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investing, personal finance, money management free online course

for many investors figuring out where they should put their money is a tough question and it gets even more complicated when you bring risk into the conversation so here’s five guidelines to help you make investing decisions number one don’t risk money you can’t afford to lose when you’re first investing and you don’t have a savings buffer or if you’re saving for something really important like a deposit on a house don’t put that money into risky investments be patient with those investments look for high quality bonds blue chip stocks and preferred stocks they’ll give you an income from interest or dividends and have less chance of losing value number two risk money you can afford to lose over time your income will grow your savings will increase your investments will gain in value and you will gain investing experience when this happens you’ll be better able to handle losing some of your savings this is why some investors preach increasing your exposure to risk as you get older this reverse glide slope model has been shown in some studies to increase returns better than other investing strategies number three time is on your side until it isn’t contrary to the reverse glide slope proponents some advisers argue that as you age you have less time to make up for mistakes so they suggest you lower your exposure to risk as you age so how do you resolve these conflicting pieces of advice make sure you preserve the core of your savings with low risk investments but don’t take your foot off the accelerator with your other investments you won’t cash in everything the day after you retire so you will still have time to generate gains even in retirement number four be cautious when borrowing money to invest never put all of your money at risk with loans this is true when trading on margin shorting stocks or investing in real estate make sure you calculate what a default would mean to you and never put all of your savings at risk and number five limit speculation many advisors will tell you to stay far away from super high risk investments like options derivatives penny stocks foreign exchange and cryptocurrencies but if you insist on taking on this level of risk there’s no reason why you can’t put five percent or less of your portfolio into these super high risk categories just make sure you’re okay with losing that money in the end the final barometer of your investing strategy should be your gut if you can sleep well at night then you’ve made the right decisions just make sure you check back over time and alter your strategy to match your changing reality every investor wants to maximize their returns but how to do that isn’t so easy defining your goals and developing a strategy is the way to move forward with confidence start by clearly defining your goals in two years do you want to have enough for a down payment on a house or you have a new baby and you want to have enough to pay for college whatever it is set a date and write it down next look into the different strategic approaches to investing and see which ones appeal to you you can choose between active and passive investing or a combination of the two with passive investing you default to what’s going on in the market through low-cost etfs you’ll never do better or worse than the market at large but at least you’re in and history has shown that over time that just tracking the market can be the best investment of all it’s the ultimate in set and forget active investing is choosing specific investments rebalancing your portfolio and optimizing your tax and there are a number of active investment strategies including value investing where you buy an investment that you believe will increase in value over time and hold it the godfather of value investing is warren buffett in 1980 one share of his company cost 280 dollars it’s now selling for over 300 000 buying and holding that company has been a sounding strategy for their shareholders for retirees investing for income is a common strategy this means that the money you put to work will pay an income it might be dividend from stocks interest on bonds or payments from an annuity social impact or sustainable investing is a strategy where you only invest in companies or assets that align with your values or pay back to causes that you care about growth or momentum investing tends to be the preferred strategy of younger and professional investors growth investing is all about beating the market like investing heavily in tech stocks in the early part of this decade

small cap investing is a higher risk potentially higher return strategy where you invest in smaller companies that tend to have much more volatile stock swings a subset of all of these strategies is the idea of dollar cost averaging when you buy can have a huge impact on future returns dollar cost averaging means that you buy into your investment over time sometimes the price is up sometimes down but over time you’re buying the average and the most simple strategy of all starting as early as you can and adding funds as often as you can preferably through automatic deposits every month whatever strategy you choose be sure to keep your money working for you always look to the long term and look to minimize fees and before you know it you’ll be reaching your goals and setting nuance so you have some money saved terrific that’s a huge first step so what should you do with it in this video we’ll talk about investment options with each i’ll talk about the associated risks i’ll start with bank accounts then move on to bonds stocks and funds so let’s start with bank accounts right now banks pay less than one percent interest on deposits and with fees your money could actually lose value while sitting in the bank not a good deal at all and we won’t even talk about how much money banks make of your deposits so let’s look at some alternatives banks also offer certificates of deposits also known as cds these offer better rates of interest than standard checking or savings accounts cds all have fixed time lengths ranging from one month to several years the only problem with the cd is that you must keep the money in the cd for the duration if you withdraw it early you’ll get penalized many people find cds too inflexible and the interest too low if you can handle a bit more risk you should look at bonds bonds are basically a loan that you the bondholder make to either a government or a company for this privilege the bond issuer will pay you interest the nice thing about bonds is that independent agencies give every bond a rating based on how likely you are to get your money back so you can gauge risk very easily bonds pay a wide range of interest and have various due dates which is the dates when the principal is paid back the highest quality bonds are called investment grade bonds and they pay lower interest rates but even these lower interest rates can be attractive especially for the low risk that they offer the lower quality bonds funnily enough called junk bonds pay the highest interest but have much higher risk levels the nice thing about bonds is that you can easily buy and sell them you don’t actually have to wait until they mature you can buy and sell them at any time for a small fee the one drawback to a bond is that the value of the bond itself can change in the worst case scenario the company that issued the bond runs into financial trouble if that happens the chances of you getting your money back for the bond decrease if you now try to sell the bond early you may not get the full value for the bond but that’s the risk to reward of bonds they can pay higher interest than banks but you take the added risk of not getting as much back as you initially thought now if you’re okay with more risk then stocks might be a good option stocks are actual ownership stakes in companies as an owner you get to share in the profits through dividends and sharing the growth of the company through an increase in the value of the stock the price of a stock is the amount of money that someone will pay for that stock at this moment in time based on all the currently known information about a company but the future is always unknowable so the true value of a stock is unknown the true value of stock is the current value plus the untapped hidden potential that the company holds the goal of buying stocks is to find the stocks that are undervalued and avoid the ones that are overvalued this may seem like a very subjective exercise but everybody has the skills to pick an undervalued stock we’ll talk more about how to value stocks in our next video but taken carefully investing in stocks offers the best year-over-year returns of any financial instrument finally there are funds there are lots of funds from mutual funds to exchange traded funds there are pre-packaged pools of bonds and stocks they can be either actively managed where a manager works day and night to improve the return of the fund or they can be passively managed funds where the manager sets the fund up and lets it run making a few changes along the way because active funds are managed by an

expert it’s assumed that they offer better returns this assumption is debatable but what is true is that actively managed funds are more expensive than passive funds index funds are a subset of passive funds where the manager tries to mimic the performance of the market itself so for example if you read the paper and hear that the dow was up one percent a dow index fund will also have gone up one percent these funds have become very popular because they don’t try to outperform the market they try to mimic the market and there really is a sense of ease that comes from no longer trying to beat the market thus the popularity in our next video i’ll talk about risk value and confidence three fundamental concepts in putting your money to work setting goals is a vital step for every investor but when i hear investment companies ask what’s your retirement number i cringe how much do you need to retire they ask my answer is as much as humanly possible but in my mind they’re asking the wrong question you should never set a target until you take a good look at who you are and what your needs are once you do that you’re going to learn what kind of investments you should make and how much risk you should take on only then can you begin to set goals so let’s look at you and begin with your investment objectives objectives may sound like the same thing as goals but they’re slightly different your objective should be a general idea of what you want to get out of your investments do you want to generate income that you can use to live off do you want to grow your savings base for later or do you want to grow as quickly and as much as you can or do you want to make sure you don’t lose any money in your investments these general objectives will guide your investment decisions next how much risk are you willing to take on if you don’t want to lose any value in your investments you probably have a low tolerance for risk and if you want fast growth then you’re okay with the prospect of losing money you probably have a high tolerance for risk your objectives and risk tolerance can sometimes run counter to each other if this is the case you need to reconcile them if you want to speculate but you have a low appetite for risk you should adjust your objective to aim for moderate growth if you like the high returns that come from taking a risk but you’re scared to death of losing money you need to move away from making high growth your objective so make sure your objectives and risk tolerance match now let’s look at you from the outside these are life related self-assessments that must be taken into consideration when you’re setting your goals to do this you should ask yourself a few key questions in fact every registered investment advisor is mandated to do the same for every client the first question is your experience level this one’s straightforward if you’ve never invested before you should start off slowly and not take on too much risk next look at your time horizon this one’s not as straightforward there’s a lot of debate about how much risk you should take on as you get older here’s my position take on as much risk as you can when you’re young because you have time to make up for mistakes when you near retirement evidence shows that keeping a higher level of risk pays off because you have so much more to invest retirement doesn’t mean you stop investing so don’t cut your risk too much unless you just can’t tolerate the risk another question to consider is your financial situation if you have debt and little savings you shouldn’t take on too much risk you literally can’t afford to lose money if you have little or no debt and some savings you can take on more risk finally your family situation should also influence how much risk you take on if you have a family you need to be more conservative to protect the savings you have especially for things like health care and education so now let’s look back at your objectives again you need to modify your objectives to match your self-assessment if you’re an experienced have some debt and have a family you need to be very conservative with your investments to protect your savings if you’re young and childless you have experience have a little debt and disposable income you can take on a considerable amount of risk so you may have noticed that we don’t have a goal or a number we just have a general idea of investment objectives and a risk profile that’s great now you can build a portfolio to match your objectives and risk profile in the meanwhile here’s a goal for you save as much money as possible based on your objectives and tolerance for risk and this is only one part of a bigger picture you should also think about budgeting and debt reduction things that will help you save more in the end you’ll generate savings and these will help buy you options in life and your future will thank you for that one of the hardest things about investing is getting started and one of the things that stops people getting started is understanding what all the words mean in this video i’m going to cover the five basic building blocks of investing i’ll start with simple low-risk products

and move up the scale to more complex higher risk products so let’s start with something simple cash cash is the easiest thing to understand because we use it every day generally you give your spare cash to a bank and you earn interest if you’re lucky these days banks pay terrible rates of interest but in the us they guarantee deposits of up to two hundred and fifty thousand dollars so it’s safe but not strategic you can invest in cash equivalents also known as money market accounts or certificates of deposits also known as cds or t bills these pay slightly higher interest rates than your trustee savings account but you can’t move money in and out of them easily like a bank account for something that has better returns but more risk let’s look at bonds most people are probably familiar with savings bonds bonds are also called fixed income instruments they’re essentially a loan you make to a third party for which you get paid interest there’s a vast range of bonds available they range from essentially risk-free bonds issued by governments all the way to super risky junk bonds issued by companies the rule of thumb with bonds is that the higher the risk on the bond the higher the interest rate you’ll be paid one of the nicest things about bonds is that they’re all rated by bond rating services so you can very easily look up how risky that bond is the fees on bonds are also generally super low usually a transaction fee to buy and sell them the next investment category you can put your money into is stocks also known as equities or shares a stock is literally ownership of a piece of a company so if you own a common stock of apple you are an owner of apple and as an owner you’re eligible to share in the company’s profits through dividend payments you also have shareholder voting rights and because stocks are traded in public markets the value of the stock changes so if you invest in a good company and the value of the stock goes up you’ll be able to sell your shares for more money than you bought them for giving you a gain on your investment the cost of holding stocks is just the cost of buying and selling them usually just a few dollars finally it’s important to know that historically u.s stocks have averaged a real five percent annual rate of return in the 20th century the next investment category are funds there are funds that you buy and sell just like a stock on an exchange called etfs these are exchange traded funds some are built to match a specific index like the s p 500 for example in fact for every share of an etf there exists a basket of stocks of that targeted index the beauty of an etf is that they can reflect a specific index so if you want to match the overall return of the market an etf’s perfect you won’t beat the market but you certainly won’t underperform either and they are for the most part low cost you have to pay your fee to buy and sell etfs just like stocks but on top of that you have to pay your fee as a percentage of what you own for large funds this can be low sometimes less than a tenth of a percent but for smaller more exotic funds fees can hit two percent or more but overall etfs can be a powerfully low cost low effort way of getting into investing mutual funds have traditionally been a very popular way to invest they operate differently than stocks and etfs they’re not traded on an exchange so you have to go directly to mutual fund companies to buy and sell them most people with retirement plans will own mutual funds the big point of difference to etfs is that mutual funds are usually actively managed so they have experts who buy and sell holdings to take advantages of changes in real time but one of the big problems with mutual funds is they charge a lot of fees because there’s people managing these funds who need to be paid after their fees have been taken out of your investment it can be quite difficult for you to beat the market you may also have to pay a sales fee or load there’s ample evidence to show that the promise of extra gains that mutual funds promised because of active management are not as true as investors are led to believe the final area i need to mention is the world of alternative investments these are annuities whole life insurance products private placements and hedge funds for people getting started i recommend they stay away from these investments most of them have heavy fees or are offered by non-fiduciary standard providers and many of these products are not liquid meaning they’re difficult to sell they’re difficult investments to understand and manage and often do not provide enough return to cover the cost for people getting started with investing on their own i recommend getting familiar with stocks bonds and etfs for step one and for investors working with an advisor i recommend steering away from complicated products as they usually come with complicated fees and to make sure your advisor is very clear how much the different investments are costing you

how would you feel if i told you the only way you could buy a house was it if you paid for it entirely in cash it’s hard to imagine right and that’s why loans exist loans make big important purchases possible this is essentially what a bond is a loan that you make to a company or government so they can finance large projects in order to do this they issue bonds government issue bonds which are also called government notes or bills are considered quite safe cities states and federal governments all issue bonds with rare exceptions governments always pay back their bonds when a government fails to pay its bond which is called a sovereign default its impact to world markets is quite severe so it is avoided at all costs some government bonds are also tax-free so if you fall into a high tax bracket a tax-free bond can be used as a way to earn income without having to pay tax on the interest corporations also issue bonds many large international companies issue bonds as a way to fund expansion or build new products or move into new markets large well-known companies rarely default on their bonds and they’re considered quite safe smaller less known companies also issue bonds these bonds are much more speculative and risky for this reason they’re generally called junk bonds they aren’t as their name implies garbage but they do default much more frequently and a much higher risk than higher grade bonds at this point we should talk about risk the great thing about bonds is that there’s independent third parties that rate bonds they do sometimes make mistakes but overall the two main rating agencies moody’s and standard and poor’s are very good at giving you a rating for bonds anything above a triple b for standard and poor’s or baa for moody’s is considered investment grade or the most risk-free of bonds the ratings reflect risk and should definitely be examined before you purchase a bond lower rated bonds definitely have more risk but they also pay more interest this risk premium is why people buy junk bonds it’s a gamble but for some people who have the tolerance for risk the payoff can be much higher than someone who only invests in low risk bonds but be warned the key word here is could taking on excessive risk could also lose you money pricing of bonds is fairly straightforward every bond has a face or par value this is the value of the bond when it was issued every bond also has an interest rate that it pays which is called the nominal yield or the coupon rate so a one thousand dollar par value bond with a coupon rate of four percent will pay you forty dollars a year bonds also have a maturity date the date at which they pay back their principal one more thing you need to know about bonds is that they fluctuate in value bonds are traded in secondary markets and they often do not change hands at face value the present value of a bond is driven by both supply and demand and by external economic forces especially inflation i’ll give you an example of how this works let’s say the u.s economy is booming and there’s a shortage of all sorts of things and as a result prices rise this is inflation everyone gets nervous including the banks to cool off inflation and slow the economy the fed raises interest rates and interest rates throughout the economy rise but not on your bond you’re holding a bond that has maybe a two percent yield and it’s going to stay at two percent but new bonds are being issued at three percent coupon rate so no one’s gonna pay full value for your two percent bond when the same price they can get a three percent bond so in order to sell your bond you have to sell it at a discount this is how the secondary market for bonds work as a rule of thumb as the interest rates rise the price of existing bonds drop and as interest rates fall the price of bonds go up the last thing you should also take note of what a bond is backed by bonds can be backed by land buildings equipment securities or just a promise generally it’s better if your bond is backed by something tangible but for bonds issued by super strong corporations or governments a promise is usually good enough many advisors will put bonds into your portfolio to balance out risk or to provide you with ongoing income adding bonds to your investment strategy yourself is easy government bonds are usually available through your bank other bonds require a brokerage account but these are easy to set up and the purchase of bonds is extremely cheap if you have extra cash bonds are a great alternative to cash in the bank if you had a choice to invest in real estate gold bonds or stocks which option historically has given the best return it stocks hands down through thick and thin the u.s stock market has returned five percent even after bubbles

economic meltdowns stocks still have the best returns over time of all asset classes so let’s look at stocks and see why they have traditionally been such good investments first let’s start with what a stock is stocks also called equities or shares are an ownership stake in a company when you buy a share you actually become an owner of a small percentage of a company as an owner you get certain benefits which vary depending on what kind of stock you own there’s two types of stock you can buy first to common shares these are by far the most widely used form of stocks they give the shareholder the right to vote at shareholder meetings and a right to a share of the company’s profits if the company offers dividend payments common shares are traded on stock markets and have prices that fluctuate depending on supply and demand and market forces preferred stocks are a different class of shares they’re also an ownership stake in a company generally preferred stock pays a higher dividend than the common stock of the same company and their payments are fixed and predictable typically a preferred stock’s value is driven more by the dividend it offers than by the company performance this means that preferred shares don’t move up and down in price as much as common shares because preferred shares are based on regular dividend payments they behave more like a bond than a share regular income and relatively stable value with all shares the key to being successful is by correctly managing its price prices of stocks go up and down you want to buy a share when the price is low and sell it when the price is high this gain is called a capital gain and you want that number to be as big as possible the key to doing this successfully is by correctly assessing a stock’s inherent value at any moment in time a stock’s price is not a perfect reflection of a stock’s value it’s essentially the unlocked potential of the stock if you can find a stock with lots of unlocked potential and buy it the price of the stock will rise as the value is unlocked i’ll give you an example the day apple launched the first ipod the stock price was the equivalent of a dollar 22. at the time apple stock looked expensive but now apple stock costs over 100 times that was apple undervalued on that day absolutely but who was to know how well apple was going to do did anyone know the iphone was coming or the ipad no but the ipod contained the seeds of massive untapped potential for apple so just like buying any product you want to calculate the value in a share and this is the holy grail of wall street and i can tell you this right away there is no perfect way of measuring value but i’ll also say this you can do it you have the skills to find value in stocks and this is where you start where does your money go what products do you love what products your friends talking about what was your last aha moment when you bought something truly breakthrough what will the world look like in five years or ten years and what companies will be the market leaders of that world these questions all form the basis of stock valuation and the difference between the price of a stock today and your perception of where it will be in the future will determine whether the stock is undervalued or overvalued and you want to buy the undervalued stocks and sell the overvalued stocks a bonus is if you find a stock that you love but others hate an example is netflix when they moved from dvds to a digital model and raised their prices people hated the idea and the stock got crushed but when their decision proved to be smart and subscribers shot up the stock sword the lesson here buy from the pessimists and sell to the optimists and this is the value of stocks as an owner of a smart company you can and should benefit from their smart ideas and the growth that these ideas create finally you’ll need a brokerage account to trade stocks the brokerage market has been democratized to a great extent fees on transactions are only a few dollars per trade now most brokers have good research you can tap in for free it’s a little complicated to open a brokerage account it’s also known as a trading account and you’ll have to answer a lot of questions but it’s well worth the effort a company can grow from a startup in a garage to a multi-national conglomerate within a single generation no other asset class can do that and that’s why stocks can grow like no other asset class and that’s why it’s so important that you learn about stocks and make them part of your life for the long term remember the words of warren buffett the stock market is a device for transferring money from the inpatient to the patient if you need a bit of help investing you might want to leverage some experts wall street is full of them and funds are a great way to do it first of all funds are pooled stocks or bonds

which are put together to attain an objective these objectives can be anything from generating income to investing in gold to matching the movement of a specific index these objectives are contained in a prospectus which is an overly complex but important document so make sure you check the fund’s objectives to make sure it matches your own the best thing about funds is that they’re created by experts they’re either actively managed where the funds holdings are constantly rebalanced to match objectives or they are passively managed where the fund is expertly set up and allowed to run on its own either way you get the help of an expert funds also allow you to do things that you can’t do with a single stock or bond because they’re pooled investments you can get the advantage of spreading your investment amongst various different holdings which allows you to access more opportunities as well as spreading your risk across more investments there’s two types of funds mutual funds and exchange traded funds i won’t go into the structure of one versus the other but they are different the most important structural difference is that etfs trade freely on an exchange and a mutual fund is bought or sold after the market closes directly with the issuer of the mutual fund there’s definite differences between mutual funds and etfs generally mutual funds are actively managed this gives you day-to-day confidence that a smart person somewhere is working to make sure your investment is well taken care of etfs on the other hand are generally passively managed they’re all built to mimic at a set index and once they’re set up they run on their own mutual funds also have the benefit of low minimum investment sizes and automatic and free dividend reinvestment where any income generated from your mutual fund is automatically reinvested into shares of that mutual fund mutual funds also give breaks in fees for higher levels of investment etfs have the benefit of price because they’re passively managed you don’t have a lot of high priced talent to pay for some of the largest funds have annual fees that are a fraction of a percent because they’re traded like a stock on an exchange you also have to pay a broker like schwalbe trade to buy and sell those etfs but these should be less than ten dollars per trade in the us you also need to be aware of a cost called the spread which is the price between what the buyers and the sellers are willing to pay big spreads increase your buying price and reduce your selling price but these can be reduced substantially if you stick to the more popular highly traded etfs search out the fees and spreads on sites like before you buy an etf mutual funds are generally actively managed and require you to pay for some of that high price talent an expense ratio is an annual fee that pays for this talent the average fee on a u.s mutual fund in 2013 was 1.25 of your investment and you pay for it year after year even if the fund goes down in value it may not seem like much but if you make a five percent return last year you’ll have to give a quarter of your profit back to the mutual fund company in fees and added to this are loads these are commissions paid to brokers when you buy or sell a mutual fund through brokers banks or insurance agents these can be as high as five or six percent there are no load funds but they too can charge a fee as long as it’s less than point two five percent per year i can’t stress enough how worthless these fees are they are sales fees and do not pay for the experts who run the fund these fees are worthless and should be avoided at all costs so how about performance first of all there’s no evidence that a fund that charges a higher fee ostensibly for better advice generates higher returns added to that even with experts behind you the fees for an actively managed fund will on average give you lower returns than the overall market so the bottom line if you buy and hold a few select funds for the long term and don’t trade them too often etfs are your answer if you have less than a thousand dollars to invest or have a 401k with limited options a no load mutual fund may be a better option if you’re working with an advisor or someone who’s buying on your behalf be careful that they aren’t putting you into high-cost funds or funds that hold assets that you may fundamentally disagree with so that’s funds this market has really expanded in the last decade and there’s now some fantastic low cost options out there if you do your homework and avoid feeds funds can be an excellent option for your portfolio it’s not how much money you earn but how much you keep that is the key to your financial success and the delta between those two numbers is how much you spend in this video i’ll cover the idea of conscious consumption

and how being more objective about what you spend can help you long term according to emarketer advertisers around the world spent over half a trillion dollars last year marketing their wares a third of that 180 billion dollars is in the us and of that 36 companies all of whom you know well spent over a billion dollars in media it’s no wonder you want a shiny new car the way that you feel about certain companies and brands and products it’s no accident there are brilliant people all over the world that spend their whole careers figuring out exactly how their shampoo will make you feel energized or their gum will empower your day or their car will make you feel like a rock star but it’s not all advertising’s fault humans are hardwired to compare themselves to others it helped us survive during much tougher times when the weak ones of the tribe had to be left behind this hardwiring manifests itself now into the syndrome known as keeping up with the joneses in the words of will rogers too many people spend the money that they earn to buy things they don’t want to impress people they don’t like in this chapter i cover tips on budgeting and managing your credit cards they’re the practical manifestations of controlling your spend in this video i’d like to explore the idea of conscious consumption my goal with my business is to turn consumers into investors and step one of that transformation is for people to be more aware of what they’re spending their money on conventional wisdom says to pause before you make a purchase research the options wait a few days comparison shop you can do all those things but if they worked the average debt of a household with credit card debt would not be 15 000 as it is now my view is different i’m a big believer in the idea of follow the money in both your career and in having a better understanding of where your money goes you work hard for your money everyone does and then you give your money to companies for the things that you want and need those companies work hard for your business but their primary responsibility is their shareholders those brands that empower and energize and make you feel like a rock star they’re working for the people who’ve invested in them or to put it differently the outcome of your hard work and the hard work of these companies is making mr connecticut hedge fund manager richer so who owns the companies that you spend money with and who’s getting paid their much more powerful ways to be conscious of your consumption habits than just pausing or price checking before you buy now do one more thing look around at all of the stuff that’s made it into your home and into your closet how much of it do you truly value how much is functionally important and how much is just stuff you could have done just fine without or perhaps it’s things that you wish were better quality remember this mini audit the next time you’re shopping every dollar you spend is a vote for the companies that you’re buying from are they companies that you trust and believe in or are you just buying out a habit your money is enormously powerful use your votes well if you’re trying to grow your savings you need to make sure that you’re on target to reach your goals here’s some ways to help you do this first of all make sure you know what your goals are let’s start with your short-term goals these should be all about your most pressing issues like saving for deposit on a house for example these should have a specific dollar amount attached to them for this focus on increasing the money you have in your investment accounts and keep track of the change in account value line in your investment accounts this growth will come from a combination of cash that you put into the account and gains that you’ve made on your investments when you hit your target celebrate and start the process again with the new goal your medium term goals should be geared towards bigger picture wealth targets this is where you need to go through all your financial statements and start keeping track of all your cash investments and assets if for example you use your investment money to put a down payment on a house you haven’t lost money yes your investment account will shrink but now you own a part of an asset a house so don’t just look at your investment and bank accounts in fact keep a spreadsheet of your net worth add up your cash investments and assets and then subtract your debts this is your net worth try to update it at least at the end of each quarter and set a midterm goal of how much your net worth should be at the end of every year and make sure you check how you’ve done against that goal finally your long-term goals i’m not a huge fan of setting a savings goal for retirement for many people it’s so far away and so difficult to imagine that setting a specific goal becomes extremely difficult i like to say save as much as humanly possible saving for retirement is a specific task

in most countries there are tax advantage retirement accounts if you can divert some of your money into those accounts then you are saving for the long term again your goal shouldn’t be some giant retirement number instead try to target an increase in the size of your contributions every year if for example you can set a goal of increasing your contributions by 10 every year then you’ll be doubling your contributions every seven years or so before you know it you’ll be well on your way to saving a sizable chunk of money for retirement so do your best to keep track of your cash investments and debt if you do you’ll be able to target and track your progress against all of your goals my favorite quote about budgeting is that a budget can tell you what you can’t afford but it can’t stop you from buying it anyway in the previous video on why we spend we covered a few tricks for how to resist the lure of the latest shiny object the next step in conscious consumption is understanding how money flows in and out of your household and making a budget to set goals and track your progress against them the four main reasons to set a budget are to live within your means to get out of debt to have money to invest and to pay for bigger things like cars or vacation or education or the latest must-have designer bag the entertainment world is filled with scrooge mcduck stories penny penny-pinching millionaires who are seen as an aberration but the reality may be closer than you think the conscious decisions that you make about how you spend your money have a far bigger impact on your long-term financial success one of the most powerful things you can do before committing to larger items that need to go into your budget is shop around for example a mortgage is probably the biggest financial decision you’ll make in your lifetime but only 25 percent of people shop around before making that decision the impact of a few percentage points in interest can be tens of thousands of dollars that would otherwise be available for your budget there are many free apps and browser-based budgeting tools available it’s well worth your time investigating how some of these could help provide some structure to the way that money flows through your households but not all households are the same so here’s different budgeting tools for different if you’re sharing a home with roommates or a family where you all contribute to the bills then you might want to check out boxfor this site specializes in group budgeting and shares expenses between friends or roommates and tracks shared bills couples could check out better halves for individuals there are many paid and free solutions one that’s very user friendly is level money there are a few other noteworthy tools out there like mint which is a very widely used tool that can auto categorize your expenses and money strands which allows you to link all your accounts and create a 12 month spending plan to get started i recommend you try a free service first and get to know whether this will work for you or whether you need to pay many of the free tools mentioned are based on the envelope system a tried and true method from the days when cash was king where households would have different envelopes for different expenses food entertainment bills savings and once the envelope was empty you knew you’d reached your lemon for the technologically challenged envelopes are still a great solution but now with credit cards in our pockets it’s a lot harder to face the reality of empty envelopes so once again it comes back to you a budget won’t change your behavior only you can do that step one to making a budget work for you is to have a budget that you’re comfortable with building in wiggle room for emergencies and extra shoes if you can step two is not just stick to it as many advisors would have you think but to be much more conscious with your spending decisions both the little ones like your daily latte and the really big ones like which neighborhood you live in or public versus private education for your kids if you really want to dig into the psychology behind the myth that is if you skipped your daily latte you’d be rich i found the book pound foolish by helen oren to be extremely useful the best part of having a budget is that once you’re saving money and have some investments underway it’s a great feeling to see your numbers go up on a monthly basis there’s nothing fun about paying down debts or trimming costs but it is essential to provide the foundation for future growth and buying yourself better options in life i’ll leave you with this thought that is very applicable to budgeting from the great eleanor roosevelt it takes as much energy to wish as it does to plan you’re in the money now one if you ask old school investment advisors what

keeps them up at night it’s the concept of wealth transfer the generation that was able to buy a home for ten thousand dollars and sell it thirty years later from a million they’re retiring and they’re starting to pass on the wealth that they’ve accumulated over their lives is being inherited by their children and their grandchildren which is something that gives these old-school investment advisors nightmares you see this next generation is far less financially literate than perhaps they could be but they’re spectacular consumers what does a sudden big check from a recently deceased relative let’s say a hundred thousand dollars mean to the average person if this was a game show these would probably be the top five answers new car vacation pay off debts new house help out family and friends nowhere in that list is invested and certainly there’s no sense of let’s give it back to the financial advisor that helped aunt maud with her money so you see where this is going how you spend a windfall big or small will speak volumes about your financial muscles the first thing to do is make a plan i know it sounds terribly boring compared with the idea of running to a jewelry store or telling your boss that you quit but bear with me set aside an amount that feels too small like you’re cheating yourself for some fun it could be 10 to 20 percent of the amount now prioritize what you’re going to do with that money perhaps set a budget of the 20 of the windfall you plan to spend where will that go be clear about what you want to need and take some time before you start writing checks in the meanwhile invest the rest and before you stop this video right here consider this if you were to win the lottery jackpot tomorrow you have a 90 percent chance of spending it all within five years and then being back at work and if that happens to people who win unimaginable wealth what will happen to your windfall without some active management of your behavior if you were to invest the majority of your windfall especially for larger windfalls it’s possible you could live off the interest and income that your investment generates maybe not buy your own plane lifestyle but one where your options are far broader than if you did buy the plane and end up broke in five years anyway the second thing to consider is that if you’re eyeing the assets of your relatives as your own retirement plan don’t things change and they can change quickly think of your inheritance as a bonus versus your call plan unless of course you’re malcolm forbes who famously said i made my money the old-fashioned way i was very nice to a wealthy relative right before he died if you’re holding credit card debt use your windfall to pay down as much as you can it’s such a terribly boring way to spend money but as we highlight in the credit card video the impact of getting rid of your credit card debt is the inverse equivalent of having an investment that’s paying 15 to 20 plus percent planning for a windfall is different to wishful thinking our instincts has finally trained consumers as to spend to upgrade to enjoy ourselves should you be fortunate enough to have money come to you keep your present self on the path that you’re on unless of course you’re in dire financial straits and pay your future self far more handsomely than your present self the last thing to consider is that if you’re handing over your windfall to someone else to manage you must be in a position to ask the right questions as an investor it’s your responsibility to know how much your money is earning for someone else the first question to ask is how much in fees will i be paying you the second question is how does my return on investment after fees compared to the rest of the market asking these two questions and acting responsibly on the answers will do more to protect and grow your windfall than anything else you can do and you don’t even need to be malcolm forbes to do it there is so much confusion and emotion around money for so many people that learning about investing or how to grow your money can seem very overwhelming so where do you start confidently asking questions about money is step one towards financial empowerment and investing don’t be afraid to channel your own a five-year-old the simplest questions can often be the hardest repeat why what how how much until you really understand what’s being discussed and if the person you’re working with is not helping you understand that it’s time to work with a new person once you’re on the road to understanding how to start investing the focus needs to turn to you you may want to invest but should you understanding your financial position and risk profile will help you determine how to get started if you’re very risk averse starting with lower risk assets like bonds or cds could help build your confidence or if you’re looking to build your knowledge about how investing works sometimes buying stocks or funds in things you already know

and care about can help to contextualize investing there’s three ways to get yourself set up you can work with an advisor who will invest on your behalf you can set up a trading account and do it yourself or you can work with the hybrid solution so open an account fund the account and go i’m a big believer in investing what you know and learn as you go investing is a lifelong journey and the earlier you start the better even if it’s with virtual dollars virtually buying and selling stocks and funds is a great way to build your money muscles watch your balances go up and down because they do go up and down and history has shown that you’re better off in the market than not in the market and then when you’re comfortable go in maybe start with a smaller portion of what you want to invest just to get a feel for it if someone is investing on your behalf make sure they’re following a strategy that you’re comfortable with ask lots of questions and don’t ever assume that that money that you work so hard to earn is doing just fine without your attention last remember the great opportunities exist in downturns if you can buy when everyone else is panicking ask this question of the experts you come across if prices went down significantly what would you do get familiar with how investing works and be ready for when the new york stock exchange goes on sale like many things in life the simplest things are often the best asking simple questions can yield powerful learning opportunities ideas and ensure accountability so take a deep breath and ask so you want to get better with money but you don’t have money right now to invest there’s a great way to get you started with no risk to you and no money down and that’s by building a virtual portfolio a virtual portfolio or sometimes called a practice portfolio is a collection of investments that you can buy and sell and watch over time the big difference is that you don’t use real money so why would you do this a few reasons first virtual portfolios are a great way to try investing without actually investing it’s a super easy way to learn second i truly believe there’s such a thing as money muscles like regular muscles the more you work them the stronger they get third and most importantly the best time to learn about investing is before you put your money in virtual portfolios are risk-free it’s easy to set up a virtual portfolio online at places like investopedia or see if your online bank has that capability once you’ve got yourself set up then the important part begins the market goes up and down all day every day so there’s no point crying or celebrating in the short term the goal of your weekly check-in is first to track how you’re doing and second to gauge your reaction to how you’re doing do you get super anxious if your portfolio has gone down two percent are you already mentally spending your gains when your portfolio is up ten percent over time you’ll learn to manage the ups and downs and learn how to take the emotion out of investment decisions the single biggest thing to learn is that you don’t panic when things are down and don’t jump on bandwagons after things have gone up but if you do feel terrible when your portfolio is down you should think about moving away from stocks and look at more conservative investments like bonds your investment strategy should reflect your risk tolerance also a giant benefit to virtual portfolios is that when you’re ready to invest you’ll have already built a wish list of exchange traded funds and stocks that you believe in finally i recommend you bring friends or family members along for the ride learning is always more fun in groups and maybe you can encourage each other to spend less save some money and get going for real how do i make the most of my fixed income while this is a common question from retirees there’s some great lessons for everyone now fixed income can mean many things from payments from an annuity to living on social security or a pension the key is that every month you have a finite level of income here’s three ways to optimize your fixed income life it goes without saying that you need a budget and that your expenses should be less than your income not break even you should not spend every dime that you get this may mean some adjustments to the way you live and change is never easy but on a fixed income with the assumptions that things get easier over time the sooner you make the necessary adjustments the better life is full of surprises good and bad so include a buffer each month and if you don’t have any surprises great put that money aside as savings and put it to work which leads to the second point contrary to popular opinion that retirees especially should be risk averse if you have money that you’ve put aside you can still put it to work and earn money on it now i’m not suggesting risky or speculative investments but you can now put smaller amounts into

lower risk balanced portfolios that could earn you more than what a savings account can but remember all investing involves risk so only put in what you can afford to potentially lose also regardless of how you earned your living or currently get your fixed income there’s ways to make more money for ideas look at the next generation of workers where having a side hustle or multiple sources of income is increasingly becoming the norm start with the sharing economy what do you have that you can rent a car that sits in your garage 99 of the time put it to work and maybe you have a home with a room to spare or access to a vacation property check out airbnb remember that there’s always work to be done from proofreading to serving coffees to teaching it probably won’t make you rich to do side hustles like these but there’s an upside the time that you spend working and earning money isn’t time you spend spending your money lastly a warning with all the advances in technology there’s increasingly creative ways of getting scammed be suspicious of anyone offering easy money or demanding upfront payments for future income if you’re younger and work in a profession with a pension or you have an annuity that will pay you a set amount for the rest of your life start planning now for ways that you can maximize or subsidize your income and keep your cost of living in check i’ll leave you with this thought living on a fixed income doesn’t have to be an exercise in restriction and deprivation but it should be your starting point from which to build on focusing on your paycheck is great and making sure you get paid a fair wage for your work is super important but if you’re trying to maximize your earning potential it’s always good to look further than your paycheck there’s three main areas where you can look your skills the things you own and your liquid assets first your knowledge and experience is always worth something but as a person with finite hours in the day it’s hard to exponentially grow income based on your job but don’t let that stop you from exploring side hustles from teaching to participating in focus groups to making things to sell on etsy doing something with your time that can convert to cash is a great way to create multiple income streams next look at the things you own especially the things of value that can be turned into cash and with the advent of the sharing economy it’s much easier to unlock the potential of any asset look at listing your car or lawn mower or even your house on sharing sites look for platforms like peer buy that are available in your area and don’t forget if you’re willing to put in the time there’s always a market for selling your second hand goods and clothes the third way to generate a different income stream is to put the money you have to work through investing this is a side hustle that you can do while you’re working hard at your other job or jobs growing your money in real estate your investment portfolio or businesses should be a part of everyone’s money mindset regardless of how much money you have right now you work hard for your money make it work hard for you in the us and in many countries investment income is taxed at a much lower percentage than salary which is why the one percent aka the rich probably pay a lower tax rate than you so investing can be a second income stream if that’s your goal but the key thought is that longer term multiple income streams buy you options in life investing your time attention and money in more avenues than just your primary career is a great way to ensure that your net worth can grow the thing about loans is this if you need to borrow money you generally will find a way obtaining a loan can be easy but paying it back is not borrowing money has become the default way to pay for the big things in life like education and housing but for many people it’s also the default way to pay for things that they can’t afford right now and buying things that way means that they will cost you more in the future sometimes a lot more let’s consider the many types of loans they include student loans mortgages car loans home equity loans credit cards yes they are considered loans cash advances and payday loans the most important thing to know is that interest rates and terms matter enormously and they vary a great deal depending on the loan let’s talk about this in terms of good debt and not so good debt let’s start with good debt good debt is debt that is manageable predictable and buys you something of value that means interest rates are low terms are long and rates don’t fluctuate drastically the most obvious example is mortgages low interest student loans can also fall into the good debt category especially when the rates are fixed for

the term of the loan in the us and other countries there’s programs that type payments to your income level thereby keeping the loans manageable not so good debt are loans that you cannot predict how much they’re going to cost you in the future or take a considerable percentage of your income or have high interest many variable loans fall into this realm some mortgages private student loans and personal loans are often variable because they’re not secured against an asset whose future value is predictable these loans are higher risk to the lender hence the higher interest rate and higher risk to you if you can’t plan your budget accurately let’s say you have a ten thousand dollar personal loan with a five-year term if the interest rate goes from five percent to seven percent you’ll have to find an extra six hundred dollars for interest payments so it’s in your best interest to pay down as much as you can when rates are low if you have multiple sources of debt car loans credit card debt personal loans it’s worth seeing if you can consolidate into a single loan which has a more predictable payment term consolidating your debt only works if you’re committed to not going back into debt so hide those credit cards and be careful where you consolidate your debt the first thing not to do is to go to predatory lenders like payday loan providers solving a temporary problem through a payday loan becomes a rolling process of taking on more debt to pay for all debt online lending options like sofi for student loans and lending club for access to crowdsource capital also make it easy to get a loan but if you’re consolidating federal student loans you’ll lose the benefit that comes with them so do the math on what that will really cost you also don’t overlook your bank as a source for consolidation they’re more interested in keeping you as a customer than saying you’d go to a competitor so they can usually work something out so let’s do a quick dive into interest rates the key thing to look for is apr specifically how much does the interest rate being offered to you deviate from apr if the cost of money is one percent from the central bank as it is now and the lender is asking for more than six or seven percent that means they’re making quite a profit on your loan so look for better alternatives the last and most important thing is that loaning money in any form means that you’re taking on an obligation in the future to pay it back you must understand the agreement and the implications especially if the loan is secured to any of your assets do the math on your repayment terms and understand the consequences of what happens if you miss a payment and if you ever feel pressured to sign something that you don’t understand do not sign it ask questions seek advice and do the math until you fully understand what you’re signing your future self will thank you paying fees is a part of life there are convenience fees fuel surcharges extra baggage fees account maintenance fees atm fees fees and surcharges are everywhere and avoiding them can be something of a competitive sport one of the biggest offenders in this annoying fee game are financial institutions their fees are not only high but they also target those least able to pay them first of all you should know that banks make a ton of money off fees overdraft fees alone generate 27 billion in revenues for banks and it isn’t getting any better free checking accounts have dropped from 76 of all accounts in 2009 to 37 today and fees themselves have risen 21 over the past five years by calling something a fee instead of a loan lenders can avoid regulators and charge whatever they want for example if you buy a 20 lunch but don’t have the funds in your account to pay for it your bank can lend you the money to pay for the lunch for that loan you’ll get charged a 27 overdraft fee for the sake of argument instead of calling a fee let’s call this a loan which really it is your 27 fee would be equal to a loan with a 3 520 interest rate payday lenders are the champions of this fee game they have been restricted from charging exorbitant interest rates so now they play with fees and if you convert their fees into interest rates many payday loans bear interest of over a hundred percent another fun game that banks play is to reorder transactions to maximize overdraft fees some banks will process transactions from largest to smallest so if a big purchase puts you into debt the smaller transactions will each trigger an overdraft fee even if you think you’ve done the right thing and waited to make the big purchase until the last minute the reordering can cause a cascade of fees that can be shocking it’s in everyone’s best interest to minimize fees so here’s a few ideas how to help

number one never set foot in a payday lender and if you have pay off the loan and never go back bank fees may be heavy but payday lenders are terrible overdraft protection may sound like a great idea but the fees you pay can be astronomical many banks automatically opt you into the programs you can opt out facing the embarrassment of a rejected payment is often better than being charged over to our fees it can also help to find out your bank’s fee policy if you can make sure you keep a buffer of cash in your checking account while debit cards are great they’re the main reason people get dinged with overdraft fees if you’re running out of funds in your checking account consider using your credit card for a few days until your paycheck clears if you have room on your credit card interest on a few extra charges will almost always be lower than overdraft fees if you need overdraft protection consider an overdraft transfer it’s a form of overdraft but uses one of your secondary accounts to fund your overdraft the fees are still high but lower than a standard overdraft to avoid other account fees try to find a no fee checking account they still exist but they are harder to find they all have limits on what you can do but try to find one that has no account balance minimums in the us new players like bank mobile work well for fee-free banking and use cash remember cash try this for a month take out what you need at the start of each week and only spend that amount you’ll never overspend because you only have what you have and you’ll limit transaction fees and atm fees because you only need to go to the bank four times a month and no overdraft or insufficient fund fees it’s not easy to avoid fees but it is possible and there’s increased pressure on banks and lenders to at least be clear about the fees that they charge and remember the more you save on fees the more money you have to pay down debts or invest let’s just all assume that at some point in your life you’ll receive some money that you didn’t earn in your day-to-day job it could be an inheritance a bonus a legal settlement or if the odds are truly in your favor a lottery win which just so you know you’re just as likely to be struck by lightning as when big in a lottery still it happens so here’s three things that you need to do when a windfall comes your way first check if the money is taxable and if you will owe tax on it take that amount and don’t touch it until your tax bill comes an unexpected tax bill can be a nightmare then consider this question how can this money improve my long-term financial situation for the 50 of american households that are carrying credit card debt the number one best thing to do is pay it off the interest rate you pay on credit card debt is higher than what you can earn on most investments so don’t even think of trying to make money off the investment to pay off your debt if there’s still money left over after high interest debt is paid off great now you can make a plan for that money a tool called the reverse budget can really help when managing a windfall or any other lump sum basically the rule is before you spend the first penny figure out where every cent will go park the money temporarily in savings account so you’re not tempted to fritter it away then step back and do a self-assessment to figure out where the money should go you can do it in a storytelling format like i just received five thousand dollars that i don’t have to pay tax on i’ve stopped incurring new debt but i still have a balance of two thousand dollars on my credit card my goals are to get out of debt establish a financial cushion for emergencies and invest for the future i’m gonna allocate two thousand dollars towards the debt one thousand dollars towards my cushion and contribute two thousand dollars to my ira of course you can change those numbers but the idea is you figure out a plan for your whole amount before you spend anything so you can end the story with some sort of result i’m moving forward debt free i’ve protected my financial stability by establishing a cushion and i’m making progress towards my future goals make sure that plan is one from which your future self also gets to benefit that means investing versus just saving the money the more you invest now the more your future self will be able to cash out later i’d recommend at least 50 of the money after tax and debt reduction to be put aside for investing if it makes you more comfortable get professional help someone who you pay a flat fee for an unbiased opinion then and only then do you start thinking about spending the money on yourself or helping out family or friends or giving to charity here’s a thought that flies in the face of most people’s understanding of their money you don’t save what’s left over from spending you spend what’s left over from saving and when you receive a windfall this is sage advice indeed if you don’t know where you are how can you determine where you’re going

it’s a thought that applies brilliantly to your financial life whether you like it or not there’s a lot of data out in the world about you and your financial life banks credit agencies companies even your trusty apps know more about you than what you might think it’s important for you to know what they know for a few reasons specifically accuracy privacy and planning the first thing to focus on with your financial data is accuracy make sure you check your credit rating at least once per year check accuracy of all the data and also look at the data being measured you’ll find that credit agencies measure how much of your credit you actually use what your high balance is how many different types of credit you have and how often you miss payments poor ratings in any of these measures will lower your credit score now privacy be very careful when you sign up for account aggregation services to understand where your data goes remember when you get a product or service for free what’s really being sold is your data bottom line with privacy understand where your data is going last make a plan there’s amazing tools available for budgeting investing and broader financial planning what used to take a lot of research and paper shuffling to get a picture of where you are can now be done through tools like level spendy and you need a budget another business concept to borrow is kpis key performance indicators what are your financial kpis i recommend building a set that makes sense of your progress against your goals it could be saving a set percentage of your income setting a monthly debt reduction plan or deciding on a monthly transfer to an investment account what you want to have at the end of this is a snapshot of what you own and what you owe plus a personal or household view of your cash flow now none of this may seem particularly pleasant and there’s no perfect time to get your financial data in order overcome that obstacle by setting yourself a time on your calendar to do it and schedule something that you love doing right afterwards remember once the facts are in front of you it doesn’t matter if it’s an excel sheet a account or a plain old pen and paper keep coming back to those numbers and track them over time you work so hard to earn a living doesn’t it make sense to spend a little more time on tracking exactly what’s going on with your money it’s been said that the most dangerous concept when it comes to the economy is this time is different history has shown that the economies of the world move in cycles it’s easy to slip into that mindset because economic cycles feel abstract and they talked about so much that economic news just becomes more noise to tune out but when you can see where you are in the context of the economy you can do two things you can adjust your behavior and you can take advantage of opportunities here’s how start by making key economic ideas personal you may think that interest rates currency values and unemployment don’t have much to do with you but they can influence your life more than you know the first thing to understand is that economies expand and contract expansion means the economy is growing and there’s more money flowing through businesses and individuals in times of expansion there’s often new developments within the public sector like governments building new airports or upgrading roads in times of contraction there’s less money if there’s three successive quarters of negative growth this is called a recession and if a recession lasts six quarters it’s a depression during a recession companies share price will often go down and stay down as long as sentiment about the economy is negative savvy investors wait for down cycles and buy low so at the time of this recording the u.s unemployment rate is 5.5 percent interest rates are near zero and the us dollar is very strong so what do you do with that information first unemployment when unemployment numbers are high say above five percent that means there’s a lot of people looking for work who could potentially replace you at lower cost businesses have fewer incentives to grant pay raises when there’s available labor in the market conversely when unemployment’s low you can push a little harder for more money or benefits because it’s harder to replace you if you leave and what about interest rates if the government raises interest rates it means two things you’ll be paid more interest for deposits that you have in the banks which is a good thing you’ll also pay more on the debt that you owe such as variable mortgages or credit card which is absolutely not a good thing when rates are increasing do all you can to pay down debt at the lower rate currency values have an impact too when the us dollar is trading at 79 cents to the canadian dollar it means that the hotel room you stayed in a year ago when one canadian dollar equaled the us dollar that room is now 20 cheaper and that’s why it’s called economic cycles everything is related buying a cheaper hotel room seems great but it means that whatever the us is producing for export has become

more expensive for people in other countries to buy so that can push down production which can increase unemployment now there’s brilliant people all over the world who spend their lives doing economic analysis and predictions but guess what with all the tools in the world even they must admit there’s no such thing as future facts no one knows what’s going to happen to the economy so the best thing to do is to have an understanding of where you are now and to plan for your future self to be well taken care of that means adjusting your behavior and lowering costs in advance of economic contractions plus increasing your savings should you experience job loss but it’s not all doom and gloom history has shown that there will always be good years and bad years and at least knowing that can help you make bigger decisions like buy versus rent when to increase investments or sell off and perhaps the most fun decision if you have a vacation budget in what country will your money go the furthest there’s no question that the economies of the world are changing at an extremely fast rate a century ago when the industrial revolution made manufacturing the cornerstone of the economy products and services became available from mass market and the prosperity of the world grew exponentially since then much of the world has consumption-based economies growth was assured by constantly increasing levels of purchases since the post-war boom of the 1950s until now individuals and family consumption has been the source of growth expanding populations needed places to live appliances food clothing and technology but recently something has changed the ownership culture has shifted a little whereby people are rejecting the notion that you need to own all your own stuff and if you do own stuff you can put it to work by renting it out to others this is the core idea of the sharing economy in the us right now every second household is struggling with credit card debt so the widespread adoption of buy less and share more is a good thing let’s look at a few ways that you can benefit from this change one of the most high profile changes for urban dwellers especially is the idea of car sharing when you add up the cost of a car itself what it costs to park it service it register it and insure it even the cheapest car may be costing you thousands of dollars every year look into services like zipcar to see whether you can rent one on demand instead and if you do need to have one or more cars in your life is there a way to put them to work to generate more income services like uber and lyft allow for you to sign up to become a driver and work as much or as little as you like or looking to turo where you can allow people to rent your car when you’re not using it think of other big ticket appliances in your life that you need but don’t use all the time lawn mowers leaf or snow blowers or bikes look for local versions of where you can list your stuff your availability and your price to rent and your biggest ticket expense of all your home airbnb has revolutionized travel and has allowed for people everywhere to generate extra income by renting out some or all of their homes the world of finance has also been impacted you can now participate in the cycle of borrowing and lending the way that banks have done for years by depositing money with lending club or prosper and then earning interest as other people borrow your money of course there are ideas that have been around a long time that are essentially sharing economy carpooling babysitting clubs shop my closet clothing swaps even potluck dinners anything where a cost can be shared by a group of people versus taken on yourself here’s an idea why not set a goal today to get extra money in your pocket by reducing some of your own expenses or generating some income or both if you haven’t heard of the frugal movement you’re not alone but it’s very real and it’s growing fast being frugal isn’t just about making ends meet when you’re short on cash it’s more about being able to buy options later in life versus spending all you earn now the frugal movement has some great lessons for all of us let’s explore four of them first buy less stuff the advertisers of the world all have one goal make you buy and then rebuy their product over their competitors the big question for you is do you need to buy it at all the sharing economy ebay and plain old going without are all alternatives and if you think you’re already economical with how you spend your cash here’s a great way to commit to the buy less stuff mantra think of all the holidays in the course of the year and make a concerted effort to celebrate without buying all the stuff that goes with them second live with a smaller footprint

we fall in love with neighborhoods and homes often without doing the math on the financial commitment they’ll take before moving compare the short and long term cost differentials between options first the total cost of buying versus renting and then the ongoing cost of furnishing heating cooling insuring and maintaining different homes spoiler alert smaller is better and after decades of building bigger and bigger homes the trend is now reversing to downsizing new developments so they aren’t so expensive to run the most extreme example of downsizing is the tiny house movement i recommend doing a search to see how whole families are living happily in homes the size of the average american kitchen their creativity and commitment is quite amazing now if you’re not up for buying less stuff or downsizing the least you can do is recycle everything the frugal movement is all about buying less but better stuff nobody needs a wardrobe makeover or new stuff every season take pride in making things last or exchanging them with family and friends for the things that you need keeping up with the joneses is a fallacy it’s extremely difficult to truly know another person’s financial situation but it’s a strong possibility it’s not the same as yours no matter how much you think you have in common take pride in living below your means and understand that for every new car that appears in your neighbor’s driveway it’s more than likely that’s an extra bill that they’re taking on too spending money to try to be like someone else is a dangerous slippery slope you have to accept that everyone in the world has either more or less money than you and we have to get comfortable making choices that are in line with our financial circumstances and values remember you don’t have to live in a tiny house or weave your own shoes but learning from this movement will help both your wallet and the environment and best of all every dollar that you don’t send out into the world today is available to you to invest so your future self will have more money and more options tomorrow so it’s coming up on tax time do you have a feeling of dread when i say that or did you think great i’m all set i can skip this video taxes do bring up all sorts of emotions but regardless of the feelings that tax time invokes you will most likely be paying tax this year so let’s see how we can minimize the stress and maximize your return if you’re lucky enough to have a salary your employer has most likely had tax taken out of each paycheck via the pay as you earn system depending on the withholdings you signed up for when you took the job you will have either overpaid in which case you’ll get a tax refund or underpaid in which case you’ll owe additional tax either way you’re better off than independent contractors and small business owners who need to keep track of taxes they owe in the course of a year and put money aside to pay them in order to feel less stressed about tax be aware of expenses you can deduct all year round not just prior to tax time to make things easier have a folder for things that you think might be deductible business and school expenses charitable donations or child care and medical expenses keep it inside and organized so it’s not a source of stress rather it should give you a sense of being in control in the u.s if you made less than 62 000 last year you can file directly with the irs for free they even have some state forms that you can also file for free go to and look for the free file link also research the different online services like turbotax and h r block these programs have developed a lot in the past few years if you’re claiming itemized deductions these services are a great alternative to the higher price of accountants if you live in the us make sure to check if you’re eligible for the earned income tax credit this is one of the only tax programs that is a refunded credit it’s free cash and 25 of people eligible for it don’t claim it the irs has an eitc tool to check if you’re eligible then do one more thing if you think that you may owe tax this year make sure to set up a goal within your savings account or a new account completely and create a direct deposit on a monthly basis to cover any surprise tax bills here’s the great thing about that should you be hit by a bill it won’t eat into your savings or worse put you deeper into debt but in the us the odds are in your favor eight out of ten american taxpayers get a tax refund so if you do get a refund make sure you don’t spend it right away think about prioritizing these two things paying down debt or increasing your investments these aren’t as much fun as a new tv but both of these options will pay off more in the long run lastly a word about fraud these last few years have seen an increase in fraudulent tax returns with people going to file their taxes to find that they’ve already been filed and their returns have been cashed by

someone other than themselves try to file earlier to reduce the chances of this happening doing these things can help you focus on what’s really important making sure that you’re taking advantage of all the deductions that you can and more importantly making sure you’re focusing where it really counts on earning as much money as you possibly can for most people under 50 the concept of retirement can be difficult to imagine let alone plan for how do you plan for something that seems so far away and how do you navigate the minefield of acronyms and regulations and service providers if you’re lucky enough to live in a country where you’re provided a pension or a defined benefit for your life beyond employment congratulations but that doesn’t mean you don’t need to think about what the third phase of your life will look like for many people all over the world their comfort level in retirement is determined by a simple factor prioritizing your future self over your current self but think of yourself at the age of 71 can you imagine what you’re going to be doing on a tuesday morning when you’re 71 it’s not easy right here’s four building blocks to make sure the 71 year old you will rock your retirement number one take advantage of any free money offered to you usually in the way of a company match for your contributions in the us this is your 401k you should contribute enough to get the maximum company match if your company doesn’t contribute a 401k loses some of its benefit it’ll still lower your taxable income but you won’t get the long-term benefit from your company’s extra cash also look at setting up a separate long-term taxed advantaged account in the us this is an ira which is an individual retirement account try to deposit the maximum allowed each year these accounts will allow you to grow your money tax-free or deferred until you retire also make sure the funds are invested and not sitting in cash the easiest way to do this is to buy a super low-cost etf which is an exchange-traded fund or an index fund that tracks the overall market in the u.s these two funds are the best-known lowest-cost examples your retirement accounts are for your future self there are often huge penalties if you want to withdraw money early 25 of americans take money up before retirement and they’re hit with huge taxes and fines so make sure the money you put into retirement accounts can be left there until retirement and depending on when you start contributing and how much you put in it still may not be enough that’s where it’s important to consider your assets across your life tracking your worth over time and prioritizing ongoing investments many people rely on their homes to be a core asset when they retire but homes aren’t liquid meaning you can’t get cash out of them quickly and many people want to remain in their homes and you need to live somewhere right so don’t rely on your house as your retirement plan lastly the biggest impact on your long-term financial health isn’t how much you earn but how much you spend it’s an annoyingly simple formula spend less than you earn and prioritize saving and investing think about the relationship between your short-term wants versus your long-term needs that is rethinking retirement and it’s much easier than trying to imagine the 70-year-old you as much as human nature conditions us to live in the present and make ourselves happy the more you can prioritize your future self the better you