Sunday, September 28, 2014

What You Think Determines How You Spend Money

There are thousands books available that talk about how to save money, spend money wisely, get out of debt, increase your credit score or invest your money.  None of these books can help you if you don't take the time to realize how your thinking affects your spending habits.

Money can be used to help you achieve your dreams and improve your life for the better. How you spend money can help identify any painful or traumatic experiences you have had with money, overcome those and move on to have happy experiences with money. You must learn how to remove your negative emotional attachments to money such as fear, doubt, worthlessness, stress, depression, guilt, hurt, jealousy, envy and anger.

Negative thoughts become negative feelings. Negative feeling become negative words, negative words become negative actions.  If you continuously make negative statements about your financial situation you will manifest those statements into reality. To change the way you think about money you have to be willing to make sacrifices and be willing to do something different.

Financial Planner Vickie Champion has a quiz that determines if you need to change your relationship with money.  The quiz can be found at The first step to change the way you think about money is to admit that there is a problem. By doing this you will be able to eliminate those negative thoughts, beliefs and emotions that are attached to money and be able to turn them into positive, reinforceable, thoughts that will manifest themselves into abundance.

You will continue to be poor if you:

  1. Believe you will never have enough
  2. Believe your situation will never improve
  3. Believe you will always be poor or always be in debt
  4. Spend money based on how you feel or peer pressure to have a certain lifestyle
  5. Buy more needs vs. wants
  6. Are unable to buy or pay for basic necessities
  7. Live paycheck to paycheck
  8. Don't have a monthly budget or don't stick to your budget
  9. Don't have a saving or retirement account
  10. Don't have health, life or disability insurance
  11. Have creditors calling your house day and night or sending harassing letters
  12. Are depressed and stressed out over your money situation
  13. Are afraid to spend your money
  14. Spend more than you earn
  15. Have credit cards that are maxed out
  16. Have bad credit
  17. Use risky financial products such as payday loans
  18. Buy things to fill a void

Here are 8 steps to change the way you think about money which will help you improve your financial situation:

  1. Remove the following phrases from your vocabulary: I can't, I don't have, maybe, I hope, possibly, hopefully, I will never be able to, I am a loser, I am broke, I have nothing, I don't have any money, I will have to work until I am 65, I will never be able to buy a house, the more I make the more I will spend, money is the root of all evil, money just causes you to have more problems, I am not good with money, etc.
  2. Be thankful and responsible with what the money you have now. If you cannot be thankful and responsible for what the money you have now, how will you be able to handle your finances if you gain more money in the future?
  3. Think about your childhood and identify any traumatic or painful experiences or beliefs you had about money and write them down.
  4. Write down why you felt that way.
  5. Next write down how those thoughts have affected you as an adult.
  6. Ask yourself if you truly believe those thoughts, have they just become habits or someone else's thoughts projected on you. If they are someone else's thoughts projected onto you then you can easily eliminate those. If they are your own thoughts, then you had to make a hard decision and commitment to yourself that you will stop having negative thoughts about money.
  7. Each time you have a negative thought or make a negative statement about money or your current financial situation and immediately write down why you feel that way. Then write down a positive statement that is the exact opposite of that negative thought.  If you need additional reinforcement buy some books on positive affirmations. You can also put an empty jar or water bottle somewhere where you will see it often and place $5 in the jar every time you think or speak a negative thought about money.  Repeat this for 30 days. By the end of 30 days you will have begun to change your thoughts about money. Whatever money you have in the jar after the 30 days use that money to pay a bill, put in a savings account or investment account.
  8. Set a monetary goal that you wish to accomplish and a deadline for that goal, i.e. I will pay off my Visa credit card by June 30, 2015. Once you accomplish your first goal continue to make additional financial goals and continue this throughout your life and you will see your financial situation improve and your negative thoughts turn into positive ones.

You must know and believe that money does not make you smarter, nicer, more successful, more intelligent or a better person.  Your character determines all these things not money.  If you were a mean person when you had a few dollars you will continue to be a mean person when you have more money.  Once you start changing your thoughts about money you will start to see a change in your financial situation. It may not be right away but things will change for the better.

I leave you one of my quotes, "Money has the ability to generate debt or generate wealth, you make the choice".

Wednesday, September 24, 2014

How to Respond When Millenial Children Ask for Money

According to NEFE:  50% of parents are providing housing, 48% are helping with living expenses, 29% of giving money and 28% are helping with medical bills.  It is important to clarify expectations when helping adult children financially. Some parents don’t want to see their children suffer but in some cases parents are hindering instead of helping their children. This is especially true if children mismanage their money or make bad life decisions.

Parents have to be cautious and prevent taking on their children’s problems and making them their own.  Here are some questions to consider before loaning money to adult children:

  1. Decide if it will be a loan or a gift?
  2. Will you charge interest?
  3. What are the consequences if they don't pay the money back?
  4. Will the loan you give put your relative in a financial bid?
  5. Is the loan for a legitimate reason?
The YOLO Generation: How Their Financial Priorities Differ
  1. Taught to use credit cards as their primary means of payment.
  2. Don’t think about the future and only live day to day.
  3. Assume their parents will take care of their financially.
  4. Assume they have plenty of time to save for retirement, buy a home, etc.
  5. Lack basic money management skills.
  6. Reluctant to take advice from others – assume they know everything.
  7. Feel credit cards are the best way to track their spending.
  8. Make purchases on credit and make plans to pay them off in a few years instead of a few months. Don’t realize buying with debit cards is a better way to track spending.
  9. Believe they will have an inheritance so don’t worry about saving for retirement.
  10. Use extra money for fun instead of saving – don’t understand the importance of saving.
  11. Don't understand the costs associated with having a credit card and have too many credit cards.
  12. Impulse shoppers - buy what they want when they want it, don’t negotiate, not consumer savvy.
  13. Consider the environment when making purchases.

Here are some tips to use when children ask for money:

  1.  Pay yourself first.  Pay your bills first to keep a roof over your head.  If you have any additional money left over you can use a portion of that to help your children.
  2. See where you are. Determine if you can afford to help financially, if not, provide your children with other alternatives.
  3. Save.  Continue to save money while you are helping your children.
  4. Don’t dip.  Don’t dip into your retirement or take out a loan to help children. 
  5. Debt.  Don’t go further into debt helping your children. Don’t co-sign for a loan or open joint credit card accounts.
  6. Advice.  Give advice on how to manage finances and deal with problems. Be as supportive as possible and try to see your children’s point of view.
  7. Provide resources.  Provide resources such as social organizations that can help financially.
  8. Set a limit.  Set a limit on how much you will help and stick to it.
  9. Draw up a loan agreement.  Sign a contract that includes a formal letter stating the terms of the loan and when the loan must be paid back.
  10. Don't be a sucker. Don't fall for the tears, sobs and emotional pleas for help from adult children who do not manage their money wisely. Don't let adult children bully you into giving them money.
  11. Don’t give money. Don’t give money directly. If your children need money to pay bills ask for the address and send the money directly to the company.  If your adult children need spending money they should find ways to generate income.

Saturday, September 20, 2014

How to Effectively Invest Your Money in 2014

Countless people ask for advice from friends, co-workers, family members, strangers and their financial planners about what they should do with their investments or retirement plan.  Many people panic or spend all or a large portion of their retirement money or moved their retirement money to a savings account, CD or hid it under their mattress when an economic crisis occurs. This is least effective decision. 

Don’t get caught up in the hype - investing in the latest tip, follow a friend or family member’s advice without doing research first. Follow the rule of 72 – your money doubles every 7 years, it is not the timing of the market, it’s the time in the market.  Keep your money invested for the long haul. Don’t take money out based on economic changes.

Every investor has different financial goals and objectives and should work with a financial planner to assist you with meeting your goals.  Financial planners have expertise in how to survive the ups and downs of the stock market and can provide the best advice and if and when you should move your money.  Here are 21 tips to help you invest your money effectively in 2014.

When to invest
  1. As soon as you start working or as early as elementary school.  If your company does not offer a retirement plan open your own IRA.  You will need at least 30 years of investing (depending on your salary) to have enough money for retirement.
  2. If you plan on getting married
  3. If you plan on having children
  4. If you are part of the 99%

How to Invest
  1. Employer. Sign up for your employer's retirement plan and take advantage of matching contributions. You will need at least 70% of your income during retirement so contribute as much as you can each year.
  2. IRA. Setup a separate IRA using automatic paycheck deduction to help reduce taxes.
  3. Brokerage. Invest with an established investment company or brokerage company such as Charles Schwab or Price Waterhouse Coopers.
  4. Mutual Funds. Invest in mutual funds.
  5. Stocks. Purchase stocks that offer dividend reinvestment. Also purchase stock in companies you do business with or purchase products from. If you shop at Target frequently purchase a share of Target stock.
  6. Businesses. If you have some extra money you can invest in companies that never go out of business: grocery stores, gas stations, car repair shops, pharmaceutical companies, information technology companies.
  7. Diversify. Diversify your portfolio to minimize losses.  Put a portion of your money in stocks/mutual funds, a portion in low risk investments such as bonds and a portion in medium risk investments such as large cap funds.

Where to invest
  1. Mutual funds
  2. Individual stocks
  3. Bonds
  5. DRIPS (Dividend reinvestment plan)
  6. Options
  7. Futures
  8. Real estate
  9. Precious metals
  10. Art