Monthly Archives: July 2018

Woody Harrelson Is a Terrible Debt Collector

He was bad at his paper route. And not a great hype man for a lame gym. But as the actor tells Wealthsimple, he’s gotten better at money over the years, partly by not needing to spend much of it.

I was 9 or 10 years old when I got my first job, delivering the Houston Chronicle. Here was the problem: I was good at delivering newspapers, but I was terrible at collecting money from my customers. When I did my collection rounds, a lot of people would be like, “Hey, can you come back tomorrow?” And I’d say, “Sure, no problem. Sorry to bother you.” But day after day they always had an excuse or they’d pretend not to be home, and as a little kid, my collection efforts had no real teeth.

The way it worked, I’d buy the newspapers in bulk from the publisher as an independent contractor, and once the customers paid me, I’d turn a small profit. But despite all my hard work delivering papers, with my ineffective collection efforts I’d usually have a net loss. I’d hoped to make a little spending money, but I didn’t make money — I lost it. Sometimes in life, the middleman gets squeezed. On the other hand, that paper route sure got me a lot of exercise. I always try to find the silver lining.

The least expensive things can be the most personally rewarding. My wedding, for example. The whole event cost a total of $500.

In my early 20s, I was living in New York City, and I’d take just about any job I could get. I waited tables mostly, but I also did all kinds of weird side gigs. One time a friend of mine started working at a cheap local gym that happened to have some famous members, like Madonna and the guys from Kool & the Gang—this was 1983, and their song “Celebration” was all over the airwaves. The owner of the gym wanted to do some grassroots advertising and hired my friend and me to ask other neighborhood businesses — bars, coffee shops, laundromats — if we could place ads for the gym inside their store windows. The lure for them was that if they let us put up a poster, they’d get a free membership to the gym and might catch a glimpse of Madonna or Kool & the Gang. For us, we got a couple bucks for every poster a business owner agreed to hang. It was a lot of door-to-door hustling. Fortunately, my people skills had improved since I was a kid with a paper route. But the posters didn’t seem to make a difference: Even with Madonna, “Celebration,” and all our grassroots energy, the gym didn’t survive. That said, I met a lot of interesting people around the neighborhood, and the money in my pocket helped me get by, so I don’t count any of it as a wasted effort.

Wealthsimple is investing on autopilot

Over the years my relationship with money has shifted in some ways, but in other respects, it has stayed the same. These days, when I go into the grocery store, I’m not calculating the cost of each item. I don’t need to be as penny conscious as I used to be — I just grab and go. But I was raised to be conservative in my spending habits, so I always seek a balance: I don’t want to be a spendthrift, but I also don’t want to be needlessly lavish.

Every once in a while I treat myself with a special purchase. The most extravagant I’ve been is when I bought a Tesla not too long ago. I like the way it drives, and I really like the idea of reducing my carbon footprint. But often, I’ve found, the least expensive things can be the most personally rewarding. Take my wedding, for example. The whole event cost a total of $500.

Are You Living Paycheck-to-Paycheck?

A large number of American households live from one paycheck to the next. This number has gone down since September 2016, according to a survey conducted by McKinsey & Company, where consumers expressed more confidence in their financial stability compared to the last eight years. But about 24% of the participants in McKinsey’s study still lived paycheck to paycheck. This means they struggled to cover their basic expenses and had empty checking accounts until the next pay period. With families to support and unexpected additional expenses, this can be a very difficult experience for anyone to go through.

The problem can arise for several reasons, but the main driving factor is not having enough financial knowledge. When you are financially knowledgeable, you understand the essentials of budgeting and how managing your money will help you be stable and reduce anxiety and stress.

Creating a Budget Can Help

If you are living from one paycheck to the next, the first thing you need to do is make a budget. What are your expenses? What are necessary and what are extraneous? How much do you need to have every month for your required expenses (rent, food, insurance, etc.)? When are these payments due? Cash flow also can affect payments significantly and your stress level. If you are getting paid only on the 20th but your payment is due on the 1st, you are always going to be behind.

The first step you can take to budgeting and healthy money management is to monitor your expenses. You must know how you are spending your money, down to the dollar. It is essential that you know how you are spending your money and on what.

Begin by monitoring your spending for a couple of weeks to gauge your habits. Keep track via an online software system such as mint.com, or at the very least, a notebook. Use a method and tool you like. The most important thing is that you are aware of all your transactions.

Handling Additional Expenses

Budgeting will also help you prepare for unexpected expenses, emergencies and seasonal expenditures. You can see from your prior spending where your dollars are going. The more you prepare, the better it will be. You can also include gifts, holidays, vacations and other expenses. Budgeting early on prevents headaches later!

Next, do the math. What is essential? See where you can trim. This is easier if you have a salary. You may be getting a fixed amount every month you can work with. Look at your pay stubs to figure out your average income after tax.

After you subtract your essential expenses such as rent, food, insurance, etc., do you have any money left over? This is money that will need to go towards savings and also can be used for discretionary spending.

Lowering Personal Spending

See where you can lower your spending. Budgeting takes time. No one is a pro at it immediately. You have to adjust that budget based on your lifestyle and what you’re learning about your spending habits through tracking over time.

Find ways to increase your income through an extra job, extra hours at your current job or other ways to get paid.

Finally, be realistic. If you are too drastic in your spending cuts, you will find it hard to stay motivated and may miss your target goals. Give your budget some flexibility so you can stay on track and keep going forward.

 

Financial Tips

Keys to Financial Success Although making resolutions to improve your financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are my top ten keys to getting ahead financially.

1. Get Paid What You’re Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule.

Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you’re paid, you’ll never get ahead if you spend more than you earn. Often it’s easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn’t always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It’s not a four-letter word. How can you know where your money is going if you don’t budget?

How can you set spending and saving goals if you don’t know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.

3. Pay Off Credit Card Debt

Those little pieces of plastic are so easy to use, and it’s so easy to forget that it’s real money we’re dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don’t, and end up paying far more for things than we would have paid if we had used cash.

4. Contribute to a Retirement Plan

If your employer has a 401(k) plan and you don’t contribute to it, you’re walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you’re already contributing, try to increase your contribution. If your employer doesn’t offer a retirement plan, consider an IRA.

5. Have a Savings Plan

You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 5{54b029a5ca0a1b2a6802487bc2bca822a59ec715333e1a02eb6833dc8d8a033a} to 10{54b029a5ca0a1b2a6802487bc2bca822a59ec715333e1a02eb6833dc8d8a033a} of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.

Should You Pay in Cash?

Articles and books on personal finance generally pack in as many tips as possible in an effort to make at least a couple essential ones stick. This shotgun approach is worth it if it helps readers learn to pay themselves first, spend less than they make, and so on, but saying too much sometimes means explaining too little.

In this article we’ll focus on just one technique to improve your finances, by taking a close at how making purchases with cash can contribute to your ability to budget, save and invest.

There is also the security advantage with debit and credit cards. Debit cards are protected by your personal identification number (PIN) and credit cards by your signature (and for some cards, a PIN number too). Cash is only protected by your ability to defend it should someone else want to take it from you.

Moreover, cards are as widely accepted as cash – with the exception of a few mom and pop shops. And yet, from a personal finance view, cash is almost always the better choice for making a purchase. Here’s why:

Overpaying

One of the drawbacks of credit and debit cards is that they encourage you to spend more than you intend to by giving you easy access to more capital. With cash, spending more than you intended requires going to a bank or ATM to get more and then going back to the store to complete the purchase. While some businesses have in-store ATMs, all charge fees, in addition to whatever fees your bank charges. For most people, these factors will cause them to reconsider whether their budgets can handle any extra strain.

Generally speaking, only carrying the cash you are prepared to pay for a given product will prevent you from buying the next level up and paying for features you don’t need. This works for small-scale purchases, but buying a computer or a car can involve large amounts of cash that probably shouldn’t be carried around. If a check can’t be used, a debit card is better than a credit card because you are spending money you have rather than money you don’t.

Over-Shopping

Just as cards encourage overpaying for one item, they also allow you to buy more items than you mean to. Stores are set up to make products appealing in order to persuade shoppers to buy more. Sometimes a shopping list isn’t enough to protect you from impulse buys.

According to the article “Cards Encourage You to Overspend” on Soundmoneytips.com, people will spend more with a credit card compared to cash. In fact, a Dunn & Bradstreet study found that people spend 12% to 18% more when using credit cards than when using cash. And McDonald’s found that the average transaction rose from $4.50 to $7 when customers used plastic instead of cash.

So what can you do to avoid this? Only carrying enough cash to buy the things on your list can limit the damage. This is the best way to keep shopping within your budget. If you are motivated, you will find discounts or cheaper alternatives to your regular brands to make that cash go further and maybe earn yourself a luxury item.

Cash Vs. Credit Cards

Cash, for the purposes of this article, is strictly limited to money you have already earned and is sitting there for you to use. Using your Visa to take a cash advance and then carrying the cash with you will not solve the essential problem of using high-interest debt to cover your expenses.

Cash has one very clear advantage over using a credit card: If you buy something on your credit card and end up carrying a balance, or only make the minimum payment each month, you will incur interest at a rate of 15% or more of your purchase (which can have you paying $15 or more for every $100 you spend). If you save up enough cash for the same purchase, you are giving yourself the equivalent of a 15% discount by not using your card. Before you even sign up for a card, make sure you know what you’re getting into.

Idea Staycation Your Summer

As the kids finish school and the weather heats up, many people are getting excited about long-awaited summer vacations. Summer vacations are a time to relax, unwind and spend some quality time with loved ones. Big vacations, however, do require quite a bit of planning and, of course, can end up costing some serious cash, especially with a whole family in tow.

If you haven’t gotten around to making summer vacation plans, or it’s just not in the cards this year, you might be the perfect candidate for a summer staycation. (A staycation can be just as enjoyable as a vacation, and can enrich your life for the whole year.

A staycation is like a vacation, only you spend it at home. Instead of spending lots of money on airfare and expensive hotels, you can take advantage of the attractions your area has to offer that you never get a chance to enjoy. This includes your house – when was the last time you relaxed at home?

Get Out

Outside, that is. National parks, state parks, county parks, metro parks and nature centers all provide a place to run around and enjoy nature. As an added bonus, many are free. You can easily spend a day hiking, swimming and picnicking in your local park.

A rainy day during your staycation is a terrific opportunity to visit a local museum or two. Art museums, aquariums, planetariums, science museums and natural history museums can be enjoyable and interesting. You can search for museums at the American Association of Museum’s website

Get Active

Take advantage of the local swimming pool, tennis courts, golf course or skating rink. Go for a bike ride, a walk, or try a new sport. Dust off the old baseball mitts, soccer balls and Frisbees and have fun.

Get Festive

Summertime is usually ripe with festivals in one form or another. Your local newspaper or Chamber of Commerce can keep you up to date with goings on. In addition to daytime festivals, many locales host free music nights during the summer months.

Learn Something New

Have you always wanted to learn how to throw pottery or paint with watercolors? How about cooking Cuban food or home-brewing beer? Your local recreation department or community college probably has a great choice of classes to get you started. Many of them will be one-day introductory classes that won’t require a huge investment.

Be Pampered

With all the money you’re saving on your staycation, you just might be entitled to a trip to the local spa for a massage and facial. Most spas do require advance reservations, and many offer specials and packages so be sure to ask.

Tell Ghost Stories

Pitch the tent and build a small fire – in your back yard. Camping in the backyard is a fun and easy way to camp. You can chase fireflies, sing songs, look at the stars and roast marshmallows (or make s’mores: roast a marshmallow until golden brown, place between two graham crackers with a piece of chocolate and squeeze together).

 

A Few Financial Basics

1. Create a Financial Calendar

If you don’t trust yourself to remember to pay your quarterly taxes or periodically pull a credit report, think about setting appointment reminders for these important money to-dos in the same way that you would an annual doctor’s visit or car tune-up. A good place to start? Our ultimate financial calendar .

2. Check Your Interest Rate

Q: Which loan should you pay off first ? A: The one with the highest interest rate. Q: Which savings account should you open? A: The one with the best interest rate. Q: Why does credit card debt give us such a headache? A: Blame it on the compound interest rate. Bottom line here: Paying attention to interest rates will help inform which debt or savings commitments you should focus on.

3. Track Your Net Worth

Your net worth—the difference between your assets and debt—is the big-picture number that can tell you where you stand financially . Keep an eye on it, and it can help keep you apprised of the progress you’re making toward your financial goals—or warn you if you’re backsliding.

4. Set a Budget, Period

This is the starting point for every other goal in your life. Here’s a checklist for building a knockout personal budget .

5. Consider an All-Cash Diet

If you’re consistently overspending, this will break you out of that rut. Don’t believe us? The cash diet changed the lives of these three people . And whenthis woman went all cash, she realized that it wasn’t as scary as she thought. Really.

6. Take a Daily Money Minute

This one comes straight from LearnVest Founder and CEO Alexa von Tobel, who swears by setting aside one minute each day to check on her financial transactions. This 60-second act helps identify problems immediately, keep track of goal progress—and set your spending tone for the rest of the day!

7. Allocate at Least 20% of Your Income Toward Financial Priorities

By priorities, we mean building up emergency savings, paying off debt, and padding your retirement nest egg. Seem like a big percentage? Here’s why we love this number .