Poll: How Often Did You and Your Parent(s) Discuss Money?

National surveys indicate that the majority of parents across our country have never spoken seriously with their children about money. In our own surveys done with high school students, we also find that a majority of parents are not fulfilling their responsibility to raise children to understand how money and credit work and how to stay out of consumer debt.

More than half of the students we survey indicated that they’ve had, at most, two conversations about money in their lifetime with parents. And these were high school seniors!!!

What about you? Interested in describing your own experience about money conversations with your parent(s) from your formative years? In your teen years, how often did you have discussions with your parent(s) about money, credit and/or debt?

Thank you for your participation. Have a wonderful week!

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

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Teaching First Graders about Money

I wanted to acknowledge our gratitude for a store in the area that made our work a little easier this month. In December 2011, we received word that the Walmart store in Caldwell, Idaho had approved our mini-grant application and awarded us a $750 gift. With those funds, we quickly purchased from Random House 400 copies of the Berenstain Bears Trouble with Money book.

Debt Reduction Services Inc reads and distributes book to elementary school childrenBooks in hand, I visited three first grade classes this week here in the Treasure Valley (southwest Idaho). In each classroom, we had a discussion about needs and wants as well as earning and spending money. We even had a fun (and brief) conversation about why it would be pretty pointless if money actually did grow on trees.

Next, I read the Berenstain Bears book to the entire class, after which we talked about way that the cubs were able to earn money and save it. We also talked about the chores that the children do around the home.

Finally, and this is always my favorite part of the presentation, I got to announce that I was sending each of the children home with their own copy of the book. Yea!!! I also send along a 2-page “Parent’s Guide for Talking to Children about Money,” since surveys show that most parents have never had a serious discussion about money with their children.

The teachers appreciate the presentations because the lessons correlate with the state’s achievement standards, plus they get a few extra minutes to catch up on their own work during the class. All in all, the presentations were enjoyable and successful activities.

Do you know of a teacher whose class could benefit from a book reading (usually K-4), a presentation about money and spending habits (probably 5th grade and above), or about credit and interest (9th Grade and higher)? Please let me know or have them contact me. All such educational services are free if their within about an hour of our offices.

Have a fantastic week!

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on January 13, 2012 at 11:31 am  Leave a Comment  
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“Leveling” our Expenses

April 30, 2011

how to manage unexpected expensesI regularly teach in my Budgeting (“Spending Plan”) classes that our goal should be to turn as many of our Variable and Periodic expenses into Fixed (or “level”) expenses as possible.

A Fixed expense is one that occurs every single month at the same cost. Examples are rent or mortgage, car payments, 401(k) contributions, monthly bus passes and day care center bills.

A Variable expense occurs every month also, but the amount varies. Electricity, heating, gasoline, and groceries are among the most common variable expenses in our household budgets.

A Periodic expense, obviously, occurs less than monthly, irregularly or just once in a life time. Typical of this type of expense are medical-related charges, vacations, car or home repair, taxes, and most insurance premiums.

Because we are so used to our Fixed expenses, we typically do not spend that money. We know, subconsciously even, that we have to set a certain amount of money aside for our rent/mortgage or our car payment. Ideally, if we could turn all of our expenses into Fixed expenses, we would be better able to manage our money.

Here are a couple of easy ways to convert a Variable and a Periodic expense into Fixed expenses:

  1. Utilities: Most electricity and gas utility companies offer their customers the option of making the same payment every month. They simply average monthly payment for the past twelve months. Some customers have tried to tell me that  this is a more expensive option, but that is a myth.
  2. Insurance Premiums: Most insurance premiums are designed to be billed every 6 or 12 months. However, most may now be paid on a monthly basis. Be aware, though, that there is often a $1 to $5 monthly processing fee accompanying the monthly payment option.

Wouldn’t it be nice if our local grocery story or gas station would allow us to be on level pay at their establishment? Alas, I have not heard of such opportunities yet. Instead, it is up to us individually to put ourselves on level pay. This is called, of course, budgeting. We set aside a specific amount each month for our regular expenses.

Pay yourself regularly in order to be financially prepared for replacing appliances when they dieIt is up to us, as well, to look ahead and plan for periodic expenses. Your fridge may be working now, but if it’s already 12 years old, you probably ought to begin saving for your next one soon (“This Old House” has a nice list of average life expectancies of household appliances: click here). If you think it might cost you $1,100 to replace it, divide the expected expense by the number of months you probably have before it needs to be replaced, and you’ll find out what your Appliance Replacement level pay to yourself should be:  $1,100 ÷ 24 months = $46 we should be putting into our savings each month for our next fridge.

We should be doing the same calculations for our furniture (think couches, beds, tables, etc.), appliances, vehicle(s), etc…

In this way, we are “leveling” our Fixed, Variable, AND Periodic expenses so that we’re able to pay for supposedly “unexpected” expenses in cash, by check, or using our debit card, thus avoiding the additional expense of paying interest to store creditors and credit card companies.

Please feel free to share how you’ve converted some of your own Variable and Periodic expenses into Fixed expenses.

Best wishes for continued improvement in your own personal finances!

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on June 2, 2011 at 3:41 pm  Leave a Comment  

Can Budgeting Be “Fun?”

April 20, 2011

Last night, I met with a couple in one of my classes and wanted to share their insight into what they were experiencing. They had come to my Budgeting (aka “Spending Plans”) class a couple of weeks earlier, and they shared last night that they were making solid progress.

They had not only gone home and talked about a household budget, Can Budgeting Be Fun?but they had put one together and had been having regular discussions about it. I was excited for them because I know how a household budget can affect the family finances.

When I asked them how they were feeling about the past couple of weeks, the wife shared that they were having “fun” working on their budget. Now, you have to understand that during many of my budgeting classes, I explain how the critical step missing in virtually all failed budgets (written financial goals) makes budgets “meaningful,” but that even I – a budgeting professional – don’t think of budgets as “fun.”

So, when she said they were having fun, I had to ask for clarification. I was doubtful, I must admit. But, as she began explaining how they were enjoying the process of working together on a budget and feeling more in control of their finances each day, I could actually tell that she really was enjoying the whole process.

Budgeting Brings Peace of Mind and Greater ControlThe feeling of lacking control when it comes to our household finances is very disconcerting for pretty much all of us. Regaining that control really can provide us with a sense of euphoria that will have us coming back to our household spending plan again and again. In that sense, then, budgets certainly can be and are “fun.”

How about you? What are the feelings you’ve had as you’ve taken back control of your finances? Please feel free to share.

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Plug for 2-1-1

Friday, April 15, 2011

We all know the value of being able to call 9-1-1 in an emergency. Back before the days of cell phones and Google, we also knew the value being able to call 4-1-1 for information.

But I’m regularly surprised that a large portion of our population does not know about 2-1-1. All 50 states, plus DC and Puerto Rico have 2-1-1 call centers. 2-1-1 is an invaluable referral line for help with food, housing, employment, health care, counseling and other issues.

If you’d rather surf, check out www.211.org. When you’re experiencing a financial or an emotional emergency, 211 is the number to call.

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on April 15, 2011 at 5:10 pm  Leave a Comment  
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Raising Financially Savvy Kids-Part 1

April 6, 2011

Some of the inherent responsibilities of parents include protecting their children and preparing them to be responsible adults in our society. Teaching children the proper management of their financial resources helps to accomplish both of these goals.

If the children in your family are similar to my own (and I would bet there are far more similarities than there are differences), they probably do not enjoy being lectured by their parents, nor do they learn much thereby. So how else are they supposed to learn to be financially fluent if they don’t listen to what we tell them? Well, we show them.

Further suggestions will follow today’s blog, but here’s an easy, fun and effective way to teach children that money does NOT grow on trees and that it must be properly managed and controlled:

  1. Pull out the game of Monopoly or any other board game that has play money in real denominations. If you don’t have such a game, you can print some play money from www.printableplaymoney.net.
  2. Gather the kids around the table to “play” a game. Count on spending anywhere between 15 and 45 minutes for this activity. This game is best for children 8 or 9 years old or older, since they’re getting to the point of being able to grasp abstract concepts. You can tell them you’re going to play a game to show them how Mom and/or Dad makes and spends money every month.
  3. Explain the rules, such as, “We’re going to count out how much money Mom and/or Dad make every month and put it in the middle of the table. Our goal is to spend it on everything we need and then on things we want without running out of money.”
    At this point, you may choose to explain your feelings that you are sharing information that is only meant for your family, and that you are trusting the children not to talk to their friends or to extended family about how much money Mom and/or Dad make.
  4. Teaching children the realities and the value of household budgetingEnthusiastically and dramatically count out of the bills how much money your household makes every month. This should be gross income (before taxes and other deductions). Enjoy the look of astonishment on the children’s faces while it lasts. For many, any amount over $100 might lead them to think that the family is RICH!!!
  5. Explain that the first thing that comes out of the monthly income is Taxes. Remove from the pile of money in the middle of the table the amount of taxes you pay each month. To raise a financially responsible child, you should explain the benefits that come from paying taxes, including security provided internationally by our armed forces, security provided locally by the police and/or sheriff,  transportation infrastructure, schools, laws, health and human services, public transportation, and more. Avoid complaining bitterly about taxes, though it may be educational to explain how we have the right and responsibility to vote for representatives in our government who we hope feel the same way we do about how taxes should or should not be used.
  6. Next, explain that other amounts come out of your paycheck before you receive any money, including Medicare and Social Security (FICA), in addition, possibly, to insurance premiums and retirement account contributions. Remove the amount of your monthly deductions from the pile of money in the middle of the table.
  7. Teach children the importance of committing to saving for emergenciesNext, explain to the children that you have committed to paying yourself first, in case of emergencies, so that there is a specific amount that you put into your savings plan right off the bat. Let them know that this amount is non-negotiable, and that as they grow up, you expect them to do the same. Many children, even fairly young ones, may take comfort in knowing that their parents have a plan in place in case anything unexpected happens. Remove your monthly savings contributions from the pile.
  8. Then, ask the children if they think you should next pay for things you need or want? Explain what your survival needs are and remove that money from the pile. Typically, needs include shelter and security (rent/mortgage and their corresponding insurance and utilities), food and water (NOT including dining out), protective clothing (the very basics), and possibly medications or medical procedures.
  9. The next expenses to come out usually include things that make life comfortable and convenient, like transportation costs, child care, additional clothing, school activities, air conditioning in the summer,  etc. You may also include other obligations and loan repayments (credit card, student loan, signature loan, etc.).
  10. Continue to remove money from the pile until you’re left with “extra” money (usually pretty scarce). Remember to calculate the monthly amounts to set aside in order to take care of periodic expenses like vacations, car and home repair, holiday and birthday gift giving, etc. You may also consider including the children’s allowance or amounts they can earn through chores.

Going through this exercise every couple of years or so will help your children to realize that money is not an infinite resource, that it doesn’t grow on trees, and that their parents are in control of their finances. It generally has the added benefit of stemming the continual flow of the “gimmees” and the “buymees.” “Give me this” and “buy me that.”

Finally, letting our children “see” how important budgeting is to us will lead them to value it as well.

Have fun with this activity, and let me know how it goes.

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Maximizing Benefit of Tax Refunds

March 15, 2011

Debt Reduction Services Inc suggests a sensible approach to using your tax refundIt’s tax return time. Many households are receiving tax refunds now or will over the next month or so., but too often, these refunds – which can amount to several thousands of dollars – are spent on consumer goods. Such emotion-based consumer spending typically has no significant impact on the household’s net worth or financial stability. Instead, it tends to perpetuate the mindless spending cycle that keeps too many American households stuck in the rut of paycheck-to-paycheck living.

Here is what we and other financial experts suggest such households ought to consider doing with their refunds instead:

  1. Set aside 25% of the refund for consumer spending, if the head(s) of the household feels “the urge to splurge.” This may help to satisfy the primal spender within.
  2. Add 25% of the refund to the household’s emergency fund. This should be held in accounts that are fairly liquid (or easily accessible). A savings account is a standard option, though its rates tend to hover somewhere between the average inflation rate and zero. Other possibilities include Certificates of Deposit that earn a little more interest than savings accounts. Money market accounts are also decent options, as well as interest earning online savings accounts. Rarely will you find an account that offers quick access to your cash but pays interest above the current rate of inflation.
  3. Use another 25% of the refund to pay down debts. Either send it to the account charging the highest interest rate or to the account with the smallest balance. Where I differ from many financial experts is that I also suggest that you consider paying down your mortgage debt. Even though there currently are tax incentives connected to mortgage debt, debt is still debt. Until a mortgage is paid off, the home owner’s freedom (to move, to rent out the home, etc.) is restricted, just as with any other type of debt.
  4. Lastly, use the final 25% to add to long-term retirement investments, including 401(k)s, 403(b)s and Individual Retirement Accounts.

Although some of these suggestions might not be relevant to some households, the remaining suggestions probably are.

Please feel free to share your own successes and experiences with your tax refunds.

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on March 15, 2011 at 10:53 am  Leave a Comment  
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7 Tips for Keeping You in the Black this Black Friday

November 23, 2010Keeping your own finances in the black this Black Friday

If you’re a Black Friday junkie, before you head out the door this Friday morning (likely EARLY Friday morning), please consider the following 7 suggestions for keeping your own finances in the black:

  1. Have a simple financing plan in place. There will be WAY more cool and attractive stuff on sale than you could possibly afford, so you’ll need to decide AHEAD OF TIME for whom you are purchasing the items, and how much you’re willing to spend for each person on your list. Create a simple chart with the names of gift recipients down the left hand column and the amounts you’re planning to spend on them in the right hand column. If you want to be more detailed, you could split the “Amount” column into two, with “planned amount” in the middle and “Absolute Maximum” amount on the right. Aim to spend no more than the middle amount, but commit now NEVER to exceed the right hand amount.
  2. Leave the cards (credit and debit) and the checkbook at home. You can’t overspend if all you’ve got is cash.
  3. Take a shopping buddy… but NOT JUST ANY shopping buddy. Go with the friend, family member or neighbor with whom you enjoy spending time but who will also keep you on financial track. Verbally commit to each other to stay within your stated spending limits.
  4. Budget for your Black Friday breakfast or brunch. Many make this meal part of their holiday traditions (in fact, for many, if may be the first time since consuming the Thanksgiving meal 20 hours or so earlier that they’re even able to eat). Just make sure you have a limit, you know restaurant’s price range, and you stick to your plan.
  5. Compare prices online: Make sure you know how much competitors are listing the items on your want list for. Check out their web sites. Of course, you have to take shipping and handling costs into account.
  6. Think in dollars, NOT percentages. Forget the sale signs. “75% off” doesn’t mean anything to your purse or wallet. The reality is NOT how much you’re saving but how much you’re spending. Remember that sales come and sales go. What’s “hot,” “in” and “cool” this year will be next year’s forgotten fad. However, you only get to spend the dollars in your wallet once. After that, they’re gone, and they’re not coming back. Make sure you’re spending them on your own priorities and not what the stores are telling you your priorities should be.
  7. Make your Christmas about the people in your life rather than the “stuff” you’re buying for them. We all know that relationships are more important than things, yet too often we get caught up year-after-year in buying and consuming. This year, get creative by spending MORE TIME with the important people in your life and spending LESS MONEY for stuff that will sooner or later likely end up in the attic, garage, or, worse, the dump just taking up space.

I wish you all a Happy Thanksgiving, Happy Holidays, and (although still a few days early by my standards, but if you can’t beat ’em…) a very Merry Christmas!

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Turning the Torture into a Treasure

November 8, 2010

I’ve heard a number of people in my financial education classes tell me, “I’ve tried to budget, but I’m just not a budgeter. Budgeting doesn’t do anything for me.”

To anyone who has ever felt this way before, let me say two things.

  • First, I totally get it. I was there too. I hated budgeting because it was painful, ugly, uncomfortable, and a general exercise in frustration.
  • Second, though, is that I can all but guarantee that THE most crucial item of any household or personal budget was missing from your own the last time you tried (and consequently failed) to “stick to” a budget. That principal part of your spending plan is a list of one, two or three goals that explain WHY you’re budgeting in the first place.

Without attaching meaningful and motivating goals to your budget, I completely agree that budgets can end up being a massive waste of time. After all, who enjoys spending an hour or two or three each month reviewing expenses, anticipating purchases, figuring our future income, and trying to balance them all. It seems like a set up for some tortuous reality show.

Listing a goal or two or three at the top of your budget reminds you that there really is a point (and it had better be an important one) to expending all of this energy and spending all of this time trying to make the numbers add up. However, the goal must:

  • Specify: What specifically do you want to achieve that requires you to spend some amount of money. It might be a vacation. It might be a newer car. Whatever it is, it must be something important enough to you that you will do just about anything (including creating and looking at a budgeting regularly) to attain.
  • Date: Set a deadline for when you want to achieve your goal. Do not state it as a length of time, such as “six month,” because in three or four months, you’ll look at it again and say, “I’ve still got six months to achieve that goal.” Set a specific date, if not at least a month when you want to achieve the goal.
  • Be Short-term: Most of us, when we hear the term “Financial Goal,” think of long-term goals like buying a house, retiring, or “becoming wealthy” (that topic is another blog post all together). However, long-term goals tend to involve large amounts of money that we can’t relate our daily purchases to. For example, we might say, “How could taking a brown bag lunch ($1.50) to work rather than eating out with my co-workers ($6.50) keep me from retiring in 30 years with $250,000. It’s just an extra $5.00!” In reality, that $5.00 per day could end up being $1,300 a year ($39,000 over 30 years) that, if invested even at just an average 8% return, could earn you an additional $122,000 of investment income over 30 years. So, never say, “It’s just $5.00. Who’s going to miss it?” The answer: You are.
    If you’re motivated by a long-term goal, make sure to break it down into at least a monthly figure. If it’s a short-term goal, how much are you going to need to put aside (save, invest, not spend) each month in order to reach that goal?
  • Quantify: How much money, exactly, are we talking about here? $50 or $5,000? How much is that each month? Each week? Each time you look at your budget, you should also ask yourself, how much closer am I to achieving this goal?

After putting together and writing down your goals, post them where you’ll see them, especially when working on your budget. Then, congratulate yourself. Just by writing down your financial goals, you’re not much closer to achieving them.

Now, give the budgeting process another chance using these tips and then try to tell me that budgets are a waste of time. I believe you’ll find the entire task completely changed for you. Until you’re at a point where your budget is on autopilot, keep looking at it weekly, even for just 15 minutes. Figure out what bills are coming due, how you’re going to pay them (online, by check, in person, etc.), and what you can do this week to get closer to your goal.

Best wishes as you continue to endeavor to live a financially stable and successful life.

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on November 8, 2010 at 2:30 pm  Leave a Comment  

Top 3 Personal Finance Tips

November 2, 2010

I’ve answered the golden question many times in my classes and presentations: “What is the number one suggestion you have for financial success?” In all honesty, don’t we already live in a society that’s plenty busy and plenty complicated already? Why throw on our shoulders another five, ten or twenty financial skills to master?

Each time I answer the question, though, it’s within the context of a specific course topic, whether it’s budgeting, using credit wisely, or getting out and staying out of debt. Consequently, three different people in three different classes have heard me provide three different #1 suggestions. Today, I’ll combine my three top tips into one gloriously simple but profound blog:

  1. Write down your financial goals.It’s true that every journey starts with one step. I also love the expression, “An unwritten goal is just a dream.” However, I am not referring to massive, long-term goals. We can’t relate our day-to-day financial choices to goals that are more than 3 years away or that require more than probably $1,000. For large goals, you’ll need to break them down into monthly, if not weekly, savings required to reach the goal.Regardless of nature of your goal, you should write down the following: 1) What you want to achieve, purchase, or do with money, 2) How much money you project you will need all together, 3) What month and year you plan to achieve the goal, and 4) How much you’ll need to save each month/week/paycheck from now until the time you plan to reach the goal.
  2. Pay yourself first.Once you have suggestion #1 in place, suggestion #2 becomes both easier and more meaningful. Without #1 in place, #2 because a chore and will likely not last or produce any significant results.Set up an automated deposit, ideally directly from your paycheck but otherwise from your checking account, into your savings and investments accounts. Even if it’s just $5 per month or paycheck to start with, consistency is much more important than the amount you transfer to savings. Once the money is out of your checking account, you’ll be much more likely to live within your remaining income and will probably not even miss the money placed into savings.
  3. Pay ALL your bills ON TIME and IN FULL.So much time and energy is wasted in discussing what makes up good credit, what credit is, and what it’s used for, that many people overlook the simple fact that online payments every month is the simplest and most effective way to build a solid credit score.Before figuring out the best way to pay down debts or determining how many credit cards you should carry in order to have the best credit score, remember that credit is a reflection of your financial habits with regards to debts and accounts for which you are responsible. As such, your credit score is an indication of your credit reputation. Paying your bills on time as agreed is the surest way to protect your credit reputation. Defaulting on your payments or making a late payment is basically an indirect way of telling your creditor that paying that as you agreed is not very important to you. Consequently, they will tell other creditors of your actions (that’s what a credit report is), impacting your credit reputation.

    Although paying down debts and avoiding a “maxed out” card is nearly as important, no one can argue that on time payments (even they are just the minimum payments required by the creditor) make up the most influential portion of your credit score.

So, there you have them: my top three personal finance tips of all time. Hopefully they make your life, your parenting techniques, and your overall well being a bit easier and much less complicated.

If you have a personal finance tip or suggestion that you feel deserves a crack at the top 3, please let me know. Having taught hundreds of classes, written scores of articles, met with thousands of students, and read innumerable studies and opinions on the subject of personal finance, the one thing I know and accept is that there are always better ways to approach things. What’s yours!

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney