How Do I Teach My Teenager About Money?

How Do I Teach My Teenager About Money?

One of the most important jobs we have as parents is to teach our children how to navigate the adult world. An important skill they’ll need to master is managing their money.

Starting while they’re young is a good plan but if you’ve missed that boat it’s not too late.

So how can we successfully teach our kids to manage money when they’re teenagers, still living at home, and dependent upon us for most of their monetary needs?

Some school districts, realizing the importance of educating young people about money, have begun offering personal finance classes in high school.

North Carolina recently became the twentieth state to require high schoolers to complete a course in economics and personal finance to graduate. Topics taught to teens include paying for college, using credit cards, and taking out a home mortgage.

Even if your state doesn’t require such a course in high school, however, there are ways you can teach your teenager how to manage their finances.

Teaching Your Teen About Money

Here are six essential money topics and tools to discuss and use with your teen to boost their financial literacy.

Budgeting

One of the fundamentals in personal finance is “spending less than you earn.” Since teenagers don’t usually have full-time jobs, and may not earn any money at all, how can we teach them how to manage their spending?

One way is to allow them to make all of their purchases out of a weekly or monthly allowance. That way, they’re forced to budget for the things they need and want.

You can ask them to pay for clothing, school lunches, car insurance, and gas (If they’re drivers), school supplies, and entertainment money. They’ll have to decide how much to spend in each financial category.

They’ll also need to make sure they don’t spend too much cash in one category and run out of money for another.

If you feel comfortable, share your budget with your teen. Be sure to go over all of the periodic or hidden expenses also included in the family budget.

You can explain the difference between gross and net pay. Plus, show them how much money comes out of your wages for taxes, health insurance, and retirement saving.

With teens, showing often works better than telling. So, giving your child space to make his own financial decisions or showing him your budget will be a more powerful teaching tool than hypothetical advice.

Allowance Cards

To continue reading, please go to the original article here:

https://womenwhomoney.com/teach-teenager-money-financial-literacy/

Good Enough Is Pretty Great

Good Enough Is Pretty Great

January 8, 2020 By Machinist

Have you ever noticed how much contradiction and disagreement there is in the advice being offered about personal finances?  Suze Orman claims that buying coffee is like flushing a fortune down the toilet.  Others assure us that we can tolerate a vice or two and still be responsible personal financiers. 

Some people are convinced that owning a home is a waste of investable capital, while others are convinced that real estate, with its easy leverage is the best, most reliable passive income stream.  Still others make the choice to pay off their mortgages early. 

Some people wouldn’t stoop to driving someone else’s hand-me-down car, while others will gladly accept years of additional retirement as a trade for doing just that.  Which advice is best? More importantly, which is good enough?

The reason for this disagreement is simple.  People are unique and so are their finances.  We all operate within the same economic system, so there are universal principles that apply to everyone, but beyond these foundational principles, we all get to decide how to make the most of our limited resources. 

You can choose to buy your coffee, a big home, and a new car.  Maybe you have the resources to support the purchase of all of these things, all at the same time.  Perhaps you can even afford private school, and a fancy yacht, but at some point, you will reach the limits of your available resources and will have to start making choices.

The Point at Which You Start Making Choices Is the Determinant of Wealth and Happiness in Life.

And that’s the secret to economic success.  Life operates within a framework of limited resources.  Whether you are Jeff Bezos or Joe Schmo, your resources are limited.  This is not a flaw in the universe.  It is a key feature of life in the universe.  And, as with nearly everything, understanding the rules and features of the system makes it easier to use the system to our advantage. 

When we understand that we will never be able buy everything the world has to offer, we can get to work on what really matters – optimizing the benefit we can get from the resources we have.  The key is to deliberately choose what we value most before we have exhausted our resources.

Life Is Short, But It’s Also Rich

I want to get all the joy and adventure I can get out Life.  I don’t want to give up the things that make life great in order to have more money when I am old.  I want a great life now, AND when I am old. 

To continue reading, please go to the original article here:

https://perpetualmoneymachine.org/good-enough/

Your Advisor-Free Financial Plan

Your Advisor-Free Financial Plan

By Machinist

Last week I explained that you are better off without a financial advisor, because advisors cost more than the value they provide.  The purpose of this article is to provide a financial plan that you can follow to financial independence and a plentiful retirement.  The plan is intended to be simple enough that anyone can understand and follow it without professional support.  It is also intended to leave you with a higher net worth than if you hired an advisor.  

Our financial plan will focus on your own personal macro-economics, not your day-to-day expenses.  Financial advisors may offer support with how you spend and save your money, but let’s face it, the best they can really do is give you a pep talk and hand you a pamphlet on budgeting. 

You are the one that will have to decide whether you are willing to pack your own lunch, drive used cars, or send your kids to public schools.  Only you can decide what you value most. 

In other words, a financial advisor will focus their advice on where and how to invest, not how to save the money in the first place.  We’ll skip over the details of your saving too and get right into the financial plan.

Step 1 – Spend less than you earn.

Living within your means is the foundational principle of personal finance.  The power behind productive finances and your Perpetual Money Machine is investment returns, but you can’t have a return on investment until you have something to invest.

If you are starting from a position of negative net worth, then you need to stop digging yourself further into debt and start aggressively paying it off.  I completely agree with Mister Money Mustache when he says that you should act like your debt is an emergency situation, because it is.  Make every reasonable effort to minimize your spending so that you can pay off your debts as quickly as possible.

I cannot stress enough how important time is to building wealth.  A few lost years of saving will make a huge difference in your eventual net worth.  In very simplified terms, you cannot start saving until you are out of debt.

Home mortgage debt May be an exception to this rule, because home mortgages typically carry such low interest rates, because homes tend to appreciate in value, and because a home is a necessity of life.  However, please consider whether your home fits with your income and lifestyle.  If you are not able to afford your top priorities and your mortgage payment while saving at least ten percent of your income, then I advise you to seriously consider whether your home is the right one for you.

Step 2 – Choose the best type of account.

To continue reading, please go to the original article here: 

https://perpetualmoneymachine.org/your-advisor-free-financial-plan/#more-609

The Future is Uncertain (2020)

The Future is Uncertain (2020)

April 30, 2020 MonkWealth Investing, Monthly & Financial Updates

You probably clicked on this post because the title was relatable in a certain way.

How did it make you feel? Vulnerable? Scared? Expecting to read how we’re headed for the biggest economic collapse since 1930? Or maybe excited, interested? Or simply indifferent?

Whatever the case is, if you’re reading this blog you’re most probably interested in growing and maintaining a diversified, long-term, passive portfolio, understanding exactly what “time in the market beats timing the market” conveys.

In that case, you shouldn’t fear the markets at all. If you do, it contradicts your investment strategy and you should immediately reevaluate one of the following factors:

Risk taking willingness

Risk taking ability

I already have dozens of post that can help you make a better assessment of your risk tolerance, but would recommend setting yourself in the right mood by reading the following post first:

Your Role in the Next Big Thing  https://monkwealth.com/your-role-in-the-next-big-thing/

With that said, let’s see where we stand at this moment. Here’s the S&P 500’s performance in the past 6 months, as a representative for the stock market:

Pretty volatile, yes. However, if you already determined your investment strategy and asset allocation, you should be pretty indifferent. If you expected to see technical analysis (which doesn’t work in semi-efficient markets) or speculation (“where the S&P will end up in 2020”) you’re set for disappointment. A piece of financial advice might come in handy: don’t trade based solely on what you read.

And for total peace of mind, don’t listen to economist. I can’t say “nobody knows what’s going to happen” because some of them (us?) apparently do. Some of the prophecies will be fulfilled. Some with a delay when they’re no longer relevant. And some won’t.

So, picking the right economist is like picking the right stock. Maybe the right thing to do is diversifying in terms of the investors you trust so that you allocate your investments accordingly… And you’ll end up with what you should have from the start – a diversified portfolio of asset classes diversified within.

To continue reading, please go to the original article here:

https://monkwealth.com/the-future-is-uncertain-2020/ .

7 Smartest Financial Decisions I Made

7 Smartest Financial Decisions I Made

October 7, 2019 MonkWealth Personal Finance

The road to financial independence is conceptually pretty simple. There are proven vehicles to facilitate our road to success, we just need to put in the time. Now, there are people who got lucky and there are people who worked hard. What I’ll cover in this post is parallel to that spectrum.

These are a few things that helped me budget better, save more, and put me years ahead compared to where I could have been without them. More importantly, they are a strong base for both creating opportunities to get lucky, and also to support working hard towards our goals.

Sometimes it even feels like a real-life cheat code.

And lastly, I said that these things helped me, but they can also help anyone who adopts them. No matter how you earn your money, certain decisions and habits can put you way ahead in life.

1. Not overspending

This is where it all begins.

And of course, for us, personal finance & FIRE obsessed individuals, this item might seem obvious or even redundant. But think about it – this is exactly what separates us from the general public.

Basically, people resisting consumer indulgences are rare. But even rarer are people not even having to resist consumer indulgences because we saw they’re meaningless. And when I witness how much money is spent on liabilities and expensive consumables because of insecurities and the need to impress other consumers, I see the major advantage we have by simply spending less than we earn.

This item alone is the cheat code, all the others are extras!

I’d have even go as far as putting minimalism as the first item, but I don’t think conscious spending should be frowned upon. And I’m not promoting being cheap either. What I am saying is that buying a big house with a mortgage of $500k under succubus pressure just so you can catch up with your dumb friends is a trap.

So yes, this is the first pillar of my financial success so far. It all starts with saving money.

Let’s see what else I’ve built on top of this habit.

To continue reading, please go to the original article here:

https://monkwealth.com/7-smartest-financial-decisions-i-made/  

Don’t Stress About Things You Have No Control Over

Don’t Stress About Things You Have No Control Over

Posted by TEBI on February 28, 2020

By Jonathan Clements

 Here’s the least surprising thing you’ll read this week: you can’t control the financial markets. They’re driven by news — and we simply don’t know what news we’ll get in the weeks and months ahead, whether it’s about the spread of the coronavirus, its impact on the global economy or something else entirely.

But don’t despair. There’s also much that we can control, including how much we save and spend, the amount of investment risk we take, how much we pay in investment costs, our portfolio’s tax efficiency and — most critically at a time like this — our own emotional reaction to market ups and downs.

Indeed, if you were going to design a laboratory experiment to test investors’ mettle, this past week would provide a nearly perfect template. Think about it. We have a virus without a vaccine that’s spreading rapidly — but nobody knows how rapidly — which is damaging the global economy — but nobody knows how badly — at a time when many U.S. stock investors were already anxious after an extraordinarily long bull market that has pushed valuations to worrisome levels.

Feeling unnerved? It would be shocking if you weren’t. Think about all the ways that this year’s market action has messed with our heads.

Recency Bias. In 2019, the S&P 500 stocks were up an impressive 28.9%, excluding dividends. This year, they’re down a fairly modest 7.8%. Which number are we focused on? You already know the answer. Instead of celebrating the huge gains enjoyed over the past decade, investors are fretting about the relatively modest losses suffered this year. Our thinking, alas, tends to be heavily influenced by whatever’s happened most recently.

Extrapolation. The S&P 500 has given up 12% over the past six trading days. The temptation is to take the past week’s losses and extrapolate them into the future. But that would be a classic investor mistake: We imagine we can forecast returns simply by looking at past performance.

Loss Aversion. Recent stock losses — and our sense that more damage may lie ahead — is enough to cause many folks to panic. We simply loathe losing money. Indeed, experts in behavioral finance suggest we get at least twice as much pain from losses as pleasure from gains.

Anchoring. As of yesterday’s market close, the S&P 500 had fallen back to levels last seen in mid-October. If somebody had told you in mid-October that U.S. share prices would tread water for the next four months or so, you likely would have shrugged. But instead, we’re anchored on the S&P 500’s Feb. 19 all-time high and the 12% decline since then.

To continue reading, please go to the original article here: 

https://www.evidenceinvestor.com/dont-stress-about-things-you-have-no-control-over/

Stop Overspending With This Simple Budgeting Trick

Stop Overspending With This Simple Budgeting Trick

December 2, 2019

Do you find yourself falling short of your savings goals or taking on debt because you can’t stop overspending?  Have you tried budgeting but still struggle to control your spending?

Changing our spending habits is extremely difficult. When you are used to a certain level of spending, it’s hard to teach yourself to spend less. This was me a few years ago when I found myself on the overspending struggle bus. I had established new savings goals but was struggling to adjust my spending accordingly. This resulted in me not being able to both meet my savings goals and pay my bills. And it was frustrating as heck.

Budgeting did help me get to know my spending a bit better, but I still needed something more to really reel in my spending. I needed a way to learn what it feels like to live within my means and meet my savings goals.  I needed to tighten the reins. So I hacked my budget and created a trick to rein in my spending which allowed me to  align my money with my all of my priorities.

Why This Trick To Stop Overspending Works

I won’t lie. This trick can feel a little restrictive at first. But for the chronic overspender that I was, I needed this trick to get me to really understand what I could spend while still meeting savings goals and paying my bills.

This trick prevented me from spending money I didn’t have and blowing my monthly budget. And more importantly, it taught me how to spend in a way that allowed me to meet all of my financial goals and pay those darn bills. And I’m happy to say, I don’t use the trick for all of my expenses anymore.

I was able to get away from it because I had learned what my spending needed to look and feel like if I wanted to meet all my goals. This trick was an effective way to get myself in the mindset of spending intentionally.

And this is why this trick is a game-changer for anyone struggling to stick to their budget, stay out of debt, or simply stop overspending.

To continue reading, please go to the original article here:

https://www.cashfortacos.com/stop-overspending-with-this-simple-budgeting-trick/

Does Money Bring You Joy?

Does Money Bring You Joy?

November 27, 2019 By Machinist

Pure Joy

You trade you time and energy for money, but what do you trade your money for?  After you provide the necessities of life, you probably spend most of the rest of your money in the pursuit of joy.  But, do the things that you spend your money on actually bring you joy?  

At a time when almost everyone already has the necessities of life and so much more, you might think that there would be plenty of joy to go around.  As it turns out, joy is probably more of an individual choice than a matter of money.

Sparks of Joy

Now that she has her own show on Netflix, nearly everyone has heard of Marie Kondo and her philosophies about tidying up.  I’ll admit that I don’t know a lot about Kondo, nor have I succeeded in tidying my house up, but I have noticed a phrase that she seems to use a lot – sparks of joy. 

The idea is that as you are going through your belongings, you ask yourself, does this item bring me sparks of joy?  If the item is merely useful or valuable but doesn’t actually bring you sparks of joy, then it may not be something worth keeping in your life.

In Pursuit of Money and Joy

If you are like most people, you are right in the middle of the best years of your life.  And, if you are like most people, you are probably spending most of your waking hours engaged in the pursuit of money.  That money certainly makes joy possible.  It is difficult to enjoy anything when you are hungry or homeless.  But having and spending money does not necessarily bring joy.  In other words, the things that money can buy may or may not actually make us happy.

How often have you purchased something with great anticipation for the joy that thing will bring, only to find that the anticipation was more joyful than actual ownership.  How many items have you purchased that made you happy for a while, but now sit idle?  Maybe some of those things have even become a constant reminder of waste or regret and a source of sorrow or disappointment?

How can we avoid buyer’s remorse and find joy in our purchases more often?

To continue reading, please go to the original article here:

https://perpetualmoneymachine.org/does-money-bring-you-joy/

UK Uses Feudal System Law To Seize £150 Million From Bank Accounts

UK Uses Feudal System Law To Seize £150 Million From Bank Accounts

Notes From The Field By Simon Black   May 26, 2020  Bahia Beach, Puerto Rico

May 28, 2020  Bahia Beach, Puerto Rico

During the summer of 1215 in a riverfront meadow near London, some of England’s top barons gathered to confront King John and force him to sign a contract guaranteeing their rights and freedoms.

The contract became known as the Magna Carta. And one of its key provisions (#43) gave the Barons protection against something called ‘escheat’.

In medieval times, ‘escheat’ referred to property being forcibly passed to the King if its original owner died without heirs.

So if a Baron passed away without a son, his domain would pass by escheat back to the crown.

Over time, kings vastly expanded the use of escheat; anyone convicted of a crime would have their property seized by escheat. Occasionally someone’s son or daughter could be pressed into servitude by escheat.

It was like a medieval version of Civil Asset Forfeiture: the King took whatever he wanted, for any reason, and people had no rights.

By 1215, England’s noblemen were sick and tired of it, and they successfully forced King John to sign the Magna Carta.

Unfortunately for the other 99.9% of England’s population, most of the Magna Carta’s guarantees only applied to Barons and other noblemen.

Plain ole’ regular serfs still had their meager property plundered by the King, and by the noblemen themselves who had just fought to preserve their own rights at the expense of everyone else’s.

So if a feudal serf in England died without an heir, or was convicted of a crime, all his property was escheated to the local Lord, or to the King.

This became such big business in England that the government appointed special agents called ‘escheators’ in every single English county to oversee property confiscation every time someone passed away.

If there was any doubt at all whether or not the deceased had valid heirs, the escheator would seize the property immediately.

Amazingly enough, this ridiculous feudal custom still exists. And not just in England-- in many countries around the world.

In just about every state in the Land of the Free, for example, your possessions, real estate, etc. are forfeited to the government if you die without heir.

Even bank accounts that are left dormant for some period of time-- usually a few years-- can be confiscated by the government. 

But this is totally bizarre, because ‘dormant bank account’ rules can be incredibly loose. In many jurisdictions, for example, simply having some savings stashed away in a bank account that doesn’t have any other activity can put your funds at risk of being seized.

They actually still use the same word-- escheat. So money in dormant bank accounts is escheated to the state.

To be fair, this practice has been relatively rare… until Covid. But now governments are starting to look at every source of funding they can get their hands on, including the medieval ones.

The British government recently announced that they had “unlocked” £150 million from dormant bank accounts, with cooperation from some of the biggest banks in the UK, all to help fight World War Covid.

And now the UK is looking to expand the practice beyond bank accounts; they’d like to be able to seize unclaimed financial assets (including stocks and bonds), insurance proceeds, and even dormant pension accounts.

As one UK government official put it, “I look forward to the potentially millions more we can unlock for good causes through expanding the Dormant Assets Scheme.”

This is a practice that literally dates back to the feudal system. And it reinforces a simple truth: you don’t really own anything if the government has the authority to take it.

I have no doubt the bureaucrats who came up with this idea have very good intentions.

After all, what nobler cause is there in this bizarre world of ours but to wage an endless crusade against the Coronavirus, no matter the cost?

They’re willing to do whatever it takes, spend whatever it takes, print as much money as it takes, and yes, even confiscate people’s private property, to rid the world of the virus.

This is our new reality: medieval serfdom.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/uk-uses-feudal-system-law-to-seize-150-million-from-bank-accounts-27825/

Treat Your Life Like a Business

Treat Your Life Like a Business

May 10, 2020 By MonkWealth  Career, Finance, Personal Finance, Philosophy

Some people got lucky and made millions. Some people were disciplined and got rich slowly.

However, adopting certain principles can make us eliminate the factor of luck in business and in life. Maybe not completely but enough to feel sufficient control over our project.

In this post I want to point out a few non-exclusive factors that may significantly improve our lives.

The idea is in the title: Treating our lives as a business. And if we’d do a good job in achieving what’s considered success in life, applying the same principles in a corporate environment would be a joke. Winning at life is much more rare than career success.

Don’t overspend It always starts here. Know your budget. Allocate it properly. Don’t borrow without a plan. Have a fund that can cover your expenses for a few months.

Regardless of whether we talk about business or life, going into high interest debt is extremely risky, especially when certain levels of cash-flows are not already established. Although debt can be used as a leverage given a proper strategy, it can also be a fast track to a bankruptcy. So use with caution – or don’t if you have the slightest doubt in what you’re doing.

But what’s even more important is where you allocate your spending. Do you buy items that serve no real purpose and have non-positive ROI? Both in life in business these can be abstracted away as indulgences without long-term value, usually purchased because of human instincts and insecurities.

On the other hand, you can buy assets – things that give value in return. These can be your employees and tools & technology as a business, or long-term investments and education as a private individual. The amount of overlap is huge.

You want that debt-to-equity low. While at it, utilize financial reporting. Have a balance sheet. Know what you own, know what you owe. And if you still haven’t, develop a thorough understanding of your cash flows. Market research & Strategy Never jump in the waters without a plan.

It’s your responsibility to know the environment you’re operating in. Know your customer. Know your audience. Know your obstacles. Know the framework you’re a part of – learn about the government, the economy, the tax system… Understand supply and demand.

It’s in your best interest to understand the rules of the game you’re playing and leverage them to your advantage.

 To continue reading, please go to the original article here:

https://monkwealth.com/treat-your-life-like-a-business/

Money – We Need To Talk About It

Money – We Need To Talk About It

December 4, 2019 By Machinist

Let’s talk about money.

There are few things that people avoid talking about more than money, yet we probably spend most of our time in pursuit of money.  We could all benefit from a better understanding of it, but sadly, we are mostly left to find our own way with money. We rarely even have the chance to learn from other’s experience, so we are bound to repeat the same mistakes.

I get it; there are some good reasons not to talk about money.  We think that letting people know how much money we have or how much we earn will complicate our relationships and interactions. 

Strangely, even though we don’t want people to know our financial situation, most people spend a lot of time and effort trying to appear as though they have more money than they actually do.  I’m not sure how this deception makes interactions any more comfortable.  Maybe people inflate their perceived financial status in an effort to avoid having to interact with people of their own income level.

Silence on money causes problems.

Because people are so unfamiliar with money topics, just living normal lives inevitably leads them into financial conflict which they are unprepared to resolve.  The inability to identify and avoid financial snares and navigate out of mistakes causes crisis situations for many individuals and for society in general.  For example:

The Student Loan Crisis

Most kids receive almost no instruction about money at school or home.  They enter college with a poor understanding of its costs.  They are ignorant of the burden a student loan will be – possibly delaying the major milestones of adult life for decades. 

Most kids choose their college based on factors of prestige or fun but may not consider which institution will provide the best value for their money or the best employment opportunities upon graduation.  Most entering freshman have not chosen a major, so they spend valuable time and money “exploring their options” before buckling down. 

They often realize that their initial school choice was a poor one, so they decide to transfer.  All of this leads to more years spent in college and greater expenses.  In addition, many kids aren’t even aware of options other than college.  For all of these reasons and more our educational system is failing students and the student loan situation has reached crisis level.

Money and Divorce

 To continue reading, please go to the original article here:

https://perpetualmoneymachine.org/money-we-need-to-talk/