Category Archives: Investing

Mind Over Money

When I graduated in the spring of 2015, I thought I had it all figured out. I had some money saved, a job lined up and an apartment to move in to. College had been a blast, but I felt mature and ready begin my life as a real adult. I was going to succeed and it was going to be a breeze.  

Now, a year and a half later, I sit here writing my first post for my brother’s finance blog. See, I used to think this blog was dumb. I didn’t understand what BeatingBreakEven really meant and always thought my brother was wasting his time talking about money so much. But after switching jobs in June for a salary raise and signing a new lease, for rent that was $200 dollars less a month, I realize I am exactly where he was. I am broke, have no concrete plans for my future and am extremely unsure of myself.

In the past few months I have been thinking a lot about my life and who I want to be. I’ve thought about what to do next in my career, thought about what city I want to move to and thought about how to save more money. I’ve also spent a lot of time contemplating my inner motives, my deepest fears and my varying levels of self esteem. In this process of psychological discovery, I have begun to understand just how powerful our minds really are. They can be our biggest tool for success and the biggest obstacle.

I have started to experience first hand how becoming more aware of my thoughts and psychology can really help me achieve my goals. I mean don’t they say that you can achieve anything you put your mind to? Mastering your mind will not only make you a happier person, but will keep you on track to reaching your long term goals. Since many of my goals are financially based at the moment, I went through last month’s credit card statement to recount my recent purchases. Besides food, almost everything I bought was unnecessary. Nails, makeup, new shoes, drinks at the bar, etc. Practically everything on there were things I bought to feel better about myself. For many of us millennials, our credit card statements are a long list of our deepest insecurities resurfacing as impulsive spending habits. It’s actually pretty scary. Working through my insecurities and understanding the motives behind my purchases has started to help me say no to a lot of things I normally would have swiped for without thinking twice.

If we want to change our spending habits, we first have to change our thoughts. Seems simple and intuitive on the surface, but our minds are really unexplored territory for many young adults. We millennials do not spend enough time understanding our needs, wants and desires and instead, act on impulse as a way to band aid our immediate emotional challenges. We are impulsive because we do not take enough time to think and we spend because we don’t want to feel. We really need to learn how to understand our thoughts and be okay with our emotions, so we can make healthy, logical financial decisions.

Take Control of Your Financial Future By Paying Yourself First

One of my most memorable lessons from my childhood was when I learned the importance of “paying yourself first.” Many of my peers and friends have complained about their money problems; bills weigh on their mind and they become stressed living paycheck to paycheck. While it is important to stay cognizant of costs and expenditures, too many people make paying their bills their number one priority.This leaves them treading water just to keep their nose out of the water. This is definitely not detrimental, but it will not leave you on top or help you reach your more long term financial goals. I’m here to tell you why it is more important to pay yourself first before paying any bills.

The common routine for many millennials is to set aside money every month for costs, such as rent, transportation, etc. and then treat the leftover money as free spending to blow. Instead, I am suggesting that you first set aside an amount, “personal bill” and then using the rest to supplement bills and other costs. Creating this kind of system will change your mindset about your money. First and foremost you will be saving and secondly, you will be more calculated and thoughtful about how you spend your earrnings. Putting your money in a personal account will prevent you from spending carelessy.

An easy way to start this spending transformation is to go to the bank and open up an account specifically for your savings goal, whether it be a car a house, business or your future. These accounts can be set up so a percentage of your weekly paycheck is directly deposited. This can also be accomplished by setting up a a pre-tax or Roth 401K account. With these types of programs, some of your “extra” money will go directly towards yoru retirement fund that you will be able to acess around the age of 65. As I’ve written about in previous blog posts, a 401k adds a percentage of your paycheck and in many situations your employer will also match your contribution up to as high as 5%.

By focusing on long term financial goals and redesigning your spending/ saving schedule, you can really improve your financial standing. Having a personal account can also bring more security and allow you agency to act on larger investment opportunities that could present themselves in the future. With this mindset, budgeting becomes a crucial component to your life. You should always be adding your savings or “profit” into your weekly and monthly budgets. You want your personal account to be a guaranteed resource you can draw on, so maintenance and continual deposits are crucial. Your other finances will naturally accommodate and adjust for this extra profit and you will in-turn become more intune and financially savvy.

A further benefit to “paying yourself first” is the secondary psychological effects from having saved money. It can be a great feeling to know that you are now controlling your own financial security and this can in-turn guide even more smart choices for how to save and invest money that comes your way in the future.

3 Resolutions To Get Your Finances In Shape This Year

It’s the start of the year all over again. “New year, new you,” you’ve heard it a million times. Everyone says it. The time to change things around and turn over a new leaf, form better habits and start living a more fulfilled life, or so you think. Everyone wants a strong body, a fit mind, to worry less, love more blah blah blah. Well what about a fit wallet? Maybe this year, it is time to start building a sturdy base for financial success that will carry you through your life. Why don’t you make this year about ramping up your PFS (Personal Financial Statement)? This is the year to start seeing less red and more GREEN. I want to share with you some of the resolutions you should make during this new year that can help you get growing!

First and foremost, save money. I cannot stress this enough. Whether it’s in a savings account, checking account, certificate of deposit, retirement account, 401k, etc. If you are only going to do one thing this year that is going to put you on the path to saving, open one of these accounts. Even if you only have a little to save, just the act will make you feel better about your future. Furthermore, if you can constantly contribute you will soon watch your money grow and mature, your financial self esteem will increase and you will become more proud of yourself and more confident in your ability to save. Start this habit NOW, so it can become second nature.

Dabble in investments. Saving money is important, but it won’t make you rich. You need your money to work for you. This is another crucial process necessary to grow your wealth. You need to make smart investments with your money, investments that will grow and give you good returns in your future. Examples of smart investments include opening a brokerage account for trading stocks, investing in business projects, friends businesses, your passions, land, properties etc. If investing is too scary of a step at this point, do some research! Learning about different opportunities can help you get your foot in the door. Read a book that will increase your knowledge in the subject or ask friends, family and colleagues about their investing experiences. Knowledge is power and the more you know the better your decision will be regarding certain investments. A book I strongly suggest above the others is ‘Rich Dad, Poor Dad’ if you haven’t read it already. It will change the way you think about money and wealth for good.
The last resolution you need to stand by is ridding yourself of impulsive spending. Take control of your money and your wallet. This is by far one of the most important resolutions because it can impact a lot of your everyday decisions. Make a list and take a hard look at what you spend, what you need and what you can live without in 2015. Do you need a Starbucks coffee everyday? How about a $5 breakfast sandwich? Can you bring your own lunch instead of paying $11/day? Do you actually need to buy new shoes every month or go shopping every weekend? Can you save by eating in? Why don’t you try cooking, it might save you money and calories! Why don’t you try fixing things that are broken or torn instead replacing them? Get creative with your life. Learn to create things instead of buying them. You are more able than you think. Don’t buy artwork for your apartment, make your own art. Stop spending money when you don’t have to or can do something for less. As the millennial generation we tend to fix problems by throwing money at them. Learn to take control of your problems and try solving them yourself before you open your wallet or pull out your card. Buy simpler foods, use less resources, buy a bigger blanket and use less heat at night. Become a minimalist and get rid of excess. Only spend money that you have and not money that you borrow. Leave your credit card at home. Once you do this, go back to the first resolution I mentioned and start saving your money!

Why you don’t have to be Gordon Gekko to Invest in the Stock Market

Before I really understood the stock market, I always assumed investing was reserved for highly intelligent finance geeks, who read textbooks on the in’s and out’s of trading. As if they specialized in a secret science, an opportunity only available for the privileged that had the wealth needed to invest and grow. Like my unrealistic, childhood dream of becoming a celebrity, the thought of trading stocks was always desirable, but always seemed unattainable. However, after attending Bentley University and living amongst many other finance majors for the first time, I started to understand what it actually meant to trade different securities in the marketplace.

One of the biggest game changers was when I realized that I didn’t have to be a chic trader on Wall Street, finance professional or an economics professor to trade stocks. Really anyone can do it, and I mean everyone. Even you! All you really need is a computer, access to the Internet and about $200 dollars to invest. I was very unaware of just how accessible the stock market was. My classmates were pouring money into these brokerage accounts, buying and selling stocks in the dorms, during class and even on their smart phones walking around campus. My intrigue spiked one day, when my friend told me he had been paying off his college tuition by trading securities. He was very successful in his endeavors and had even bought a car with some of his yearly proceeds (not everyone is this successful). After that I knew I had to start putting money aside so I could finally take a chance of my own, and invest myself in the market. I told myself that even if I completely failed and lost everything, it would be a great learning experience. The decision proved to be worthwhile.

My first step, which was a very important one, was to choose the right brokerage online. Obviously I had seen various commercials and advertisements for brokerages of these types, but I wanted to do some comparison before I settled. It is important to choose a company that caters to your exact personal investment needs. This is especially important because every time you trade, you have to pay a percent fee known as commission. Commission is a rate fee that is tacked on to the cost of purchasing or selling stock, and every company has a different commission rate. This rate also tends to vary depending on stock type and/or amount invested. Investors also have to pay for the options in addition to the account, such as consultations, personal attention, branch locations, etc. These additional costs can add up, so it is important to keep all of this in mind when figuring out a brokerage to use. there are many sites that can give you a breakdown of pros and cons for each site.

As a millennial we aren’t the most trusting people when it comes to other people handling our money so I skipped out on a brokerage house that offered expensive advice. I wanted to learn about the market myself. We have an endless heap of knowledge known as the internet at our fingertips. I just figured I would research all the stocks myself and this would help me understand the market better and further my knowledge. Also with such low commission rates it makes sense for us millennials because we don’t have all this extra money to just toss around, the fees do tend to add up if you trade a lot.

What I learned after my first few weeks of trading was that once you put some skin in the game, you are more motivated to learn and understand where your money is going and how the system works. It was definitely one of the big motivating factors. You tend to watch the news more and pay attention to worldly events and the market. I always wanted to know what the market was doing. You will quickly learn that stock prices are more heavily influenced by the news rather than how the company may actually be doing according to numbers. So if you pay attention you can make predictions on when you may want to buy a certain security or sell, sell, sell.

The first $200 I ACH’d into the platform bought me a learning experience that I really don’t think I could’ve gotten anywhere else. It was worth every penny. This blurb of an article is just a little piece of insight to get anyone who is thinking about trading stocks or learning more about the process to consider the benefits and the knowledge that you can gain from learning to invest and what I wish someone told me before I knew anything about investing. Good Luck!

Finance Like A Pro: Buying A Car, What To Know

So you want to buy a car!? You’ve seen Dan Bilzerian’s recent Instagram photos and have already binge watched all seasons of Top Gear. Not only that, but you’re sick of driving your mom’s minivan to work. All things considered, it is time you had a little hot rod all for yourself. The only problem: now that you are living on your own, you have to pay for the car on your own as well. For most of you, this will be the first big purchase of your life, and this will be very exciting. One of the many milestones into adulthood is buying your first whip. While fulfilling this dream may bring you back to childhood, it will be very important to think maturely and be well informed in making this important financial decision. Below are some things you need to know before taking this step:

  • Talk to your bank about financing a car. Talking to a professional should be your first step. Being experienced with clients who have been in the same position, they can work with you to analyze your past statements and finalize a budget. You will want to know exactly what term you are able to afford, with the appropriate interest rate and how much you can fork over for the down payment. This step is crucial because in theory, as long as you are making money, you can afford any car with a loan. However, the amount you are making and/or able to pay forward will dictate just how long the term will be. In this sense, the longer the set term, the smaller the payment amount. However, the smaller the payments, the longer you are paying interest on the loan. A five year loan payment vs. a three year loan payment could be the difference of $200. This is something to strongly consider. Buying too expensive of a car may not take priority over other expenses you have to pay, no matter how long the term or how small the monthly payments. This leads me to my next point.
  • The price of the car isn’t the only cost you will have. Lest you forget you have to afford the interest, car insurance, gas and maintenance on the car to keep it running smoothly for the entirety of your ownership. When considering the cost of the car all of these factors must be remembered. Choosing a car in your price range is crucial and this price range should be determined keeping these other equally as important factors in mind. Just because all of your friend’s parents bought their kid a 3-series BMW, does not mean you can afford one yourself.
  • Car payments and loans have two parts: interest and principal. The principal is the amount you need to pay off the car or the balance. The interest is the additional cost of borrowing money. The APR is the rates, fees and other costs that come with the loan in the form of an annual percentage rate. My rule of thumb is three years; if it takes you longer you can’t afford the car.
  • When you want a loan you basically have two choices: dealership loans or bank loans. You will almost always pay additional interest if you go through a dealership. The dealer will get the loan through a bank, so they are just a middleman. That is why I suggest going straight to the source.
  • When you go see a lender, he will be assessing your credit score and credit history in order to make sure you will be able to pay off the loan. Essentially, the lender will be analyzing and predicting your future cash flows and budgets. If you have bad credit, you will likely pay higher interest rates or you may even be denied a loan. If a bad credit score is your reality, you will likely have to put a generous down payment on the car. The ability to pay a percentage upfront demonstrates to the bank that you are financially responsible which could help to lower your payments. When you are approved for a loan, the bank hands you a check to pay for the car and you will soon owe the bank a payment each month. Your new car will become what is called ‘collateral.’ In case you can no longer afford the monthly payments, the bank can seize your car to recover the money that is owed. Having the bank take your car will not only leave you riding a bike to work, but it will destroy your credit score, which will strongly decrease the likelihood of you ever being able to borrow money again. I know this sounds serious, but being a financially responsible adult is serious business.
  • Read consumer reports. In order to minimize these external expenses, you may want to consider a car that is more reliable in terms of average breakdowns or miles to the gallon. Legitimate consumer reports could help you save significantly. As long as looking at the resale value of certain cars.
  • Consider the pros and cons to buying a new vs. a used car. New cars have lower interest rates, but lose intrinsic value almost as soon as you drive the car off the lot. When the back tires hit the road, you have already lost up to a few grand. Buying a used car may mean that you can afford the quality brand you trust and essentially get more for your money. Buying new from a dealership usually means you have to pay for a salesman commission on top of the price of the car.
  • Be a savvy negotiator. The marketplace is still a marketplace, and therefore the concept of sales will apply. Many times salespeople have more leeway in terms of prices than they initially give off. These bottom line prices tend to be far below the advertised price of the car. This is important to keep in mind if you find yourself feeling pressured by a sales employee to buy a specific car. In actuality, you could put pressure on the salesman and turn things around, by negotiating and trying to get the lowest price available.

Lastly, make sure you take care of resale value, change the oil, rotate the tires, don’t drive recklessly, put a protective coat of wax on your car, and change the air filters regularly to keep mpg high. This will also save you a lot of money. So if you are buying a car, enjoy your new whip but be smart with your money at the same time! It will all pay off down the road, literally and figuratively.

 

The Real Winning Lotto Ticket

As a Millennial myself, I know that there is one aspect of life that we are always thinking about, and that is the present; the now, the YOLO, and the ‘if I have cash lets blow it now’ mentality because why not? I’ll just figure it out later. Well this may be all fun and games, but there is something you can do. Something that will allow you to feel justified about spending money freely like this, and that is setting yourself up little-by-little for the future.

As a kid, whenever I received any amount of money, whether it was an allowance or a paycheck, my dad made sure that I always put a portion away in savings for the future. At the time, this seemed like a cruel punishment, but he wanted to ensure that I would have money set aside for college when the time came. Upon receival, I was always inclined to blow this money on candy, electronics or the latest trends, but I am really glad that I did choose to save. When I was finally ready to go to college, I had a large lump sum saved in a separate bank account that was allocated to help me avoid copious student loans.

This same concept can be applied to your 401k. If you are able to put small amounts of money away, you can retire comfortably, with 40ish years to really live your retirement out to the fullest. Many companies in corporate America offer 401k plans that can even MATCH your contribution by up to 4-6%. In the long run, this is HUGE! This means that whatever money you put into your account, up to 4-6% of your salary, your employer could match about half or all of that amount. This means that you could have the potential to double the amount you ultimately save in the early stages and create a snowball effect of interest and returns.

So let’s do some more math here.

According to my 401k Calculator:
Say you are currently making $40,000 per year, and your salary is expected to grow 3% every year (inflation, promotions, job changes),then if you are putting 10% away every year ($4,000: Year 1), after 40 years you will have amassed an amount close to $2,100,000. Much of this money will be relegated pre-tax, meaning you will have more money available to put away that doesn’t have to go to taxes. The best part of this deal is that with this example, almost $410,000 of this amount will be FREE MONEY, money you get from a good Rate of Return (RoR) and/or employer contributions. So everyone, please take my advice and ask your company or current employer about the 401k plans they offer. Please take advantage of these! Your future family and self will thank you. I promise.
Thanks to BankRate.com the screenshots can be found below.

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Screen Shot 2014-04-27 at 2.37.44 PMImages from Tumblr, Bankrate.com