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

Advertisements

Defining PovertyThink

January 7, 2010

I read this past week of efforts in many countries to eradicate poverty by, as some have phrased it, “paying the poor.” The generic term for such programs is “conditional cash transfers” (CCTs), meaning that the government essentially pays cash to families in poverty that meet certain criteria, such as keeping their children in school, having regular preventative medical check ups, and attending workshops on financial skills and disease prevention.

Reportedly, the CCTs can have a widespread positive impact on reducing the income gap between the wealthiest and the poorest in that country. Today’s topic, though, is not about the pros and cons of CCTs or whether we should implement one in the US. Rather, I’d like to address the less tangible side of poverty: PovertyThink, if you will.

Financial Evolution and PovertyThink-National Financial Education Center at Debt Reduction Services IncI would describe PovertyThink as a set of beliefs, attitudes, and accepted presumptions held by individuals of ALL  income levels that prohibit them from implementing, or cause them to  take action contrary to, wisely money management behaviors, particularly with regards to building a satisfactory positive financial net worth in a capital-base economy.

Please do not misunderstand my statement. I am not referring to poverty (deficiency of money, goods or means of support) as being a choice. I am talking about people of ANY income level that subscribe (usually subconciously) to PovertyThink as a view of the financial world and, consequently, who fail to achieve financial success or independence.

Following are possible indicators of the presence of PovertyThink:

  1. Blaming others, particularly banks and creditors, for your financial woes. After all, you reason, they are the ones who have sabotaged your finances by charging ridiculously high penalty fees for bounced checks, late payments, and/or other mistakes.
  2. A strong distaste for the rich. In your mind, being rich is driving luxury vehicles; vacationing at luxury resorts; living in large homes; having mountain retreats or ocean-side cabins; having a garage full of motorcycles, ATVs, or snowmobiles; dressing in designer outfits and suits; and be able to buy just about anything else you want. You feel that those who are rich probably don’t deserve, and certainly don’t appreciate, what they have.
  3. Obsessing over the lifestyles of the rich. In spite of your feelings about the rich, you are often prone to obsess about their lifestyles and dream about what you would do if you were “rich.”
  4. PovertyThinkers play the lottery, mistakenly believing it to be their best shot at wealthPlaying the lottery. You play the lottery because it offers you the best chance of becoming rich. You feel that  the lottery is a way to become rich without having to financially injure anyone else on your way to the top, as the rich often do.
  5. Believing that finances should be fair. You hold to the belief that life should be fair for everyone and that the riches of the world should be equally available to, in not downright divided among, everyone. It galls you as completely unfair to think that the “rich” have it all and you don’t. After all, you believe that the harder a person works, the more they deserve to be rich, regardless of what they do for a living or what they contribute to society. And since you work harder than the wealthy you see on television, you feel you are just as deserving of riches as anyone.

On the surface, these beliefs seem harmless enough. In fact, #3 and maybe even #4 seem to you to be attitudes that should actually motivate someone towards financial success. So how do these points above, collectively identified as PovertyThink, actually do more financial harm than good? Let’s address them one at a time:

  1. Blaming others gets us no where. Blaming the umpire or referee for a bad call, in fact, can get you thrown out of the game.  Blaming others for our financial woes just means that we’re throwing ourselves out of the financial game. What should we do, by contrast? Accept responsibility for (and the consequences of) our mistakes. This may mean additional fees, high interest rates, and more work for us in the short term. However, once we recognize that we often get ourselves into financial troubles, we also recognize that we are responsible (and capable) of getting ourselves out of them. No one else wants us to succeed like we do. It’s time to hunker down and approach our financial challenges with more focus, patience and wisdom. Lashing out only turns would-be friends to long-term foes.
  2. Beware of misconceptions regarding what it means to be rich and what it means to be wealthyThose who dislike the rich the most are often those who want to become rich the most themselves. Unfortunately, they also usually have a warped sense of what it means to be rich. For those in the grips of PovertyThink, being rich is a lifestyle or a certain amount of income. If someone earns, say, $100,000 a year, well, they may be defined by a PovertyThinker as rich. It’s considered whether the same person earning $100,000 a year is spending $110,000 a year, is deep in credit card debt, or is staring foreclosure in the face because they can’t take care of their mortgage payment. The same could be said (and often is true) for a large percentage of people who drive the fancy cars, live in the opulent neighborhoods, and dress and accessorize themselves in the most expensive fashions. PovertyThinkers assume that the rich are greedy and have oppressed others while they earned their riches. The irony is that those who live the luxurious lifestyles tend to have noticeably smaller net worths as a percentage of their income than most millionaires, who buy used, American-made cars and live in modest homes. This PovertyThink tenant is, therefore, based upon inaccurate assumptions.
  3. PovertyThinkers are often seen buying or reading magazines about celebrity lifestyles. They know what brands of clothing celebrities wear, what types of vehicles they drive, where they vacation, which celebrities have their children in a private school and where that school is located, etc. Because many of the truly wealthy typically shun the spotlight, there is no magazine that gives an accurate description of what a real millionaire’s lifestyle is like. So, PovertyThinkers use transitive arguments to equate celebrities (who tend to earn large sums of money) with millionaires (who, outside of their primary residence, have a net worth of $1M or more in assets such as investments, accounts, business ownership, and real estate). Unfortunately, not all celebrities are (or stay) millionaires, and only a very small percentage of millionaires ascribe much importance to the extravagant lifestyles of many celebrities.
  4. Every week, we can read of or watch on television the report of the latest multi-million dollar lottery winner somewhere in the US. PovertyThinkers will see a dream come true for the winner, because they think in terms of amounts and dollars. In reality, many lottery winners (even some of the multi-million dollar jackpot winners) end up spending and/or giving away ALL of their winnings within a few years. Some huge jackpot winners have notoriously ended up living in trailer parks or with family members because they did not have a true appreciation of how much money they had won. They figured that since they were millionaires, they could give away or spend whatever amount they chose. They soon learn, though, that even a million dollars is a finite sum.
  5. The idea that reward should be directly tied to effort is not new, though it is pervasive. “Johnny got an A for effort.” However, it is a fundamental reality that effort is only one of several factors that our society rewards financially. Others include competence, creativity, productivity, personal affinity, loyalty, and on and on. To base someone’s financial compensation solely upon effort is to deny the importance of the other factors. Such an inflexible practice would lead to stagnation in productivity and innovation. Unfortunately, PovertyThinkers who fixate on the importance of effort tend to shun or ignore opportunities around them to solve problems and create solutions that could otherwise lead them toward greater compensation and reward. Developing an entrepreneurial work ethic or style, even if one works as an employee for someone else, creates an entirely new way of considering the value of work as it relates to their income.

So what’s the answer for PovertyThinkers? Since becoming a financial educator, I’ve always felt that the formula for personal finance success has more to do with motivation than with numbers, math, or school grades.  PovertyThinkers, if left to themselves, often have to hit rock bottom or experience some other sort of life changing event before taking the decision to make changes. Otherwise, not surprisingly since this is coming from a financial educator, I believe education is key. Whether through workshops, webinars, conversations, or reading materials, learning about others who have broken the PovertyThink cycle and learning how they did so can provide the hope and belief that makes such individual progress possible.

Such stories are not hard to find. Most of us just don’t look for them or don’t recognize them in the context of breaking the PovertyThink cycle. A large percentage of rags-to-riches stories (excluding lottery winners and those who inherit their money) are case studies in overcoming PovertyThink.

Have a fantastic day!

Todd

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

Published in: on January 13, 2011 at 11:45 am  Leave a Comment  
Tags: , , , , ,

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

What It Means to Be Rich

August 23, 2010

Today, I read a good blog post about the 3 Ps of True Wealth (http://bit.ly/9WxV8l) and felt to add some of our own insight into the concept of wealth and riches.  People, Passion and Purpose make up Jason’s 3 Ps, though all of them revolve around building relationships and the people with whom we interact day to day.

What it means to be richI added a comment regarding what we teach about being rich. In a way similar to the 3 Ps standing for true wealth, being rich involves setting personal goals that require money and then making your money work for you in order to reach those goals.

Being rich is not an amount, an income, or a lifestyle. It’s not about showing off. It’s not about envying and wishing. It’s about doing what’s important to you. Accumulating money, unfortunately, serves as a pseudo-goal for too many people.

“I want to be rich” is a phrase we hear far too frequently. Having a lot of money is a relative concept. For someone living in poverty, a few hundred dollars could be a lot of money. For a recent college graduate, a lot of money might be a $40,000 annual income. For others, it might be $1,000,000 lottery ticket (Please!!! Don’t get me started about the lottery unless you’re truly willing to listen).

The reality, though, is that if we were to set a financial goal to have or earn a certain amount of money, we would find that amount insufficient to satisfy us once we reach it. It’s not how much money you earn or have that counts so much as how much you keep. By “keep,” I mean hold onto in order to reach your own truly satisfying personal goals.

A goal needs to be specific (in outcome, time frame, and amount of money needed), but it needs to be, most of all, motivating. What is it that truly inspires you? Relationships? Accomplishments? Charitable work? Respect? Admiration? Knowledge? Time with family or friends? Experiences? Ask yourself, “When all is said and done and my time on this earth is over, what do I want others to remember me for?” How’s that for a question to get you thinking?

Whatever your goal may be, write it down and keep that goal on top of any spending plan (budget) you every work on. Post it on your fridge. Tape it to your bathroom mirror. Carry it in your purse or wallet. Look at it regularly and recommit to it every day. You’ll soon find that you have little care for spending your money on “stuff” that you’ll now see as frivolous. Saving for an important goal will become fun and exciting.

Once you have your motivating goals in place, it’s then time to act like you’re rich already. But remember that the rich don’t work for money (duh!). Act like the rich by making your money work for you (savings, investments, lending). You may not have hundreds of thousands of dollars to act like the rich, but first of all, you have to get rid of the Hollywood stereotypes of the rich. Most millionaires do NOT drive luxury vehicles, don’t live in mansions, don’t have butlers and maids, don’t take vacations every month, don’t fly in personal jets, don’t frequent trendy boutique shops, and don’t call attention to themselves with what they wear, drive, or live in. That sort of ridiculous spending is targeted at members of the middle class who think that they can spend their way into the upper class. Seriously? How can you spend your way up the wealth ladder?

Most millionaires earn their own wealth through running their own business or being careful with their own money and investments. They are conscientious about and control their own finances. They make they’re money work for them, not the other way around. When they do spend, they spend with purpose. And that purpose is what we’re talking about today.

What’s your purpose? What do you want to accomplish and do in life? How much money will that require? Does it really involve a $500/month car payment and designer clothing? Does it require the biggest home mortgage you could possibly qualify for?

Goals goals?

Goals are the Key to Financial Success and Personal SatisfactionWrite them down! Write them down!  Write them down!

Goals that are not written down are just wishes, and except in fairy tales and the movies, wishes are earned, not granted.

Best wishes for financial success in reaching your own goals!

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

Motivation for Mid-Week

Click this link: I Will

A few years ago, I saw a mentor of mine, Larry Wintersteen, include in his office management presentation a simple, black and white PowerPoint, set to music, that had an intense and dramatic effect on his audiences.

So, with a nod to Mr. Wintersteen and a great big “Thank you” to my friend and music hero, Jonathan David Clark, for his genius and his generosity, please enjoy the PowerPoint linked here, entitled, “I Will.”

(You’ll want your speakers plugged in and turned on)

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

Love and Money-1 Key to Personal Finance Partnership

There are so many great ideas for improving one’s personal financial situation. But that’s just it. A lot of those tips are for “one,” not for partners. There are some books (e.g. Financial Bliss by Bambi Holzer) and studies out there regarding love and money, but not enough.

However, I personally believe that one simple step, more than everything else, would do more good in a couple’s personal finances than anything else. And in spite of the fact that we teach budgeting every day at the National Financial Education Center at Debt Reduction Services Inc, it’s not a budget.

  • Both partners must simply write down mutually agreed upon goals that are then posted where they can be seen by both partners regularly

First of all, this turns the couples’ finances into a team effort. That’s part of a relation after all, isn’t it? To partner and work together?

If financial goals are not discussed, not agreed upon, not reviewed, not tracked, then finances can all too easily devolve into a competition or, worse, a grudge match. When it comes to money and relationships, rather than one-on-one (where there is only one winner), think one-and-one (where there are at least two winners).

So the next time you think that money is the cause of most divorces in this country, remember that money is a tool. Don’t blame the poor workmanship on the tool.

Here’s a link to our budget planner. It’s still on a budget that I think is most important in marital financial bliss, but rather the shared financial goals. That’s why at the very top of this planner, you’ll find a place to write down 3 financial goals. Write them down and agree to them with your partner. You’ll never regret it.

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

Saving or Deferred Spending?

Saving GoalsHaving read “How to Create Barriers to Your Savings” by PT Money today on WideBread, I was reminded of wish that in my college days, I had, first of all, thought of savings as savings and not as “deferred spending,” and second, that I had protected my savings from myself. I raided it pretty regularly every 3 to 4 months.

Now, in our workshops at Debt Reduction Services Inc, we teach this very concept for emergency savings. Automate the deposits into your savings accounts, but make it difficult to get to them. Unless you’re extremely disciplined, you should not even have your savings with the same bank/credit union as your checking.

Creating online savings accounts can be a good idea too, unless even transferring money from the comfort of your own home and waiting a few days is still too much of a temptation. Otherwise, you could consider using a bank or credit union that doesn’t have a branch within 20 miles of your home, work, or other area you frequent regularly. And certainly ask them to block any online or telephone transfers capabilities.

That way, if you have to actually go into a bank or credit union to withdraw the funds, it’s much more likely that it would take a real emergency to motivate you to do so.

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

Published in: on July 23, 2010 at 12:19 pm  Leave a Comment  
Tags: , , ,

Financial Freedom

Freedom is a Journey

I read a blog asking about financial freedom and, even though it specifically mentioned how narrowminded that concept is when defined by amounts or by financially-based ideas (e.g. “getting out of debt”), I was surprises by how many comments still focused on purely financial achievements or factors.

Here was my response to what financial freedom means to me:

“Yes, financial freedom carries different meanings not only for different people but for each of us depending upon our stage in life.

“I like to share my concept of financial freedom in my workshops as follows: If you’re making your money work for you, then you’re at least on the road to financial freedom. Otherwise, if you’re still working for your money, it controls you and you are definitely not free.

“Where that road leads is up to the individual, but I certainly hope it’s headed for fulfillment outside of the financial sphere.”

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