financial lessons

How to Talk to Your Teen About Student Loans

Ashley Eneriz — Mon, 28 Jan 2019 09:01:08 +0000

With college almost close enough to touch, your high schooler has probably been talking your ear off about which universities they want to visit and which majors they're considering. While this is a very exciting time for your teen, you also don't want them to go into massive debt chasing their dreams.

Student loan debt is running rampant today. Your teen might see student loans as an easy way to go to school without worrying about financial costs, but in reality, a heavy debt load can get in the way of their post-graduation dreams. Here's how to help your teen see the big financial picture.

Address scary student loan stats

According to a 2016 study by Citizens Bank, millennial graduates are spending almost one-fifth of their income (18 percent) on loan repayment. That means that graduates are well into their 40s before they even see the light at the end of the student loan debt tunnel.

Not only are graduates paying more money towards loans, but they're also having to delay life milestones like weddings and buying a house. Fifty-four percent of millennials have said they have limited their travel, and 40 percent have limited the amount they can spend on rent or mortgage payments.

Sit down with your teen and ask them about their future. Do they see themselves spending 20 years paying off debt, or would they rather spend that money on a new car, a wedding, or their first house? Also ask them if they want to be forced into taking a higher paying job that they hate just so they can pay back their student loans. When you saddle yourself with debt before graduation, you limit how much freedom you have when you enter the job field.

It is also good to remind your kid that debt does not go away. Even if they have no money to pay for it, they cannot declare bankruptcy and expect their student loan to miraculously disappear. (See also: How to Manage Student Loans On a Low Income)

Start with smart financial decisions

Once your teen understands how heavy student loan debt can be, they'll know they need to make other money moves in order to pay for college. They can apply for scholarships, and applying for FAFSA can make them eligible for financial aid and also school-sponsored scholarships. Encourage them to apply for scholarships regularly — as if it were their part-time job — because even a $1,000 scholarship will be highly beneficial.

Encourage them to also raise money through part-time jobs and saving birthday money. Every little bit helps, especially when they're repaying student loan debt while still in college. Attending community college first can also reduce the student loan burden by half.

If they don't need to take on maximum debt, then why should they? Along with going to community college first, they can test out of classes that they are already experts in, such as freshman English and math courses. This will save time and money.

There are also many jobs that offer tuition assistance that are available to college students. These jobs may only offer $500 reimbursement per semester, but it's still something.

Stick with federal loans

There's a huge difference between federal loans and private loans. Federal student loans have better repayment options, lower interest rates, and they're more forgiving when it comes to job loss and disability.

Even if your teen makes minimum wage after graduation, they can apply for income-driven repayment programs through federal loans and still be able to make payments. Federal loans can also come with forgiveness programs that forgive remaining debt after so many years of on-time payments, or that forgive debt for working in public service. (See also: 5 Sobering Facts About Student Loan Debt)

Clearly state how you'll be helping

You've been providing for your child since they were born, and they might expect you to provide for them while they're in college as well. Make sure they know exactly what you'll be paying for. If you're not going to be paying for their loans, or car, or insurance, let them know so they know how to budget correctly.

If you do want to help your child with student loan debt, consider paying off some of the payments while they're still in college. Even paying $50 a month towards their loan while they're in school will help significantly. (See also: 4 Things You Should Make Your Adult Child Pay For)

Don't use the whole loan amount

Your teen might be granted $40,000 worth of student loans for the year, but that doesn't mean they need to use every last dollar. If possible, they should live at home and live frugally. They don't need to buy a new laptop or make rent payments with this money. Remind them that every dollar borrowed is a dollar plus interest they have to repay after graduation.

Make payments in college

Even though your teen will have a grace period of up to six months after graduation to start paying back student loans, that doesn't mean you can't start making payments while they’re still in school. This is especially helpful if they have unsubsidized federal loans, since this type of loan accrues interest while the student is in school, during the grace period, and during any forbearance.

Remind them that any amount of repayment is too little while they're in school. Set regular minimum payments to occur each week, even if it's just $10 to $20. This might mean that your teen needs to eat out less or skip a movie, but it will be worth it once they graduate. (See also: 10 Tips from a Financially-Savvy Teen)

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

Think Like a Startup to Boost Your Finances

Damian Davila — Fri, 28 Jul 2017 09:00:05 +0000

From tech giants like Facebook, Dropbox, and Instagram, to retailers like Harry's, Warby Parker, and CartFresh, companies who found success as startups seem to be all the rage in business news. But don't take startups as a business fad — there are plenty of personal finances lessons that the average Jane and Joe can learn from them.

1. Focusing on too many things can kill your finances

Spreading your financial goals too thin can often do more harm than good. Successful startup founders often find that a service that does one thing really well works better than a service that tries to do many things.

Venture capitalist and PayPal co-founder Peter Thiel advises all budding entrepreneurs to think hard and pursue a single idea that nobody else is doing. In an article for The Wall Street Journal, Thiel asked entrepreneurs, "What valuable company is nobody building?" The answer to this question is harder than it looks.

Personal finance lesson

Keep things simple. Focus on the biggest issue affecting your finances. For example, hone in on paying back a 401(k) loan or eliminating high-interest credit card debt.

2. Forgetting that cash is still king

Startups famously burn through cash for "growth," believing they will land yet another round of capital the next time around. That plan cannot only backfire, but become the death sentence of some startups. An example of this is server chip designer Calxeda. Despite raising $131 million in four rounds of financing, executives had to shut down operations in 2013 and declared, "We simply ran out of money."

Personal finance lesson

Plan ahead and be ready for periods in which you won't get a constant paycheck. Even when receiving payment from your employer, sometimes paychecks can bounce! Pay yourself first out of every paycheck and build an emergency fund to cover your basic expenses for three to six months.

3. Preparing to be wrong

"Pivot" is among the top three terms most used by startup founders. And for good reason: There are countless stories of million-dollar ideas that flopped but were able to turn into much more profitable ones after a well-timed adjustment.

Take Payal Kadakia, for example, who first founded Classtivity (a self-described "OpenTable for fitness classes") with a pay-per-class model. About two years into operations, Kadakia's service wasn't seeing the user traction that she was seeking. So, she pivoted Classtivity into ClassPass, a monthly $99 subscription that lets users go to any class at any participating gym. Once a struggling startup, ClassPass is now a $470 million business.

Personal finance lesson

If the plan isn't working at all, it's time to change the plan. Consider these facts:

50 percent to 70 percent of college students change their majors at least once and most will change majors at least three times before graduation.
American workers stay on the same job for a median of 4.2 years, according to MarketWatch.
The average person changes jobs 10 to 15 times (with an average 12 job changes), according to data from the U.S. Bureau of Labor Statistics.

Change is inevitable, so welcome it and make the most out of it. It may very well improve your financial situation.

4. Outsourcing nonessential activities

"Spend your calories on things you do well and the things that make you and your business valuable — and outsource things that aren't core to that mission," Jeff Haynie, co-founder and CEO of Appcelerator, wrote for Recode. From accounting to employee meal planning, startups are well known for outsourcing as much as possible to keep overhead costs down.

To improve your overall productivity, Matt DeCelles, co-founder of sunglass retailer William Painter, recommends mapping out all tasks and determining which ones may be better completed by another person. By focusing on core operational activities, DeCelles is able to make the most out of his day. (See also: 11 Time Saving Hacks From the World's Busiest People)

Personal finance lesson

Remember complaining about how you never seem to have time to balance your checkbook, organize your tax deductions, or get an additional quote for a home or car loan? Spending money on "help" to complete these tasks can save you a couple hundred dollars in the long run.

If you think that you need to be a high roller to hire somebody, think again. Leverage gig economy sites such as Fiverr, Elance, ODesk, Fancy Hands, or Zirtual to post your tasks, find talented freelancers, or hire a virtual assistant for as little as $5 to $10 per hour, depending on the type of task.

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

7 Money Lessons We Can Learn From Jay-Z

Tim Lemke — Tue, 25 Jul 2017 08:00:11 +0000

Hip-hop artist Jay-Z recently dropped his latest release, 4:44, and is already getting praise for an album that's fresh, honest, and full of insightful commentary.

Any observer of Jay-Z's career can learn a thing or two about entrepreneurship and handling money, as the man is worth upward of $800 million according to recent estimates. But 4:44 has some great new insights on the value of saving and investing, supporting your community, and passing wealth on to the next generation.

1. Diversify your income

Jay-Z isn't just a rapper. He's a founder and owner of record companies. He has a clothing line and a sports bar. He's a part owner of the NBA's Brooklyn Nets. He has involvement in the casino and real estate industries. He owns the majority of the music streaming service, Tidal. All of this has allowed him to amass a net worth of reportedly more than $800 million, far more than he could make from music alone. He's set for life even if he never raps another word, and if any one of his revenue streams falters, he has plenty of other streams coming in.

2. Get married

There are many benefits to being married, and it can often be great for your finances. Having a joint income can improve your buying and borrowing power, and boost the overall net worth of your family. In Jay-Z's case, he's married to Beyoncé, a hugely popular music artist with a net worth that rivals his own. In his new song, "Family Feud," Jay-Z asks, "What's better than one billionaire? Two."

3. Support your community

In his new album, Jay-Z raps at length about looking out for those in the black community, noting that "Nobody wins when the family feuds." He extends this advice to supporting black-owned businesses when he says, "Black-owned things, hundred percent, black-owned Champagne. And we merrily merrily eating off these streams."

4. Think about your heirs

Many ultrawealthy people got that way through their own business success, but many started out wealthy as money was passed on from their parents. In fact, what often separates wealthy and poorer communities is the amount of "generational wealth" and savings that remains in families over the course of decades.

Jay-Z raps about this very concept in the new song, "Legacy," saying "Generational wealth, that's the key/My parent's ain't have s**t, so that ship started with me/My mom took her money, she bought me bonds/That was the sweetest thing of all time."

Jay-Z also gives a small nod to estate planning by having his daughter Blue Ivy open "Legacy" by asking "Daddy, what's a will?"

5. Buy real estate on the cheap

Jay-Z has made good money on real estate deals, but also recognizes that he may have missed out on some bargains, too. In his song, "The Story of O.J.," he laments spending his money on frivolous items when he could have bought property in a once-troubled neighborhood.

"Wish I could take it back to the beginning/I coulda bought a place in Dumbo before it was Dumbo/For like two million/That same building today is worth 25 million/Guess how I'm feeling? Dumbo."

6. Spend wisely and invest

In "The Story of O.J.," Jay-Z digs into the idea that young people should stop worrying about "living large" and instead plan for the future. He advocates buying and holding onto things that will increase in value.

"Financial freedom my only hope/F**k living rich and dying broke/I bought some artwork for one million/Two years later, that s**t worth two million/Few years later, that s**t worth eight million."

7. Control your image and products

It remains to be seen whether Jay-Z's purchase of streaming service Tidal will pay off in the long run, but the move did give him control over how his music — and its revenue — would be distributed. Jay-Z has released his latest album exclusively on Tidal, meaning that he will no longer be at the mercy of other competitors who may take a bigger cut of revenue. Jay-Z has noted that Tidal offers higher quality streaming than other services, making it more respectful of artists.

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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 Money Lessons We Can Learn From the Easter Bunny

Paul Michael — Wed, 12 Apr 2017 08:00:10 +0000

Easter is upon us once again, and with it comes the arrival of the Easter bunny and baskets full of treats. Sure, everything about this holiday is delicious and worth the caloric splurge — right down to the succulent Easter ham — but what can we learn from all this spending? Maybe it's time to embrace the bits of financial wisdom we can get from the Easter bunny himself. What can he teach us about this annual day of sweet treats? And how can he help us with our money over time?

1. Hard work is rewarded

Hunting for Easter eggs is something most of us remember fondly from our childhood, and pass on to the kids of today. And there's a simple lesson to be learned here; the more work you put in, the more you get out of it. In this case, get out there early, search every nook and cranny, and fill your basket with as many eggs as it can hold. Then, there's egg decoration. Many schools, and some families, like to make a competition out of the task. While a simple egg dipped in dye is ok, those who really go the extra mile win the day. And that can mean winning a basketful of goodies, or a fun experience.

In your career, your financial management, or a creative pursuit, the more effort you put in, the more you'll get out of the entire process. You'll also be much prouder of the reward you receive, knowing you truly earned it. So do the work and get the rewards — financial or otherwise.

2. Don't compare your assets with your neighbor's

How many times have you seen some kids continually look into the baskets of their friends, saying, "No fair, you have way more than me!" And "How many have you got?" They're so concerned with what others have, they get less eggs than they could if they were focused on their own egg haul. Plus, it's also a quick path to misery. They may have only four or five eggs in the basket, but that's still a bunch of free candy and goodies that they didn't have an hour earlier.

It's been said that we measure our happiness by our neighbors, and that can be frighteningly true. For example, you're proud of your new car, especially next to your neighbor's old rust bucket. But when they trade that in for a brand-new car twice the price of yours, with all the bells and whistles, your paradigm shifts. Your great car … now, is not so great, even though it's the exact same car. This attitude can make you spend money when you don't want to. So, focus on yourself, not what others have.

3. Never put all your eggs in one basket

When kids are running around, grabbing as many eggs as they can to load up their baskets, there's no problem. But in the real world, we want to avoid this practice.

Whether it's the stock market, your career, investors, or clients, diversification is the key. When it comes to your career, these days it's essential to have other irons in the fire. Layoffs happen daily in America, and all too often, people are finding it hard to get the same job because it's dying out. You should consider finding other ways to bring in money, in areas that are growing in strength; even if it's just a side business flipping thrift store finds on eBay. (See also: 15 Ways to Make Money Outside Your Day Job)

4. Something of value may not be visible … yet

That Easter egg hidden in the dense grass isn't something that can be found immediately. But for those with a little perseverance, it's waiting to be collected. So much that we do in life applies to that moment. It's the idea sitting in the back of your head that can become a business venture. It's the investment opportunity that seems like nothing special. Or, if we are to be very literal, it's a hidden treasure tucked away in your basement or attic; something worth a small fortune, just waiting to be uncovered one day. Keep your eyes peeled for the prospect of uncovering something of value, and it's much more likely to happen.

5. Don't judge a book by its cover

In the case of Easter, don't judge the contents of an egg by its shell. Many parents and schools will put the most valuable prizes, like cash and gift cards, inside the most unassuming eggs. The big, gold, shiny eggs may well be fool's gold, containing only a few candies.

Now, if you have ever shopped at a garage sale or thrift store, and found something valuable, you'll know it was hiding in plain sight. It didn't look like much, but to the right person, it was worth a lot. People can be judged in just the same way. Do you hire someone based on how they look, or what they offer? It is, of course, the latter. A home can look terrible at first glance, but after a little sweat equity, they can double in value. Find your hidden gem.

6. Something can come out of nothing

We all know (well, most of us, anyway) that the Easter bunny doesn't really exist. However, look at the excitement and incredible good will generated by the existence of this fantasy, including the revenue generated every Easter. We spend big bucks on this holiday each year. And yet, there is no bunny. There's no magic. It's all something we have created. So, do likewise with your finances. Can you find a way to create money out of something that doesn't exist right now? Is there a gap in the market? Do you see a need that is not being fulfilled, like all those contestants who appear on Shark Tank? It may not exist right now, but you can make it real, and you can make it a financial success.

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

3 Good Money Examples Every Parent Should Set

Ashley Eneriz — Thu, 27 Oct 2016 09:30:25 +0000

Here's a scary statistic for you: 71% of parents are reluctant to discuss financial matters with their kids. I think the reason so many parents hold back from talking about money with their children is because they feel like they have nothing to offer. Or that kids don't need to learn about money until they're old enough to get a job. But there's a great deal they can learn from you during their younger years.

No matter what your financial situation is, how much debt you have, or what you make per year, you can master better financial habits that your kids can learn from. Lead by example with these three important practices.

Maintain a Giving Heart

When your kids are driving you nuts, and you just want to get from your car into the store or restaurant as fast as possible, someone begging for money can seem like an inconvenience. It can be tempting to blow off the person with thoughts like, Get a job, or I don't even have enough money for my own family. Instead, offer to buy the person a meal at the restaurant or a grocery item at the store you are about to enter.

This shows your children how to be giving and thoughtful of others. If the person does accept your offer, you can turn it into a simple teaching moment with your children. Say something like, "You know how we always have food to eat or how you have a bed to sleep in? Some people don't have anything."

Many times, the person in need will just want money. This is another great teachable moment. Encourage your children to help meet basic needs, but to not just foolishly throw their money at people. This goes for both homeless people and friends/family members who try to take advantage of others.

Avoid Impulse Buys

We see it in places like Target all the time: A child begs for every toy or sparkly thing. While the mother says, "no" firmly, she also has no reserve as she tosses a cute blouse and table décor into her cart.

I'm guilty of this, too. I'm pretty good at keeping my children in check with impulse buys at the store, but I didn't immediately realize that I needed the same lesson. Now when we shop, and my four-year old asks if we can buy something, I try to make that a teachable moment for both of us. I say, "Honey, I know you want a lot of things here, and so do I, but it is so important for us to buy only what we need today."

Does this mean you can never buy anything fun? Of course not. But plan and budget for the fun items, including your children in the process. Maybe saying something like, "Today we are going to pick out some holiday decorations. Our budget is $20 today. Can you help me pick out something?"

Set Financial Goals

Goals are extremely important in life. I'm not talking about vague and lofty goals such as, getting out of debt or saving $20,000 by January 1. You need to set concrete goals that have actionable steps, and keep progress of your goals until completion. Don't be afraid to tell older kids what your financial goals are for the year, and give them progress reports. It is important for children to learn that they can accomplish a huge variety of tasks — saving money, getting healthy, learning a skill, etc. — if they set and follow through with their goals.

To make this a family matter, come up with a fun vacation you can take together. Figure out the cost (don't forget to budget in money for unexpected extras) and the date. For example, if you are planning on spending $2,500 for a weekend vacation in six months, then you would need to save about $100 each week. Make it a fun game by drawing a chart that tracks progress.

Another way to help your child understand how to set financial goals is to have them set their own. For example, if they want a certain toy at the store, figure out how much it will cost. Then make a savings jar and a progress chart for them that relates to how much they earn per week through chores. Frugal-mama.com has a free savings goal printable to help you track progress.

Whether you don't want to burden your kids with your financial woes or you feel like you don't have enough information to give them, think again. You don't have to share every money worry or goal with them, but show them how you manage money and teach them basic financial fundamentals in a fun manner.

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

7 Personal Finance Lessons Women Learn in Their 30s

Christa Avampato — Thu, 12 Feb 2015 14:00:05 +0000

The 30s have been my best decade yet. I've taken risks, experienced great accomplishments, and picked myself up from quite a few failures and tragedies. I've also learned a lot about personal finance in this decade, and these lessons from my 30s will carry me through all the years to come.

1. Manage Your 401(k)

Compounding is an important concept to learn and use. Putting away even small amounts of money now in a 401(k) or IRA can be your savior once you decide it's time to retire. Contributions lower your current tax liability by being deducted from your paycheck pre-tax, and target-date funds allow you to select an investment bundle based on the target year you'd like to retire and your risk tolerance. For example, at age 35, I'd choose a 2045 target date fund, such as this fund from Vanguard. Using the target retirement date, the account will adjust the risk of its investments automatically. If you can, max out your personal contribution and get your employer to match a percentage of your contribution.

2. Now Is the Time to Take a Professional Risk

If you have a professional risk you want to take, your 30s are the time to go for it. You still have plenty of time to work and save if the risk doesn't pan out, you're young and energetic, and you've got enough experience under your belt to have the confidence you need. I'm so glad I stepped away from my corporate career to work as an independent consultant and freelance writer. The projects I've worked on, skills I've gained, and portfolio I've built have put me in a strong position to continue doing the work I love as part of a larger organization.

3. Cash Is King

Having cash on-hand is crucial whenever you take a professional risk. I keep a nine month emergency fund for those unexpected (and unwanted!) events, and I also have another savings account as a float as I manage the invoices from my freelance clients. Having this cash on-hand has helped to keep worry at bay, so that I can focus on high-quality work.

4. It Pays to Have a 1099 Gig

A gig that pays you on a 1099 — whether it's your full-time job or a side venture — can result in a lower tax burden. Depending on the 1099 gig, part of your rent or mortgage, utility bills, cell phone bills, travel, and entertainment expenses may be tax deductible. Talk to your accountant to determine what's realistic and what records you need to keep for tax time.

5. Insurance Is Worth the Price

Whether it's health insurance, renter's or homeowner's insurance, or pet insurance, by my 30s I learned that emergencies happen. Being insured against the unknown has a cost, but the peace of mind and the help it provides in the event of an accident are far more valuable than any of the premiums I pay. Life is unpredictable; protecting yourself from financial ruin isn't.

6. To Own Your Place Is Divine

I've now lived in three states and moved nine times in my 30s, and I've still got over a year to go! Some of these times I moved by pure choice, and other times I moved because I had to. I am tired of moving, so I can't wait to actually own my own place and everything inside of it. From a financial perspective, owning your own place provides tax advantages, often allows you to build equity (rather than just paying rent), and you can avoid the expense of all of the costs of moving on a regular basis.

7. Play the Long Game

The most valuable thing we learn in our 30s is that our very best investments are long term, and involve making ourselves the best people we can be. Reduce your stress, make yourself happy, and you'll see huge benefits in the quality of your life and your longevity. Investing in your education, buying things you love that will last, and taking small steps to secure your financial future everyday will pay off in the long run.

The 30s are a fun and interesting decade. We're experienced and still hopeful. We're energetic and wise. We're grounded and still dreaming. Use these financial lessons above well and you'll find the financial foundation you've laid in your 30s fuels all of your days ahead.

What personal finance lessons have your 30s taught you?

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

5 Things Play Teaches You About Personal Finance

Sarah Winfrey — Thu, 06 Nov 2014 14:00:06 +0000

I don't know anyone who can't wax poetic about playing as a child. Even my friends who had difficult childhoods remember playing, somewhere and with somebody, with fondness.

There's something about remembering our childhood games, whether they were pickup games of baseball in the middle of the street or tag or imagining we were pirates deep in the woods, that makes us happy. Even as adults, with jobs and responsibilities and families and so much to do, we relish the hours that we can spend resting, relaxing, and enjoying our hobbies — also known as playing. That's because play is important. (See also: 11 Fun Games That Make You smarter, Too)

Whether you are child or adult, play brings joy. It makes us excited and happy. And it all makes me wonder: What if we could bring even a little bit of that joy into tasks that can seem difficult or frustrating, like managing our personal finances? Could even these things become more like games?

Try some of these ideas and let me know what you think!

1. Play Is Practice

More than anything else, play seems to be practice for life. The thing is, little kids don't like to practice. In fact, most of them don't have the focus to be able to practice in the same ways adults can. So they play. They play house, they play fireman, they play mommy and daddy and teacher. And in doing this, they learn about taking on different roles, conflict resolution, and so much more. Their practice prepares them for real life.

As adults, we can remember that practice is at least as important as studying a topic. While there's nothing wrong with researching what investments to make next, we might find ourselves more engaged if we actually jump in and practice. Trade with fake money or create sample budgets based on different salaries, to figure out how to make things work for you in real life.

2. Play Is Fun

As adults, we make personal finance into work. We get serious about the budget, or study hard to determine how to invest our money. We feel like we need to buckle down and get serious about our finances. Again, there's nothing wrong with this, but what if we could make the whole process less painful?

Try setting aside some money for "fun investing," or make budgeting a game by coming up with creative ways to spend less in different categories.

3. Play Promotes Counterfactual Thinking

Counterfactual thinking means thinking outside the box of what is, or in many cases, what seems to be. People who are good at thinking counterfactually are the ones who, when solving a problem, ask us to reexamine our assumptions, rather than just suggesting new ways to work within them. This sort of thinking can offer huge benefits in so many areas, because we often make assumptions that aren't true, or that aren't necessary. And pretend play seems to help children improve their counterfactual thinking.

Most adults would be embarrassed to be caught pretending. We can, though, pretend within a certain context. I have an example of this from my own recent history. For a long time, my husband and I assumed that we could not afford grass-fed beef, even though avoiding antibiotics and hormones is important to us. Recently, though, we researched different ways to purchase this meat, and found that, if we buy wholesale rather than from a store, it's much more affordable. We had assumed we'd be buying from Whole Foods or Costco, but now we're purchasing direct from a rancher.

To learn to examine your assumptions, or "pretend" in the context of your own finances, start by writing down your assumptions. For instance, you might assume that you don't have enough money for something, or that you have to keep a certain percentage of your assets invested in stocks, or that there's not another method for buying something. Then ask around and do some research to see if your assumptions are, in fact, correct.

4. Play Is Social

When kids play, they are learning social skills. Even when they are not playing with other kids, play itself seems to help the brain socially, so that those who play function better socially than those who do not. And adults seem to play in order to enhance their social interactions, to build community and find friends who they can connect with on a deep level.

We can reclaim our sense of play in personal finance by making aspects of our financial life social. If you live with roommates or a significant other, make sure you are both involved in budgeting. Even set aside some time to enjoy a meal together and go over finances in a less stressful environment. You could also start an investment club or, at least, talk through some of your financial questions with trusted friends or family members. All of this is likely to make finance more enjoyable, more like play and less like work.

5. Play Encourages Self-Regulation

The more kids play and the higher the maturity level of their pretend play, the more they learn to regulate themselves. Self-regulation touches on many aspects of life — we should be able to regulate ourselves emotionally, to keep desires (even strong desires) in check, and to make choices focused on long-term benefit rather than short-term pleasure.

Self-regulation seems to tie naturally to personal finance. Most of us want to be able to resist spending money when we don't have money to spend or when we are saving our money for something else. We also want to be able to leave our investments alone if we believe the investment is a sound one, even when the market is fluctuating and we feel unsure.

Again, it will help us to "pretend" in the context of our finances. If we are tempted to make a purchase that we really shouldn't make right now, we can envision how we will feel in two days (or even two hours!) if we make the purchase, and then again if we don't. If we are trying to leave an investment where it is, we can imagine ourselves using the money in 30 years, happy that we left it where it was.

What do you do to make personal finance more like play? Does that help keep you on track financially?

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

Do You Know These 5 Financial Lessons Most People Learn in Their 40s?

Nora Dunn — Thu, 02 Oct 2014 13:00:06 +0000

By the time you hit your 40s, you're supposed to have figured everything out, right? Then suddenly you're 40, and guess what? Life is still pretty confusing. Join the club!

Luckily, learning doesn't stop when you hit the big four-oh.

First, let's review what you've already learned.

In your 20s, you (hopefully) learn and apply financial lessons like the value of compound interest, the difference between good and bad debt, savings strategies like dollar cost averaging, and more. (See also: The 5 Most Important Financial Lessons Everyone Should Learn in Their 20s).

In your 30s, you learn about balancing the budget between big-ticket items like kids, retirement, and home ownership, you choose debt (including mortgages) wisely, align yourself with financial experts, and learn to live within your means. (See also: 5 Lessons Everyone Should Learn in Their 30s).

Now you're in your 40s, and things are changing (again). Some of the ground rules you lived by in your 20s and 30s may not serve you anymore. Here are five financial lessons that generally come to light in your 40s.

1. Risk Tolerances Change Over Time

With some investment experience under your belt and retirement still a long way away, you might be feeling a little more gutsy with your asset allocation, and want to rejig your portfolio to be more aggressive. In other cases, you might have survived a few market (and life) downturns, and are feeling more risk averse.

This is why it's important to have regular financial reviews (ideally with your financial planner) to ensure you're feeling good about your investments, and can track your progress towards your life goals.

2. You're Not Invincible

I remember as a child, falling off my bicycle was a no-brainer: get back up and keep going. Falling off a bicycle in our 40s isn't so easy; we don't bend any more — we break!

You might have had a health scare or serious illness or injury, and if you're lucky it didn't hurt your finances as well. In your 20s, hopefully you took advantage of good health and low premiums to insure yourself. Now it's time to do an insurance review to ensure you're properly (but not overly) covered.

To get started, check out these Financial IQ Tests:

3. Your Finances Aren't Invincible Either

Think of your finances in the same way as you and that bicycle. There is less room for mistakes and slack savings strategies the older we get, given that we have an ever-decreasing amount of time to take advantage of compound growth in order to recover. Make sure your financial health is in tip-top shape; recovering from "broken finances" is no easy task.

4. Inflation Sucks

Once you reach your 40s, you understand the real effects of inflation. When you were a kid a candy bar only cost about 25 cents — now it's 500% more at about $1.50! Carry this forward another 30-40 years when you're retired, and that same candy bar will be even more expensive. The money you save for retirement right now needs to go further than you think. Take inflation into account when planning for the future, and ensure your investments are structured to (at least) keep up with inflation.

5. 40 Is Not Old!

40 used to be "the new 30," and now 50 is "the new 40." As we age (and also live longer and longer) we realize that our younger preconceptions of certain ages has been skewed. In your 20s you might have thought that you'd have it all sorted out by your 40s (since you'll be old by then, right?), and suddenly here you are, and you're alive and kicking and still trying to figure life out like everybody else.

Forgive yourself. You're still young. You can change careers, embark on new adventures, and make a few mistakes like the rest of us. Not only that, but you have a long time until retirement yet, so under the premise of asset allocation (and keeping up with inflation), it behooves you to keep a long-term vision for your portfolio.

What crucial financial lessons did you learn in your 40s? Please share in comments!

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

9 Financial Lessons People Learn in High School — Did You?

Mikey Rox — Tue, 26 Aug 2014 13:00:03 +0000

Whether it be in the classroom or via real life experience, high schoolers get the chance to learn and apply a lot of the basic tenets of personal finance and money management. Some of them apply and retain the information, while others ignore, forgets or simply misunderstand it. (See also: The 5 Most Important Financial Lessons People Learn in High School (Did You?))

Which way did you go?

Check below for the nine financial lessons most people learn in high school, and then ask yourself: are you (financially) smarter than a 12th grader?

1. Money Is Difficult to Come By

Many people who grow up with loans, credit cards, and other forms of debt have lost their understanding of the value of money. Money is valuable for a reason; because there is a finite amount of it. With a culture that relies so heavily on credit and debt to compensate for the finite nature of money, we tend to lose sight of the value that it really holds. High schoolers learn this by having to work for their spending money, or by receiving an allotted sum from Mom and Dad, and once it's gone, it's gone.

2. Budgeting Is a Weekly Task

Budgeting for your expenses is not a one-and-done proposition. In fact, budgeting on a weekly basis is the most prudent way to handle money, since expenses (and sometimes income) can change from week to week. Teens and young adults have to do this to pay for their gas, entertainment, or other activities they want to participate in. As adults, our approach should be no different.

3. Saving Money Is a Slow and Consistent Process

High schoolers who do try to save money learn that it's a slow and incremental process, where small contributions add up over time. Trying to put large sums of money away all at one time will be difficult, and though possible at times can cause morale to sink whenever the process can't be repeated. The trick to saving money is putting away just a little bit at a time over a long period. Consider an automatic transfer from your checking to savings account every week, set to something small like $20.

4. It's Not Always Easy to Get a Job

Teens with little experience and low job-skills know the difficulty of finding good work. Jobs, though widely available in most cases don't exist in a vacuum. They exist because someone else is making money and needs people to help them make more money. Otherwise, neither you or anyone else would be getting hired. That means in reality, a job is a precious commodity that's difficult to come by.

5. Frivolous Spending Should Be Limited (and Cash Only)

When the money set aside for going out on the weekend is gone, that's the end of the fun. At that point, most high schoolers need to go home and do something that they don't have to pay for. That's a lesson that's harder to learn when you're an adult, especially when a swipe of the credit card makes you feel like you never run out of money. But it once again highlights the importance of living by a budget and within your means.

6. A Cheap Car Can Be a Good Thing

Remember when you were happy to have any car that would get you from point A to point B? Those were good times (good enough for Brad Paisley to write a song about them),and highlighted the practicality of avoiding a car payment and paying for your car in cash.

7. Saving for Retirement Can and Should Start Early

Many teens have money put away in a long-term savings account by their parents. Starting a long-term savings plan that early in life means that their money (if invested wisely) will grow at a steady rate and become a significant amount depending on the amount of cash and investment type. The key though is to understand the retirement savings options and start early.

8. Personal Finances Are Closely Tied to Personal Freedom

The less you're in debt and the more you're able to stretch your money and budget for the things you want, the more personal freedom you'll have. Teens learn this quickly as they begin to drive and take on small financial responsibilities. If they carry it into adulthood the benefits are far-reaching, often helping them avoid taking on too much debt or developing lifestyles that can't be maintained by their income.

9. There is No Such Thing as a Free Lunch

Popularized by Nobel Prize-winning economist Milton Friedman, this simple phrase is often echoed by fathers in the hopes of instilling a strong work ethic in their kids. The phrase itself is meant to quickly articulate the idea that nothing in this world is truly free. Though people might give you things for free, those things still required somebody to work and pay for them. Whether we agree with it or not, it's one of the harsh realities that we face living in a society built around economics and the free market. Teens learn this quickly as they begin to transition out of their parents house and into the "real world" where nothing is paid for, and they're now responsible for most of their own expenses.

What financial lessons did you learn in high school? Do you think more emphasis should be put on real-life finances and budgeting in high school? Let me know in the comments below.

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

5 Financial Lessons Everyone Should Learn in Their 30s (Did You?)

Nora Dunn — Wed, 09 Jul 2014 13:00:04 +0000

Regardless of our chosen life path, there are certain financial benchmarks, lessons, and practices along the way that allow us to make the most of what we have and, hopefully, to get ahead. Here are six financial lessons everyone should learn and practice in their 30s. (See also: The 5 Most Important Lessons People Learn in Their 20s)

A Preface on Lifestyle Design

We're generally expected to follow a certain life path — you know the deal: go to school, get a good job, get married, buy a house, pop out 1.5 kids, etc. And although the lessons below apply to this lifestyle template, they can be moulded to your own unique situation. For example — because of the financial lessons I applied in my 20s, plus the financial lessons below, I had the financial freedom to redesign my life, sell everything, and travel the world full-time at the age of 30. So take a broad view of these financial lessons and see how they best suit your own lifestyle designs.

1. Don't Rush Into Buying a House

I used to work as a financial planner, and one of the biggest mistakes I've seen clients (and friends) make is rush into buying property because they're convinced that every month they pay rent, they're throwing money away. So they buy a house with little to no money as a down payment, before realizing that the cost of owning and maintaining property is considerably more than paying rent — especially after their paltry down payment.

One client of mine in her 30s realized her blunder when she lost her house because she got laid off and had no financial reserve (as she had sunk everything — which wasn't much — into her house).

If you want to buy a house, save aggressively for a down payment. This will reduce your mortgage payments, insulate you against interest rate hikes, and give you a jump start on building equity. And saving for a down payment is a great exercise even if you don't end up buying a house; this money could be used to start a business, pay for additional education, or even fund long-term travel aspirations).

2. Budget for Having Kids — But Don't Forget About Retirement

When I was a financial planner, I watched new parents "temporarily" stop saving for retirement when they had kids, only to resume their savings when it was essentially too late (remember that lesson about compound growth you learned in your 20s? It's still very important in your 30s). Other parents simply didn't realize the cost of having kids, or overspent on unnecessary parenting items and baby gear that sunk them into consumer debt. Let's not even talk about the cost of childcare, and later on, higher education. (See also: Can You Afford to Have a Baby?)

Having kids costs money; make sure you've got a budget for it.

And as long as you're having kids, it's good to have a plan to help them financially get ahead in life. Include them in your financial journey, and set milestones for their own financial education that foster comfort and confidence with money. (See also: How to Financially Educate Your Children).

3. Use Financial Experts to Get Ahead

With any luck, you already aligned yourself with a financial planner in your 20s and sorted out your insurance needs, but this isn't a one-time exercise. Perform semi-annual financial reviews and periodically reevaluate your insurance needs. And don't try to reinvent the wheel yourself. Team up with financial experts who know their stuff and can advise you accordingly. In your 30s you already have enough on your plate; growing businesses outsource and hire employees to get ahead — your growing finances require a similar strategy.

4. Go Into Debt Within Your Means

In your 20s, you (hopefully) learned the difference between good debt and bad debt. Regardless of the kind of debt you get into, it's important that you do it within your means, so that you can continue to make payments even if life throws you a curve ball or two.

A prime example of how people in their 30s overextend their debt capabilities is in buying property that they can't afford. Banks calculate the mortgage they'll lend you based on a simple equation that doesn't account for your other expenses and obligations. Some people get the biggest house the bank will allow them, before understanding all the other costs of owning property (like taxes, maintenance, repairs, utilities, etc), and they then realize that they're in over their heads. One unexpected financial blow can send this house of cards down.

The higher your debt, the fewer options you have, but sometimes taking on that debt is still worthwhile. Ask yourself how your debt will help you, and how it could possibly hinder you.

5. Income Is Just a Number — Work With What You Have

My first year in the financial planning business netted me $15,000 in income. Six years later I was earning over six figures. I spent those years along the way thinking life would be easy once I hit six figures.

It wasn't.

In fact, I found that the higher my income was, the higher my expenses were — but I couldn't explain where the money was going. I simply didn't have the financial cushioning I expected to have with a six-figure income.

I made two mistakes that put me behind financially.

The first was that I got caught up in the spending curve that came with earning a higher income. I bought more expensive suits. My Honda Civic was no longer the image I "needed" to portray, so I got a nicer car. I took restaurant meals for granted. And my business expenses outlaid to earn more money were considerably higher (such as the need to hire employees). It stands to reason that you spend more money to make more money, but you can get ahead if you're conscious of how you spend it, instead of allowing yourself to get caught up in the whirlwind.

The second mistake I made was to arbitrarily attach value to an income figure — for example "six figures." Randomly setting that bar without truly understanding how it would make my life better made my eventual achievement of it an anticlimactic disappointment. It's not how much money you make — it's how you use it to empower your life. (See also: A Lot of People Don't Really Understand What Money Is – Do You?)

If You Didn't Learn It in Your 20s, There's Still Time

Concepts like compound growth and getting insurance while you're young and healthy still work in your favor when you're in your 30s. Take a minute and brush up on the financial lessons for people in their 20s to make sure you're ahead of the curve.

What financial lessons did you learn (or re learning or hope to learn) in your 30s? Please share in comments!

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

The 5 Most Important Financial Lessons People Learn in Their 20s (Did You?)

Nora Dunn — Tue, 22 Apr 2014 09:24:17 +0000

Your 20s is a time for living life and discovering your path. It's also an incredibly important time to create a lasting effect on your finances. Financial planning isn't something you do when you get old; in fact, due to the financial lessons I learned in my 20s, I "retired" at 30 to travel full-time, knowing my financial future was safe because of what I did in my 20s. Here are the five most important financial lessons you can learn in your 20s to set you up — for life. (See also: Retirement Planning if You're Under 30)

1. Compound Interest

Because of the beauty of compound interest, saving money early allows you to put away less money overall, but end up with way more.

For example, let's look at retirement savings. Hypothetically speaking, you invest a chunk of money — $10,000 — at the age of 20, and leave it for 40 years, growing at an average of 8% per year. By the time you're 60, that $10,000 is worth $217,245.

If you wait until 30 to invest the same $10,000, it will only be worth $100,626 by age 60. In order to get the same $217,000 at 60, you'd need to invest $22,000.

If you wait until 40, $10,000 is only worth $46,609. To get $217,000 at 60, you'd have to invest $47,000.

Thus, when you're in your 20s, even if you can only put away a small amount of money for your long-term goals (like retirement, buying a house, investing in business, and more), it's totally worthwhile.

2. Dollar Cost Averaging

Most of us don't have $10,000 to invest at 20. (In fact, many are inundated with debts, but we'll get to that in a minute). This is where dollar cost averaging is invaluable.

The technicalities of dollar cost averaging are simple. You invest a set amount of money on a regular basis. You set it up so it's automatic, ideally coming out of your account on payday, and ultimately you don't even miss the money.

For example, let's say you invest $200 a month, starting at age 20, with an average rate of return of 8% per year. By the time you're 60, it's worth $648,361, and the money you invested totals $96,000.

If you wait until 30, your $200 per month would be worth $283,522; to get the same $650,000 if you'd started at 20, you'd need to invest $430 per month, totaling $154,800.

If you wait until 40, your $200 per month is worth $114,532 at 60, and to get the same $650,000 you'd need to invest $1,100 per month, totaling $264,000.

In addition to compound interest and ease of investing automatically, dollar cost averaging is about getting a good rate of return in a variable market. Most of us don't have the time, inclination, or expertise to time the markets, nor do we have the stomach to buy at the best time — which is when the market is tanking. Over time, dollar cost averaging allows you to take advantage of all markets, without having to watch stock prices or play the (dangerous) game of market timing.

3. Choose Your Debt Wisely

Your 20s are not only a time of great opportunity to set up your finances for life, but they're also a time for making — or avoiding — the biggest mistakes. One of these mistakes (which can take a lifetime to recover from) is getting into debt, specifically bad debt. (See also: Good Debt, Bad Debt)

In your 20s, you're likely setting up your own home and life away from your parents, which costs money. Many 20-somethings turn to credit cards — a bad choice if you can't pay them off right away.

Bad Debt

For example, if you charge $5,000 in expenses to a credit card at 18.75% interest, and only make minimum payments of 2.5% of the balance per month, it will take you 50 years to pay it off, totaling $13,000 spent on a mere $5,000 in charges. Even flat payments of $100/month will take 7 years to pay off and $9,000 in payments. (See also: What 20-Somethings Can Do About Credit Card Debt)

But sometimes debt is unavoidable, and it can even be considered good.

Good Debt

For example, buying a house is often considered good debt; your initial down payment buys you an asset worth much more than the money you currently have, and it appreciates accordingly. Although you're paying interest on the mortgage, part of your payments also go toward equity in the house — which is your money, and your own growing asset.

The trick with buying a home (or investing in other good debt) is to avoid committing to repayments that cripple your other financial goals and quality of life. People often buy houses they can't afford, forgetting about technicalities like property tax, utilities, repairs, and other costs of home ownership beyond the mortgage. (See also: You Shouldn't Buy a Home If...)

4. Insurance

Another financial lesson you might not consider in your 20s, but which can pay off in spades, is to get insurance while you're young and healthy. Things like life insurance and critical illness insurance often allow you to lock in your rates based on your age (and state of health) at application. You might not see much need for insurance while you're young, but it's one of those things that you wish for the most when it's too late. Similar to dollar cost averaging and compound interest, a small investment now can save you a ton of money later.

5. Developing Good Habits

The above financial lessons involve developing good habits early on. In our 20s, we're malleable to what life offers, and if we create good habits right away, they're much easier to maintain (and build on) than if we have to readjust our ways later in life — and pay the price.

When I was a financial planner, I loved working with clients in their 20s, because we could achieve so much and set everything up to be easily maintainable. Thus, a great way to develop good financial habits in your 20s is to align yourself with a financial planner who can help you with all the above important lessons, and so much more. (See also: 9 Signs You Need to Fire Your Financial Planner)

What financial lessons do you wish you had learned in your 20s?

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

4 Reasons Why You Don't Have Financial Common Sense (and How to Get It)

Mikey Rox — Fri, 17 Jan 2014 10:48:07 +0000

If you're always in the hole, you may look anywhere for financial help. You may listen to financial experts on TV, read their books, or pay to attend their seminars on money management and debt elimination. (See also: 10 Sites and Apps That Help Manage Your Finances)

The truth is, improving one's financial outlook can be as simple as having financial common sense. It doesn't take an expert to know that spending more than you earn can trigger financial problems. And you don't need to read a book to know how excessive credit card use can result in debt, issues with creditors, and sleepless nights.

Financial common sense is so simple, yet so hard to follow. Why?

1. We Believe That Things Will Make Us Happy

Retail therapy may be your pattern for coping with your emotions. If you feel stressed, depressed, or anxious, going to the mall and picking up a few items for yourself may be the thing that lifts your spirits. (See also: Free Ways to Relieve Stress)

But while shopping may put a smile on your face and help you forget the day's troubles, rarely does it provide lasting happiness.

"The positive emotions associated with acquisitions are short-lived," says a study from the Journal of Consumer Research. Further, although positive emotions are common after making a purchase, these emotions are less intense than before actually acquiring a product, explains author Marsha L. Richins.

Of course, if shopping has become your biggest mood booster, you could probably care less about the psychology. At this point, you want to feel better, and if you feel that a pair of new shoes will make you happy, nothing else matters — even if you go into debt or spend bill money to acquire them.

However, the blues or a bad day doesn't justify irresponsible spending. There are plenty of other ways to distract yourself, such as journaling, exercising, or listening to music. But if you're feeling particularly low and believe that retail therapy is the only cure, set a "bummer budget."

Give yourself a strict spending limit — maybe $20 or $30. There is no rule that says you have to spend a lot to feel better. The experience of a cheap purchase can provide the same lift as an expensive one.

2. Old Habits Are Hard to Break

If your early adult years involved a lot of spending, no budget, and habitually late payments, looking back, you probably know where you went wrong. But if this has been the routine for years, re-adjusting your thinking and adopting better money habits is much easier to say than do. (See also: How to Break Bad Habits)

Sure, you know the importance of establishing a budget, as this helps track where your money goes. And you know that paying your bills late can result in late fees and maybe a damaged credit score. However, it's one thing to know the mistakes you've made; it's an entirely different thing to rewire your brain and make better choices in the future.

First, identify why you've been unable to change these bad habits. For example, if you pay bills late because you procrastinate opening your mail or because you don't write down your due dates, take steps to fix these issues. Open mail as soon as it arrives, and keep bills in plain view. Set payment alerts on your phone or schedule recurring payments. Likewise, if you don't know how to budget or manage your money, hire a financial planner or get help from a relative or friend who's good with finances. (See also: 12 Habits of Responsible Credit Card Users)

3. We Didn't Learn Good Money Skills

The fact that you have a hard time following simple financial common sense may not be entirely your fault. Although you may have developed some bad habits of your own as an adult, much of what you know about money probably came from your parents. If your folks aren't the best money managers, you may have inadvertently adopted some of their bad habits. (See also: Stupid Things My Parents Taught Me About Money)

According to the 5th Annual Parents, Kids, and Money Survey conducted by mutual company T. Rowe Price, nearly 97% of kids surveyed said that they learned money habits from their parents.

If your parents didn't save, used credit cards excessively, paid their bills late, and didn't budget, you're likely to imitate this behavior. And if you observed these habits for the first 18 or 19 years of your life, following financial common sense may require erasing everything you've learned about money and acknowledging that your parents' way isn't the right way.

4. We're Trying to Impress Others

With credit cards and home equity, just about anyone can live the good life. You know, designer clothes, nice shoes, lavish vacations — basically a life that says, "I have it all."

The problem, however, is that some of those people flaunting the good life are up to their noses in debt. We live in a materialistic world where success is determined by bank accounts and where many feel the need to have the best and biggest of everything. And while some people see this as nothing more than false security and fake happiness, others fall for the hype and spend their lives trying to keep up with others. (See also: Is Peer Pressure Keeping You Poor?)

This thinking and attitude makes it difficult to follow financial common sense, because while your bank account says you can't afford a particular item, your brain says you need the item to fit in and maintain a certain status. For many habitual overspenders, no amount of financial education will correct the behavior — usually the correction only comes after a serious financial crisis.

What are your thoughts on why it's so hard for us to observe financial common sense sometimes? Let me know in the comments below.

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

7 Financial Lessons From Breaking Bad

Tim Lemke — Tue, 01 Oct 2013 10:00:04 +0000

The hit TV show "Breaking Bad" will leave a lasting legacy as one of the most intense and popular shows on television. Watching Walter White and associates descend deeper into meth madness week after week has been truly entertaining. (See also: Financial Lessons from "Sons of Anarchy")

But it's also been educational from a personal finance standpoint.

Suffice it to say, Walter White made a lot of questionable decisions. And while we're probably never going to make a foray into making crystal meth, many of his choices can offer helpful lessons in money management for the average, law-abiding citizen. From preparing for disaster to investing your money and how to deal with unexpected wealth, there is much to learn from the craziness of Breaking Bad. Here are seven lessons to take away from the madness. [Caution: Spoilers Coming]

1. Practice Good Estate Planning

Walter White began cooking crystal meth because he got an unexpected cancer diagnosis. He wanted to pay off his medical bills and make sure his family was taken care of.

There are obviously better ways to plan for a bad event.

Life insurance is something everyone with a family should have. Do you have enough coverage? Look into setting up an annuity or other vehicle that can result in consistent payments to your family if the worst should happen. (See also: How to Buy Affordable Life Insurance)

Another big piece of estate planning is your emergency fund. Do you have enough cash in the bank to get through a tough period? Many financial advisors suggest putting away at least six months of salary.

A Roth IRA is a great way to save for retirement due to its tax advantages, but it also comes in handy in an emergency because any deposits you make can be withdrawn without a penalty.

Take time to review your financial plan. Are you prepared to handle any bad news that comes your way?

2. Get Quality Health Insurance

Health insurance is a vital part of your financial plan, and it's important to review your policy to ensure you're properly covered.

Walter White lived in a pre-Obamacare world. That means his medical expenses may not have been capped. Under the new Affordable Care Act, his expenses would have been capped at $12,700 annually, even if he had the low-cost "Bronze Plan" purchased through one of the new health insurance exchanges. (He also would not have been turned down by insurers for any pre-existing conditions.) (See also: Understanding the ACA’s Health Insurance Exchange)

But even under Obamacare, it's still important to find coverage that won't leave you on the hook for thousands of dollars that you may not have budgeted for. If you get insurance through your employer, review it closely to ensure you're properly covered. If you do purchase coverage through a health insurance exchange, take a look at the Gold or Platinum plans, which have higher premiums but more comprehensive coverage. Being underinsured can still lead to financial hardship.

If you do come down with a medical condition, your employer may offer a health spending account, which allows you to deposit money tax free to help pay medical bills. Keep in mind, too, that unreimbursed medical expenses are often tax-deductible.

3. Talk About Money With Your Spouse

Walter thought he was best off hiding the truth from his wife, Skyler, but he'd have been better off being honest with her from the start.

According to the National Endowment for Financial Education, 31% of American adults who combined assets with a spouse or partner say they have tried to conceal the truth about their finances. Nearly 60% of these adults say they hid cash from their partner or spouse. But that same report also pointed out that in most cases, spouses end up finding out the truth, anyway.

Once Skyler knew about Walt's "business," she was — surprisingly — able to help him. But their relationship was irreparably damaged. The lesson here is that hiding financial truths from your spouse can strain a relationship and cause you to make bad choices. A family's finances are always better off when everyone is aware of the full picture.

4. Do Something With Your Money

Since most of Walter's money was obtained illegally, he had trouble investing it through traditional means. That's why he kept most of his cash under the floor, in storage units, and in barrels in the desert.

But for the rest of us, it rarely makes sense to follow the "under the mattress" philosophy of saving. Most bank savings accounts and CDs will pay you interest and are FDIC-insured. There are also plenty of other safe investments, including bonds, that will protect your initial investment and offer a return. Even stocks are generally safe if you invest in index funds and don't need your money for a decade or more. (See also: How to Get Started With Index Funds)

5. Manage Your Risk, and Don't Get Greedy

Walter White's downfall may have come when he continued to cook crystal meth even when he had more money than he'd ever need. He let ego and pride get in the way of sensible thinking, and continued taking big risks when he didn't have to.

It's tempting to always go after the highest return on investments. But investments with the highest returns often have the highest level of risk.

The lesson here is that if you are ahead of the game in achieving your financial goals, consider taking a more conservative investment approach to protect what you have. This is especially true for folks who are approaching the age at which they plan to retire.

6. Don't Buy Flashy Things, Especially for Your Kids

After Walter's drug money started rolling in, he went and bought Walt Jr. an expensive sports car. This was, of course, a terrible idea for someone trying to keep a low profile.

Even if you come into a lot of money legally, there are better things to do than blow it on an expensive material item. (Especially a car, which declines in value the second you drive off the lot.)

Even ultra-rich people should take time to teach their children about good financial habits. If you feel the need to get a car for a teenager, take them to the car lot and have them learn about how cars are marketed and priced. Let them help you negotiate the best price on a small, reliable, and fuel-efficient sedan. Once it's bought, set up a plan for having them pay you back.

And set a good example — parents who spend money irresponsibly have kids who spend money irresponsibly.

7. Don't Be Afraid to Ask for Help

When Walter needed to launder his drug money, he called Saul. When he needed some bad guys to disappear, he found Mike or some other henchmen. Without some help, there's a good chance Walt and Jesse would have been caught or dead before Season 3.

It never hurts to consult with experts when you are in over your head. If you are confused by how to invest your money, find a good financial advisor. If you have home or auto repairs that you can't handle yourself, hire a guy. It's OK to get help.

Any other financial lessons to be learned from Breaking Bad? Please share them in comments!

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:

Financial Lessons From "It's A Wonderful Life"

Julie Rains — Mon, 24 Dec 2012 11:24:30 +0000

You may have seen the classic film “It’s A Wonderful Life” that is often played over the holidays. Set on Christmas Eve in the 1940s, the story is told through a series of flashbacks, an alternate reality of what the world would look like if main character George Bailey had never been born, and, finally, a happy resolution in the present day.

Described as a reverse “A Christmas Carol” with George’s nemesis Mr. Henry F. Potter playing a Scrooge-like role, the movie has many financial lessons that are relevant today. (See also: 21 Personal Finance Lessons From Harry Potter)

Financial Crises Can Cause Tremendous Stress

George Bailey went berserk and contemplated suicide in a financial crisis. As the top executive of a local financial institution, Bailey Bros. Building and Loan Association, he was responsible for regulatory compliance. But when his Uncle Billy, a key employee, lost an $8,000 bank deposit on Christmas Eve (which coincided with a visit from the bank examiner), he faced criminal charges for embezzlement unless he could repay the money immediately. Though he was innocent, George questioned all of his life, career, and financial decisions that led to this situation.

Some Business Owners Don’t Have Your Best Interests at Heart

Mr. Henry F. Potter, a wealthy business owner who gained control over the local bank, didn’t care about those who lived and worked in the community. George seemed to be one of the few people who recognized the potential long-term effect of Potter’s power over the local economy. As a result, he spent a lot of energy protecting residents from Potter’s plans to control real estate and business development in the area. When his guardian angel showed George what the town would have looked like if he had never lived, you get an idea of the social and economic conditions that might exist if Potter's evil intentions went unchecked.

A Family Member May or May Not Be Your Best Employee

Uncle Billy, the brother of George’s father, nearly ruined the business. He drank on the job and didn't seem to be a productive employee even in the best of times. George could have hired a better employee or given him lesser responsibilities, somehow finding a way to show generosity in a way that didn’t compromise the business.

On the other hand, George's younger brother Harry Bailey seemed to be a valuable asset to his father-in-law’s glass manufacturing company. So, managing a successful business means being discriminating about your choice of employees.

Build an Emergency Fund

George was thrifty but didn't have an emergency fund. He worked for years to set aside the money to travel and attend college, so he was capable of saving. Though he didn't spend needlessly, he also didn't pay himself first, but rather put others' needs ahead of his own. As a result, he didn't have the means to save his company from disaster.

Not All Financial Institutions Are Run Alike

There was a significant difference between the lending policies of Potter’s bank and Bailey Bros. Building and Loan Association. When making a decision about financial services, compare interest rates, fees, etc., as they may vary widely among institutions.

Resourcefulness Can Save Money

Mary, George's wife, saved money by buying a fixer-upper and making repairs herself while she was raising their family. Even though this process was time consuming as well as frustrating to George at times, she was able to help provide shelter for herself, George, and their four children.

Progressive Lending Policies Can Fuel the Local Economy

Building and Loan Associations provided real estate loans to families at a time when short-term mortgage loans were the norm. When these loans were called, often after five years (as opposed to a more typical 30-year term today), most people couldn’t afford to pay the outstanding balance. As a result, banks foreclosed on many homes. The types of loans that George’s business provided gave the working class a better opportunity to own a home and helped to create a thriving local economy.

Companies Often Purchase the Competition to Gain Market Share

Potter attempted to buy members’ shares of the local building and loan association as a way to stifle competition. Later, he tried to lure George from the financial institution by offering him a compensation package that far exceeded the business valuation. Potter’s goal was to eliminate cheaper alternatives for area residents so that he could gain market share and later raise prices.

Welcoming New Industries to Town Can Help the Community (and You)

When Mary's former beau, Sam Wainwright, mentioned that his company was going to build a factory in Rochester, George asked him to use a vacant facility in Bedford Falls instead. Later, employees of Sam’s business were likely among those who helped bail out the Baileys.

Investing in New Technologies Could Increase Your Wealth

George turned down Sam’s offer to invest in his new plastics venture, which later made Sam very wealthy. He may not have had the extra money at the time, but just because he personally wasn’t going to leave Bedford Falls for a higher-paying and more exciting job shouldn’t have excluded the possibility of investing in a potentially ground-breaking business.

In Marriage, a Financially Compatible Spouse Is Crucial to Happiness

Husband-and-wife team George and Mary agreed on decisions that impacted the family’s financial status. They stood together as they made career and money moves that focused on community betterment rather than personal wealth, such as staying in their hometown and forgoing a honeymoon to keep the family business open. Most importantly, though, Mary understood the financial consequences of the couple’s priorities and was not bitter or regretful about the path that they chose.

Relationships Are More Valuable Than Money

When George saw the reality of life in his hometown without his presence, he realized that the investments he had made in relationships were worthy of setting aside travel plans and career ambitions. And, ultimately, he was redeemed by these relationships. Mary alerted friends and family to his troubles, and people brought cash to reconcile the building and loan association's shortfall.

The big take-away is that we can use our financial resources as well as our talent and time to lead impactful lives. Not only can we inspire and encourage our family and friends but we can influence the direction of our local communities and global events.

What financial lessons have you learned from "It's a Wonderful Life"?

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