Top 5 Money Myths

Top 5 Money Myths

Top 5 Money Myths Exposed

Due to the coronavirus, high school and college commencements in general, are being held online. For the college Class of 2020, we have some financial advice to offer. Plus, we will expose the top 5 money myths that hopefully will get you started down the right path.

Based on personal experience, I’ve come across young graduates that are of the mind-set “let’s just kick back & be young for the time being and adulting will kick in when it’s ready.” As I look back now, this is not what I would recommend to 2020 grads or for any student.

My best recommendation to you is to get your finances in order as early as possible and don’t postpone it. The following are 5 money myths that really need to be debunked, once and for all.

Myth 1. To create a budget means you can only buy things you need, and not what you may want.

A proper budget is a means of allocating your money to cover your expenses and to place a certain amount in savings and retirement. A good budget to see this in action is the 50/30/20 budget. Many young adults find this one easier to understand and follow.

A part of these money myths is thinking that a budget is supposed to stop you from having any fun in life. Instead, think of it as one of the best ways to develop healthy financial habits. The key to this budget is to calculate your take home pay and work from there.

50% of that amount goes to cover rent or mortgage payment, utilities, transportation, insurance – essentially all of your basic needs. 30% is used for vacations, travel, clothing, other items that wouldn’t be covered by the 50% category.

The remaining 20% goes to set up an emergency fund, retirement, and debt retirement. By debt retirement, we mean all of those nasty credit cards that take forever to pay off. Payoff all short-term debt before starting to pay extra on your mortgage.

Top 5 money mythsThe 50/30/20 budget, if followed carefully, will help you to develop good financial habits and eventually, debt free. Watch the charge cards. They can be too tempting for some individuals. If you can’t payoff the card balance in full each month, stay away from them.

Healthy financial habits also include setting a consistent amount aside from each paycheck.

Myth 2. Why should I save for retirement at my young age?

Again, from experience, you’re never too young to start. The earlier that you begin to save for retirement, the more comfortable you will be in retirement. There are so many Americans who are ready for retirement and don’t have enough money saved. Some will be working until the day they die.

If you’re fortunate enough to be able to contribute to an employer sponsored 401(k) account or an IRA where the employer matches a certain percentage, take advantage of it. Put as much in that you can afford,  to start, and increase the amount as you go along.

It didn’t take the current coronavirus long to hurt our economy. Many, many jobs were lost, some permanently. Many individuals getting near retirement will have to postpone that date, or simply cancel it as long as they are able to work.

As an example, take a person at age 25 who saves $1,000 a month for ten years using an investment rate of 7%. When he gets to be 65, he will have about $1.4 million. If another person started at age 35 with the same parameters, he would end up with about $700,000.

The amount that you save each month is important, but it doesn’t have to be a large sum. The most important thing is compounding. The longer your money is invested, the more that you will have and this is why you need to start at an early age. This alone should debunk the money myths.

Myth 3. Using a credit card will just get me into heavy debt.

It’s true that it can for some individuals, and that’s why you need to be responsible and need to build and maintain a good credit history. Building a good credit score now will benefit you in the future. Most individuals are familiar with the FICO score, but there are many more. The two most lenders use are FICO and VantageScore.

Your credit score is a three-digit number assigned to you by the credit scoring programs. It tells lenders how much of a risk they are taking by advancing you credit. The credit scoring programs vary in what they consider to be the most important factors, so we’ll use FICO, who is the most familiar.

Top 5 money mythsThis data at FICO is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

It’s important that you choose the right credit card when you begin. Some have annual fees and some have many other options. Read the fine print, review the fees and other charges, especially the interest rate.

To stay on track while you develop healthy financial habits, use the card for normal monthly expenses and pay it off before the end of the month. Don’t use the card for long term expenses such as financing something you bought on impulse.

Myth 4. Can I negotiate my salary for an entry-level job?

Recent graduates are of the opinion that they’re not experienced enough to be able to negotiate for more money when applying for a new job. Studies done show that only about 39% of new employees negotiated their salary. Another one of the money myths.

Just be careful and diplomatic when doing this. You don’t want to get passed over for the job for being too aggressive. Before considering negotiating, do some research. Find out what the industry’s pay on average is for your job.

Some of the factors used in doing this are experience, the job title, degrees required, industry, and especially the area of the country and/or city where you will work.

Myth 5. Will I ever be able to pay off all of my student loans?

You’re probably aware of the current student loan crisis with so many of them in default for non-payment. Plus, the very high tuition costs have increased the average loan amounts quite a bit. It’s no wonder that many new graduates are concerned that they’ll be paying on these loans when they reach retirement.

Even with the government postponing payments and even forgiving some others, student loan borrowers need to cut expenses as much as possible and apply that extra money to the student loans.

One well known financial counselor, who shall remain nameless, has suggested moving back in with your parents to cut more costs. Sorry parents, but sometimes this is necessary. Especially for the graduates that have postponements and no job prospects.

There’s a lot of scary things happening in the world today, and being back in your parent’s home can be tough. It’s okay to treat yourself once in a while if you’re able to, but stick with your budget. One of the money myths again.

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4 Basic Steps on Saving for Retirement

4 Basic Steps on Saving for Retirement

4 Steps on Saving for Retirement & Why You Should Start Early

It’s safe to assume that most people will agree that having a good amount of savings before you retire is something that’s really important. Once you stop working, even if you do get a pension, having a nice cushion of money to pay your bills, move, go on vacation, or spoil your grand kids with will be really nice!

In fact, a study conducted in December of 2019, showed that almost half of all Americans made the resolution to save more money in 2020. It ranked just as much in importance as getting a lot more exercise, eating healthier and losing weight.

Saving for retirement can be tough, especially if you’re living paycheck-to-paycheck or don’t have a 401(k). Regardless of your situation, there are a few great tips for saving for retirement that you and your family can start implementing today.

Prepping for your retirement plan

STEP 1 – Know how much to save

Regardless of your retirement goals, or if you have yet to make any, good rule of thumb when it comes to saving for retirement is to save at least 15% of your income.

STEP 2 – Set a retirement goal

In order for you to reach your goals, you have to know what they are first. You need to begin by sitting down and mapping out exactly what your retirement plan looks like. Will you move to the beach? Finally buy that car of your dreams? Sell your house and move into a condo?

After you decide on your retirement goal, you’ll have to figure out the logistics for it. How long will it take, and how much money will you need? Are there initial costs or will they be steadily distributed over time?

STEP 3 – Pay off debts

You can’t really save money at all if you are still in debt! Debt is a huge reason why people of all generations are unable to save for retirement. The most important debts to get out of the way are credit card debts. Things like car payments and mortgages that have lower interest rates and are spread out with a specific plan of payment aren’t as crucial to pay off.

STEP 4 – Cut back on non-essential spending

This isn’t to say that you can’t  have fun or go on vacation every now and again, but a recent study showed that the average American spends around $1,500 every month on non-essential items.

Even if you can cut your spending by $150 a month, that’s almost $2,000 a year that you can save toward your retirement plan! See if you can cut costs by cancelling out things that you don’t use or need like recurring subscriptions or cable.

Invest your income

If you’ve got a 401(k) though your employer and they match your contributions, make sure you’ve invested at least up to what they will match.

If you have a traditional 401(k), talk to a financial consultant about opening up a Roth IRA too. A Roth IRA is another version of a savings account for retirement. With this type of account, money that you put into it has already been taxed. After a period of 5 years, any money that you withdraw is all tax free, including the interest earned.

Wrapping up…

With the initial savings steps for retirement and taking advantage of a 401(k) and Roth IRA, you should be on the right path to saving for retirement! It will save you and your family a lot of stress in the long run and allow you to be able to fully enjoy the later years of your life. You’ve worked really hard for a long time and deserve to enjoy the fruits of that labor!

If you need any help saving, paying off debts, or setting up a 401(k) or Roth IRA, contact one of our experts today and we’ll get you on the right path.

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Retirement Savings By Millennials

Retirement Savings By Millennials

Retirement Savings – Issues That Worry Millennials

Just when you thought that retirement savings meant putting away as much money as you needed for your lifestyle…now, making plans for unknown factors creeps in.
For the millennial generation, unfortunately, much is unknown. There are four primary concerns that we will list here and then elaborate later on:

1. Will social security and Medicare survive?
2. Will they have to take care of their elderly parents?
3. What will future health care costs be?
4. Are their retirement funds being managed properly?

Knowledgeable financial planners say View full post…

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How To Retire Early

How to Retire Early

How to retire earlyWe all have dreams about our future.  Maybe your dreams look like this:  by the time you are middle aged, you are living comfortably but still working hard and smart.  When you are older and have figured out how to retire early, you are living the good life without a care in the world.  You’ve had great success and look back on your past with great pride.

Life has a way of getting ahead of us all before we know it.  Sometimes our dreams get lost in the fact that time passes too quickly with too much to do, much less thinking about how to retire early.  We struggle more than we ever thought we were going to.  We tend not to focus on our retirement because we are so busy trying to be a success right where we are at.  Most people are really good at living in illusion and ignoring the reality.  Sometimes if people look at the future, they have to truly admit where they are.  Too much of ignoring the reality leads to a life that is not very productive; as the road becomes harder to travel, the illusions begin to crumble in a very painful way. View full post…

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