One of the statements you often hear in the investment world is “spotting a trend.” Some may think it only relates to a stock chart with all the ups and downs of company’s share price, but as with many skills in the financial world, finding trends is also important in the “real” world. Social media has become a great tool for spotting trends because you can see what types of clothes people are buying, where they are eating, if they are getting or losing jobs, and many more things. Social media gives us the one thing that all the math and government reports cannot give; a chance to look into the mind of the consumer. However, this blog is not about the power of social media, but it is about a trend I have noticed through social media…working from home.
We all have friends that sell makeup, cookware, storage boxes, jewelry, diet supplements, etc., but in the past 8 months, it seems like this trend has exploded! My Facebook newsfeed has gone from family pictures and fun announcements to the market from Disney’s Aladdin! All I see is buy this, join this, or promote this. I never thought I would say this, but I actually miss the “my child used the potty” announcements. Before I get push back from my friends doing these businesses, let me be clear: I am extremely proud of you for doing this and making extra money. You should be very proud of your success and I wish you the best.
However, I have 2 concerns. First, for those that haven’t started selling anything, please understand that these businesses are designed to be supplemental income at first. Yes, there are many people who are successful and sell Avon or whatever as their full time job, but there are many more who realize this isn’t the job they hoped it would be. Usually, the ones that are successful have a spouse with steady income and health insurance, so they can afford to give the time needed to build a business.
I look at these programs like investing in that a person should never invest until they are already financially stable to a point. For example, if you have $2,000 in credit card debt and $100 in your savings, I can promise you that investing that $100 will not give you the huge return you see in movies. There are actually very good odds you will lose that $100. In the same case, you have a high risk of loss if you spend your last $100 on a starter kit for product sales. You may make a fortune, but part of my job is to help my clients understand risk and there are risks to starting these programs. Granted you all aren’t my clients, but you are my friends and I’m still going to look out for your best interests.
Second, for those who are selling, as you probably already know, selling is hard! While you may start off making a lot because the product is new and your friends want to try it, eventually that well dries up. It’s not that your friends don’t want to support you, it’s that there are so many things pulling at our wallets each day. So what do you do? Plan for these rainy days! If you had a great month where you made $5,000, save enough of it to survive the month where you don’t make a dime.
I will be glad to create a plan with you where we can help you have success and stability.
In the midst of all the political advertisements, I finally found one that I liked. However, it wasn’t done by a candidate. It was done by the AARP showing a donkey and elephant with one request: Please fix Social Security. Like many things in Washington, I think this is a fairly easy fix, but certain groups will be disappointed. While Social Security has many issues (especially with the antiquated disability rules), the greatest fear among my generation is that Social Security will not exist when we hit the Full Retirement Age (FRA). Basically, we feel that we’re throwing money away when we pay Social Security and Medicare taxes each month as we’ll never get to use it. We believe we could put that money in a retirement account instead of trusting the government to keep it. As a financial adviser who would love to open these accounts, it pains me to say that I disagree. Going back to my last blog’s discussion, we cannot guarantee that we will save this money. We barely save for retirement now and the $10,000-$30,000 annual promise of Social Security is a great help as the middle-class millennial chases his/her retirement goals. When you look at Social Security as part of your pursuit of financial independence, then you’ll feel better about your monthly contributions. The key phrase here is “part of your pursuit” as Social Security was never meant to be our entire future; we still have to do our own financial planning.
So, how do we make sure that Social Security is still here 30 years from now? I had a finance professor that said Social Security will always be here because the elderly and people with disabilities always vote. If politicians want to keep their job, they won’t mess with Social Security, which is exactly why the problem is always talked about, but never fixed. Sure, this fact offers a little reassurance because politicians want to keep their jobs, but it still doesn’t solve the problem of the Social Security funds running out!
The obvious first step is for the government to stop stealing from it. I believe this problem is under control now, but we still need to keep an eye on it. After all, it’s our money!
Second, Social Security needs to keep similar rules. Step 3 will add new money to the Social Security Fund, so it will be important that certain rules, such as the max amount received per household, remain the same. Of course, the amounts will continue to be adjusted for inflation. These rules are vital with the new money because we don’t want politicians to get any new ideas for use of our money.
Step 3 is “Insanely Simple” to quote the title of one of my favorite marketing books: Eliminate the Social Security tax limit on income. Did you know that once you make over $118,500 (in 2015), you no longer have to pay Social Security taxes for that year? Most middle class Americans don’t know this because we never reach the limit. Therefore, eliminating this rule will not hurt the middle class at all. In fact, it will actually help preserve their future because it will add to the Social Security fund. Think about it; if all the celebrities paid Social Security taxes on their entire $10 million salary (for example) instead of only on the first $118,500, then shouldn’t that put the money we need in the Social Security fund? It’s really not that complicated.
The wealthy may be disappointed, but I think they will find comfort in paying a tax that helps the future of their fellow man. This is so different from income taxes that go to the whims of a politician. This money goes to keeping a promise made to Americans years ago. I have met a few pro athletes and celebrities over my life and I have never met anyone that didn’t appreciate their blessings and want to help their fellow man. Of course, they didn’t want to just give everyone money to throw away, but they love helping fulfill a need in the community. Preserving the Social Security promise is a need that can benefit all of us. It’s not about the right or the left, it’s about the future of ALL Americans.
Again, Social Security is only a piece of your financial independence, so we need to start your financial plan as soon as possible.
The “Millennial” generation is often the subject of many news stories. Most of these stories shine a less than favorable light on the generation and, while I agree with these stories to a point, sometimes I think the perspective we are given of the Millennial is unfair. I did some research and, yes, there are many Millennials who are the entitled protesting type that we see on the news, but there are many more who have the same ambition and work ethic that made America the greatest country in the world. I was also surprised to find out that technically I am a Millennial. I thought it was only the 25 year olds we see on the news. Mark Zuckerberg, the founder of Facebook, is a Millennial as are many of the pro athletes and celebrities we and our children admire each day. We are so much more than what the media shows and I know that future generations will admire us just like we are inspired by the past.
So, why are the Millennials always so controversial and angry? The obvious answer is that we don’t have enough money! The key word here is “enough” because higher salaries won’t help if we don’t learn how to manage money. A family making $80,000 a year faces the same monthly struggles as a family making $40,000. Athletes sign multi-million dollar contracts, but many struggle financially in retirement because they never have “enough” money. More is not always the solution. Sometimes you just need to visit your friendly neighborhood financial planner.
I do sympathize with the Millennials because we face expenses that past generations never had. My parents asked me why people my age cannot survive on $60,000 when they were only making $8,000 when they got married. The short answer is inflation as $8,000 per year was a great job in the 1970’s while it is way below poverty level now. However, we also forget that the technological advances we have today did not exist in the 1970’s. For example, the bills in my household for cable, internet, and cell phones alone cost over $300 per month. Technically, these are considered luxuries, but can you imagine life without them now? It’s hard to do schoolwork or apply for jobs without a phone and email address. Sure, we do unproductive things on our devices, but they have become necessary tools in life. There are other examples of expenses, but you can already see how the single Millennial making $30,000 a year struggles each month.
I believe this is why the Millennial is always protesting for higher wages. We believe more money will solve the problem and we think politicians will give it to us. First of all, there will always be temptations to take our money, so if we don’t learn financial management, we will always struggle. Second, do you really want to put your whole future in the hands of politicians? How’s that revamped healthcare program working for you? Instead of forcing higher wages, which will be hard to do, why not give us a technology tax credit each year or a credit on all the different insurances we have to buy? Then you put money back into the pocket of the consumer without hurting the employer’s bottom line. Yes, it takes money away from the government, but they need to learn financial management as well!
Personally, I’m not going to waste my life waiting for the government to solve my problems, so I would like to challenge all Millennials to do the same. As someone said, “Noah didn’t wait for his ship to come in, he built one!” Wouldn’t it be awesome if, 50 years from now, we are referred to as one of America’s greatest generations? The first step to greatness is learning financial management and I would be glad to help you on your journey!
One of the services I offer is what I call a budgeting plan, which basically helps the client learn good spending habits. I’ll change the name eventually because I don’t like the view society has of the word “budget.” It seems that when we hear “budget,” we think of Government agencies where they have to forecast spending in each category for an entire year before the year begins. Then, if you over or underestimate a category, you must get approval to amend the budget. I spent 8 years in County Government, so I know how much of a pain it can be.
I understand these steps are necessary to prevent corruption, but it cannot be done in the home. You cannot let your family starve because you underestimated food costs for a month. I believe home budgeting is more about making good choices. I teach clients to understand how much cash they bring in versus how much goes out, while keeping their eyes on their future goals. Hopefully, this leads to good spending habits.
A major topic in client meetings is debt management as it is a key to financial success. It is hard to plan for the future while you are paying for the past. Obviously, a good spending habit is using unexpected income to make an extra payment on your debt, but how can you actually get out of debt? I have the tools to help you decide what payments you can afford and how long it will take to be debt free, but my clients have been asking me if I preferred the snowball or avalanche approach. Honestly, I had to do some research because they didn’t teach these in finance school. We were just taught how to pay it off in a specific amount of time. The snowball/avalanche approach came from self-help books, so of course, I had to do an experiment to see which was best.
My test included 5 different debts for a total of $10,000 with each debt charging a different rate of interest. There was $500 available each month and each debt had a $25 minimum payment. I used the snowball, avalanche, and a balanced payment approach. The total spent to pay off the debt with balanced payments was $10,625.85, the snowball was $10,625.44, and the avalanche total was $10,558.62. The avalanche approach saved $68.23 overall, which makes sense because it eliminates the debt with the highest interest rate first. The snowball approach eliminates the debt with the lowest balance first regardless of the interest rate and the balanced payments were just $100 on each debt each month.
Other than saving $68.23, there really isn’t anything that makes one approach the right one over the other two. It is basically based on the perspective of the client. Some may want to save the $68.23 while others prefer to eliminate the small debts first. All 3 approaches eliminated all debt in 22 months, which tells me that, regardless of the approach, a plan always works! Let’s set up a meeting and build a plan for you!
I recently read an article that said Goldsboro was the fifth poorest city in the United States. The original article was written by 247wallst.com and I read the summary provided by the Triangle Business Journal. You can read the article here. I was interested in the article because I live in Pikeville, Goldsboro’s neighbor to the north.
Of course, I’m sure it was written to be “click-bait” so everyone would feel sorry for our community and call our politicians, but I am always an optimist and found positives in the article. Actually, it inspired me as a financial planner just starting my business in this area.
First, I never like any survey that uses “median.” The median is the number that sits in the middle of a set of numbers. For example, if you had 3 salaries let’s say 0, 50, and 100,000, the median would be 50. The mean or average salary would be $33,350 while the median salary would only be $50. Granted, our sample was only 3 and it shows a major difference while the article’s sample was probably huge, but my point is that using median doesn’t tell a very good complete story when you’re talking numbers.
Furthermore, the story doesn’t take into account that we are a rural community and have a lower cost of living than other larger cities with higher “median” incomes. Not to mention that many jobs here are Government jobs, which don’t pay well. Granted we do have poverty problems, but I can argue that much of the poverty is because the people who need assistance (like people with disabilities) become trapped under the super-low income restrictions. Those of us that are trying to dig out of the hole can’t because of the laws designed to help us. I am a self-employed, college graduate, but I would be one of the 25% listed in the poverty number in the article because if I generate too much income, I’ll lose medical help which would cost me more than I’ll ever make. So, you see the law keeps me under the poverty line ($11,770 for individuals in 2015 according to healthcare.gov). Yes, my life goal is to get off assistance permanently, but it has to be done carefully where I can cover my own healthcare costs.
The “political” solution to the poverty and unemployment problem is to throw money at it creating yet another program that may help a little. However, there was a mural in Goldsboro that says, “We want change, not dollars.” I believe the artist is saying that we want ways for us to help ourselves, not incentives (such as the low income restrictions) for us to stay in poverty.
The key to building wealth is learning how to maximize the value of what you have and not spend more than you make. The citizens of Goldsboro made me proud because, according to the article, the mortgage payments on the median house will be less than 20% of the median monthly income, which is GREAT! This means that we’re not buying houses that we cannot afford. In my opinion, this fact alone reverses the article. Goldsboro is not the 5th poorest city, but we are a city that is building the right way, within our budget. I am so glad that as a financial planner, I have the opportunity to help residents of Wayne County build wealth while we help the community grow in the right way. I would love the opportunity to help you!