saving

5 Financial Accomplishments Millennials Can Be Proud Of

Tim Lemke — Thu, 15 Nov 2018 08:01:11 +0000

Millennials get blamed for a lot of things. Often, they're accused of being spendthrift and irresponsible. Critics assume that Millennials are unable or unwilling to save money or invest smartly.

Much of this criticism is unfair. In fact, if you look at what Millennials have accomplished with their finances, they have a lot to be proud of.

1. More than one in three Millennials own a home

Pew Research Center reports that about 35 percent of Millennials now own homes. That's still lower than the national average overall, but many experts say that an increase in Millennial homeownership in recent years has helped boost the overall rate of ownership to its first increase since before the Great Recession. Given the headwinds facing Millennials (high housing costs, student loan debt, stagnant wages), a homeownership rate of more than one-third is nothing to sneeze at. (See also: 10 Reasons to Cut Millennials Some Slack About Their Money)

2. Millennial homeowners have good credit

Research from Ellie Mae, a platform provider for the mortgage finance industry, showed that mortgages to Millennials weren't going to people with terrible credit. In fact, the average FICO score among Millennial borrowers in 2017 was 723, which falls in the "good" range. (See also: 7 Ways Millennials Are Better With Money Than You Are)

3. Millennials are hitting their savings goals

A 2018 Bank of America survey revealed that about two-thirds of Millennials who have a savings goal are able to stick to it each month. In fact, 16 percent of Millennials have $100,000 or more socked away in savings. And 59 percent of this demo feels financially secure. These stats directly contradict the assumption that Millennials don't know how to save and waste every dollar they earn.

4. Millennials ask for raises, and often get them

If you're a Millennial, there's a good chance you've summoned the courage to ask for a pay increase, and have gotten one. Bank of America reported that 46 percent of Millennials have asked for a raise in the last two years, and 80 percent of those people have received higher pay. Baby Boomers, Gen Xers, and other generations have lagged behind in asking for more money. (See also: 6 Ways Millennials Are Working Less and Earning More)

5. Millennials have made investing cheaper and easier

It used to be that investing was exclusively for the elite, and you could only trade stocks through a human stockbroker who charged high commissions. But in the last 20 years since Millennials began investing, costs have come down. Index funds with super-low expense ratios have revolutionized investing. Discount brokerages are engaged in a race to the bottom on the commissions charged per trade.

And there are also tons of smartphone apps that make it easier to buy even fractional shares of stock. Millennials are also responsible for the surge in new services such as robo advisors, account aggregators, and more. (See also: Here's How Boomers and Millennials Are Creating Winners on the Stock Market)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Essential Personal Finance Skills to Teach Your Kid Before They Move Out

Tim Lemke — Fri, 06 Jul 2018 09:00:10 +0000

Your child is on the verge of moving out and living on their own. Are they prepared?

Arming them with the right personal finance knowledge will give them a strong foundation to go and achieve many of their life goals. If their understanding of personal finance is lacking, they could begin their independent life on the wrong foot (and they may even come back home).

Consider these ways that you can help your child build a base of financial knowledge before they move out.

1. Show them how to budget

Perhaps the most important personal finance skill is consistently spending less than you earn. There are a million different ways to budget, and whatever works for you may not work for your child. But encourage them to develop a system to track and categorize spending and then compare those expenses to their income. Of course they'll need to account for housing, food, and utilities but also let them know it's OK to include "fun money" in their budget. It will help them stay motivated to stick to their budget. (See also: How to Help Your Kid Build Their First Budget)

2. Teach them how retirement plans work

If your child is moving out, they likely have some earned income. That means they can start contributing to a Roth individual retirement account. They may scoff at the notion of saving for retirement so early, but if you help them open a Roth IRA and demonstrate how much money they can accrue over time, they'll get on board. Urge them to save as much as they can each month, invest in simple things like index funds, and simply watch their account balance grow over time through compounding.

If they have a 401(k) plan through an employer, take time to review the plan document with them and encourage them to contribute as much as they can. Be sure to explain the advantages of getting a company match on contributions, if one is offered. (See also: 11 Basic Questions About Retirement Saving Everyone Should Ask)

3. Explain bank interest rates

Chances are, your child already has a savings account. But it's still helpful to explain that they don't necessarily need to put their money in the first bank they see. Show them how interest rates can vary, and that it's OK to shop around for the best rates so they can earn a little extra money. Explain terms like APR and APY, and the factors that impact whether rates go up or down.

Also outline the pros and cons of placing money in certificates of deposit. These days, it's also helpful to explain that while interest rates are rising, they're still quite low, and that it might make sense to invest some funds in ways that generate a higher return than savings account interest. (See also: 12 Places to Keep Your Money Safe — And Growing)

4. Tell them about bank fees

Once your child understands how bank interest rates work, they'll need to know about the tendency banks have to charge fees to account holders. These fees could be for anything from low balances to the use of paper checks. Tell your child how they can avoid these fees by researching the best bank accounts and reading the fine print. Let your kids know that if a bank is charging too many fees, it's OK to switch to another bank that doesn't. (See also: Are You Paying These 6 Unfair Banking Fees?)

5. Teach them the pros and cons of credit cards

Credit cards can help a person establish credit, and that's important when you are starting out. And some credit cards offer nice benefits, such as cash back on purchases or travel rewards miles.

You can help your kid apply for a card, but it should come with a series of warnings. Young people must know that credit card balances should be paid off in full each month whenever possible. Show your child that credit card interest rates can be exorbitant, and that high balances can lead to a debt spiral from which they may never escape. (See also: How to Get Your First Credit Card and Build Credit)

6. Outline the pain of debt

Arguably the most important lesson you can teach your children before they leave the nest is that debt is not a good thing. Take time to explain the basics of borrowing so they understand how expenses can continue to increase if debt is not paid off. Show them calculations with interest rates for credit cards, auto loans, student loans, personal loans, and mortgages. Give them an understanding of debt-to-income ratios, and what that means in the context of their financial well-being. (See also: 8 Common Causes of Debt — And How to Avoid Them)

7. Explain the concept of net worth

When your child leaves home, they may be focused on finding a job that pays a high income. That's fine, but it's important for them to understand that income alone is not what generates financial security. It's more crucial to acquire assets that increase in value, while eschewing things that will decrease in value or be a drain on your finances.

This means saving money and investing it. It means avoiding debt. It means purchasing a home instead of renting, if possible. Your net worth — that is, the total value of your assets minus your debts — is the true indicator of your financial well-being. (See also: 6 Money Moves to Make If Your Net Worth Is Negative)

8. Urge them to shop for value

Saving money isn't always about spending as little as possible. It's also about spending your money wisely and getting the most bang for your buck. For example, if your child needs to purchase a refrigerator for their apartment, convey to them that they should seek out the best quality model at a price that fits their budget.

Shopping for value involves understanding quality and longevity of products, and knowing what features matter and which don't. It also involves doing extensive research of products and prices before you buy. Shopping for value is a skill that can be learned, and one that could save your child a considerable amount of money over time. (See also: How to Shop With Purpose — And Save More Money)

9. Teach them basic car maintenance

You don't need to teach your child how to replace a catalytic converter, but it helps if they have a decent foundation of car knowledge. Teach them how to put air in a tire and change the tire. Demonstrate how to swap out a headlight bulb and replace a hubcap. Urge them to read the car's manual and learn what all of those warning lights mean. Get them in the habit of changing the oil every few thousand miles.

Finally, teach them how to research the cost of car repairs, so they don't get ripped off at the mechanic. Your child won't be able to avoid car repair expenses, but they'll know enough to avoid getting stranded on the side of the road. Moreover, these basic maintenance efforts could help prevent the need for a major repair later. (See also: Bookmark This: Save Money With an Easy to Follow Car Maintenance Checklist)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Smart Way to Talk About Money on Your First Date

Tim Lemke — Fri, 08 Jun 2018 08:00:30 +0000

Many relationships have been known to crash and burn because the couple has differing attitudes toward money. You may have one partner who's very frugal, while another loves to spend. Other relationships fall apart because one partner may have financial troubles or large personal debts.

How can you find out early on if money issues will plague a relationship? There's no way to know for sure, and it's not a subject many want to delve into on a first date. But there may be ways to pick up some clues. Asking simple, relatively innocent questions can help you get insight into the financial habits of the other party and give you a sense of whether you may be on the same wavelength, money-wise. (See also: 5 Money Conversations Every Couple Should Have)

How can you approach the money issue on a first date?

Ask what they do

It's fairly normal to inquire what a person does for a living, and from this, you may be able to glean some information about their career goals. You then may get some sense of how much they earn or what their earning potential might be. I'm not in favor of judging a person on how much money they make, but poor spending habits combined with low income could be a recipe for disaster.

Understanding a date's career goals may also offer a clue as to whether they have student loan debt. A lawyer or doctor, for example, may have bills from law or medical school.

Inquire about their passions

People with healthy attitudes about finances are generally more inclined to spend money on experiences rather than material objects. So when inquiring about a person's interests, it helps to get a sense of what they spend their money on. Do they enjoy shopping for fancy clothes, or traveling with friends? If they are avid readers, do they collect books or borrow from the library? Do they collect high-end artwork, or are they content to just visit the local galleries?

Ask about their smartphone

This may seem a little silly, but a person's phone can be another indicator of how they spend their money. If they have the newest iPhone that just came out the day before, you can sense that they may be drawn to the newest and fanciest things. If they are still walking around with a 10-year-old flip phone, that's an indication that they are pretty frugal. A smartphone can be a key into a person's financial soul.

Inquire about their family

People's attitudes toward money are often handed down from their parents. If a person's Mom and Dad had horrible money habits, there's a good chance they will, too. If your date's parents are near retirement age, ask if they have stopped working. If so, that's a good sign that they had good saving habits that may have been passed on. But if you learn that your date's parents are calling and asking for money, that's less encouraging.

Asking about family can also give you a sense of what their parents did for a living, and the lifestyle they may be used to.

Find out where they live

You might not end up back at their apartment at the end of the night, but you may learn what neighborhood they live in. A person who is cost-conscious might live in a humble part of town with some roommates. Someone who is more spendthrift might live alone in the priciest part of the city. (But, this also may simply be an indicator of their income.) Inquiring about their housing situation might open up a conversation as to whether they are actively saving to buy a home.

Compliment their shirt

Say, "Nice shirt, where'd you get it?" Their answer could be very illuminating. An answer of, "The Versace store on 5th Avenue" versus, "Target" might offer a small glimpse into their income, spending habits, or both.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Free "Digital Retirement Coach" Aims to Take Angst Out of Retirement Planning

Lars Peterson — Wed, 21 Mar 2018 14:01:05 +0000

If you're like me, you dread thinking about retirement planning. But a new website from two nonprofit organizations, AARP and the Ad Council, incorporates a "digital retirement coach" that helps you get started with minimal pain.

That's saying a lot. According to a survey commissioned by AARP and Ad Council, 45 percent of moderate-income Americans between 40 and 59 years old said they would prefer a visit to the dentist to a meeting with a financial adviser. The same survey found that 49 percent of people in that age group were not confident about retirement planning.

To be sure, there are plenty of obstacles to retirement saving, including tight budgets and lack of financial confidence. Yet most of the 40- to 59-year-olds surveyed have already met significant financial challenges in their lives, including buying a car or a house, or paying off a student loan or mortgage. More than half have used money-saving strategies like coupon-clipping and comparison shopping.

With that data in mind, AARP and the Ad Council created AceYourRetirement.org, a free website that takes a lot of complexity and stress out of retirement saving. That's also where you'll meet a chatbot named Avo, the site's digital retirement coach. But why a chatbot?

"People already feel overwhelmed or stressed when they think about their retirement savings," says Mary Liz Burns, the Strategy Director of Financial Resilience at AARP, "and we wanted to create an empowering experience to help people get on track — they can do this! AceYourRetirement.org and our friendly digital coach, Avo are fun and accessible for everyone, and there is no judgement. As you use the site, you feel like you are simply texting with a friend."

Here's what I found when I visited.

It doesn't look like other retirement planning websites

Here's a screenshot of my visit.

It looks more like the interface on a smartphone chat or texting app than an accounting tool. There are no form fields to fill with personally identifiable information, or spreadsheets to download and save. There are no ads pitching retirement saving products (it was created by nonprofits, after all).

After you click through a few introductory screens, a smiling chatbot named Avo blinks at you and begins to ask questions. Avo is a "digital retirement coach" that makes the whole process feel friendly and supportive. You answer its questions by typing a few words in the chat window or by selecting "yes" or "no" with a slider button.

It doesn't ask you for a bunch of financial details

Avo asks your age, when you plan to retire, whether you plan to work part-time once you do, and if you have kids. Only one question is tough — the percentage of income you're already setting aside for retirement, so you may want to get a handle on that before you start.

After half a dozen or so similar questions, it returns with some advice. The questionnaire was much shorter than I expected it to be.

It gives you three action items when you're finished

Mine were:

Get paid to wait.
Picture yourself post-retirement.
What's your number?

With the action items, the website drops the chatbot and gets down to brass tacks.

"Get paid to wait" advised me to delay taking Social Security to maximize my monthly payment. It also pointed me to additional tools where I can learn my full retirement age (according to the Social Security Administration), and how much I can expect to receive once I do take Social Security.

Reading this is a little more involved than answering a chatbot's questions, but honestly, it still takes only 20 minutes max. The other two action items were more detailed and required more time — and financial details — before I could check them off my to-do list.

It's a cute face on top of a lot of retirement planning depth

Digging in on the other two action items meant reviewing my current savings and expenses to estimate my post-retirement needs and calculating how much I need to save to get there. These are the familiar calculations one finds at retirement planning websites across the internet.

Presented here as a series of step-by-step tasks, the road ahead seems a little less daunting. That's not to say the required amount that I need to save isn't daunting — it is! — but with the website's help, at least I have a number to aim for.

The website sets me on the right path, but I have to follow through

With the savings goal in hand, I have an idea of the scope of the challenge ahead, but I still have a lot of work to do. I need to increase my savings to reach that number, and there is more to that than answering questions in chat and filling in calculator fields. I need to choose the right savings vehicles, prioritize some spending, and eliminate credit card debt once and for all.

The resources included in the action items offer additional detail on how to accomplish some of these important tasks. It's still a lot of work, but at least with the provided guidance I'm more confident now that I know where to start.

Will Avo be a financial adviser in the future?

There is a lot of chatter in personal finance circles about using behavioral "nudges" to help people become better at money management, including retirement planning. Popular personal finance apps like Mint and Personal Capital make the task easier by eliminating a lot of the tedium through automation, and they make it more fun with user-friendly interfaces.

Elsewhere, financial experts often encourage us to automate saving through direct deposit from our paychecks, and there's been a shift toward making 401(k) deductions "opt-out" rather than "opt-in." When the deductions are done by default, we're much more likely to take advantage of them.

Right now, Avo does a great job helping reluctant savers get over early resistance to retirement planning. Maybe one day, Avo will work in tandem with a financial robo-adviser tied to our investment accounts to give us with more in-depth financial planning.

For now, give Avo a try and see if you don't feel more confident about retirement planning, too.

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This article is from Lars Peterson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Ways to Reverse Lifestyle Creep

Tim Lemke — Wed, 07 Mar 2018 10:01:05 +0000

As time goes on, you may find that you are earning more money than you were previously. Congratulations! That's a good thing. Unfortunately, new income often means new spending. You use higher paychecks to boost your standard of living with a bigger house, pricier cars, more costly meals, and luxury items. This is called lifestyle creep.

The problem with lifestyle creep is that things can crash down on you if your income drops. And it's not particularly easy to dial back your cost of living quickly.

If you find that you are spending more than you have in the past, it may be time to evaluate whether you are the victim of lifestyle creep. Here are some tips on getting that "creep" headed in the other direction. (See also: 9 Signs You're Suffering From Lifestyle Inflation)

1. Track your spending

Sometimes we just don't realize how much we are spending. We spend unconsciously, assuming that we're not doing anything different from what we've done in the past. We pay our credit card bills without reviewing them, barely glancing at the record of what we purchased in the previous month. This lack of attention can gradually lead to lifestyle creep.

If you begin a practice of tracking every dollar and reviewing that record on a regular basis, you'll recognize where you're making careless spending choices, and you can do something about it.

Reviewing credit card bills and bank statements is a good way to start. There are also online tools such as Mint.com and Personal Capital that allow you to aggregate accounts and see all your income and spending in one view.

2. Practice mindful spending

This goes hand-in-hand with tracking your spending. It's important to be aware of how you are spending your money. Try to get in the habit of making purchases deliberately rather than impulsively. When you intend to buy an item, ask yourself questions like, "Do I really need this?" and, "Can I get this for a better price?" Do extensive research before buying any large items. In this day and age, there's plenty of information available online about any product.

Mindful spending may even involve switching from credit cards to cash, so that when you buy something, you actually feel money going out of your hands. That sting alone can make you less likely to spend. (See also: How One Nice Thing Can Ruin Your Whole Budget)

3. Identify wants and needs

Lifestyle creep happens when you start spending money on things you want rather than things you truly can't live without. You need food and shelter. You need school books for the kids. You don't need cable television, designer clothes, or vacations in Bali. You don't need Netflix, no matter how much you've convinced yourself that you do.

If you focus on spending money on things you need and ridding yourself of things you don't, you'll find your lifestyle creeping back down. (See also: How to Resist Lifestyle Creep and Still Have Everything You Want)

4. Seek value over luxury

Reducing lifestyle creep is not about bringing spending down to zero, or even purchasing the cheapest version of any item you buy. It's about spending money in the most efficient way possible. When you seek to make purchases that are a good "value," it means you are trying to find the perfect balance between quality and price.

Let's say you need a new refrigerator. You found one at the store with the lowest price, but the reviews suggest it has poor reliability and uses too much energy. Meanwhile, you may have found a fridge that's highly-rated in terms of quality, but its price is three times higher and has features and components you don't need. The best value fridge for you is somewhere in the middle.

Finding value can come into play with any purchase, from homes, to cars, and even college educations.

5. Focus on maxing out retirement contributions

If you have a 401(k) plan, you are allowed to contribute up to $18,500 each year to help you save for retirement. If you have an IRA, you can contribute up to $5,500 annually. In both cases, you can contribute even more if you are over 50. It should be your goal to hit these maximum contributions.

It's hard to hit these limits when you are young and perhaps not making a lot of money. But as you earn more, it becomes possible. If you set a goal of maxing out these contributions, you are more likely to put any new money you get into retirement accounts than spend it.

Bottom line: Don't expand your lifestyle until you've put as much into retirement accounts as you can. If you are not maximizing the potential of your retirement accounts, you should not be upgrading your car, buying a bigger house, or doing other things that make your life more expensive. (See also: 6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future)

6. Don't go after more credit than you need

One of the ironic things about being financially responsible is that companies will make it easier for you to spend more. Credit card companies will keep your interest rate low, thus making it easier for you to borrow. They will raise your credit limits so you can more easily buy big-ticket items. If this happens, you must avoid the temptation to spend more just because you can.

It's also just as important to avoid any special efforts to expand your purchasing power, unless you have a dire need to do so. If you have a couple of credit cards with reasonable credit limits, be content with what you have. If you have a $5,000 credit limit on one card, there's no need to request a $10,000 limit just because you can. That extra $5,000 will simply serve as a temptation to spend money on items you don't need.

7. Ignore everyone else

You've heard the term keeping up with the Joneses. You may have a neighbor or friend who always seems to be getting the newest thing: a new house, a new car, expensive camps, and top-of-the-line sporting equipment for the kids. It is common for people to expand their lifestyle to keep up with friends and neighbors, and they may not even realize they are doing it.

Never forget that your money is yours alone. You must make financial decisions that make sense for you and your family. Paying attention to the spending habits of others accomplishes very little. Keep in mind, too, that while other people may appear to be living the high life, they may actually be deeply in debt with no focus on saving for retirement or other goals. (See also: 4 Money Lessons You Can Learn From the Joneses)

8. Become more aware of marketing

Whether we realize it or not, there are billions of dollars being spent every day in an effort to get you to part with your money. Commercials on television and radio, ads on the internet, and even social media posts are all working to get us to buy products and services. Granted, this is part of how capitalism and free markets work. But we don't need to fall victim to it.

It's possible to avoid making unneeded purchases simply by become more cognizant of when companies are advertising. Your buying decisions should be based on your needs, and timed according to when you are most comfortable. It's important to be stoic, even cynical, in the face of marketing efforts.

9. Change your thinking when it comes to trade-offs

As our life circumstances change, we are often forced to accept trade-offs. But we often make the wrong trade-off from a financial standpoint. We purchase a larger, more expensive house and are willing to forgo retirement savings to make it work. We accept high monthly payments and credit card debt as a trade-off for driving two brand-new cars.

Life is about trade-offs, but financial freedom is about making trade-offs that benefit your wallet rather than your ego. You desire to maximize your retirement accounts, so you are willing to avoid the $5 daily coffees to help make it happen. You don't want your children saddled with student loans, so you're happy driving the Honda Civic with 200,000 miles on it. You don't want to increase your mortgage payment, so you invest in bunk beds instead of a new house when your second kid is born. These kinds of trade-offs prevent lifestyle inflation from creeping in and taking control.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Worries You'll Always Have No Matter How Rich You Become

Tim Lemke — Mon, 26 Feb 2018 10:00:06 +0000

Benjamin Franklin once said, "Do not worry about trouble, or what may never happen. Keep in the sunlight." In other words, don't fret.

But it's not always easy to follow Ben's advice. Worrying is a normal, natural thing, and it happens to the poorest and wealthiest among us. Money can help ease some fears, but there are ultimately things that will cause us to worry no matter how financially secure we are.

Here are things that we all worry about, regardless of our income. What else keeps you up at night?

1. Your health

One of the sad ironies about building wealth is that once you actually have accumulated enough to achieve financial freedom, you may not be young enough to enjoy it for very long. As much as older Americans worry about having enough saved, they also worry about whether they'll remain healthy enough to have the active and happy retirement they dreamed of.

Financial wealth can help you get access to good medical care, but aging can win over even the richest among us. And even young people with money worry about falling ill or getting injured. The good news is that this worry can motivate us to do those things necessary to maintain good health, like eat well and exercise. (See also: 9 Problems You Can't Solve With Money)

2. Your loved ones

Having money may ease your worries a bit, as you can help protect your loved ones from financial hardship.

But you can't protect them from the consequences of their own bad choices. You can't cure their illnesses. You can't prevent them from having their hearts broken. Their health and happiness will be a perpetual source of worry. Even when we're old and gray, we'll still worry about our kids and other relatives. We'll always worry about our spouses. But that's OK. What kind of monsters would we be if we felt differently?

3. The health of our institutions

We can do a lot on our own to ensure financial security, but much of it also depends on outside entities to function properly. We need the federal government to operate smoothly and play a role in keeping our economy stable. We need a banking system that works. We need stock markets that operate effectively and in the best interests of investors. We need education systems that are working to make America stronger and smarter.

At various times in recent years, these institutions have had shaky moments. No matter how wealthy you are, you'll always be keeping an eye on our governmental and financial systems to see if they are working the way they should.

4. Global conflict

There's a reason the stock market took a major dive after the events of September 11, 2001. That's because as a nation, there was genuine fear that we'd be roped into a major conflict or war that might have hurt our nation's economy. We worry about war and global instability due to the potential impact on our finances.

But we also worry about global conflict because we are human. Having money in the bank means nothing when you're worried about terrorism, or concerned about a friend or loved one serving overseas. We worry when we hear about global tensions that might turn into something worse. We actually live in one of the most peaceful times in human history, but until there's peace on earth we will worry, regardless of how wealthy we are.

5. Change

Fear of change is so prevalent that it actually has a name: metathesiophobia. It is natural for people to worry about changes in their lives, particularly those they can't control. Having wealth can help mitigate some negative impacts of change, but there is some change that is inevitable no matter how financially prepared you are.

In fact, some of our biggest life changes — retirement, kids moving out, new living situations due to health declines — come later in life when we have achieved financial security. Consider that many older workers choose to remain in their jobs for no other reason than they fear the lifestyle changes that retirement might bring.

Change is inevitable, no matter how rich you are. Do you have the ability to embrace it when it comes?

6. Money

Yes, you'll worry about money even when you have a lot of money. That's because there's a good chance you've spent all your life worrying about having enough. So even when you reach a point when you're financially comfortable, your brain defaults to worrying. Even when you're rich, there may be things that happen to throw you financially off track.

The stock market can take a dive. Your family may be faced with a string of bad events. You never know what's around the corner. We all want to reach a point when we don't have to worry about money, but perhaps worrying about having enough money may be the very thing that ensures we have enough. (See also: Why Even Millionaires Aren't Happy About Their Finances)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Simple Money Milestones Anyone Can Hit

Tim Lemke — Wed, 15 Nov 2017 10:00:06 +0000

Achieving financial freedom is really about setting big goals and going after them. But these goals can sometimes seem overwhelming. Saving enough for retirement, a new home, or a college degree is a big task. Eliminating debt can also feel impossible.

That's why it helps to set smaller, more manageable goals and work from there. You won't save all of your retirement nest egg or pay off all of your credit cards tomorrow, but there are steps you can take to build your confidence and get you on your way. Here are some achievable financial milestones that you can go after.

1. Open a retirement account

Just open the account. You don't even have to invest more than the minimum: Simply take that first step and open your 401(k) or individual retirement account. By checking this off your list, you have removed a big mental hurdle from investing, and you may even begin getting matching contributions from your employer even if you are not contributing much yourself.

With the accounts open, you'll be able to begin putting more sizable chunks of money aside and buying stocks and mutual funds when you feel you are ready. But if your accounts aren't open to begin with, you might talk yourself out of getting started. (See also: 5 Retirement Accounts You Don't Need a Ton of Money to Open)

2. Be independent

Do you still rely on your parents or other friends and family for financial help? Do they assist you with rent payments, credit card bills, and other expenses? Getting help from others isn't a bad thing, but there comes a time when a young person must learn how to maintain financial independence.

This means being able to live on your own, pay your bills, and avoid debt without seeking "loans" from the Bank of Mom and Dad. This is not always easy, especially in an era when many young people have student loan debt — but this should be a goal for anyone in their 20s. (See also: 11 Money Habits That Make You Look Financially Immature)

3. Reduce your credit card debt

Ideally, you want to pay off the whole credit card balance as soon as possible. But for some of us, we just want to keep the balance from growing. Sometimes, we're stuck in a spiral of making minimum payments, while interest charges are adding to the debt. You may not be able to get rid of your credit card balance overnight, but you can take a big step toward that goal by simply reducing the balance the next time your bill is due.

This will mean paying substantially more than the minimum required to make a real dent into the principal. If you can do this once, you'll prove to yourself it's possible to reduce your debt burden and eventually get rid of it entirely. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

4. Get your credit score over 700

Many people have trouble getting ahead financially because they are saddled with a bad credit score. A low credit score makes it hard to get favorable rates on loans, and can lead to a spiral of debt that's hard to escape. The good news is that you can fix your credit score over time by making the right financial choices, and your bad finances of the past don't have to burden you forever.

A credit score of 700 is considered "good" by most credit bureaus. To get there, you need to pay your bills on time and try to pay off all balances in full. If you have missed payments, get current as soon as possible. You don't want to close your credit cards after paying them off, as this can lower your percentage of available credit and ding your credit score. But you should avoid the temptation to open new cards, as that only increases your potential for adding debt. Your credit score may take time to rise, but hitting 700 is achievable if you make the right moves. (See also: 5 Ways to Improve Your Credit Score Fast)

5. Earn $1,000 in passive income

One of the great ways to give yourself some financial breathing room is to get revenue from sources that don't require a lot of work. This could mean purchasing dividend stocks, in which companies pay out portions of their earnings each quarter to shareholders. It might mean buying and renting out properties, licensing your creative works, or building a website that generates some ad revenue. Passive income may require some work and expense up front, but could provide you with a solid amount of extra cash without extra effort over time.

Try to earn a spare $1,000 in the next year. Then try and boost that figure. Before you know it, proceeds from these passive sources could be a significant total of your overall income. (See also: 5 Ways to Make Passive Income Online)

6. Save $100 in a month

When your income is barely covering your living expenses, it may seem impossible to save even a few bucks a month, let alone $100. But most people should be able to hit that $100 milestone by taking a good look at their spending.

Begin by tracking your spending in a detailed way, making a note of where every dollar goes. Then categorize your spending. You might have a category for eating out, and another for gas or kids' activities. By examining your spending this way, you will likely find areas where you can cut costs. You may have to make some hard choices, but they will be worthwhile. A few dollars here and there can add up to $100 or more. And $100 a month can add up to thousands of dollars over time.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

First Rule of Financial Wins: Avoid Losses

Tim Lemke — Tue, 14 Nov 2017 09:31:09 +0000

The task of accumulating wealth and ensuring long-term financial security is often discussed alongside the idea of winning. And while it's fine to think of financial planning this way, it may be just as important to simply avoid losing. Smart investing involves looking for gains over time, but also escaping costly losses when the market goes down. Let's take a look at some ways we can "win" financially simply by avoiding losses.

1. Avoid overpriced stocks

The last thing you want is to buy a stock and immediately see it take a dive. If you are a young investor with a long time horizon, you can usually get away with putting your money in the market at any time. But it is important for anyone to avoid buying stocks when they are overvalued and perhaps due for a correction.

It's tempting to buy a stock if shares have been moving upward, because we all like to invest in companies that are doing well. At a certain point, however, share prices can be too high based on the company's earnings. It's important to learn the basics of how to tell if a stock is fairly valued.

A price-to-earnings ratio is an important consideration in valuing a stock. A P/E ratio is the share price divided by earnings-per-share (EPS). A P/E of more than 25 is on the high side, though P/Es vary by industry. Take time to learn what typical P/E ratios are for the sector you're looking to invest in.

Another rule of thumb to keep in mind: If a stock has been consistently setting new 52-week highs, it may be due for a pullback.

If a company's share prices seem overvalued, it's wise to practice patience or look elsewhere for better value. This will decrease your likelihood of losing money on the investment.

2. Know when to cut your losses

One common piece of investing advice is to stay the course and avoid panicking when shares of stock fall. This is sensible, but it should be balanced with an awareness of when to cut your losses.

There's a fine line between being patient and sticking with a dud investment for too long. It's OK to stick with an investment if the company's underlying financials are still strong, but if the company is seeing shrinking profit margins and revenues, or has completely lost its competitive advantage, it may be time to cut and run. In particular, hanging onto investments during major market downturns can result in massive losses that will take years to recover from. Some financial advisers suggest selling an investment if it drops more than 10 percent in a short amount of time. (See also: 10 Signs a Stock Is About to Tank)

3. Be truly diversified

Most investors know to avoid investing in too much of one thing. Diversification of investments is a key way to avoid a big loss. But sometimes, it's possible to think you are diversified when you aren't. For example, you may think you are diversifying your portfolio by investing in both U.S. based and international stocks. But have you considered that many U.S. companies already have a huge presence internationally? And even if you think you are diversified with various investments and asset classes, many investments still perform similarly, meaning that you're not as diversified as you think.

Financial advisers have varying thoughts on the ideal way to diversify. Of course, everyone's portfolio will differ depending on their age, risk tolerance, and projected retirement year. But the basic tenet applies: Don't be too invested in one area.

4. Watch out for investment fees

When you buy and sell stocks and other investments, you'll likely be stuck paying a variety of fees. There are transaction costs for every trade, and maintenance fees and other costs for mutual funds and ETFs. These are costs that are taken out of money you invest, so you not only lose money immediately, but lose out on its potential gains. This can add up to thousands of dollars in the long run.

Savvy investors know how to invest well while avoiding high costs. Discount brokerages such as Fidelity and Scottrade allow you to buy and sell stocks for as little as $4.95 per trade. Mutual fund companies including Vanguard, T. Rowe Price, and others have become more cognizant of fees, and are increasingly offering funds with super-low expense ratios. (Generally speaking, it's best look for funds that charge less than 1 percent for expenses.)

Keep your costs low when you invest, and you'll find that avoiding these "losses" can boost your gains.

5. Understand when the markets may be due for a dip

It's very difficult to time the stock market, and for young investors, it's a good idea to just invest as soon as you can. But it's also possible to avoid big losses by recognizing when the markets may be due for a correction. If it seems like stocks are priced too high based on their earnings, that's one bad sign. A slowdown in economic growth is another, and you should be wary of a spike in inflation and interest rates, too. It's also worth noting if companies are downgrading their earnings predictions for the upcoming quarter, as that could be a sign that business executives are pessimistic. If you recognize any or all of these signs, it may be worth waiting a while before investing too heavily.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Buying a House? Here's Where to Keep Your Down Payment

Christa Avampato — Mon, 25 Sep 2017 09:00:05 +0000

I am in the market to buy my first home in the next few years. I have been saving and researching for a long time, and have learned many of the ins and outs of home buying, thanks to real estate agents, financial advisers, and friends who have generously shared their expertise with me.

Living in New York City, the trickiest part of the process is saving up for a down payment. I have been diligently stashing money away for the past two years, and have become curious about whether or not I am parking my funds in the best place. Here is what I discovered. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

The definition of a near-term purchase

The time horizon of your home purchase can dictate where to place your down payment savings. A near-term purchase is one that will occur in three years or less. If that fits your time horizon for buying a house, the best thing to do is to save your money in high-yield savings, money market, and CD (certificates of deposit) accounts. For near-term purchasers, the critical point of consideration is keeping your money liquid. Of course, you'll still want to compare interest rates from different banks, but keep in mind that you won't be earning a whole lot from these types of accounts.

There is a strategy to using CD accounts

If you decide to use CD accounts for your down payment savings, you will want to use what is known as the ladder method. Let's say you have $10,000. The ladder method instructs you to place $2,500 in a three-month CD, $2,500 in a six-month CD, $2,500 in a nine-month CD, and the final $2,500 in a one-year CD. Here's why: If rates go up, you can quickly take the money returned to you each quarter and place it into the higher-yield account.

Unlike savings and money market accounts, there are penalties for early withdrawals from CDs. If you think there is a chance that you may need your funds for emergency purposes of any kind, it is best to skip CDs and just place the money into a savings or money market account that you can withdraw from at any time without penalty.

There are additional options for longer-term home purchase plans

If you have a longer-term plan for your new home purchase, there are some additional vehicles that may be worth your consideration. Bond funds can sometimes provide a return of 2 to 4 percent, which is significantly higher than savings, money market, or CD accounts. If this option interests you, there are a few points to keep in mind.

Bond funds lose value if interest rates rise, so it is best to consult an experienced financial adviser to get a sense of what is likely to happen to interest rates in the next few years. That said, no one has a crystal ball — so while a financial adviser can make a very educated guess, they cannot guarantee what will happen with interest rates. Risk is a part of investing. Also, unlike savings, money market, and CD accounts, bonds are not insured by the FDIC and you could lose money by investing in them.

The bottom line on down payment savings

Retirement savings can afford to be invested in vehicles like stocks and bonds because we often have decades before we will use the funds. That long time horizon means retirement accounts can weather the risks of a fluctuating market. Down payment funds usually do not have the luxury of time, so investing them in stocks or bonds carries a higher risk.

If you are considering uninsured tools such as bond funds for your down payment savings, know and understand your time horizon, risk profile, and the likely trend of the market rates. That combination of factors will determine the best place to save your down payment funds, and eventually, buy the place you will call home.

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Are You Putting Off These 9 Adult Money Moves?

Tim Lemke — Fri, 18 Aug 2017 08:00:05 +0000

You are not a kid anymore. It's time to start acting like an adult, especially with regard to your money. Procrastination won't help you on the path to financial freedom, so it's time to grow up, and examine whether you've been avoiding these adult money moves.

1. Bolstering your emergency fund

When you are young, you may not need a lot of extra cash on hand. After all, you may feel like your life is simple enough that very few emergencies would result in financial ruin.

As you get older, though, there are more costly events that can crop up. You may own a home and face major, unexpected repairs. You may have children with unexpected medical needs. And because your overall expenses are higher, you'll be hurt more if you or a spouse loses their job.

While it's important to invest for the long-term, it's also crucial that you keep enough cash on hand to cover emergencies. At least three to six months' worth of income is a good rule of thumb. Without this savings, you may find yourself in debt or tapping into retirement savings to get by. (See also: 4 New Reasons You Need an Emergency Fund)

2. Tracking your money

When you're young and living large, you have no idea where your money is going. You are too busy having fun to worry about it. But now you're an adult, and it's time to actually assess what you are spending your cash on.

It's impossible to budget and save if you have no idea where to cut expenses. To begin tracking your money, analyze your bank and credit card statements to view all of the purchases you've made. Enter these into a spreadsheet, or use an account consolidation website such as Mint.com to help you. Once you start tracking, you'll have a good idea of where you've been wasting money and where you can start cutting down on your costs. (See also: Build Your First Budget in 5 Easy Steps)

3. Sticking to a budget

Once you get a handle on where your money is going, it's time to develop a system that will allow you to save money. The only way to avoid debt and save for the future is to keep expenses below what you earn. This may mean making tough decisions and reducing nonessential spending.

You may have to eat out less. You may need to cancel your cable TV or baseball season tickets. You may need to forgo that trip to the Caribbean. Set a budget for groceries each week, drive less, and clip more coupons. None of this is fun, but it's what adults do if they want to achieve financial freedom.

4. Getting your credit card debt under control

Early on in life, your credit card debt may just seem like a number you can hide from yourself. But at a certain point, it's something that truly impacts your ability to build wealth and obtain financial freedom.

When your debt is high, this impacts your credit score, which in turn impacts what you will pay for things like a mortgage and auto loan. In essence, debt can become a downward spiral of pain if you don't nip it in the bud early. Be an adult, and start paying down that credit card debt.

Try to go after the debt with the highest interest rates first, then go from there (otherwise known as the avalanche method). Begin using cards more sparingly and rely instead on good old cash as much as possible. Soon, you'll see your credit score rise and your overall financial picture will look much rosier. (See also: The Fastest Method to Eliminate Credit Card Debt)

5. Saving for a home

Homeownership isn't for everyone, but there will likely come a time in your life when it makes sense to build equity in real estate rather than spend money on rent. Owning a home gives you a sense of pride, a sense of stability for your family, and is a good financial move in the long run — as long as you can manage the monthly payments.

To make a sensible home purchase, traditional expertise has advised saving enough money for a down payment of at least 20 percent. So if you are eyeballing a $250,000 home, for example, that means amassing $50,000 — a sizable amount. While you aren't required to put 20 percent down, doing so can help you avoid having to pay private mortgage insurance, or PMI, until you build up equity in your home. Saving for a down payment is not an easy task, and may take many years, so it's best to start as soon as possible. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

6. Investing toward retirement

The notion of saving for your 60s might seem ridiculous when you're in your 20s. But you can't put off retirement savings forever, and this procrastination can really hurt you down the line. The earlier you start saving, the more money you will have when it's time to leave the workforce.

If you're into your 30s or 40s and have little saved for retirement, you need to start socking money away right now. Take advantage of your employer's 401(k) plan and any of your company's matching contributions. You can also open an individual retirement account (IRA). Max out these accounts, if possible. The sooner you start investing, the more time your money has to grow. (See also: 7 Retirement Planning Steps Late Starters Must Make)

7. Saving for your kids' education

It's hard to imagine saving for college when you have no children yet, or your kids haven't even left elementary school. But with college costing tens of thousands of dollars, and getting more expensive every year, you shouldn't put off saving for too long if you plan to help your children with some of the expense.

It's possible to begin saving before your child is even born, and there are many investment accounts, including the popular 529 college savings plans, that offer great tax advantages to those that save for education. It's not wise to save for college costs at the expense of your own retirement, but if you have the ability to put aside money for both, do it sooner rather than later. (See also: 5 Smart Places to Stash Your Kid's College Savings)

8. Getting properly insured

Proper financial planning isn't just about accumulating wealth, but protecting it. The best way to protect your assets is by insuring them at appropriate levels. Do you own a home? Make sure you have homeowners insurance to protect the structure and everything inside. Do you and your family members have health insurance to protect against illness or injury? And do you have life insurance so that your family will be financially OK if something were to happen to you?

Insurance can sometimes seem like a waste of money if you don't use it. But when something bad does happens, you'll be massively grateful you have it. (See also: 5 Reasons Why Life Insurance Isn't Just for Old People)

9. Crafting a will

Do you know who gets your assets if you unexpectedly pass away? Do you know who will take care of your children if you are no longer around? Have you given any thought to whether you'd like to be kept on life support if you are the victim of an accident? These are unpleasant things to think about, but they are important considerations.

In the absence of a will or other documents that outline your wishes, family members may be left to make challenging decisions. The money and assets you wished to pass on to specific relatives may not be passed on according to your plans. Writing a will may not seem like a crucial thing to do when you are young, but it becomes more important as you get older, expand your family, and accumulate assets. (See also: What You Need to Know About Writing a Will)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Financial Differences Between Millennials and the Next Generation

Tim Lemke — Mon, 17 Jul 2017 08:00:12 +0000

We hear a lot about millennials and their money, but what about the generation behind them? Members of Generation Z are now approaching adulthood, and have their own unique characteristics. They may also have their own unique attitudes toward money. How do millennials and Generation Z differ? The answer to those questions could have fascinating implications for our economy.

1. Generation Z may be more frugal

Members of Generation Z may only now be entering adulthood, but there are indications that they are more conservative with their money than previous generations. Perhaps it's because this generation has grown up at a time of unrest, from the attacks of September 11, 2001 and the aftermath, to the near collapse of the financial sector at the end of the last decade.

The 2016 Annual State of Credit published by Experian noted that Generation Z has an average of 1.29 credit cards, compared to 2.02 for millennials. They also have about half as much debt overall, though it's worth noting that many are entering college age, when debt levels can soar.

2. Generation Z is totally cool with technology

Millennials are pretty tech-savvy, but Generation Z is the first generation that's never known a time without the internet. This means they should be entirely accepting of online banking and investing, using mobile payment apps, and similar innovations — though they will be cautious, due to their awareness of high-profile data breaches. Generation Z will also have no recollection of the tech bubble burst of the late 1990s, so they'll be perfectly comfortable investing in tech stocks.

3. Generation Z wants career stability

There is some evidence that members of Generation Z prefer to go after careers that are solid and pragmatic. The consulting firm Altitude reported that this generation may be less entrepreneurial and more focused on stability and earning enough money to avoid financial struggles.

Another report from Bainbridge Consulting found that more than half Generation Z-ers feel like they need to get work experience as soon as possible in order to succeed. The broader economic implications of this risk aversion will be worth watching in the coming years.

4. Millennials may be less focused on retirement

Even though millennials are the older generation, it's Generation Z that may already be focused on retirement savings. One study from the Center for Generational Kinetics found that about 12 percent of Gen Z-ers already have some retirement savings. Another 35 percent said they expect to begin saving once they hit their 20s. Some of this may be influenced by parents who urged them to save; more than one out of every five people in Generation Z reported having savings accounts by age 10.

5. Millennials are more loyal to brands

Good luck trying to get a millennial to switch from an Apple to an Android phone, or vice versa. But those from Generation Z don't have the same kind of steadfast allegiance to products. A study by IBM said two-thirds of this young generation prefer high-quality products that last, and will do their homework to find the best value, regardless of brand.

6. Generation Z shops smarter

Because of their internet savvy, members of Generation Z know how to comparison shop and get information about products online. Research from MarketingProfs showed that more than half of people in Generation Z use YouTube and other social media sites to research products before they buy.

7. Generation Z is wary of student debt

About two-thirds of millennials say they have more than $10,000 in student loan debt. This reality has led Generation Z to be more thoughtful when examining the value of higher education. One survey by Adecco reported that 21 percent of Generation Z students said they were concerned about the price of tuition, compared to 13 percent for millennials. There are also indications that Generation Z is less inclined to go after a costly advanced degree.

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10 Reasons to Cut Millennials Some Slack About Their Money

Tim Lemke — Fri, 30 Jun 2017 08:00:08 +0000

Millennials are getting beat up these days for their money habits. According to observers, people between the ages of 18 and 34 are financially irresponsible — one CEO even suggested they are spending too much money on pricey avocados when they should be saving for a home.

But these reports are unfair. There's a lot of evidence to suggest that from a financial standpoint, millennials may be facing unique challenges that older generations simply didn't deal with. (See also: 7 Ways Millennials Are Better With Money Than You Are)

Should we take it easy on millennials when it comes to their money habits? Perhaps, and here's why.

1. College is really expensive

We encourage young people to attend college, but according to Student Loan Hero, the average member of the class of 2016 graduated with more than $37,000 in student loan debt. Borrowers between the age of 20 and 30 spend an average of more than $350 a month to pay off these loans.

This student debt is largely the result of rising college costs: Public school costs have risen 9 percent over the last four years, and private universities have risen 13 percent. A student attending a four-year private school now pays an average of $45,000 each year. While it's true that young adults should be aware of the cost of college when deciding if and where to attend, it's also clear that many are now handcuffed by their student loan burdens. (See also: 7 Unique Ways Millennials Are Dealing With Student Loan Debt)

2. Wages haven't gone up

One of the biggest problems with the current economy is that it's been a long time since wages have gone up in real terms. In fact, there's evidence that wage growth has basically been stagnant since the 1970s, and any wage growth at all has been concentrated to the top earners.

Anyone without a college degree has seen their wages decline, on average, in the last decade. It's easy to accuse millennials of making bad financial choices, but there's very little evidence they are rolling in the dough to begin with.

3. Housing is really costly

In many parts of the country — especially those with good job opportunities for millennials — it's nearly impossible to find an affordable house or apartment. A recent survey of 24,000 renters by ApartmentList.com found that millennials would have to wait more than a decade to save enough for a 20 percent down payment on a home in many markets. In some cities, including San Francisco and Austin, the wait is as much as 19 years.

There are simply not enough affordable, entry-level homes available for millennials to buy, and with interest rates rising, the problem is only going to get worse.

4. Saving for retirement is mostly on them

If you're a baby boomer or even a GenXer, you might have worked for a company that offered generous pensions to its employees. For much of the 20th century, workers could find decent jobs at big companies and know they'd be getting a monthly check even after retirement.

Nowadays, it's up to the individual to save for retirement, using a 401(k) plan (if they have access to one) or individual retirement accounts (IRAs). No doubt, you can generate a lot of wealth this way over time, but most of the savings will have to come from the worker, not the employer. And for many young people, setting money aside for retirement is an afterthought if they are also facing student loan debt and other expenses. (See also: 4 Things Millennials Should Do Today to Prepare for Retirement)

5. They've lived through several market crashes

For millennials, the stock market and economy have done quite well during their time on Earth, but there were several big events that may have left them wary about investing.

The stock market endured three straight years of bad losses from 2000 to 2002, due to the dot com bubble bursting and the terrorist attacks of September 11. The markets tumbled dramatically again in 2008 after the financial crisis. These events may have taken place during a millennials' formative years, and the headlines may have clouded their belief in the power of investing. (See also: 7 Reasons Millennials Should Stop Being Afraid of the Stock Market)

6. Many don't use credit cards at all

We often assume that millennials have a ton of credit cards. But according to one survey, millennials have fewer cards than most Americans. BankRate.com reported last year that only one-third of people under the age of 30 have a credit card. (See also: Best Credit Cards for Millennials)

7. Everybody is marketing to them

It's easy to say that millennials should be more frugal, but that's easier said than done when America's marketing dollars are bombarding that exact generation. Ask any advertiser what their coveted demographic is, and they'll likely tell you they deliberately target people between the ages of 18 and 34.

On one hand, we want young people to be responsible with their money. On the other, we know that consumer spending by that same group is often a big driver of the American economy.

8. They are more generous than you think

It may be frustrating to see millennials with poor personal finance skills. But while they may not necessarily be smart with money, they are not as selfish as you might believe.

Millennials basically invented the concept of crowdfunding, which has led to sites such as GoFundMe and others that have supported nonprofits. One survey from 2014 noted that 84 percent of millennials donated to a charity that year, and that they are more likely to give on their own accord rather than from a top-down, corporate-driven approach.

9. They grew up in a fairly prosperous era

People who grew up during the Great Depression learned the hard way about living frugally and making every penny stretch. Those who grew up during World War II remember making severe sacrifices. Even baby boomers remember the gas shortages and economic stagnancy of the 1970s.

By contrast, millennials have grown up in a time of relative prosperity. Millennials have never been forced to learn how to save and invest as a matter of survival. Is it their fault that they grew up in relative comfort compared to older generations?

10. Luxury items are practically necessities

Older people like to accuse younger generations of spending money needlessly, but think of the expenses they have that did not exist even 20 years ago. Cellphones? Tough to get by without one these days. High-speed internet service? Yeah, that's almost as important as electricity. Millennials have considerable expenses each month that were once considered luxury items, but are now considered vital.

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5 Ways Being Late on Tech Trends Saves You Money

Annie Mueller — Wed, 21 Jun 2017 08:31:12 +0000

Late adopters are not people who hate technology, think trends are evil, and spend their time sitting in candlelit rooms grumbling about the modernization of things that used to matter. Late adopters are a segment of the consumer population who don't feel the need to jump on a new tech or trend as soon as it's available. They wait. They eye before they try. They are also often the last to try, and they save money and get more value out of what they do decide to buy. Here's how you can, too.

1. Skip the newest version

People often think of late adopters in the context of new technology. Late adopters won't be in line for the latest iPhone, or fighting crowds for the newest smart home thermostat. Their willingness to wait means they avoid the premium prices that come with getting the newest thing, now.

For example, older versions of the iPhone typically drop in price by $100 when Apple releases the newest version. Late adopters save that $100, at a minimum. Potentially, they can save more by buying a used phone in great condition from someone who can't wait. (See also: 5 Smart Ways to Save on Smartphones)

2. Save time and data

Late adopters save by avoiding the time and money spent on buying relatively untested tech trends, or gadgets. Tech is a competitive industry; not all that launches will last. Early adopters who sign on for the latest service or product provided by a startup get the thrill of the new. They also get the hassle of the new: keeping up with continual upgrades, dealing with bugs, and having to move (or lose) their data when a service shuts down. (See also: 8 Reasons Why You Shouldn't Be an Early Adopter)

3. Avoid premium pricing

The premium pricing concept translates to many industries beyond fashion. If you're set on having the newest designs, as soon as they're released, you'll pay more for it. This "hunger marketing" strategy creates a sense of urgency and scarcity, and many consumers buy into it. Literally.

Late adopters avoid price markups by waiting before purchasing. That new fashion trend highlighted on the main display will be in the bargain bin in a few weeks, and the price will drop accordingly. The timeline might be a bit longer, but the same goes for new tech toys.

4. Wait on tech stocks

By waiting, you can benefit financially by avoiding trend-chasing, a common strategy in the stock market. Prices on "trending" stocks increase to a maximum, then fall, sometimes dramatically. If you chase those trends, purchasing as the trend is growing or peaking, you might overpay.

Seasonal cycles and holidays in the stock market can favor late adopters, as well. Trading activity, and prices, follow predictable patterns. People who are willing to wait can buy and sell at the best time, rather than taking what they can get right away.

5. Evaluate your true necessities

Turns out, the necessities of life aren't always necessities. If you talk to the sales rep at your nearest baby goods warehouse, you'll get a long list of items that you simply must have. If you talk to a seasoned parent, you'll get a much shorter list: the essentials, and those daily-use items that save a parent's sanity more than a few times.

Taking the late adopter approach for a new baby, or for family entertainment, or for your tween's wish list will help you filter it to a shorter, smarter list. Many things seem optimum and exciting when we first hear about them and when our friends all have them. The crystal-clear voice of experience will save you money if you give it enough time.

This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Are Your Emotions Costing You Money? Take This Quiz

Tim Lemke — Wed, 21 Jun 2017 08:00:16 +0000

Building a strong financial foundation for you and your family requires discipline. It requires patience. It requires a steady mindset. But even the best of us have found ourselves spending and making financial decisions based on emotions, whether that's retail therapy, or holding off on investing due to fear of the markets. We've made decisions based on joy or comfort in the short term instead of satisfaction in the long run.

Are you letting your emotions control your finances? Answer these questions to find out.

Do you spend money when you feel sad, happy, or stressed?

You had a bad day at work, so you go on a shopping spree for new shoes. You got a promotion, so you celebrate by taking friends out to eat at a fancy restaurant. You spend money as a reaction or antidote to whatever feelings you have at a given moment, and this makes it hard to save money at a healthy rate. You don't need to treat yourself to a costly reward every time you're happy or sad. This is an easy way to fall into a dangerous emotional spending cycle. (See also: The High Cost of the "Treat Yourself" Mindset)

Have you held off on investing because you are afraid?

Fear is one of the most powerful emotions we have, and many people have never gotten started with retirement planning and investing because they are intimidated. They may find the whole process of investing to be overwhelming, or they may have a fear of asking a dumb question. Additionally, they may fear that their investments will lose money. In reality, it's best to channel fear into investing more, because not having enough money saved for retirement is a truly scary thought. (See also: 3 Steps to Getting Started in the Stock Market With Index Funds)

Have you sold investments when you realized they lost value?

We've probably all found ourselves frustrated with certain investments that have tanked, and sold them at a loss. Of course, then we've kicked ourselves when we've seen those same investments rebound in short order. It's not a good practice to be emotional when investing; the most successful investors practice discipline, patience, and steadfastness over the course of many years.

Have you ever bought something out of jealousy?

One of your closest friends just bought a big house in a nice neighborhood. Another just bought a fancy car. It can seem like other people are making out better than you, but this is no excuse to spend irresponsibly. Keeping up with the joneses is a path to financial hardship if you spend simply because you feel left out or jealous.

Do you get excited about getting a tax return?

It's an often ignored fact that if you are getting a tax refund, you've been lending money to the government interest-free all year. Remember: This was your money that you should have had all along. And yet, most people get a rush of excitement from getting a tax return. What's worse, people often treat their tax return like an unexpected windfall, and spend it frivolously. The sound, unemotional approach to taxes is to adjust your withholding so that you don't get a return at all. In fact, even owing a small amount to the IRS is OK as long as you don't pay a penalty. (See also: 10 Smart Ways I'm Spending My Tax Refund)

Have you ever sought a refund anticipation loan or payday loan?

The same psychology that governs the love of tax returns also applies to those who seek money before it's due to them. If you are seeking cash early, you may end up paying exorbitant fees or interest rates. A typical payday loan might have an annual interest rate of 400 percent, according to the Consumer Financial Protection Bureau. (See also: Six Horrible Financial Products You Should Avoid)

Are you a habitual gambler?

Let's face it: Gambling can be exciting. It's a rush when you place a bet on some ponies and see your horse cross the finish line first. It's a thrill to see your ball land on your number. But gambling is ultimately an emotion-driven experience, and the excitement of winning can be addicting. Betting on a few hands of blackjack or the occasional football game won't kill you, but it's important to not let your emotions guide your betting habits. There's a long list of fine people who have ruined their financial lives through gambling.

Do you give a lot of money to children and other family members?

There's nothing wrong with being generous to those people who you care about most. But it's important to not let people take advantage of that generosity. Often, the decision to support a family member or friend is done not out of basic selflessness, but a feeling of obligation or guilt. It's important to not let your feeling of obligation to others outweigh your obligation to yourself.

Have you lost a job due to your temper?

Jobs can be frustrating. But if you've ever flown off the handle at work, you may be threatening your income and job security. While it's true that hiring managers look for workers with specific skill sets, they also want to make sure employees are able to get along with their colleagues. Workers who don't interact well with their peers, or respond poorly to criticism, often don't last long.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Biggest Ways Procrastination Hurts Your Finances

Tim Lemke — Tue, 23 May 2017 08:00:09 +0000

Remember those days in college when you'd put off studying until the night before a big exam? You'd stay up all night, desperately trying to cram everything in at the last minute. If only you'd taken the time earlier, you'd have walked into your test rested, calm, and most importantly, prepared.

Those bad habits can cost you a lot more in real life if you carry them into the way you handle money. Here are seven situations when procrastination really hurts your bottom line.

1. Investing: Your money has less time to grow

It's one of the basic rules of smart investing: Invest as early as you can and for as long as you can. Some of the most successful investors are those who had relatively modest incomes, but started investing young and stayed in the markets for decades. Compounding interest worked in their favor, and they enjoyed a sizable nest egg later in life. Even a delay of five to 10 years can make a significant difference in how much money you have by retirement. Quite simply, the more you procrastinate, the less money you'll have.

2. Saving: You continue to spend more than you earn

You're aware that you're spending more money than you're bringing in, but you tell yourself that you'll start cutting back after the holidays. The holidays come and go, so then you tell yourself you'll start saving after your big spring break trip. After spring break, you promise you'll start after your cousin's wedding in July. There's always some reason to put off saving, but the best time to start tightening your belt is right away. Devising an arbitrary future start date for financial prudence only means you're spending money you shouldn't in the interim.

3. Debt payoff: Your balances balloon

That credit card bill keeps getting bigger, and it comes on top of your student loans and car payments. You're getting crushed by debt, but it's so overwhelming you can't bring yourself to come up with a plan to tackle it. Every moment you wait to address your debt problem is a moment that allows that debt to grow. Devise a repayment strategy now, before your debt ruins you. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

4. Taxes: You might make a costly mistake

Tax Day seems so far away, but before you know it, it's the middle of April and you haven't even gotten started. You may think your taxes are simple, but rushing through the process increases your chances of forgetting income, missing out on deductions, or making a silly error.

No one says you have to file your taxes immediately at the beginning of the year, but at least give yourself a few weeks to file your return carefully. A rush job could mean you pay too much, or you may end up with penalties due to mistakes.

5. Bills: You miss payment deadlines

There are consequences to paying bills late, usually in the form of fees and interest charges. If you're the type of person who doesn't even open a bill until it's nearly due, you're putting yourself at risk of extra expenses.

Late fees and interest aren't merely one-time charges. Miss your payments by enough days and it can hurt your credit score, impacting your ability to borrow. It's best to pay bills right away when you get them — or put them on autopay — so they don't threaten your finances further. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

6. Job applications: You don't get that better-paying position

You found a job that you think you'll like, and it pays considerably more than your current one. But instead of applying right away, you wait. And wait. And wait. Before you know it, the position is filled. This is a total wasted opportunity.

Yes, applying for a job, reworking your resume, writing cover letters, and going through interviews are all tedious and time-consuming. But when you're stuck sitting at your current gig, underpaid and unhappy, you'll really be kicking yourself for not putting in the work to get yourself unstuck.

7. Raises and promotions: You miss out for another year

It's hard to know the precise time to ask for a promotion or a raise. Often, we wait until annual review season, but by then, personnel decisions may already have been made. The best thing is to approach the subject sooner rather than later. Your boss may not be in a position to respond right away, but you've planted the seed so they know your wishes.

Besides, simply asking for a raise or promotion may force your employer to look more closely at your work, and hopefully recognize what you bring to the table each day. If you wait too long to ask, you may have to wait for an entire budget cycle to get another shot.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: