Jeff Rose at Good Financial Cents inspired me to write on the Roth IRA movement.

I’m one of those dinosaurs that started her first IRA in her 20’s at the beginning of the IRA movement. At that time, there was no such thing as a Roth IRA, so I went with a traditional IRA. On top of that anomaly, I was the only 25 year old at a retirement seminar in a room full of 60 year olds.

Although my passion for saving and investing has stood me well over time, I am deeply concerned about the financial future of those who haven’t yet started to save and invest. Read on for some motivation to get started investing in a Roth IRA today.

A True Retirement Story

At 8:00 AM I receive a call from an older neighbor, just wanting to talk. She started off by recounting the details of her husband’s firing from his job. My neighbor, June, believes he got fired because of his hot temper. Strike one, keep your temper in check at work.

The saga continues as she tells me about the new blinds she is buying for the home. I casually mentioned, that she might postpone this purchase since HER HUSBAND, THE MAIN SOURCE OF FAMILY INCOME JUST LOST HIS JOB. June replies, that expense was already planned so she will get the new blinds. Strike two, don’t add more financial stress after a job loss.

To top it off, June continues her financial mismanagement by sharing how she paid a consultant $100.00 to explain Medicare coverage to she and her hubby. Unable to keep my big mouth shut, I said that Medicare will explain their system FOR FREE. Strike three, don’t pay for information readily available for free.

The final blow came when she mentioned she has NO ROTH IRA, NO TRADITIONAL IRA, and not much saved up for retirement.

She stated “We don’t need retirement savings, we’ll have social security soon.” 

What is she thinking?

Why You Must Start a Roth IRA Today

I understand that retirement seems a long long way off for those in their 20’s and 30’s. Yet, the earlier you start saving, the less total money you need to save, and the more you will have at retirement time.

There is uncertainty in the future of social security. At best, benefits will be smaller and start later than they do now. Long term employment with a singular employer is practically nonexistent. So, if you fail to take responsibility for your future, you face a scary life in old age. As we all live longer, we need more assets to ensure that we don’t outlast our money.

I beg you to explore the data so you don’t end up old and poor.

Check out the facts:

Joleen’s Story

At age 25, Joleen began investing $200.00 per month in a Roth IRA and her employer added another $100.00 per month bringing the total up to $300.00 per month.

She invested the monthly retirement money* this way:

• 40% ($120.00) in Vanguard Total Stock Market Index Fund (VTSMX)
• 30% ($90.00)  in Vanguard International Stock Index Fund (VTIAX)
• 30% ($90.00) in Vanguard Total Bond Market Index Fund (VTBLX)

She started investing at age 25 and stopped at age 65, for a total of 40 years.

At age 65, Joleen’s contributions plus her employers’ grew to $787,444.00*.

Jamar’s Story

Jamar, Joleen’s brother wanted to spend his earnings and didn’t think about the future. No retirement investing for Jamar, he was having too much fun; Jamar figured social security would take care of him.

At age 40, Jamar had a change of heart. He woke up one morning and realized that he had nothing invested for his future; and he was scared. He decided to start investing and chose the same investments as Joleen, but decided to try to catch up. Jamar invested $400.00 per month, twice as much as Jill’s $200.00.

Jamar’s employer matched his $400.00 per month with an additional $100.00, just like Jill’s. This brought his total monthly investment to $500.00.

*Assume: Portfolio average annual return of 7%

At age 65, Jamar’s contribution plus the employers’ grew to $405,036.00, while Jill’s lesser contributions grew to almost twice that amount at $787,444.00.

INVEST IN A ROTH IRA

The Takeaway

My friend June is living in denial. When social security comes, it won’t match her husband’s former income. As her savings are small and she didn’t plan for the future she faces major lifestyle cuts as she ages.

The alternative to old age is death. If you expect to get old, own up to reality, and invest through work or a discount broker in a Roth IRA and start contributing today. Even if Social Security continues, don’t expect it to pay for a comfortable retirement. You can choose not to invest for the future, but be aware that social security is uncertain, and you will be poor in your old age without investing in an IRA.

Start now, you won’t miss the money and you’ll appreciate the financial security later.

You do need IRA, Social Security won’t be enough to support your retirement.

Have you started your retirement investing yet? If not, what are you waiting for?

How could David Siegel, billionaire owner of the largest time share company in the world, Westgate Resorts not have back up savings when trouble hit? Bloomberg BusinessWeek recently chronicled his downfall and rebound in “Versailles, the Would be Biggest House in America“.

EMERGENCY FUND

Background; What is a Time Share?

As a struggling young married couple living in Southern California, El Carino and I visited many time share presentations. Wooed in by a set of luggage, free meal and a show, or other goodie in exchange for 90 minutes, it was both a source of entertainment and a free meal.

A timeshare is a form of vacation ownership where you buy a week or two vacation in a tony resort in exchange for $25,000.00 plus an annual maintenance fee of up to $700.00 per year. This investment (I use the term investment loosely as it is quite unlikely that you will financially profit from the time share purchase and rarely can you sell your ownership interest for a profit) provides a  small apartment in a resort area. You usually buy the same two weeks with December and prime vacation times costing more than off peak weeks. Most owners’ average annual income is about $75,000.00 and they finance their timeshare purchase at up to 15% annual interest. Time share sales teams go after the relaxed vacationers for these impulse purchases.  In sum, the sales tactics are powerful and the owner profit’s outstanding.

Why Even Billionaires Need an Emergency Fund

Business was continuing as usual with expansion funded by the profitable business model. Meanwhile, after the timeshares are sold, the property developer bundles the mortgages’ together, securitizes them and sells the new investment products to investment bankers to market to the public. Things were going along great-until they weren’t. In 2008, Siegel couldn’t sell a $300 million securitization and pay off the primary lenders, his credit dried up, and he was in the midst of a huge Las Vegas building project. His funding gravy train dried up in the midst of the sub-prime lending crisis and mortgage meltdown.

What’s a billionaire to do?

He could not pay back the lenders from the initial mortgages since he was depending upon the funds from the securitization for the capital. And there were no buyers for the securitized products. The initial lenders were not happy and Siegel was on the hook for $1.2 billion, with no savings.

His creditors took swift action requesting he sell a dude ranch, mobile home park, and a Ramada Hotel near Disney World. His creditors put he and his wife on an allowance leading to a drastic lifestyle adjustment.

Lessons from a Billionaire Without Savings

Not only are there wealthy folks without savings, there are high income earners plagued with debt and a negative net worth. Without getting into the psychological reasons for this, what does this mean for those of us without a $1,000,000,000.00 net worth?

Add Siegel’s losses to those of lottery winners who blow it all combined with millionaires in bankruptcy court and the examples of financial mismanagement are not hard to come by. What can you learn from their mistakes? Hint; the lesson is not to give up because if the wealthy can’t manage their money, what hope is there for you!

No Matter What Your Income Level is; You Need to Save

Everyone needs some cash to fall back on when hard times hit. And financial setbacks happen to everyone. Not only are the poor susceptible to financial problems, but high income earners who overspend and don’t save can run into financial problems as well. There is research that substantiates the importance of having emergency funds to fall back on.

Siegel sold some assets, scaled back on spending, and continues to pay his debt. He’s on a path to become financially stable again. Yet his story highlights the importance of living within your means and saving for the eventual financial surprise.

Action Steps

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it for all of your personal finance thoughts, activities, and plans.

Building an emergency fund must be done now. Don’t worry about the amount, just funnel a percent of each paycheck into a separate savings account designated for emergencies. Vow not to touch this money unless there is a financial emergency. No, I don’t mean buying a new electronic gadget or pair of shoes!

Each paycheck, transfer manually or by automatic deposit money into your Emergency Savings Account. No excuses. If you don’t see the cash, you won’t miss it.

Do it now!

What Others are Saying

Starting an Emergency Fund with the Right Amount of Money at Yes I am Cheap

How and Why to Start an Emergency Fund at Get Rich Slowly

Figuring the Size of Your Emergency Fund at Wise Bread

21 Strategies for Creating an Emergency Fund at Zen Habits

$1000 emergency fund? 6 months expenses? 1 year salary? Throw them all out the window! at Wealth Informatics

What tips do you have for building an emergency fund? Have you dipped into yours recently?

image credit; google images- gobankingrates.com

Ikea customer says, “I love those light fixtures.”

The partner replies, “Come on, it’s not on the list.” (eavesdropping transcript from IKEA)

That simple exchange left me speechless. Then made me anxious. Were the items I was purchasing “on the list”? Whew, yes they were. It’s so ingrained in me to shop with a list, I sometimes don’t even think about it.

Do You Have the Discipline to be Wealthy?

 Wealth in money and life are made up of a string of smart decisions.

I learned “list making 101″ from my parents at a very young age. We made “to do” lists, grocery shopping lists, and going to the mall lists. My daughter, now in her 20′s, said when she discovered at a young age that she could write an item on the refrigerator shopping list and I would buy it, it seemed like magic. Not exactly, the entries for candy and treat food were not automatically put into the shopping cart! But I give her credit for ingenuity.

That couple in Ikea exemplified the single minded determination to stick to a goal. They obviously had a budget and specific items they planned to purchase. Would one splurge have made a huge financial difference in the long term? Probably not. But, a lifetime of self indulgence and “I deserve it” type of thinking causes a life filled with financial stresses.

Financial Implications of Self Indulgence

Imagine two couples; disciplined couple one, the Smarty’s and indulgent couple two, the Spendy’s. Assume these couples were identical in income and location.

The Smarty’s Habits

• Shop with a list.
• Plan for rewards and indulgences.
• Contribute regularly to their workplace retirement accounts.

The Spendy’s Habits

• Shop frequently without a list.
• Treat themselves to indulgences whenever they feel like it.
• Don’t bother contributing to their retirement fund because they believe in LIVING FOR TODAY.

Outcome of Smart Money Habits

Look at the amazing wealth amassed from a small amount of money. The Smarty’s saved $40.00 per week from avoiding impulse shopping. They added that $40.00 per week to their investment account and let the magic of compounding return work.

SMALL SAVINGS = MORE MONEY

On the other hand, the Spendy’s were self indulgent. When they wanted something, they bought it. The Spendy’s filled their lives with impulse purchases.

The outcome? It’s unlikely that this spur of the moment spending made them any happier or more fulfilled. It’s probable that this spending filled their lives with clutter, bills, and stuff. Not to mention that later in life, they certainly lacked the necessary funds to retire.

 Self indulgent splurges are quickly forgotten. Saving and discipline lead to long term wealth and feelings of self control and strength.

Little Changes Matter

Spend a minute examining that NOT SPLURGING chart. Invest just $40.00 per week and be over four hundred thousand dollars richer at age 65. 

Do you have the discipline to say no to yourself?

SECRET SAVINGS TIP; The simple strategy of sticking to a shopping list can yield monumental results.

Caveat; I didn’t say never splurge. We all need rewards and splurges in our lives. The trick is to plan for these indulgences and make them meaningful.

Women’s Money Week

I’m participating in Women’s Money Week next week. Women have historically been laggards when it comes to finances. This week is about encouraging women to speak up about money, take control of our finances, and reshape our financial future. Women’s Money Week will run from March 5th-11th, 2012 on WomensMoneyWeek.com — coinciding with International Women’s Day.

Following are a few of the participating blogs in Women’s Money Week (I’ll include a few more each day next week):

Are you a list maker or not? How do you handle splurges and indulgences?

And Barb Recommends Links

Sign up on right to get free WEALTH TIP’s Newsletter, and FREE bonus eBook; 20 Minute Guide to Investing!

For whatever reason, I find talking about Roth IRA’s boring. Nevertheless, they are an unbelievable way to amass great wealth. To minimze the disomfort of talking about the subject, I’m going to give you the Cliff Notes Version.

INVEST IN A ROTH IRA

Background; I’m one of those finance nerds who started investing in my 20′s and have not stopped. I was decades younger than the other attendees at my first retirement investing seminar. When a way to invest and save taxes came up, I dove in! Thus, as soon as self directed IRAs became accessible, I started contributing the max. When I met El Carino in my mid-20′s, after just a few months of dating, I got him to contribute to an IRA as well.

This article will tell you why you must contribute to a Roth IRA and how to do it.

WHAT IS A ROTH IRA?

According to Money Chimp a Roth IRA is a tax advantaged investment vehicle which allows your money to grow over the long term and only get taxed one time! You put money in an investment account after taxes, invest it in your preferred investments, and pay zero taxes as the money grows and zero taxes when you take the funds out!

That’s correct, you pay no taxes at retirement when you withdraw the funds.

HOW MUCH COULD YOU EARN?

Assumptions:

Put $5,000.00 in an investment account once every year from ages 25 to 65.

Invest in 3 funds:

40% in Vanguard Total Stock Market Index Fund (VTWMX)

40% in Vanguard FTSE All World ex-US Index Fund (VFWIX)

20% in Vanguard Total Bond Market Index (VBMFX)

Earn an average return of 7% over 40 years.

At age 65 your investment account will be worth $998,175.56

When you withdraw the funds, you pay zero taxes.

HOW TO SET UP A ROTH IRA?

Contact a discount broker such as Vanguard, Fidelity, Charles Schwab, Etrade, or other.

Either on line or by phone, follow the required steps to set up the account.

Transfer money into the account either directly from your bank account, paycheck, or mail a check (very old school).

Choose the funds and indicate your preferred percentage for each one. Instruct the brokerage to transfer this money and future contributions into your funds.

WHAT IF I DON’T HAVE $5,000.00 PER YEAR TO INVEST?

No worries. Invest any amount you can. Start now, and set up an automatic transfer every month. Increase the amount as your income grows. Check out an online calculator to find out how quickly even small amounts can grow into large sums over time.

Barb Recommends

Holding Cash is Not a Sin at Morningstar.com by Liana Madura.Even big time fund managers hold cash in their portfolios. It may be your best move on occasion.

How Much Money is Actually Enough in More Magazine is one of those articles that really inspired me. It changed my perspective and allowed me to loosen some of my negative money thoughts. Read it to be uplifted.

Wealth Informatics asks, Is Gift Giving a Waste of Money? My charity contributions are automated quarterly through Charity Navigator. No muss, no fuss. What do you think of Wealth Informatics approach?

This is a recommend as well as an article where I’m mentioned ; Best Tips for Fixing Your Finances, by Donna Freedman over at MSN Money. This article is jam packed with stellar personal finance recommendations from the best money minds on line. If you are looking to learn more about money, you’re certain to find a resource here.

Priorities by Jason, at Live Real Now got me thinking about my own. This article reminded me that the difference between success and failure is putting limited time towards the most important tasks. While you’re there, don’t forget to enter his 2nd year GIVEAWAY.

The Three Stages of Financial Freedom at Invest it Wisely, also got me thinking. Let this article prompt you to consider what financial freedom means in your life.

The Reasons I Like Money Over Gift Cards at Money Reasons. This article echoes the belief of Clark Howard renowned saving guru. Give money and you can be sure it will not go unused.

20s Money writes about why the Outlook is Not Good for 20 Somethings. As a worrier, I tend to get fraught with concern about future generations. This thoughtful article talks about the perils ahead for the Gen Yers.

The 30K Online Challange at 20s Finances drops down the gauntlet for others to participate in this money making competition. Are you a blogger motivated by competition? If so, why not join in?

 Barb Across the Blogosphere

FindtheBest published,  Should You Buy Investment Products at Your Consumer Bank?

Free Money Finance published Dividend Investing is Not the Perfect Solution for Investing

Benzinga Brain Trust Column, Are IPOs worth the Risk?

Emily from Creditcards.com mentioned my Pro Shopping article

Carnival of Personal Finance, at Afford Anything, promoted my Shopping Video.

Totally Money Blog Carnival at BankNerd, published How to Get Rid of Debt; Start Here.

What type of retirement accounts are you using? What asset allocation do you prefer?

image credit; newsusacontent

VIDEO SERIES; Part 2

News Flash; I’m nominated for a Plutus Award in the Best New Ebook Category for my ebook 20 Minute Guide to Personal Finance (download for free on the right)!! Please vote for me here!

Welcome to Part 2 of my video series. In Part 1, I talked about how I went from a scared girl to a confident and successful adult. The video I showcased was a first attempt project with hints for Holiday shopping. The tips work well for any season. And the article championed getting started now!

Todays video, dedicated to those just starting out, lays out money ideas for the 20-somethings and smart money reminders for the more established.

“Never spend your money before you have earned it.” Thomas Jefferson

Follow Jefferson’s advice, add in a bit of saving, and you are on the right path. Watch the video, consider the tips, pass them along to your friends, and help them become money smart!

Money doesn’t have to be complicated. Develop consistent habits, don’t spend what you don’t have, be patient, and your money will grow. And don’t forget to create additional income streams to grow your wealth.

• This is part 2 of a series showcasing my YouTube Videos. Learn personal finance and life skills from these instructional videos. Make sure to check out Part 1; Achieve Your Perfect Life With Goal Setting.

Check out these websites dedicated to those just starting out:

• The College Investor
• Financial Success for Young Adults
• Young and Thrifty
• Thousandaire

What money advice do you wish you knew when you were starting out?

“Cash confiscates capital. Long term, after taxes and inflation, the return on cash is negative.” Catherine Keating

Since my mid-20’s, I made financial net worth goals for our family. I’d calculate our current net worth, add additional savings, and punch in an expected rate of return over the period, usually five to ten years. Occasionally, I go back and review prior goals. No matter what the market, over the long term we have met or surpassed the objectives.

Learn how long it takes to meet or surpass your financial goals.

Assumptions:

• Save monthly.
• Divide Savings among STOCK (60%) and BOND (40%) investments. The historical average annual return of 60% stock funds and 40% bond funds is 7.4%. To be on the conservative side, I’m going to assume an annual return for this portfolio of 7%.
• Investment returns over the next 20-40 years approximate historical averages; STOCKS 9% BONDS 5%

HOW LONG WILL IT TAKE?

At an annual return of 7% per year, how long until you are wealthy?

If you save $100 per month, in 40 years you will have $242,481.00. Increase that to $800.00 per month and you’ve got over 2 million dollars after 40 years investing.

Drop your monthly investment to $500.00 and invest for 30 years. You still wind up with a nest egg of over $600,000.00. Not bad.

Empowerment-It’s in your Hands

There are no guarantees in life-but regular savings and investing will DEFINITELY make you wealthier than SPENDING!

Finding the balance between spending and saving leads to pleasure now and future security.

LEARN ABOUT INVESTING

Download my free eBook from the form on the top right of the site. It’s not hard and will get you started to prosperity.

Barbara Friedberg Personal Financeteaches WEALTH BUILDING SKILLS. Pay attention, be patient, don’t overspend on stuff that doesn’t last; save, invest, and you can become rich. Take action to hit your wealth target.

“You can never be too rich or too thin.” Wallis Simpson

Whether you believe this quote or not, most of us wouldn’t mind losing a few pounds or accumulating a few more bucks.

I USED TO BE FAT

When I was an adolescent, I ate too much and was fat. Eventually, with some help, I took the weight off and have kept it off for many years. The principles for long term weight loss and wealth generation have some similarities.

Develop “thin” habits and maintain a healthy weight.

Practice smart money management habits and get rich!

This stuff is not rocket science, and it’s not even too hard (except in the beginning). Now, I don’t believe the adage that it takes 21 days to develop a habit. I think it takes much longer. But the great thing about habits is the more you practice, the easier they are to maintain.

So, I’m going to walk you through 3 habits, that if practiced over time, will lead to a trimmer weight and a fatter wallet!

TIP 1: INCREASE ACTIVITY

Build movement into your life. Whenever possible move. In fact, get up right now, stretch, twist and move around.

Park your car far far from the store entrance when shopping, or better yet, walk to the store. Make extra trips up and down the stairs whenever possible. Do the dishes, mop the floor, and dust, you will burn calories.

Cut your snack in small sections. Take only one section to the table. After you finished the section, get up, walk around, and do something else. You may not even want the other sections. And if you decide to eat the next section, you’ll have gotten a bit of exercise in the meantime.  Barb’s note; distraction may be the most underrated weight loss trick there is!

Keep a log of how active you are for a few days, and see if you can beat your record!

The key to making this tip work is to make sure you don’t increase your calorie intake!

 TIP 2: MAKE INVESTING AUTOMATIC

This tip is the cornerstone of Richard Thaler’s brilliant book Nudge. Thaler recommends putting systems in place to help you automatically make beneficial choices.

Transfer money out of your paycheck and into an investment account each month. Start with your workplace retirement account, and then have more transferred into an investment account when you can.

The first month or two, you will miss the money. Over time, I promise, you get used to living on what goes into your checking account and will not notice the additional transfers.

I look back at the workplace retirement accounts El Carino and I started at our first jobs and I am amazed at their growth. When I left my former employers, I never took the money out and it has since grown for many years. In fact, time is the most important factor in wealth generation, so start this habit now.

TIP 3: SPEND SMART

You can make lots of money through saving and smart investing, but if you spend it all, you’re right where you started-poor! 

Ramit Sethi has implied that cutting out the small stuff may not be worthwhile.

I disagree.

Consider this, save $5.00 per day for 5 years and invest in a stock market index fund or ETF (exchange traded fund). Assume you earn the historical market reurn of 9%.

At the end of 5 years you have $11,522.34.

For the cost of a pack of cigarettes, a sandwich, a magazine, a fancy latte, or a couple of lottery tickets you could have more than $11,000.00 at the end of 5 years.

Continue this $5.00 per day savings for 30 years. At the end of 30 years you have $281,349.71. Now almost $300,000.00 is nothing to ignore!

How realistic is this?

Most of us can find $5.00 per day to cut.

The key to creating this habit is to funnel money into an investment account through thick and thin.

Small amounts add up!

ACTION STEPS:

 Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

•  Jot down one habit you want to develop.
• Keep the note visible.
• Look at it and note your progress.
• Reward yourself after a couple of days!
• Write and let me know how it is working out!

For a quick overview of Investing Strategies, pick up my FREE eBook; 20 Minute Guide to Investing (top right of the page). If you like what you’re reading, sign up for my RSS feed or email subscription and follow me on twitter so you get the word immediately. 

What is your tip for getting rich and thin?

image credit; gaymay

BARB RECOMMENDS LINK ROUND UP!

WIN MONEY AND INCREASE FINANCIAL SMARTS:  $50 in gift cards from AMAZON in BOOST FINANCIAL LITERACY; MARCH CONTEST TELL YOUR FRIENDS! 

WHEN YOU’RE DONE HERE-Stop by my Featured blogger article, Want to Get Rich from the Lottery? Start a Savings Plan Instead, at Making Money Blog; American Media Marketplace,  

MAIN TOPIC: Imagine the Unimaginable

Last night, while watching the George Clooney, Up in the Air movie for the second time, I was transported back to the financial and economic pain of 2008. Real life, laid off employees were the characters in the “You’re fired” scenes. Their responses were heart wrenching.

“Who will pay my mortgage and bills?”

“What am I going to tell my kids and my family?”

“I’m 60 years old, how will I ever get another job?”

“I’m making $90,000 now; what’s unemployment, $250 a week?”

If you knew you were getting fired this year, what would you do differently?

PRACTICAL APPLICATION: Do You Know the Future?

Many give their financial future not much more than a passing thought. After all, with the kids, the jobs, the bills, who wants to consider the “what ifs”? Yet, taking a bit of time now, to plan for financial set backs, will minimize one possible lifetime stress; the possibility that a layoff or major bill could put you in the poor house.

My mom is the master of plan B (and plan C). She has a contingency plan for everything. As a result, she and my dad have always lived way beneath their means. I’m fortunate to have learned that habit early in life. Here’s how you can learn to be prepared for any financial surprise.

Plan B Steps:

1. Face reality, that there will be unexpected expenses. They may be small, or they may be huge. Ask yourself if it is worth spending a bit less now in order to have the confidence that you’ll be able to handle financial setbacks later?
2. Practice mindful spending. Before you spend anything, pause and ask yourself, ”Is this expense worth sacrificing money in the bank for financial emergencies?”  You may think this is silly, but when you’re driving the kids to their after school activities, bring a snack, don’t spend $10 every day to get snacks at the fast food joint. Save $10 per day for 350 days and at 1% interest, you have $3,532.00. Small amounts add up!
3. Transfer part of your paycheck to a savings account designated for emergencies. This is on top of any money going in to retirement savings. Use this money only for large emergencies, like a $1,000 car repair bill or a layoff. Build the value up to six to nine months of living expenses.
4. Get in the habit of living beneath your means. The pleasure of a discretionary purchase is far less than the pain of a major financial setback.

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it for all of your personal finance goals, thoughts, activities, and plans.

• For this week, write down every expense you make.
• At the end of the week review. Come up with lower cost substitutes for your spending.
• Cut out the spending that is not giving you enough pleasure, reward, or satisfaction for your dollars.

How have you handled your financial setbacks?

Barb Recommends and Featured Personal Finance Carnivals:

• Tim at Faith and Finance has a good post, causing you to think! I like it; Dangers of Dave Ramsey’s Investment Advice.
• COUPLE MONEY BLOG EXTREME GIVEAWAY-Netbook plus other great prizes! I’m donating to this awesome event!
• Enter to win a $100 gift card to Walgreens at The Saved Quarter. Who doesn’t need personal care products?
• Moneyning outlined a comprehensive, bullet point list of money “do’s” in 20 Top Personal Finance Tips to Teach Your Kids (and Yourself). Pass this one around!
• Frugalentrepreneur hit a cord when he talked about coping with the burn-out that accompanies juggling multiple streams of income. Quality analysis and suggestions.
• Money Mamba wrote an article about Why Monopoly Games Last Forever and did an amazing job relating it to real life money lessons. You must read this smart post about my all time favorite game.
• Krantcents wrote If Not Now, When? Get inspired to pursue your dreams, the motivation is in this post!
• Everyday Tips talks about some unexpected medical expenses and the benefits of diversification. As usual it’s an engaging read!
• GenX Finance writes, There is More to Risk Than Meets the Eye. Very clear cut article describing the types of risks to watch out for when investing!
• Do Not Wait-Retirement Investing Q & A; Succinct and helpful article about the retirement basics.
• Putting Food on the Table When You Can’t Make Ends Meet lists real life resources for those down on their luck. Circulate this instructive article from the Simple Dollar.
• Money is the Root has a thought provoking piece on HOME OWNERSHIP!
• Yakezie Carnival – Millionaire Nurse Blog
• Carnival of Personal Finance – Magical Penny

image credit: Flickr Creative Commons

 20 Minute Guide to Investing is NOW AVAILABLE! If you have any interest in learning about investing, either now or later, you must download this FREE eBook!

Article first published in April, 2010

“What is important for kids to learn is that no matter how much money they have, earn, win, or inherit, they need to know how to spend it, how to save it, and how to give it to others in need. This is what handling money is about, and this is why we give kids an allowance.”
Barbara Coloroso

Investing sounds exciting and glamorous. At the start of my investing career, I thought it was so cool to research investments and invest in the stock and bond markets; UNTIL I HAD MY FIRST LOSS. When I saw my first stock pick drop 50% in price, I WAS NOT HAVING FUN!

Investing is not a game, but an important activity to facilitate the accumulation of wealth. In the short run, investing is also an activity which can facilitate losing wealth.

Barbara Coloroso’s advice to kids holds equally true for ADULTS. For that reason, this list tells you in plain English what to do before you even think about investing* and why.

MAIN TOPIC; Step by Step

1. Open a bank checking account-You need this account for your monthly expenses. Internet or bricks-and-mortar banks are ok.

2. Open a bank savings account-This is where you keep all of your short term savings. Build your emergency fund in the savings account. Internet or bricks-and-mortar banks are ok.

3. Write down your income and expenses for a month-I know this is a pain in the —–. You MUST do this to be in control of your cash. There is no way out! Start with a small notebook or day calendar. Pledge to do it ONLY one day first. After the first day, continue; one day at a time.

4. Make a budget or spending plan-I know this one is painful too; but do it anyway. Find one that works for you. Once you find out where your money is going, you can decide if you are getting enough pleasure from your spending.

5. Follow the spending plan-Do the best you can, you don’t need to be perfect. Adjust along the way. Maybe when you go out for drinks, you’ll decide a beer is as much fun as a martini, and more than half the cost.

6. Pay off all credit card debt-You cannot move forward financially with credit card debt.

7. Transfer a specific amount regularly into the savings account-Don’t worry about the amount in the beginning. Just develop the saving HABIT. The easiest way is to complete a transfer form (from paycheck to bank) at your work HR office. 

8. Save enough in the savings account to equal 6-8 months living expenses- Allocate this savings for unexpected emergencies and replenish after using.

9. Buy inexpensive TERM life insurance if you have someone (spouse &/or kids) depending on your income-Term insurance doesn’t cost much and if you die, your family/spouse do not end up in the poor house. 

10. Enjoy LIFE and the PROCESS OF LIVING! After all, you’re not doing all this planning to have a miserable life or ONLY for some far reaching goal.

 You must live and have fun along the way.

 *Caveat: If your employer matches your contribution to a retirement plan, then contribute enough to get the employer match. If you don’t contribute, you are throwing away free money.

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it for all of your personal finance goals, thoughts, activities, and plans.

1. Choose one step to take today.

2. Complete one step per week. Enlist a friend and complete the steps together; it will motivate you to continue.

 YAKEZIE PERSONAL FINANCE BLOGS

Yakezie is the premier personal finance network on-line with over 100 talented members. Our mission is to selflessly help others. Stop by our dedicated website to meet our members, learn about our scholarship opportunities, and read compelling content. 

I Feel Lucky; Gambling as a Road to Wealth

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook about Investing. Stay tuned to get first crack at the NEW EBOOK; and it’s FREE to my readers.

This article is the 4^th  in a series relating poor money behaviors with stress. The topics are inspired by an article entitled Emotions, Money, & Financial Stress by Nancy Losinno, published at the US Department of Energy, Brookhaven National Laboratory website.

Why not read the whole series?

Part 1: GO SHOPPING to solve your problems?

Part 2: Overcome a Passion for Procrastination (in dealing with financial matters)

Part 3: Money & Relationships-Make it Work!

“Here’s something to think about: How come you never see a headline like ‘Psychic Wins Lottery’?” Jay Leno

 Is this an indictment on psychics or the lottery? I’m not certain, but either way winning the lottery is highly unlikely.

MAIN TOPIC: Can you Believe this Guy?

Last week a well dressed business man pulled up a chair, laid down his laptop, and proceeded to the counter to pick up his coffee. As he walked into the shop, I marveled once again at the number of virtual office workers who congregate at the coffee shop.

 Wow, was I surprised when the man laid out his “work.” He had about 10 lottery tickets which he began scraping with a small tool. This time I forced myself to KEEP MY MOUTH SHUT! 

 Here’s what went through my mind:

 “Oh my G-d. Doesn’t this guy know that he is flushing his money down the toilet? Didn’t anyone tell him the odds of winning anything significant is at least 1 in a million? He should take the amount he regularly wastes on the lottery and put it in a broad based index mutual fund like the Vanguard Total World Stock Index! ……… I really want to talk to him, but I know it is none of my business.”

This is one of my biggest financial pet peeves; trying to WIN YOUR WAY TO WEALTH. Unfortunately, this stranger is not the only one I know with this mindset. Several family members share this distorted money-making attitude. It’s the demonstration of trying to GET RICH QUICK. It is very very unlikely! The lottery ticket buyers are frequently those individuals who carry large credit card balances, and collect the latest gadgets (even when they can’t afford them).

 These individuals are missing a key SUCCESS STRATEGY: the ability to DELAY GRATIFICATION.

 PRACTICAL APPLICATION: Get Rid of Toxic Thinking

Any sort of gambling will not lead to wealth; not lotteries, black jack, roulette, poker etc. The odds are IN FAVOR OF THE HOUSE.

If you even consider gambling or playing the lottery in the hopes of “STRIKING IT RICH,” ADJUST YOUR THINKING NOW.

 As Losinno said, “The reality is that most of us will have to work until we get to retire, and only a tiny percentage of people ever win lotteries.  It’s far better to use your wits to plan soundly towards making your retirement dream comfortable.  You’ll probably come out ahead anyway, by being a tortoise rather than the hare, since most Lotto winners have lost their winnings within the first five years.” 

Old thinking: Buy lottery tickets to get rich!

New thinking: There is no such thing as a free ticket to wealth. I have to plan, save, and invest in order to gain wealth. It’s not easy, but if I take it step-by-step, it’s possible. Delaying Gratification leads to financial success.

 ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Go to the human resources (HR) office at work to set up an automatic withdrawal from your paycheck into a savings account. If it’s taken out immediately, you will not miss the cash.
2. While you are at the HR office inquire about a savings plan &/or 401(K). Don’t get scared if you don’t understand the program, ask the human resources staff to help you. It’s their job!
3. Pick up my RSS feed (the big orange striped button on the top right) and read BarbaraFriedbergPersonalFinance regularly to learn how to achieve wealth.

RECENT PERSONAL FINANCE CARNIVALS

I am honored to have my work showcased at these sites recently. Why not stop by the CARNIVALS and check out the fine articles?  

The Carnival of Personal Finance at Miss Thrifty featured my article, 3 Amazing Career Tips

The Carnival of Money Stories 2 at Simply Forties ran How Daniel Makes Extra Money and you can too.