8 Simple Ways You Can Become Financially Literate On Your Own

8 Simple Ways You Can Become Financially Literate On Your Own

If you have read any finance articles or news that relates to money, you probably have come across being financially literate or “financial literacy.” These terms apply to how well you understand your finances and how educated you are in everyday financial decisions.

Unfortunately, the financial education results in America are really not that great.

“Only 28% of Americans are considered “financially healthy,” according to a CFSI survey of more than 5,000 Americans. While not a large sample size, there are tons of other statistics about low savings, high debt, etc. out there. Yet, you don’t have to be in those categories.

Below, we’ll explore everything about financial literacy and how you can become financially literate on your own.

What is Basic Financial Literacy?

Being financially literate or “having financial literacy” is not difficult to define. These terms simply mean you have a basic understanding finances and the value of money.  Understanding financial basics thus allows you and others to make smarter money choices and are able to be self-sufficient in financial decisions.

The best way to define financial literacy is:

You are able to understand financial issues everybody deals with like saving money, paying bills, debt management, investing, etc.

Knowing and memorizing some finance terms is great, but it’s applying that terminology effectively that create financial stability in your life.

Financial Literacy Statistics

Now that we have a complete definition of financial literacy, it makes sense to put some stats behind it. There are tons of personal finance stats, but I’m going to keep it pretty simple here. Below are a few that I found interesting as it relates to financial literacy.

Two-thirds of American adults can’t pass a basic financial literacy test. (Fortune)

44% of Americans don’t have enough cash to cover a $400 emergency (Forbes)

The majority of US adults (61%) have had credit card debt in the past 12 months and nearly two in five (38%) carry such debt from month-to-month. (NFCC)

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

https://investedwallet.com/become-financially-literate/

Evasive Action

Evasive Action

John Lim  |  November 23, 2020

DEAR FAMILY, you know I don’t typically give unsolicited investment advice. But today, I’m breaking that rule, because I don’t want you to get hurt financially.

I can’t promise that, by following my advice, you’ll be better off in the short run. But I firmly believe that you’ll be better off in the long run, by which I mean in the next five to 10 years. Please take this letter for what it is, simply a warning and food for thought. Ultimately, you must make your own decision.

This is perhaps my most controversial suggestion, so let me explain. Over the past decade, and especially this year, there’s been extreme money printing by the Federal Reserve in the form of QE, or quantitative easing.

Take a look at this chart, which represents how much money the Fed has printed. Next, check out this graph of U.S. money supply, particularly the far right end of the curve. On top of this, the Fed recently made a substantial change in policy. It’s now targeting average inflation of at least 2%, which means we may see higher inflation in the future to compensate for the recent far lower inflation rate.

The bottom line: Inflation is a greater risk today than ever before in my investing career. While there’s no guarantee that inflation will spiral out of control, think of gold as insurance for your portfolio. Normally, Treasury Inflation Protected Securities, often known simply as TIPS, would also serve as an inflation hedge. But their yields are currently negative, which is not terribly attractive, though they would certainly provide some protection if inflation spiked higher.

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

https://humbledollar.com/2020/11/evasive-action/

When A Million Is Not Enough

When A Million Is Not Enough

November 19, 2020 Financial Independence 25

A Million Is Not Enough

On Saturday morning, I woke up to an email from a long-time reader of this blog. To preserve anonymity, let’s call him Carl.  Carl sent me a link to this story from the Sunday Times and asked for my views. I was still in bed, the title – and the picture of a sun-drenched pool – were catchy enough, and so down the rabbit hole I went.

A Millionaire Retirement

The author (as the title suggests) was trying to bring home two key points:

Point #1: A £1m pension pot is well within reach for most people

Point #2: A £1m pension pot is nearly not enough to be a “wealthy” (whatever that means) pensioner

That being said, I thought the two core points were interesting enough for a proverbial double-click in today’s post.

Dreaming Big

When it comes to life, it usually makes sense to aim as high as possible. Even if you land short, you’ll still end up in a great place – and our finances are no exception.  Hence, I am actually in broad agreement with the author on the fact that achieving a £1m pension pot isn’t as unrealistic as people think it may be.  In fact, these three pension millionaires can give you a realistic blueprint on how to hit the seven-figure mark in your retirement portfolio:

Pension Millionaires

No, you don’t need to be a banker or a lawyer. That being said, life also has a habit of throwing curveballs our way. It can be a stint of unemployment or a health issue.  Some folks end up making a bad financial decision or two. Divorces are far from rare. Few people are lucky enough to get through life without a bump in the road.

For many others, it unfortunately boils down to a simple lack of financial awareness. If, for whatever reason, you haven’t paid attention to your finances early on, you may find yourself out of runway for your investments to compound.

The chart below is a helpful reminder of how much difference a couple of decades can make:

Total investment required for $1m

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

https://bankeronfire.com/a-million-is-not-enough?utm_source=rss&utm_medium=rss&utm_campaign=a-million-is-not-enough

Is Peer Pressure Keeping You Poor?

Is Peer Pressure Keeping You Poor?

By Max Wong

Like every other Wise Bread writer, I hate debt. Although my debt doesn’t keep me awake at night, it is one of the things I think about while brushing my teeth every morning. “What will I do today (brush-brush) that will help me pay down (brush) my home mortgage ahead of (brush) schedule?”

The idea that “many people would rather struggle to pay off a large credit card bill than utter the phrase 'I can’t afford it,'” tests the limits of my financial imagination like a velociraptor tests an electric fence.

It’s so painful, yet I can’t stop thinking about it. Spending money that you don’t have is a type of self-harm that often goes undetected and can have lifelong consequences.

The Positive Power of "I Can't Afford That"

I am grateful that I figured out early on that people who judged me for saying “I can’t afford that” were the same people who were secretly living with crushing amounts of credit debt and didn’t own anything.

I think most emotionally mature people realize that friends and family who make you feel bad about how much money you have are not nice people, but even armed with that knowledge, there is still so much peer pressure to spend.

One of the hardest things about not having financial parity with the people around you is turning down invitations to events that are out of your budget range. Being in debt can be isolating.

In addition to missing out on weddings, nights on the town, or even schooling, friends who get turned down repeatedly might take your reluctance to spend money you don’t have as a personal rejection.

So, how do you talk about debt without losing all your friends? There must be at least a dozen ways that people manage their public spending vs. private debt, but I have four strategies that have worked for me personally.

Be Your Own Financial Cruise Director

Your debt is not your friends' problem to solve.

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

http://www.wisebread.com/is-peer-pressure-keeping-you-poor?ref=seealso

5 Friend Types That Can Hurt Your Finances

5 Friend Types That Can Hurt Your Finances

By Aja McClanahan

Your inner circle of friends can have a direct impact on many areas of your life, including your financial behavior. According to a 2014 study from the Journal of Consumer Research, peers can influence you to make certain decisions.

You can even bond with someone over decisions to abstain or indulge in certain activities. The study found, for instance, that friends bond over small shared indulgences like eating chocolate, but were more inclined to abstain as the stakes were raised.

Because of this, you want to be especially aware of how your friends might be influencing your financial behaviors. You don't necessarily have to dump friends who negatively affect your spending, you just have to know how to handle your interactions so they don't cause you to make poor money decisions.

If you think it's time to take stock of your friend circle for the sake of your wallet, here are some personalities to watch out for.

1. The risk-taker friend

This person takes a lot of risks when it comes to their money. They aren't necessarily careless, they just tend to leap without looking. Sometimes they win and sometimes they lose. If you're not careful, these seasoned risk takers can take you along for a ride you're not ready for.

The excessive risk-taker tends to be impulsive, and seeing them win can influence you to make similar choices. This friend may encourage you to make major decisions without properly weighing all the risks involved.

How to handle them

Take their "bright ideas" with a grain of salt, but don't shun everything they conceive. They can be good business partners when tempered with caution. Sometimes, you won't be able to talk them out of anything, but you can definitely leverage their passion for risk taking if you find yourself being too conservative for your money goals.

2. The spendthrift friend

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

http://www.wisebread.com/5-friend-types-that-can-hurt-your-finances?ref=seealso

5 Obstacles You Can Expect on Your Journey to Financial Freedom

5 Obstacles You Can Expect on Your Journey to Financial Freedom

By Denise Hill From WiseBread

The road to financial freedom is paved with good intentions — and littered with skid marks from those who started out, but opted for an easier path. It can be a lonely, winding road that has potholes, roadblocks, and detours. The best way to ensure any journey is successful is to properly prepare.

Here are a few pitfalls you can expect to run into on your way to financial freedom, and what you can do to cope.

1. You'll get tired

Living a life of frugality can be exhausting. Always pinching pennies, weighing options, tracking expenses, and telling yourself "no" can get old quick. Your ability to remain on the financial straight and narrow is directly proportional to your level of tolerance.

Some people can go months without new clothes, drive the same hoopty for years, take one vacation every decade, and be perfectly happy. Others cannot. Find a pace and intensity that fits your personality and level of discipline. Give yourself the wiggle room you need to succeed.

A great way to combat the fatigue that will pop up along your journey is to take breaks. Allow yourself the opportunity to relax and enjoy the view from time to time. Set financial goals that secure your future, but also keep you happy.

Plan to take a vacation, save up for a mini shopping spree, and blow a little cash every once in a while just hanging with friends. The key is to pace yourself. This journey is a marathon. (See also: Yes, You Need "Fun Money" in Your Budget)

2. You'll feel lonely

Forging a path toward financial freedom goes against the grain of our current society. You are bombarded with messages that tell you that you deserve the best no matter the cost. You are worth it. And you only live once, so you might as well live it up now. You are encouraged to indulge yourself.

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

http://www.wisebread.com/5-obstacles-you-can-expect-on-your-journey-to-financial-freedom

What Happens If Puerto Rico Becomes A State?

What Happens If Puerto Rico Becomes A State?

Notes From The Field By Simon Black November 10, 2020 Sovereign Valley Farm, Chile

In late 2018, after more than seven fantastic years of living in Chile, I decided to move to Puerto Rico to take advantage of the island’s incredible tax incentives.  By moving to Puerto Rico, I traded my right to vote in US federal elections for a 4% tax rate. And I’m pretty confident I got the better end of that deal.

I’ve written about this quite extensively– but stick with me, because there’s a new twist to the story. As we’ve covered before, Puerto Rico is a territory of the United States.  This means that the island falls under the jurisdiction of the US government for certain matters, like immigration and national defense.

But it operates independently in other matters– like taxes.

In fact, taxes is probably the most important one: Puerto Rico has its own tax system that’s completely independent from the United States.

So residents of Puerto Rico can disconnect entirely from the US tax system, as long as their income is generated from Puerto Rican sources.

This is a critical point: what constitutes Puerto Rican income?

According to the tax code, this includes dividends paid by a Puerto Rican business, as well as capital gains from certain investments like stocks and bonds.

So if you live in Puerto Rico and make most of your money from your Puerto Rican business, or you trade stocks, commodities, crypto, etc., then in most cases your income would be considered Puerto Rican in origin.

If that’s the case, you are generally no longer required to pay US federal taxes on that income. In fact you might not even have to file a federal tax return at all.

Instead, you would pay Puerto Rican taxes. And that’s where the incentives come in.

Several years ago the Puerto Rican government established a number of extraordinary tax incentives, specifically targeted at those two cases–

Traders, whose primary source of income is capital gains from their financial investments, literally pay ZERO tax.

And entrepreneurs with qualifying businesses are only required to pay a 4% corporate tax rate (plus a tiny municipal rate that’s just a fraction of a percent, depending on which city you live in.)

Plus, any dividends that your company pays to you are tax free as long as you live in Puerto Rico.

This is an enormous benefit.

If you live in the US mainland and operate an LLC, you’d pay, say, a 25% to 40% average tax rate on business income, not counting self-employment tax.

If you run your business through a corporation, you’d pay 21% corporate profits tax, plus an additional 15% to 20% dividend tax, plus the 3.8% Obamacare surtax, plus state and local tax.

In Puerto Rico it’s just 4%. Call it 4.5% to account for the local municipal tax. But that’s it. No extra dividend tax. No Obamacare surtax.  You put more than 95% of your earnings in your pocket.

This isn’t some obscure loophole or shady tax shelter. It’s the law.

Section 933 of the United States federal tax code specifically exempts US citizens from federal tax on their Puerto Rican sourced income, as long as they are bona fide Puerto Rico residents .

(Note that if you have US-sourced income, or income from foreign countries, that income would still be taxable by the IRS. Section 933 only excludes Puerto Rican income from US federal tax.)

And in Puerto Rico, the incentives are also codified by law.  In fact, once your tax incentive application is approved, you actually sign a contract with the government and are issued an individual tax decree.  So even if they change the law later, you’d still be grandfathered in under the old rules, and continue to enjoy your current tax benefits.

Now, here’s the twist: there are very, very few events that could trigger a problem with your tax incentives. But one of them just became more likely:

Puerto Rico is currently a US territory. But there’s been a movement for quite some time for Puerto Rico to become a state… similar to how there’s a statehood movement for Washington DC.

Just like DC, Puerto Rico tends to skew quite liberal politically. So the blue party in the US is very much in favor of Puerto Rico and DC becoming states.

(I hate breaking down the world into red and blue, but in this case, it’s relevant.)

It means they would likely pick up 2 more senate seats for each one, nearly guaranteeing the Democrats control of the United States Senate.

Several months ago, in fact, the House of Representatives passed a bill authorizing DC to become the 51st state. It was killed in the Senate.  But it shows the movement is real.

Last week, Puerto Ricans had their own election. And statehood was on the ballot.  The final tally showed that a majority of Puerto Ricans want to become a state. The Democratic party wants them to become a state.

And if that happens, the benefits would go away. Sure, your company would still be subject to a 4% tax rate in Puerto Rico. But then you’d have to pay US federal income tax on top of that.  So statehood pretty much kills the deal.

But does last week’s vote mean that Puerto Rico will become a state?  No, not necessarily.  Statehood would require approval by the US House of Representatives. Then the Senate would have to approve it.  And in order for that to happen, the Democrats would need to take control of the Senate AND agree to eliminate the filibuster.

Then the President would need to sign it into law.

So, it’s possible this could happen, but it’s not especially likely.

And even if it did happen, there would still be several years of a transition process.

So, bottom line, the tax incentives in Puerto Rico are still valid and extremely valuable.

And even if they only exist for another 3-5 years, they’re still definitely worth considering.

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

https://www.sovereignman.com/trends/what-happens-if-puerto-rico-became-a-state-29287/

5 Reasons Not to Use Debit Cards When You Shop Online

5 Reasons Not to Use Debit Cards When You Shop Online

By Holly Johnson. Last updated 7 November 2020.

Many consumers use their debit cards for everything they buy. Using debit instead of paying with a credit card can help you avoid the potential for debt. The money is taken out of your bank account directly and immediately, so there’s little chance to spend more than you have, unlike using a credit card. But when shopping online, there are reasons to consider using a credit card instead.

Using a debit card for online purchases can mean enduring greater losses if you're a victim of fraud. Plus, you're giving up valuable consumer protections and rewards each time you make a purchase with debit in a store or online.

Here are all the reasons you may want to stop using debit and use a credit card instead.

1. You may be putting yourself at risk for fraud

It's easy to assume you won't be liable for fraudulent purchases made with your debit card or checking account number, but this isn't the case. Where most credit cards come with zero fraud liability thanks to rules enacted in the Fair Credit Billing Act (FCBA), the same protections don't apply to transactions made with a debit card.

In fact, someone who finds your debit card number could wipe out all the money in your accounts. If you don't notice or report it in time, you won't have any way to get your money back.

According to the Federal Trade Commission (FTC), your level of liability depends on when you notice the fraud and report it. For example, if you report fraud within two business days after it's noticed, you're only liable for up to $50 in losses. If you report fraud within two to 60 days of your statement being mailed to you, you're only liable for up to $500. If you fail to report fraud once it's been 60 days from the date your statement was mailed to you, the FTC notes that you could lose "all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account."

2. You're missing out on rewards

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

https://www.wisebread.com/5-reasons-not-to-use-debit-cards-when-you-shop-online?ref=relatedbox

Get ready for the “Work From Home” Tax

Get ready for the “Work From Home” Tax

Notes From The Field By Simon Black - November 16, 2020  Sovereign Valley Farm, Chile

Once upon a time, long long ago in a dream world far, far away, banks actually used to be capitalists. They were wealth creators. They wanted to do business with their customers. They facilitated important trade and commerce. They acted responsibly and conservatively with other people’s money.

Now it’s a totally different story.

Banks seem to routinely steal from their customers. They gamble our savings away on ridiculous investment fads, treat us like criminal suspects, bury us in an absurd bureaucracy, and then charge us fees for the privilege of working with them.   And to add insult to injury, many banks seem to have become full-blown Marxists.

I started noticing this last year when a number of bank CEOs, along with heads of other major corporations like Apple and General Motors, declared that they would no longer make business decisions prioritizing what’s in the best interest of their companies’ shareholders.

Just a reminder-- shareholders OWN the company. The CEO works for the company.

And yet these CEOs, who essentially work for their shareholders, have unilaterally decided that shareholders are no longer the priority.

This is a common theme in politics as well, with Bernie Sanders, AOC, and Joe Biden calling for an end to “shareholder capitalism.”

Don’t get me wrong-- being a responsible corporate citizen, treating customers well, taking good care of employees, etc. are all obvious things that are beneficial for any business long-term, and hence beneficial for the shareholders.

The key issue behind this movement, however, is the belief that shareholders shouldn’t be able to call the shots any longer.

They believe the government gets a say who should / should not be on a corporate board. And the public (i.e. the Twitter mob) gets a say what a company should / should not do.

Everyone else gets to tell you what you’re allowed to do with your own private property, i.e. your shares in the company. It’s no longer up to you.

This is decidedly anti-capitalist; it’s effectively public ownership of what’s supposed to be private property. Yet banks seem perfectly willing to go along with this new ethos.

And now they have another feather in their cap:

Just a few days ago, Germany’s Deutsche Bank (one of the largest banks in the world) released a paper proposing that people who have the ‘privilege’ of working from home should have to pay a 5% tax to subsidize people who can’t.

This is a ‘work from home’ or ‘remote worker’ tax. The report claims that this tax has been needed for years, but “Covid has just made it obvious.”

So, regardless of your circumstances-- even if you want to go back to the office but aren’t able to because your company sent everyone home-- Deutsche Bank thinks you should have to pay up.

The report is even borderline insulting to remote workers, saying that they’re “contributing less to the infrastructure of the economy whilst still receiving its benefits.”

So apparently all of us working from home are just lazy, good-for-nothing bums in the eyes of Deutsche Bank.

This ‘research report’ seems more like something out of Communist student newspaper, not one of the world’s biggest financial institutions.

If these people feel guilty that their remote work arrangements are unjust, there’s nothing preventing them from giving their entire paychecks away.

But for whatever reason they feel entitled to demand a pound of flesh from everyone else’s paycheck too.

Yet this is the world we live in now-- where even the banks have become Marxists and every idiot feels empowered to propose public policy.

And it’s also why TAX PLANNING must absolutely be part of your Plan B… which may soon become your Plan A.

This is absolutely the case if you live anywhere in the West: your taxes are going up. It’s already been happening in many cases at the local level.

In the Land of the Free, we’ve seen income taxes, property taxes, sales taxes, etc. increase across the country.

The People’s Republic of California has even proposed a wealth tax, plus an exit tax for people who flee the state.

And that’s before considering the impact of tax increases at the national level.

The incoming presidential administration in the US has already pledged to raise taxes, including corporate profits tax, individual income tax, and capital gains tax.

It doesn’t matter that the evidence strongly opposes these decisions.

For example-- over the past several decades, the US federal government’s tax revenue has consistently been about 16% to 18% of GDP, year in, year out.

In other words, the government’s ‘slice’ of the economic pie is 16-18%.

During that period, tax rates have been all over the board, from as low as 28% (for the highest individual rate) to more than 90%.

And yet the government’s slice of the pie has remained nearly constant.

The lesson here is pretty obvious: no matter how high, or low, tax rates go, the size of the slice relative to the rest of the pie remains the same.

So rather than try to make your slice bigger, why not focus your efforts (and tax policy) on what might create the biggest pie? Duh.

But hey, why bother looking at data and history before making a decision...

Another example is about capital gains tax rates; the historical data show that raising capital gains rates actually REDUCES tax revenue.

You’d think they’d take a look at the mountain of evidence first. But no. They want to increase capital gains to as high as 40%, and that’s just at the federal level.

It’s not going to be much different in many other countries, especially Europe. Governments have all their Covid programs to pay for, so they need the money.

And now it’s clear that even the banks are on board, pushing for higher taxes.

So, again, tax planning absolutely needs to be part of your Plan B. And fast.

On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years.

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

https://www.sovereignman.com/trends/get-ready-for-the-work-from-home-tax-29341/

9 Bizarre Money Superstitions People Actually Believe

9 Bizarre Money Superstitions People Actually Believe

By Emily Guy Birken 

When I was about eight years old, my grandmother gave me a purse. Inside the purse was a dollar bill, which I tried to give back to her. I thought she had left it in there by mistake.  "No, no. That must stay in there," she told me. "You can't give a purse with no money in it, or else it will never have money in it. Money attracts money!"

That was my first introduction to the odd world of money superstitions. Grandma's belief that purses and wallets should always have at least a little money in them, especially if they are given as gifts, had been passed down to her from her Russian grandmother — although it is a superstition that can be found in many countries around the world. I have since met many people who follow this custom, including a small retail business owner who would place a penny in every wallet and purse she sold.

Money superstitions can run the gamut from the slightly lucrative to the silly to the downright bizarre, but they are always fun to hear. Here are nine common money superstitions that people take pretty seriously. (See also: Why Superstition Makes You Buy Insurance)

1. Itchy palms mean you are about to gain or lose money

According to the Palmistry and Hand Analysis website, an itchy right palm is a good thing, because it means you are about to receive money. Don't scratch that itch, or it will stop the money from coming into your life.

An itchy left palm, on the other hand (ha!), means you are about to lose money. To relieve the itch and protect your assets, you can rub your left palm on a piece of wood. This superstition is said to have originated from the Saxons — German tribes who settled in Great Britain during the Middle Ages. They believed you could cure diseased skin by rubbing silver on it.

2. Do not place your purse on the floor

This superstition is considered to be bad feng shui, because your purse is seen as a symbol for your wealth. Putting it on the floor is therefore a sign of great disrespect and disregard for your money.

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

https://www.wisebread.com/9-bizarre-money-superstitions-people-actually-believe

9 Lessons to Take From Millionaires Who Are Really Good With Money

9 Lessons to Take From Millionaires Who Are Really Good With Money

By The Penny Hoarder Staff

Life would be a whole lot easier if someone would just Venmo us $1 million, but unfortunately the chance of that happening is, well, probably zero. (Venmo doesn’t allow transactions that large anyway.)

But even though our chances of becoming a millionaire are slim, we can still manage our money like one. No, we’re not going to tell you how to buy hundreds of shares of Apple stock. Or how to pick out the perfect yacht.

These are simple money moves any normal, non-millionaire person can make today. Each tip can get you closer to achieving your big goals.

Take a look:

1. They Grow Their Money 11x Faster — Without Risking Any of it

Putting your money under a mattress or in a safe will get you nothing. And a typical savings account won’t do you much better. (Ahem, .09% is nothing these days.)

Act like the rich and use a debit card called Aspiration to earn up to 5% cash back and up to 11 times the average interest on the money in your account. Plus, you’ll never pay a monthly account-maintenance fee.

2. Leave Your Family up to $1M

Oh, to be a millionaire. Look, not all of us have the money to set up trust funds for our loved ones. But you could still leave them up to a $1 million in life insurance — and you don’t even need to have the money in the bank. You’re probably thinking: I don’t have the time or money for that. But this take minutes — and you could leave your family up to $1 million with a company called Bestow.

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

https://partners.thepennyhoarder.com/lessons-from-millionaires-desk/