Financial Success: Life Lessons for all Ages & Stages – Part 1

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To celebrate the beginning of April’s Financial Literacy month, I thought I would create a series of blogs about money & financial literacy. I am starting at the beginning, when kids are young & will continue through some of the older ages & stages of life.

Part 1: Kids learn by what they see, hear, & do:

 When my niece, Ali, was 4, she used to think money came out of a machine. It made sense, she saw her Mom do it. If you want something, you just go to the machine, get the money, & go to the store. If we don’t tell them any different, kids believe what they see – money comes from a machine.

Little ones quickly learn that they need money to buy things. They need to be taught:

  • You earn money by working
  • You deposit the money you earn in a bank to keep it safe
  • You have to have money to pay for things you need – a place to sleep, food to eat, clothes to wear, maybe, even a car to go places
  • You use money you saved in the bank to pay for things you need
  • There is a difference between needs & wants – needs come 1st
  • You usually have to save money to buy something you want

Kids learn from what they hear. Do you speak positively or negatively about money?

Most of us know that kids are like little sponges & pick up on things they hear & sometimes they repeat us to our surprise (or shock): “We don’t answer the phone at our house, it might be a bill collector”. As adults, we need to be careful with our words. We also need to pay attention to other places that kids can learn by listening – TV, video games, radio, private & public places.

In today’s digital world there are so many ways to educate our kids about money; we can play fun songs for them to hear and maybe learn. One of my favorites is Sammy Rabbit; hIs dream big campaign teaches great money habits for young children. You can learn more about Sammy at http://www.dreambigday.net or sammyrabbit.com.

Kids also learn by what they do. Teaching kids to be financially successful in life should begin early. The Davidson Institute reports that money behavior habits can be formed by age 7.   When we are young, it is hard to learn that we can’t have everything we want. Parents can help by creating incentives & providing rewards.

  • Have kids write goals & create visual savings charts for something “they want”
  • Tell them that writing goals down increases their chance of success
  • Practice “learning by doing”
  • Money earned or received can be divided into 3 groups – spend, save, give. Let them decide where to give.
  • Teach “delayed gratification” – this will provide a great leap forward to becoming financially capable & successful, later in life
  • The concept of “budget” can be taught with things other than money; i.e. 1 sugary item per day – they choose when. I used to tell my son, Jason, if you want sugar on your cereal in the morning, then please don’t ask for a cookie or something else later on in the day. He frequently decided to wait because he did not know what other choices there might be later. Till this day, he still does not care for sugar much and he learned to wait for what he wants. He also works for it.

If you want to teach your kids a little about saving money, tell them that one of the best things they can do with their money, is to save it. Start early & save often. Even a little bit saved, on a regular basis, can add up to much after time. It is like planting a seed and watching it grow. Money can do the same.

A Chinese Proverb is “Learning is a treasure that will follows its owner everywhere”. Learning to make smart financial decisions when you are young will also benefit you for life.

Have fun teaching & helping others learn to make smart financial decisions. Thanks for reading.

Deborah Ann Fox, CPA is a financial literacy advocate who devotes part of her practice to helping others make smart financial decisions by providing education while building client skill levels.  She is available for one on one, local, or remote appointments. Free 30 minute consultations.

website: http://www.debfoxfinancial.com

Phone: 619-549-2717

Money Spent, Wisdom Gained, & 20 Helpful Tips

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Many of us have said, “I wish I had known then what I do now; I would have done things differently”.

This is particularly true when it comes to money & our financial situations. Money trouble or challenges occur for a variety of reasons:

We spend when we shouldn’t or we spend without understanding the true cost:

As a student, perhaps we used some of our student loan to go shopping. Maybe, we bought things we knew we couldn’t afford because we wanted or deserved it, or signed contracts without reading or fully understanding them.

We spend because we lose our job & spent our financial safety net to survive

Sometimes we end up in money trouble just because of unexpected life events. This has happened a lot since 2008 when people suddenly found themselves with a “pink slip” & not able to get another well paying job. Even if you had the now outdated 3-6 months livings expense safety cushion, it wasn’t enough. Debt piled up.

We spend because we don’t have any other choice; it is a revolving circle:

When debt piles up, we may play the “rob Peter to pay Paul” tactic & move debt from one card to another.

We pay the bills for the services that are the most important to us – housing, electric, phone, gas, & food and hope we can pay the rest of the bills -soon. We hope something will change and actively seek solutions.

We spend to pay high service fees: Fringe Banking, Unbanked, & Under -banked:

The movie “Spent: Looking for Change”, is about hardworking Americans who do not have access to traditional banking services. The film tells us that there are nearly 70 million Americans that are unbanked & financially underserved. They use check cashers, pawns shops, payday lenders, & money order services. These alternative financial services are expensive & those that least can afford it spend more than traditional bank users to cash their payroll checks & to pay their bills.

We spend because we want our tax refund now:

Low to moderate income tax payers pay extremely high interest rates & fees to get some or part of their tax refund now rather than wait a couple of weeks and avoid these needless high expense charges.

The National Consumer Law Center’s website provides the following description:

  • Refund anticipation checks (RACs) – RACs are a financial product used to deliver refunds and to pay for tax preparation fees by deducting them from the consumer’s tax refund.
  •  RALs from non-bank lenders – A few payday and other non-bank lenders are offering RALs. These loans could be more expensive and riskier than bank RALs.

Since the 2008 recession, many people have permanently changed the way they spend their money.

Following are 20 tips to help you make your money go further. This, then will provide you the opportunity to either pay down debt, build a safety cushion, or invest in your future.

Money Management & Spending Tips:

  1. Some “assets” appreciate and can go up in value; spending money here makes sense
  1. Other “assets” depreciate as soon as you buy them – cars, furniture; consider buying used or refurbished
  1. Accountants use a term called “Sunk Costs” which means a cost that has already been incurred & cannot be recovered; limit your sunk costs
  1. Opportunity Costs: the value of something that must be given up to achieve something else; limit how much you spend on a things that you want; you might need the money later for a need
  1. Good debt provides you an opportunity to get ahead; there can be a return on your investment; i.e. a mortgage on a home
  1. Bad debt includes high interest rates on unpaid credit card balances
  1. Borrowing on credit is expensive; debt makes you a slave to payments; you’re a hostage with limited life choices & flexibility
  1. Building & Maintaining a good credit score means it will cost you less to borrow money
  1. Forgo bad debt & instead, build toward your dreams
  1. When you want to spend instead of save, think about your long-term goals. Is going out to eat, buying coffee at Starbucks, going shopping because you feel depressed or want something new worth adding more debt or forgoing savings?
  1. Read your contracts & plan for both the best & the worse scenario- can you afford both?
  1. Know that managing money is becoming more simple and that there are is a lot of free help
  1. Use the internet to learn more about personal finance- Coursera offers free classes
  1. Use on line tools to help you determine your best money moves; I have several on my website, on the resources page
  1. Hire someone to help you understand & determine your best possible alternatives
  1. Avoid “problem pile-ups”- it is too hard to solve almost anything that way. Choose one thing to work on, resolve, choose another
  1. Don’t beat yourself up if you made what you consider a “money mistake”. Ideally, we all learn as we grow. This is a normal part of life & it is fully possible to recover & regroup
  1. Don’t assume you know the answer, because you think “it is true” or someone told you. Look for the answer yourself or try to get your answers in writing from an objective source
  1. If you are a parent, be careful that you are not unintentionally teaching your children poor money habits by saying things like, “I am not answering the phone, it is another bill collector”
  1. Sometimes we learned poor money habits as a kid and carried them with us in to adulthood without realizing it. This has become so common that there is a new field of study & help: Behavioral Finance. Learn about this is if it applies to you

Deborah Fox, CPA is working to make financial information affordable & accessible. She helps others improve or protect their personal or business financial health by answering specific money questions. She provides information while building knowledge & practical skill levels for her clients. She is available for local or remote appointments. Thanks for reading.

Website: www.debfoxfinancial.com

e-mail: debfoxfinancial@gmail.com

Phone: 619-549-2717

Where is “The Help?”

We have a need. We have a want. Where is The Help?

Where is the help if we want to talk to an affordable professional about our money?

The Need:

Many of us worry about our money situation because of consumer debt, student debt, limited savings, or the ability to retire.

We might worry, but talking about our money is not something we like to do. A recent survey by the National Foundation for Credit Counseling (NFCC) showed that we would rather tell people how much we weigh than the amount of our credit card debit or our FICO score. Many of us are embarrassed.

We might not want to talk about our money situation, but we also know that we could benefit if we did. We know what we don’t know or understand.  We might be comfortable not thinking about it, but this only allows anxiety to grow and does not change anything. A comfort zone can be a beautiful place to be, but nothing ever grows there.

The Want:

We all need and want financial stability.

We might know what to do with our money and just not do it. We know that we need to spend less than we make, but doing that is hard. It can also be hard to save and not spend. We have heard, pay your self first, but do we? We leave money on the table by not getting the full company match for our 401k plans at work.

Most of us were not taught how to manage our finances when we were in school.  We learned the hard way: through trial and error and through the “school of hard knocks”.

Increasingly, we want financial literacy taught in our schools. Students need to learn how to balance their bank account, manage debt, credit, and avoid financial traps.  In short, we want our children or the youth of our community to be better prepared than we were.

The Help:

Clearly, we have a need and a want. Where can we go for affordable help?

Historically, formal financial planning services were designed for and enjoyed by those who had large sums of money to protect. Comprehensive Financial Plans are expensive and time consuming to prepare. Financial Planning service firms may have provided this service at a nominal cost and made their money by selling insurance or investment products or by providing investment management services.  This works well for people who have plenty of money and the need for a comprehensive plan.

Where is the help for those that have less money?

Where is the help for those that do not yet need comprehensive financial plans, but have questions about their money?

Where is The Help for the:

  • Young Adult?
  • Young Career?
  • Young Family?
  • Families living paycheck to paycheck?
  • Working Poor?
  • Shrinking Middle Class?

Over the last few years, service providers have started to pop up. The marketplace had a void and some are stating to fill it, including me. I want to make financial planning, understanding, and capability more accessible for this underserved market for both individuals and small business owners.

For personal finance, maybe you would like to:

  • Talk about your money situation, evaluate, prioritize, act, and build confidence about your economic future?
  • Learn to use a systematic approach to evaluate a financial decision?
  • Have a mentor/friend to help empower you to become more accountable?

For the entrepreneur or small business owner, would you benefit by learning new business skills about:

  • Pro-Forma financials for your business plan?
  • Budgets and cash flow?
  • Tax planning?

For those that like to read and learn on your own, there are a lot of good resources out there to help you.  I have resources listed on my website at www.debfoxfinancial.com. I also blog, post frequently on my Facebook page and share information on Twitter.

Perhaps, you learn best by working “one on one” and would benefit by having the opportunity to ask financial questions and then work together, as a team, to learn, grow, and achieve your financial goals.

I believe that the scope of financial services should be broader than is currently available and want to use my expertise and experience to help others.  We could work together on one project, many projects, or perhaps, I can just be a resource for financial information?

Execution matters. I can help. It is important that you know that I would not tell you what to do.  I can be a financial compass and help you sort through choices and evaluate the potential costs and the benefits of the available options. You decide what is best for you.

I am a financial literacy advocate and want to provide affordable financial solutions by providing meaningful, actionable, advice. If you can afford a personal fitness trainer; you could afford “one on one” help from me.

Takeaways:

  • Decisions made today affect the options available to you in the future
  • What you do today with “Your Present Self” has a direct impact on “Your Future Self”
  • An investment in you today can result in a financially stronger you tomorrow
  • Financial strength brings more freedom of choice

“Tell me and I’ll forget. Teach me & I may remember. Involve me & I learn” – Benjamin Franklin

Deb Fox is working to “make a difference in peoples lives, hearts, and wallets”. Although she earned her CPA designation in 1997, she is not currently practicing as a CPA. She does use her knowledge to help others. She does not give investment advice; this is outside her areas of expertise. She can help with financial planning, tax, accounting, and commercial property and casualty insurance questions.

Website: www.debfoxfinancial.com

E-mail: debfoxfinancial@gmail.com

Twitter: @debfoxfinancial

 

Financial Literacy – No App for That, but…

Over the past few years, we have heard or said “there is an App for that” and indeed, from a financial literacy perspective, there are applications for:

  • Mobile Banking
  • Budgeting
  • Cash Flow Management
  • Investing Loan Calculators

These are helpful but currently can only help us so much.  There are resources to help fill in the gaps such as:

  • The American Institute of Certified Public Accountants (AICPA) has a free community service program titled 360 Degrees of Financial Literacy.  http://www.360financialliteracy.org . The goal is to help people make smart financial decisions at every stage of life.  Information is included for both personal finance and for small business owners.
  • Feed the Pig: www.feedthepig.org was designed to encourage 25-34 year olds to take control of their personal finances.

Poverty-Action.org has a paper titled Keeping it Simple: Financial Literacy and Rules of Thumb http://personal.lse.ac.uk/fischerg/Assets/KIS-DFS-March2013.pdf .  The research suggests that reducing complexity can improve effectiveness. Rather than teach double-entry accounting, working capital management, and investment decisions to some business owners, Rules of Thumb could be used. Most of us use some of these in our personal life, but as a country we do not do a very good job in practice.

The Council for Economic Education: Survey of the States 2011: The State of Economic and Personal Finance Education in our Nation’s Schools http://www.councilforeconed.org/news-information/survey-of-the-states/ includes a lot of information that is important for our kids, ourselves, and our economic future.

We are all busy and we usually only seek information when we need it; i.e. “just in time education”.  Some people like to learn on their own and for you, I have provided some on- line resources. Others like to learn with someone and for you, perhaps, I can be your partner. As Benjamin Franklin said, “an investment in knowledge pays the best interest”. Please let me know if I can help.

Email: debfoxfinancial@gmail.com

I hope this information helps to empower you to navigate life’s uncertain financial seas. Life is meant to be good; enjoy.