solely for high impact contingencies that inevitably surface  As a rule of thumb, it contains four to six months worth of average monthly expenses (invested in safe, short-term investments) will help serve as a buffer in these unfortunate situations. During periods when the economy is weak and your job may be in jeopardy, it’s sensible to build a six to twelve-month emergency fund to give you an extra cushion. Establishing an emergency fund should be your first financial priority once you begin your career.
To determine how much you should have in your emergency fund, you should first identify what constitutes six months’ worth of normal household expenses. (Include expenses like your mortgage or rent, utilities, loans, insurance, gas, groceries, and other essentials, allowing a small amount for incidentals and entertainment, etc.)

Then, once your balance reaches six months worth of expenses, it’s hands off! You’ll need to resist the temptation to withdraw from your emergency fund for vacations, high tech toys you think you can’t live without, or any other non-emergency expenses or indulgences.
Ultimately, what an emergency fund buys you is peace of mind. When the invevitable happens, you won’t have to scramble around for the money you need and you won’t have to turn to credit cards or other debt. It’s like an insurance policy you’ll be glad you have when life throws you a big fat lemon!
How have you created an emergency fund?  Can you think of a time that your savings came in handy? It’s never to soon or too late to start. Do you have any other tips or advice, or creative ways you were able to save up for an emergency expense fund?

Picture: freedigitalphotos.net, PC- FrameAngel
– See more at: http://dennistrittin.com/view_blog.aspx?blog_id=249#sthash.dSjgQftJ.dpuf

8 Financial Mistakes You Can Help Your Children Avoid

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ID-10032399Money, money, money. Few things in life generate as much interest yet demand more responsibility. And, while money itself will not bring happiness, mismanaging it can surely ruin a person’s chances for success and cause personal and family strains. Young people who are not prepared for the responsibilities that come with managing their finances can run into major problems and often end up dropping out of college. A 2011 report by the Pew Research Center found for people ages 18 to 34 without college degrees, two thirds said they left to support their family, and 48 percent said they could not afford college. Why? One reason is that far too many college students are financially illiterate. Sadly, personal finance is not a required course for every student in every school.

As parents, you can help your children avoid some common financial derailers—not just in college, but for life.

The principles of wise financial management aren’t that tough to master. You simply need to know the basics and abide by the disciplines and key principles. It also pays to avoid these eight most common financial mistakes:

  1. failure to set goals and plan/save for major purchases
  2. failure to set aside an emergency fund for unforeseen expenses
  3. spending more than you earn and failing to budget and monitor expenses
  4. incurring too much debt, including student loans and excessive credit card usage
  5. incurring significant fixed expenses relative to your income that can’t be reduced in difficult economic times (e.g., spending too much on housing and cars)
  6. impulse buying and lack of value consciousness when shopping
  7. failure to begin saving and investing for the future at the beginning of your career
  8. lack of discipline and understanding of basic financial concepts

This list isn’t just for young people—everyone needs to keep these principles in mind both now and in the future. Periodically review how you’re doing in each of these areas, and encourage your young adult children to do the same. (Remember, they’re watching you, so be sure to “walk the talk!”) If we can successfully avoid these traps, we’ll ALL be in better financial shape!

photo: freedigitalphotos.net, worradmu

3 Tools to Help You Take Charge of Your Budget

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When it comes to “budgeting,” many people find it right up there with dieting and root canals in terms of the pleasure factor. However, tracking your spending and disciplining yourself to live within your means and save for the future is definitely worth the effort, however unappealing it may be. If budgeting is not a natural bent for you, don’t give up on the idea altogether. You just need a willing attitude and some good resources to help you stay disciplined and on track with your finances. There are actually lots of creative ways to make budgeting work for you. It’s necessary for all of us.

  1. The basic report you should complete (on a monthly or quarterly basis) is a cash flow statement. This report tallies your income and expenses in several key categories. It’s the surest way to see whether you’re living within your means  and where your spending may be excessive. After subtracting all of your expenses from your income, you’ll see whether your net cash flow for that period is positive or negative. Remember, the goal is positive, positive, positive!

These days, there are any number of online tools that can help you analyze your cash flow  (e.g., www.quicken.com and www.mint.com). In the past, analyzing cash flow was a lot more work—you had to save your receipts and organize them manually. But now, thanks to debit cards and online banking, it’s much easier. You simply link your bank account to your budgeting app or website and it will track your spending for you! You can even opt for the service to send you alerts if you are over budget in a particular category.

  1. Set your budget. For young adults just starting out, tracking their spending will help determine how much they can afford for rent/housing and a car (significant expenses each month) and give them a general idea of a budget for each category. How much should average living expenses represent? The following are typical expenditure categories and some suggested percentages for each:
  • Housing/rent (includes utilities)     30-35%
  • Household/personal items                     20
  • Autos/transportation                              10
  • Charitable giving                                  5-10
  • Savings and investments                         10+ (not an expenditure per se)
  • Entertainment and leisure                        7
  • Debt/loans                                                  5
  • Insurance                                                    5
  • Miscellaneous                                             3
  1. Finally, it helps to develop up-to-date cash flow statements when you’re considering buying a home or car. People especially get into trouble when they pay too much for a car or rent an apartment that’s out of their financial reach. As a result, there is little leftover for investing in the future, surprising that someone special with an unforgettable evening, or giving to charitable causes.

When you know where your money’s going, you are more likely to make wiser financial choices and develop good savings habits that can help you build wealth for your future.

 

Do you track and analyze your spending?  How do you do it?  Have you trained and modeled this to the young adults in your life and, if so, how? We’d love to hear your insight and experiences!

3 Life Choices to Prevent Poverty

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January is Financial Wellness Month. In honor of this special emphasis, I wanted to share some thoughts this week on avoiding poverty. Poverty can be a touchy subject, but I think it’s important to talk about the ways we can avoid it, just like any other pitfall we may encounter in life. Please pass this message on to the young people in your life. It’s one of the most important nuggets of life wisdom they’ll ever receive.

I believe every child is a masterpiece in the making. Sure, there will be some blemishes, but each of them is unique, priceless, and filled with potential. With a strong support system, excellent guidance and education, and an appreciation of their worth, value, and opportunities, they’re well positioned to fulfill their dreams. The fact is, life success also requires living strategically and avoiding choices that can derail futures. Foremost in this is avoiding poverty.

William Galston, Senior Fellow at the Brookings Institution, columnist, and former Clinton Advisor, did a hefty amount of research on the subject of poverty. Thanks to him, we are better aware of some of the chief causes of poverty. His important conclusions, based on his research findings, are surprisingly simple. Dr. Galston asserts you need to do three main things if you live in the United States to avoid poverty:

Finish high school, marry before having a child, and marry after the age of 20!

Here’s the real kicker: only 8 percent of families who do all three are poor; however, 79 percent of those who fail to do all three are poor.

These statistics are compelling and make perfect sense. Students who fail to finish high school will not have access to many well-paying careers and will not be perceived as well by employers. Those who have children before marriage (many teens and young adults) will find it that much more difficult to enter college or complete their degree due to the immense responsibility and financial demands of raising a child. Finally, those who marry before age 20 tend to have higher divorce rates and greater career and life challenges. The common thread of all three poverty causes is reduced access to attractive careers due to lack of education or life circumstances.

Words cannot express how much better our lives, the lives of our children, and our culture would be if more people simply heeded Professor Galston’s advice. These three choices won’t guarantee success, but they will help avoid some of life’s biggest derailers.

 

Are you surprised by the wisdom and logic of these research conclusions to avoid poverty? What are your thoughts on them? Are you as parents, teachers, and mentors sending this message to the children you guide?

Live Within Your Means, Part 1

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Money will never make you completely happy—but mismanaging it can be a life wrecker!

Money problems are among the top reasons for divorce, alcoholism, and suicide in our country. For these, and many other reasons, it’s critical to become a wise manager of your financial resources. You should consider this one of your greatest priorities and our nation’s educators should too.

Having a positive (and growing net worth) is essential for all of us, and the good news is it’s not rocket science. Simply put, it requires two things: 1) living within your means by spending less than you make and 2) building long-term wealth through a regular savings and investment program. This will set you up for success in both the short- and long-term.

In order to generate positive cash flow, you must spend less than you make. That means conservatively estimating your income and ensuring you have a “cushion” left over after all of your spending. Trouble sets in when you either overestimate your income or underestimate your spending.

Here’s where many run into trouble on the INCOME side:

  1. They forget that their take-home pay is roughly 60% of their gross salary (after taking into account deductions like federal and state income taxes and Social Security)
  2. They assume that a spike in their income is the new “normal” level of earnings and ratchet up their spending accordingly.
  3. They assume their strong investment returns in the recent past will persist.

It’s important to recognize whether your career provides a steady or volatile income. Generally speaking, the more your income is tied to sales (e.g., real estate agents) or project work (e.g., writers, architects, actors) the more it will fluctuate over time. This income pattern presents unique challenges in your financial planning because you can’t forecast the next few years based on the recent past.

Consequently, people often overestimate their future income when they just had a great year. Then, they increase their spending just when their income falls back to normal. Not good!

Don’t fall into this trap. Plan your income conservatively—it’s far better to be positively surprised than disappointed!

What are some ways you’ve learned to live within your means and generate a positive cash flow? Have you developed creative and effective ways of showing these principles to your own children or students? Share ideas and questions by commenting below; we’d love to hear from you!

4 Tips to Help Your New Year’s Goals Really Stick

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Wow, the holiday season really flew by, didn’t it? There is so much anticipation leading up to Christmas, and in one wonderful, joy-filled day with family, it’s over. The lights come down, the Christmas music goes away, and life returns to normal. Couldn’t it last just a little longer?

I know I’m not the only one who experiences a post-holiday funk from time to time. But, I’ve found the best antidote is having new things to look forward to. When I take a fresh start to the new year with a sense of purpose and adventure, it makes all the difference in the world. It involves setting new goals to better myself and exploring new ways to contribute to things I’m passionate about! There’s a LOT to look forward to when we take a strategic approach.

So, in this season of new hopes and resolutions, here are a few tips to make your 2015 goals really stick and take your life to a whole new level:

  1. Set tangible goals, not generic For example, saying “I want to become more philanthropic and outward-focused in the coming year,” doesn’t give you something tangible to work towards. Instead, make a more specific resolution, such as “I would like to start volunteering at the soup kitchen once a month and donating 5% of my income to my favorite charity/mission.” See the difference? Measurability improves accountability!
  2. Be realistic. Don’t tell yourself you’d like to buy a new Mercedes if you can’t afford it, or hope you’ll lose 50 pounds if you don’t have time to go to the gym or plan to drastically change your diet. Instead, resolve to buy a safer vehicle with less than thirty thousand miles on it, or to exercising daily and eat healthier. Success with small steps builds momentum!
  3. Involve a friend. If you’re hoping for big change in your life but you’re in it alone, it’ll be much more difficult. With the buddy system, you’ll have accountability and someone to keep you on track (and you can do the same for them). Encouragement builds hope and confidence! Plus, it’s a lot more fun!
  4. Give yourself grace. Above all else, be kind to yourself. No one is perfect, and even a small upward movement is better than no movement at all. If you made a mistake and did something you swore you wouldn’t do last year, IT’S OKAY. Tomorrow is a new day, with new opportunities for growth and impact. More often than not, achieving our goals is a “two steps forward, one step back” reality. So, don’t get discouraged when you regress a little. Shake it off, resolve to get back on track today, and remember, you’ve got this!

So, have at it! As you put away your holiday gifts and decorations, start thinking about what you can do to make 2015 really count for you, your family, and your friends. Instead of feeling disappointed that the season is over, be filled with anticipation for what is to come. It’s never too late to make an effort to better yourself, and this is the perfect time to do it. Good luck!

How YOU Can Change the World

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Note: This post was writting by Noel Meador, Executive Director for Stronger Families in the greater Seattle area (www.strongerfamilies.org). 

“Before you criticize the younger generation,
remember who raised them.”
-Unknown Author

We live in a culture that sees more screen time than family dinner times, that talks more through text and Facebook than eye to eye, and that praises performance and “beauty” over the heart and soul of a person. We have some big problems on our hands.

But take heart: tonight you will have the opportunity to change the world.

You can invest in the stock market, have the best house and car, and know great success, but when you die, it will all die with you. All that hard work and dedication, good stewardship, understanding of investment will be gone.

Sure, you can pass on your monetary inheritance but, if it is to a generation that hasn’t been taught responsibility, it will be squandered.

If it is to a generation that hasn’t been taught the value of family and investment in others–a heritage will fade.

If it is to a generation that is self-focused and distracted–your generosity and kindness will end.

So, how can we ensure our heritage will live on?

If we want to invest in something that will live beyond our time and have the ability to change the world, let’s sit down at our table tonight and look at the faces of our children. Take time to talk, listen and teach.

They are it! They are the change we hope to see in the world! The future of this country and our families. I hope and pray I’m investing wisely.


Noel Meador is the Executive Director for Stronger Families in Bothell, Washington and the author and creator of the Oxygen for Your Relationships seminar. Noel has a passion to see families and relationships revitalized and strengthened. He resides in Woodinville, Washington with his wife Karissa and their two sons.

Why YOU Need an Emergency Savings Fund

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Sometimes the unexpected happens. You lose your job. You have to take a pay cut when your employer faces a business downturn. Your car just died. You just got in a wreck and will be out of work for months. Your roof leaked (or, in our case, our septic system backed up!) while you were on a long vacation. What will you do?

Hopefully you’ve planned for emergencies.

According to a 2011 survey by the National Foundation for Credit Counseling, 64% of Americans don’t have enough cash on-hand to handle a $1,000 emergency. This means that if a crisis strikes, big or small, and you DON’T have money put away for emergencies—you could be in for some real stress and heartache.

An “emergency fund” is an account set aside with money earmarked solely for high impact situations that could substantially affect your wellbeing or quality of life. As a rule of thumb, a fund that contains four to six months worth of average monthly expenses (invested in safe, short-term investments) will help serve as a buffer in these unfortunate situations. During periods when the economy is weak and your job may be in jeopardy, it’s sensible to build a six to twelve-month emergency to give you an extra cushion. Establishing an emergency fund should be your first financial priority once you begin your career.

To determine how much you should have in your emergency fund, you should first identify what constitutes six months’ worth of expenses for you. Add up what you spend each month on normal household budget items and multiply by six. Make sure you include what you pay for your mortgage, utilities, loans, insurance, gas, groceries, and other essential expenses, allowing a small amount for incidentals and entertainment, etc.

Then, to avoid being tempted to spend the money you need to use to build your emergency fund, it may be helpful to set up automatic account transfers (or automatic deposits from your paycheck if your employer offers this). You’ll also need to be disciplined and NOT give into the temptation to withdraw from your emergency fund for vacations, high tech toys you think you can’t live without, or for any other non-emergency expenses or indulgences.

Ultimately, what an emergency fund buys you is peace of mind. If something comes up, you won’t have to scramble to come up with the money you need and you won’t have to turn to credit cards or other debt. It’s like an insurance policy that you’ll be glad you have when life throws you a big fat lemon!

How have you created an emergency fund? It’s never to soon or too late to start. Share your ideas, experiences, and questions with our online community; we’d be glad to hear from you. And pass our site along to a friend and suggest they subscribe; they might be thankful for it!

10 Financial Mistakes You Should Avoid

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Money, money, money.

Few things in life generate as much interest yet demand more responsibility. And while money itself will not bring happiness, mismanaging it can surely ruin a peson’s chances  for success and cause a lot ofUNhappiness.
The principles of wise financial management aren’t that tough to master. You simply need to know the basics and abide by the disciplines and key principles. It also pays to understand and avoid these ten most common financial mistakes:

  1. failure to set goals and plan for major purchases and retirement
  2. spending more than you earn and failing to budget and monitor expenses
  3. incurring too much debt, including excessive credit card usage
  4. investing too little and starting too late
  5. incurring significant fixed expenses that can’t be reduced in difficult economic times (e.g., spending too much on housing and cars)
  6. ill-timed investment decisions (“buy high, sell low” habits and market timing)
  7. poorly diversified investment portfolios (overly concentrated in high risk stocks)
  8. impulse buying and lack of value consciousness when shopping
  9. inadequate financial knowledge
  10. lack of discipline and personal responsibility

We all need to keep these principles in mind both now and in the future. Periodically review how you’re doing in each of these areas, and encourage the young people in your life to do the same.

If we can all successfully avoid these traps, we’ll be in excellent financial shape!

What are some ways you’ve learned to avoid–or overcome–costly money mistakes in your own life? Do you ideas for passing these principles on to young people? Please share your suggestions and comments below.

Positioning Students for Workplace Success

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Are the young people under your supervision—children, students, or employees—prepared to soar in their eventual career? Not just to land the job, but to be a workplace MVP?

 

With high youth unemployment and all-consuming scholastics and activities driving their schedules and priorities, many of today’s young adults are entering the work force sorely lacking the skills and maturity they need to thrive in the real world. We hear from employers all the time: “They may be book smart, but they’re certainly not life smart,” or, “They can write a resume and complete an application, but they lack the intrinsic qualities and life skills we need in our employees.” Many students understand how to succeed in the “front end” (resume and interview skills), but aren’t trained to succeed once they land the job.

 

At LifeSmart, we’re excited to announce our newest resource designed to help create future workplace superstars! Our new DVD, How to Be an MVP Employee. offers invaluable perspectives from employers and four road-tested strategies for succeeding in any career:

  • Selecting a career that plays to their natural strengths and interests
  • Modeling the qualities employers value
  • Delivering on-the-job excellence
  • Contributing to their employer’s success

 

This 45-minute live presentation at Appleton West High School includes illustrations, skits, training, and strategic insights to promote career readiness and workplace excellence. Viewers will gain practical wisdom about what separates those who soar from those who stagnate in their careers.

 

For $79, you can bring this valuable training into your own classroom or group. How to Be an MVP Employee will help prepare the young people in your life to reach their career heights and to succeed in the increasingly competitive landscape of today’s workplace.

 

For more information or to order, call (920) 319-3169 or email at dtrittin@dennistrittin.com.