A career in finance is one of the most lucrative careers available in the job market. If you’ve always been interested in management and investments, pursuing a financial career might be suitable for you. Finance involves matters such as banking, capital markets, credit, money, and investments. Moreover, it covers the creation, oversight, and study of money, liabilities, assets, credit, and investments that form financial systems. [Read more…]
With 2020 staring us in the face, it’s time to review goal setting and the systems you can put in place in order to reach those goals.
“A goal without a plan is just a wish.” – Antoine de Saint-Exupery
That said, let’s look at systematic ways to approach goal setting and actionable tools you can use to smash those goals.
Here are a few articles I’ve written in the past about financial goals:
Worthy Goals For You To Set And Crush
How Do You Set Financial Goals?
We can think of systems as the sub-category of actionable steps. A routine is another word for it. When it comes to goals and habits, you can’t rely on will power. You have put a plan in place to do the work for you.
Take exercising for example. You need to create low barriers for yourself. Wear your gym clothes to bed or have your bag packed the night before.
If you go to the gym, put your bag and your keys in a place where you have to pass them to get to your car.
If you exercise at home, have your routine and your equipment laid out and ready for you.
When it comes to creating habits, James Clear, the author of Atomic Habits, likes to break down the habit into bite-sized pieces.
For example, if your saving for a down payment, go to your banking app and transfer $1 from checking to savings every morning (or whatever amount is realistic for you).
When that becomes second nature, bump it up a dollar a day.
Another thing that James says is, “People ask me all of the time, how many days does it take to create a habit? My answer, all of them because if you stop doing it for one day, it’s no longer a habit.”
This section is speaking specifically to mental health versus other goals. You could also consider physical health as an internal goal, but for this article internal relates to mental health.
There are several things you can do to work on your mental health. See a therapist, exercise, and start a journal. Those three are low-barrier, easy things you can implement into your day to help.
Meditation, medication, and other forms of mindfulness training/practice can also help. There’s a podcast that I listen to regularly called “10% Happier” that will help you with establishing a meditation practice.
Do some research about this. Meditation can and will take many different forms, and not each modality will be right for you. Reading has also proven to have meditative benefits.
It really is up to the individual as to what they consider, short, medium, and long-term, but my definitions are as follows: Short-term – less than 3 years. Medium-term – 3-15. Long-term – 15+.
My definitions are almost entirely based on the investability of those assets for that specific time period.
Once you’ve established your short, medium, and long-term goals you can break them down into actionable steps as we talked about earlier.
Each New Year brings about resolutions that we hope to achieve. Whether it’s getting in shape or paying down debt, your barometer for success should be progress and consistency.
Are you in a better place than you were on January 1st? Do you have more saved? Are you still committed to the goals you set in the first place?
Yes. It feels great to set a target and hit it, but as far as I’m concerned, if you’re better than you were yesterday, that’s all that matters.
Take it one day at a time and keep your eyes on the prize. You got this!
Related Reading:
If you’re interested in college, you probably already know that it’s likely going to be very expensive. Although it’s possible to find scholarships and even get grants for housing, transportation, and food, it’s not guaranteed, and it’s rare to get out of college with no debt at all. That means many college students end up living paycheck to paycheck, which can be a pretty significant burden. If you want to learn more about how college might impact your finances, you might want to ask one simple question: How much money do students tend to have in their bank accounts?
Most Students Have Less Than $2,000 Right Now
When it comes to the basic numbers, 57.1% of respondents indicated that they had less than $2,000 in their bank accounts. As asked by OneClass, this question regarded both checking and savings accounts, which means that these students had less than $2,000 in available funds overall.
That’s an extremely low number — it’s definitely less than the suggested “emergency fund” of 3-6 months’ worth of bills. In some areas, it might be as small as one months’ worth of bills. Because the survey covered 82 schools, it’s impossible to say how dire these students’ situations are, but regardless of the area, it’s an unfortunate response.
A Substantial Amount of Students Have Less Than $500
Though it may come as a surprise that over half of all students have less than $2,000, the numbers get even more dire when you break them down further. 13.5% of respondents indicated that they had $0-$50, and 22.8% responded $51-$500.
That’s 36.3% of students surveyed — over one third — who indicated that they had less than $500. $500 is barely enough to cover an emergency car repair, and that’s cause for alarm. And when juxtaposed with the students who indicated having $2,000 or less, it’s even more telling. $500 is 25% of $2,000, but in fact, 63.6% of that body actually indicated having $500 or less.
Mathematics and Business Majors Tend to Be More Well-Off
In a result that probably won’t surprise you, Mathematics and Business majors reported the highest average amount when compared to other majors. Both majors most commonly reported having $2,001-$5,000.
When it comes to the median amount, the results are even more drastic, as Mathematics majors jump to $10,000 or more and Business majors move up to $5,001-$10,000. Because Mathematics and Business majors have a reputation for being more expensive, it may be that more well-off people move into those majors, causing those majors to report better finances.
Third-Year Students Are the Worst Off Overall
Overall, people’s finances tend to worsen as they continue college. First-year students most commonly reported having $2,001-$5,000, while second and third-year students both most commonly reported having $51-$500.
When moving to the median responses, second-year and first-year actually switched places — second-year respondents indicated a median amount of $1,001-$2,000, and first-year students replied with a median of $501-$1,000. But third-year students actually had a worse median response, with a median response of $0-$50.
Conclusion
You can’t draw any super definitive conclusions from just these numbers. There are of course plenty of extenuating factors that might play into these numbers. Maybe a student just received a grant, or maybe they just paid bills. But the truth is, when you look at the overarching picture, it’s much easier to see the wealth disparity.
Of the 399 students who responded, less than 100 had more than $5,000 available, which is likely the amount that one should have in case of emergencies. That’s a big deal. Whether you’re planning on going into college, you’re in college right now, or you just want to keep an eye on overarching financial trends, these are numbers you should definitely pay attention to.
Introducing the last account type on our quest to find the best way to save for college, the Coverdell ESA.
Without further delay, here’s what you need to know about the Coverdell ESA.
What is it?
Like the 529, the Coverdell ESA is an education savings vehicle for K-12 and secondary education. Coverdell ESA stands for Coverdell Education Savings Account.
It got its name from Senator Paul Coverdell, who introduced the legislation for a similar account, the Education IRA. In 2002, a new piece of legislation was introduced to make the account what it is today.
The 529 and the Coverdell ESA share many of the same characteristics, but there are some things that set it apart. All of these will be listed below.
Advantages
Disadvantages
Unique Characteristics
Conclusion
Effectively, there are three education savings vehicles used today. The UTMA/UGMA, Coverdell ESA, and the 529 plan. I’ve written about the other two in the past so go check those out.
On paper, the 529 looks like the best option, with a high contribution limit, a large number of qualified expenses, and there’s no penalty for letting funds sit for decades.
That is all true, and honestly, I prefer the 529, but the vast, vast majority of people that are helping their children save for college will not come close to the high contribution limit.
The only drawback to the Coverdell ESA is the penalty if the funds aren’t used before 30. Other than that, I don’t think the $2,000 contribution limit is a factor because most people can’t put that much away, anyway. Not without sacrificing their ability to save for retirement, as well.
That said, they’re both great options and you can’t go wrong with either one.
Education, especially secondary education, is getting more and more expensive. The cost of a 4-year public university has gone up 110% from 1994 to 2014 (Source).
Conversely, wages have grown an astounding 8 times slower than that (Source).
What can you do to save for college? How can you help your kids? Are there certain vehicles that work better than others?
We’ll take a look at one of those in the following article.
What is a 529?
A college savings plan that is exempt from federal taxes, if you use the funds to pay for qualified education-related expenses.
Those expenses include tuition, books, room and board, computer equipment, and necessary supplies for students with special needs, as long as the student is attending at least half-time.
Advantages
Disadvantages
Miscellaneous
Other types of accounts
Conclusion
Secondary education is expensive! If you start saving for your kids’ college right away, the compounding returns could really help you save a decent amount.
It’s important to use the right vehicle, and, in my opinion, there’s no better option than the 529.
If you’d like to learn more about paying for college, read this article here. Or if you’re a future or current student that need some finance tips, read this one here.
Be advised: Investments in 529 plans involve risks to principal and may involve additional fees such as enrollment charges and annual maintenance fees. 529 plans offer no guarantees. There are exceptions to the gift tax and estate tax exemptions; please contact a qualified tax, legal, or financial advisor for more information prior to investing.
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As we all know, as we age and our lives change. Our financial responsibilities and investment strategies change along with it.
In most cases, there are two truths to abide by. You have saved as much as you can and invest according to your risk tolerance, time horizon, and goals.
But what else is there? How do my financial life and my investment strategy change with time?
Starting career
Either you are just out of school or have been in the workforce for a few years. Regardless of which path you came from, there are two things on your list. Get rid of debt, or at least get it under control, and save for retirement.
There are several ways to plan for debt repayment.
Check out this post on paying off your debt, here.
Step two is saving for retirement. If the company you work for offers a retirement plan, sign up for it. Max out your contributions if you can, but at the very least, contribute enough to get the employer match (if it’s offered).
Also, open a Roth IRA. If you have a little extra, contribute some to a Roth IRA in addition to your workplace plan.
Your investments. Time is your best friend at this point. Most of your investment allocation should be focused towards growth. Don’t put all of your eggs in one basket, diversify among stocks and bonds.
Again, the majority (at least 70%) of your portfolio should be in stocks, in some form or another.
Starting family
If you’re like the average American, your family starts to form around your 30th birthday. Hopefully, you’ve got a good head start on paying down your debt and saving for your retirement. Continue on that path.
With a family, comes saving for your kid’s college education, as well as other expenses (house, car, etc.). Contribute a little every month to a 529 College Savings Plan. The funds within this account can be invested aggressively, similar to your allocation in your twenties.
Your retirement savings is still in a good spot. Similar to your twenties, regarding the stock and bond allocation.
One last thing, get some disability and life insurance. If you have people that count on you, you need to protect them.
High earning years
More than likely, this will be your forties and fifties. At this point in your life, the average American is in their peak earning years, so take advantage of that and increase your retirement savings.
This will also be the time that your kids either go off to college or enter the workforce. Congratulations (kind of) you are empty nesters. You no longer have a college education to save for. More can go towards your retirement.
More than likely, though, you will have miscellaneous expenses from your kids that you will continue to pay for.
Your investment strategy will change slightly. You are getting closer to retirement so it’s time to start protecting what you’ve saved. A little less in stocks and a little more in bonds. Think 60/40 or 50/50.
Near retirement
You are in the home stretch! At this point, your debts (including your house, hopefully) should be paid off. All assets and your retirement savings should be looking healthy.
Your investment allocation will be similar to the last section. Definitely 50/50 if not 40/60, stocks to bonds.
Retirement
Congratulations, you’ve made it to your retirement. This can be liberating for some, but for others, this is an emotional challenge.
You’ve spent the last 40 or so years saving for retirement and now you are expected to start spending it. This is very tough for a lot of people.
From my experience and in my opinion, you should retain some sort of activity. Something that gets you out of the house, something that forces you to socialize, and something that makes you use your brain.
Staying social and sharp mentally could add some extra time to your life.
Your investments should be conservative. At least 40/60, but the more conservative the better. And it’s usually not a bad idea to keep some of your savings in cash, for emergencies such as health expenses (which will certainly go up at this point).
You don’t have many or any, more chances to earn more money, so it’s very important that you protect what you’ve saved.
Conclusion
The above information can be very useful to the average person. Paying off your debt and making your retirement savings a priority is very important.
Unfortunately, there is a retirement savings crisis in America. People aren’t saving nearly enough for retirement. They are counting on other sources, like Social Security or pensions to fund their retirement.
This isn’t enough. You won’t receive enough from Social Security to support yourself and pensions are few and far between, nowadays. We all need to do a better job of saving.
This article was created for informational purposes only. The above items are not to be taken for personal financial advice. Please consult with a professional about your personal situation.
To learn more about retirement savings and investing, and for our disclosures, visit our website: www.crgfinancialservices.com.
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It’s been about eight years since I graduated college. I was 22 at the time and excited to start my career. I started off working as a mortgage banker at a local Chicago bank getting paid a small monthly draw and commission.
I know what most of you are thinking. Why would you go straight for commission based job right out of college? The short answer is that real estate has always been my passion. Luckily in college, I was able to save up a little money doing affiliate marketing with online gaming sites. I had very little debt and was living comfortably.
It was about a year down the road after I graduated that I things started to spiral out of control, and before I knew it, I saw my finances spiraling a bit out of control. How did this happen? I knew everything about net present value, gross domestic product, and calculating an internal rate of return. However, one thing I had no clue about was personal finance.
Colleges simply don’t put enough emphasis on how important your credit score is. It’s a three digit number that determines how much credit you’re given and will have a huge impact on your future finances. Most students typically have what’s called a “thin file” report. A thin file report means that there aren’t enough trade lines on to provide a FICO score.
The underlying problem with this is that it’s hard to establish a credit score when you can’t obtain it. I established credit by becoming an authorized user on a family member’s account. After a short while, I was able to get a small $500 limit account. I slowly began to build my credit score and my creditors increased my limit over time.
I never knew how important credit was when I was 22 years. It wasn’t until I got into the mortgage industry where I saw the enormous difference in a homeowner’s mortgage rate that a few points could make.
We’re all guilty of this. We overextend our credit, and we dig ourselves a hole too deep to climb out of. Having a large credit limit almost gives you a sense of “free money” to use. Your monthly payments are small enough to the point where you think you can afford to keep a large balance. In 2007, credit card companies didn’t need to require the fine prints of “By only paying the minimum payment, it will take you 27 years to pay off your debt.” It wasn’t in those exact words, but you get my drift.
The Credit Card Act of 2009 now requires creditors to show on the statement how long it would take to pay off a balance if the customer only makes the minimum payment, as well as the total interest cost to pay off the entire balance in 36 months. Unfortunately, that wasn’t the case in 2007.
A few years later after I got my first credit card, my credit limit went from $500 to $20,000. I had credit card offers coming in my mail every single day. They clearly wanted my business and were offering a nice incentive to sign up (usually a ton of airline miles).
It wasn’t long before I overextended my credit. I found it more difficult to payday my debts and was never able to see real progress.
What exactly do you do in this situation? I couldn’t recall any classroom lectures on how to convince credit card companies to lower your interest rate. It was up to me to do my research and figure it out myself. At the end of the day, I was able to set up a payment arrangement plan with my creditors (similar to that of what credit counseling companies provide).
Personal finance is something that needs to be mandated in schools. No matter how book smart you are, your lack of knowledge in personal finance can make or break your future.
This is a guest post from Kevin Yu, a Senior Associate at Avant and managing editor at ReadyForZero. He also blogs for the Huffington Post and is part of the start-up incubator, Y-Combinator.
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In the episode, OG & I discuss how we were both horrible with money while in college. We learned many lessons, but today’s college-aged child needs to know about topics many parents didn’t confront. We describe the college landscape and how to help your child cope with financial complexity while in college.
Show Notes
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<> From Broke College Kid To Financial Whiz
I can’t think of a better way to start of one’s adult life than to do so with over $35,000 worth of debt, can you? Doesn’t the idea of starting your career already knee-deep in the hole sound wonderful? In the words of Lloyd Christmas from Dumb and Dumber, “mmm..that sounds good. I’ll have that.”
Or I won’t.
The average college graduate now leaves college with over $35,000 worth of student loan debt — many have said that the student loan bubble, which now tops $1 trillion (yes, that is trillion with a “T”) is the next major “crisis” in America. I submit that it’s not the next major crisis. It’s already here. In June, Congress couldn’t figure out what to do about student loans, so in their infinite collective wisdom, they decided to let interest rates double from 3.4% to 6.8%. Thanks. We all appreciate that.
If you’re one of the umpteen thousands of people paying off oodles of student loan debt – how do you take care of it?
Step 1:
Be realistic with how much you owe. Get an accurate count of a) who you owe; b) how much and c) the interest rates. Many people have government and private loans spread hither and yon. Before you create a repayment plan, you have to be honest about how much you have.
Step 2:
Build your personal financial plan. This includes student loans, but also should include building a cash reserve, family planning, retirement planning, and other financial goals. Having a singular mindset of “I’m paying off my student loans before I do anything else… could lead to burn out and could impact how fast you reach your true goals. Plus, depending on your career choice, you may be eligible for deferment or outright forgiveness.
Step 3:
Create a debt payment plan. You have two options when it comes to paying off student loan debt: pay based on your income, or pay based on your indebtedness. Visit www.studentloans.gov and compare payments to determine what’s best for you and your personal financial situation.
Step 4:
Work your plan and throw off discouragement. Follow through with your well thought out plan. You did steps 1 through 3, now just execute. It will become tiresome and you will feel at times like you’ll never get it done – but you will. Track your progress monthly and watch the balances fall.
Student loan debt can seem insurmountable, but with the right well-thought out plan based on your personal financial goals, you can pay those off quickly and efficiently and move on to your other financial goals!
Here’s a cool way one couple–we’ll call them Tim and Shelly–helped teach their children about responsibility AND made sure that none of their children were (in Tim’s words) the partier pumping the keg, hollering, “This one’s on my dad!”
First, some background:
Although Tim was an architect, you can imagine that the budget was stretched thin in a family of seven and saving for college was a difficult task. Somehow they managed. They actually put away enough for college for all five of their children on a $110,000 salary. They also owned fine retirement funds and had a nice house. Debt? No. Surprisingly, not even a mortgage.
I was honored they were my clients.
Tim and Shelly worried aloud about their responsibility to their children. They wanted all of them to attend college, but couldn’t afford any of the lifetime college student stories you hear about (think Van Wilder). So, together, we hatched a plan. They decided to help their child find scholarships and jobs to pay for the first year of college. When each child entered their legal working years (well before college), they helped each one find jobs and save nearly every penny for school.
How did they get a 15 year old to work hard toward college?
From the beginning, Tim and Shelly were clear: “You will pay for the first year of college yourself and we’ll reimburse the cost each year, based on some conditions.”
In an effort to discourage screwing around in college and have their children graduate in a reasonable timeframe, they decided to reimburse each A or B with the inflated sum needed the next semester, including that percentage of the cost of room and board.
If college was $7,000 the first semester, junior had to pay that bill. If they received all A’s and B’s, Tim and Shelly reimbursed them 100% of the full cost that they could use the next semester to pay the bill.
While I’m not sure this method works for all children, Tim and Shelly found a way to help their children learn about the working world and responsibility while also paying for college.
When each child applied for college, three of them hadn’t saved enough for the private school they wished to attend. Tim and Shelly filled out the FAFSA form and showed their children how to apply for scholarships. Not one child had to take on student loans. I attribute this to the fact that the rules were clear and Tim and Shelly both helped guide their children.
How did it turn out? All five children graduated with straight A’s and B’s (except one child, who had one C in what Tim described was an incredibly brutal class). When they graduated, Tim and Shelly reimbursed their final semester, which gave each one a nice start for either the working world or for graduate school.
This isn’t the only creative strategy I’ve encountered. With a small amount of money, you could help lower your cost of college by using a quirky real estate-based approach.
Prepping junior for college isn’t about sticking money into a fund. Sure, that’s important, but this is an easy time to teach your child lessons that she won’t forget. Spend some time deciding how you’ll teach your child the value of school and help them become responsible members of society.
Other college planning stories:
– Maximizing Your Expected Family Contribution
Okay, team…what are some creative college savings strategies you’ve seen? Let’s talk scholarships and fun in the comments.
Photo: CollegeDegrees360