We’re more likely to save a windfall than a small amount consistently over a long period of time. Hack that psychology by saving your bonuses, raises, and tax refunds. This tax season, get ahead of your financial goals by saving at least $50.
I’ve seen it all down my timeline on Facebook, and I know you have too. I’ve been on the same end of the windfall spending spectrum, so I am not judging, however, when I learned better I began to do better. Many people are talking about receiving their income tax checks. I have watched people ball till they fall. Then they get an attitude when someone with financial knowledge tries to share other options to set them up for the future.
I am not saying you have to take all of your windfalls, whether they be income tax, inheritances, bonuses from work, or some other type, take a portion of them and fund some type of savings account. You see, when you receive a windfall it’s like you’ve been given a second chance. Although you may have made money mistakes in the past, you now have a chance to fix those mistakes (or some of them, anyhow) and start down the path of smart money management.
It can be tempting (as I well know) to spend your windfall on toys, trips, and other things that you “deserve,” but doing so will leave you in the same place you were before you received the windfall. And if that place was chained to debt, you’ll be just as unhappy as you’ve always been.
I’ve received a few windfalls. With time, I’ve developed a system for handling these situations and I’d like to share this system with you.
If you receive a chunk of cash, I recommend that you:
Keep 5 percent to treat yourself and your family. Let’s be realistic. If you receive $1,000 or $10,000 or $100,000 unexpectedly, you’re going to want to spend some of it. No problem. But don’t spend all of it. I suggest spending 5 percent on fun. That means $50 of a $1,000 windfall, $500 of a $10,000 windfall, or $5,000 of a $100,000 windfall. Don’t be tempted to spend more!
Pay any taxes due. Depending on the source of your money, you might owe taxes on it at the end of the year. If you forget this fact and spend the money, you can end up in a bind when the taxes come due. Consult a tax professional. If needed, set aside enough to pay your taxes before you do anything else.
Pay off debt. Doing so will generally provide the greatest possible return on your investment (a 20 percent return if your credit cards charge you 20 percent). It’ll also free up cash flow; if you pay off a card with a $50 minimum monthly payment, that’s $50 extra you’ll have available each month. Most of all, repaying debt will relieve the psychological weight you’ve been carrying for so long. Don’t underestimate the feeling of freedom that comes from no longer having creditors.
Fix the things that are broken. After you’ve eliminated any existing debt, use your windfall to repair whatever is broken in your life. Start with your own health. If you’ve been putting off a trip to the dentist or a medical procedure, take care of it. Do the same for your family. Next, fix your car or the roof or the sidewalk. Use this opportunity to patch up the things you’ve been putting off.
Deposit the rest of the money in a safe account. It can be tempting to spend the rest of your windfall on a new car or new furniture or new house. Don’t do it. Take some time to breathe. After attending to your immediate needs, deposit the remaining money in a new savings account separate from the rest of your bank accounts. Be sure that the account is as difficult to access as possible — no ATM card, no easy transfer to your other accounts, no nothing. (An online savings account is good for this. So is an account at a small, local bank in the next town over.)
Make a wish list. Allow your initial emotion to pass, getting over the urge to spend the money now. Live as you were before. Meanwhile, spend some time learning how far your windfall could go. Most people have unrealistic expectations about how much $10,000 or $100,000 can buy. Resist the temptation to spend the money now, but do run the numbers to see what you could buy.
Saving a portion of your windfall will take you a long way to your savings goals. Tell me what you do with your windfalls.
For more creative way’s to save, book a consultation with me and we set up a savings plan.
Yes, you read that right, save for your children’s retirement. Now hear me out, because I am not crazy. As a matter of fact, I wish this tool had been around when my children were small. When you think about it, it’s nice that we as parents and grandparents can contribute to our future generations in such an amazing way.
As we continue with America Saves Week, most people are thinking about saving for their own retirement, and that’s good. But why not save for your children at the same time. I am all for giving my future generations a financial leg up. When my retirement fund provider began offering it, I had to jump on it. It’s called a Kiddie Roth (ROTH IRA for kids). Now doesn’t that just beat all!.
The Kiddie IRA works much like your own IRA. It’s funded by after tax savings and the account grows tax free. Keep in mind though, there are a couple of exceptions. The Kiddie Roth is a custodial account for children under 18. It is funded and controlled by an adult, usually a parent or a grandparent. Control is transferred to the child once they become an adult.
Just like a regular IRA, the saver must have earned the income to fund the account. Just think, if your child or grandchild has a job you can have them take part of their earnings and start the Kiddie Roth for them, then match their contribution. In my case, none of my grandchildren are old enough to work, so it is up to me and their parents to fund their account. The good thing is that the money we put in will sit there tax free until they take it out.
You can contribute up to $5000 a year but no more than the amount of your taxable income. So it is quite possible that your child (if he/she is of age to work) could fund this account with your help. Most children aren’t disciplined enough to do it themselves, so as the custodian of the IRA, you are essentially teaching them savings habits that will hopefully last a lifetime.
The Kiddie Roth gives young savers those extra critical years of compound growth. An early starter who saves the maximum Roth IRA contribution per year from the age of 15, could end up with double the retirement account balance of a worker who starts saving the maximum at 25. Basically, your child could end up with $1,000,000 at age 70 vs $500, 000 just by getting this early head start. Hey tell your children let me hold something lol.
Finally, the additional savings is important for young people. They will have fewer sources of guaranteed lifetime income in their retirement years. So when we save for our own retirement, let’s think about the next generation and set them up for financial success.
A rainy day fund consists of a small amount of money in a savings account separate from your checking that you do not have easy access to. Saving for this fund starts with small, regularly scheduled contributions that build up over time.
It’s the money that you hope you’ll never need: the “rainy-day” fund. That’s because if you have to reach for it, something expensive happened unexpectedly.
While you can’t stave off every unexpected expense, you can take some of the financial sting out of the unknown by salting away a little extra money. A rainy-day fund is “for unexpected and unanticipated” expenses. It’s not for personal wants or desires for which you didn’t save. Like a new car, wardrobe, vacations or dinners out.
A rainy-day fund is also different from an emergency fund. While your rainy-day fund may pay for things like unplanned repairs, medical deductibles, or unexpected medical or dental bills, the emergency fund is what keeps you afloat for a few months if you lose your job or can’t work. Your rainy-day fund will typically be $1,000 to $5,000, while an emergency fund is more likely $10,000 to $15,000.
If you’re living close to the bone, paycheck to paycheck, you will likely build your rainy-day fund before you build your emergency fund. A rainy-day fund is a more “digestible goal. If you can build a rainy-day fund, it will motivate you to go the next step and build an emergency fund.
Select your savings vehicle
No-fee savings account: Shop your local credit union, along with a few local banks. What you want: An account with no fees whatsoever. Since you’re saving small amounts — and trying to recapture “lost” money — fees are the last thing you need.
Be honest with yourself
Want to find the “extra” money in your life? All you need to do is have an honest conversation with yourself. Is there something you could do differently, or do without? The answer almost always comes back yes.
Lay off the credit cards. Your goal is to save out of your income, but not to go into debt to do it. Do a semiannual review of bills and see where you can cut back. Then be very deliberate with that amount of found money. Bump up your savings by that amount so that you’re actually saving it.
Bank any extra income
Getting a raise? It’ll have a lot more muscle if you concentrate it into your rainy-day fund. It’s a common technique for retirement savings, but you can also use it to beef up your rainy-day fund. Any time you get a raise at work, you put that extra into your savings account.
Finished paying off a loan for a car, furniture or some other item? Keep paying that same amount — this time into your rainy-day fund. You’re already used to living without that cash.
Ditto for that tax refund. If you’re already getting a refund check, deposit it into your rainy-day fund. If you typically get a refund, adjust your W-4 form, and immediately arrange direct deposit to bank any extra money you’ll be receiving.
The best part: You’re building a rainy-day fund, and you haven’t changed your take-home pay at all.
Keep separate accounts
You need the rainy-day stash to be liquid, but you don’t want to make it easy to raid, either. If this is truly going to be your rainy-day fund, keep it at a separate institution than your checking account. This is the strategy my husband and I use. The temptation to spend more than I have in my account is minimized
If you create some separation between your spending account and your savings account, it’s less likely that you’ll dip into it for something other than an unexpected expense.
If you’ve built up a rainy-day fund, and are ready to establish a financial capability fund, keep those in separate accounts, at least in the beginning. I know it sounds cumbersome to have two accounts, but this is a mind game that you’re playing with yourself. Once you have about $10,000 in your financial capability fund, you can meld the two.
Want to maximize your success? Put those savings on autopilot by setting up direct deposit via an automatic transfer from your checking account or straight from your paycheck. You can read about creating an automated saving plan here.
Stash your spare change
You know that spare change that gathers in your wallet or purse? Empty it out and save it. You’ll be amazed how it adds up. Another way to amp it up: Gather up every dollar or every $5 bill (pick 1) that you have left at the end of the day. That goes into your rainy-day fund.
Do you have a rainy-day fund? I do and I’ve had to use funds out of it too. It really comes in handy! Let me show you how you can effortlessly start your rainy-day fund. Book a consultation with me today.
It can be hard to put aside money for savings, but there is an easy way to save money without ever missing it by making your savings automatic in 2018. Already saving automatically? Find ways to automate other aspects of your financial life this year!
How to Create an Automatic Savings Plan
Redirect Part of Your Paycheck From Checking to Savings, and Then Leave It Alone
Do you have a savings account, yet find it difficult to find money to deposit into it? Do you have the best of intentions every month, but find you don’t have enough left over after you pay your bills to pay yourself in the form of savings?
This isn’t an uncommon problem because I have been there and I know. Most people do find it hard to save. Generally, when you receive income it is either deposited directly into your checking account, or you make the deposit yourself, either at the bank, through an ATM, or via your phone.Then your money heads straight to your checking account, so it’s available to pay the seemingly endless stream of bills.It’s a vicious cycle, and one that’s hard to break. Fortunately, there is a way to break it: an automatic savings plan.
Why Saving Money Is Hard
You may not realize this (and may not feel that this is the case for you), but most people save money as an afterthought.
When they receive income (whether it’s a paycheck, freelance work, investments or other sources), their money is allocated to bills, groceries, rent or a mortgage. After paying for these expensive items, there may or may not be much left over to use for savings (or for fun). And in this scenario, the only time someone adds money to a savings account is when there’s money left over from paying the bills at the end of the month.
Unfortunately, with this backward thinking, there is almost never any money left over to save.So how do you break out of this pattern?
The Answer: Automatic Savings
When you make deposits into a savings account automatically and regularly, you don’t have to think about it. The money is deposited before you have time to worry about expenses or how much money will be left over. Once you get used to it, you might not even miss the money.
Thanks to modern technology, it is very easy to set up an automatic savings plan.
First, you need a savings account. Open one at the bank where you have your checking account if you don’t already have one set up, and make certain your checking and savings accounts are linked.
If you currently have direct deposit through your employer, you will find the easiest (and most effective) way to establish your automatic savings program is to have part of your paycheck directly deposited into your savings account (the rest, as usual, will flow to your checking account to cover your bills). It doesn’t matter if it is $10 or $500 — simply setting this up automatically will ensure you save money every single time you are paid.
If you don’t have direct deposit, there is still an easy option available: set up an automatic transfer from your checking account to your savings account every time you’re paid. For example, if you’re paid every other Friday, you could establish an automatic transfer of a set amount of money from checking to savings to coincide with this deposit. Just make sure you’re aware of when the money will be deducted each month, or you may find yourself overdrawn.
Don’t Touch the Money (Unless You Need It)
This last point could be the hardest: you’ll need to learn to leave your savings in your savings account unless you need it for an unexpected expense. The idea is for you to get used to doing without that cash to cover regular, monthly expenses. If you tap into it every time you run a little short, there won’t be anything left when you really need it. Set up your automatic savings plan and then leave the money alone to grow.
It’s that simple, kind of like that set it and forget it oven. Start you automated savings plan today!
I am so excited about this week! It is America Saves Week. Savers with a plan can be over twice as likely to save successfully for things like retirement and their education. Start your savings habit during America Saves week by creating a simple savings plan. In my FaceBook group, Cocktail$ & Coins$, we talk a lot about having a plan for your money and setting personal finance goals. Here are 7 steps to help you create a savings plan you can live with.
1. Have a goal.
The people who are the most successful at something have a strong ‘why’ behind what they are doing. So, why do you want to save money? Is it because you want to live comfortably in retirement? Or maybe you want to travel and see the world. Perhaps you want to prepare in case something unexpected happens in your life. Maybe you want to save for your children’s college education. Regardless of the end goal, what is your why? Write this down, then put it in a visible place to remind yourself daily!
2. Know where you stand.
Do you keep a personal profit and loss (p&l) statement? It might be scary at first, but looking at where you are is key to where you’re going. Take a look at all of your bank statements, credit card statements, debts and savings you have — and then take a step back to see the big picture. Pay special attention to anything that stands out to you and take note of what things you might be spending money on that don’t align with your values. Is there anything that needs changing? Where do you want your money to go?
If there is anything that you don’t want to spend money on, cut it! And if you want to stick to that decision, figure out how much you were previously spending on that unnecessary expense, and then set up your paycheck’s direct deposit feature to send that amount directly to a savings account (just make sure you are still leaving enough money to cover necessary monthly bills etc.). And that way, the money goes into savings before you have a chance to spend it.
In addition, if you don’t yet have a budget, now would be a good time to create one. The best way to do this is to create categories based on previous months’ expenses, then tweak a bit if you had any expenses in your statements that didn’t align with your values.
3. Create a plan.
Based on your overall goals, knowing where you are and how much you can devote to saving, create a plan around it.
Many financial experts say ‘pay yourself first,’ meaning every time you get paid, save a percentage of your income before you do anything else. It is recommended to save at least a dime of every dollar you make, but if you can’t do a dime, start with a penny and work up from there. If you feel that you’re behind on saving, you may decide to save $.15 or $.20 out of every dollar you make. Whatever the amount, start with something — and you’ll likely figure out pretty quickly that you won’t even miss that money anyway.
Sometimes a good way to devise a plan is to work backward from your end goal.
Let’s say you want to build up a $1,000 financial capability fund — money you can tap into in case an unexpected expense comes up (like a car repair or medical bill).
If you make $2,500 a month in take-home pay (about $50,000 annual salary) and save 10% each month, you’d be able to put away $250 each month. So in order to reach that $1,000 capability fund goal, it would take you about four months.
But — and this is a key step — you want to make sure your goals are realistic — otherwise it will be easy for you to get discouraged and give up. This is why taking a look at your past spending habits is a good first step. From there, you can create a plan but also be realistic about what will really work for your budget. Anything you can give up in terms of unnecessary expenses is found money!
Use automated savings
Automated savings — or lack thereof — could end up being what makes or breaks your plan.
Think about all the taxes you pay to the government in the form of automated payments from your paycheck. You know why you’re never late paying them? They do you the service of automatically taking the payments out for you before you ever see the money. Aren’t they sweet? And while no one likes the idea of the government’s hands in their pockets, the concept makes for a good analogy.
You can do the same thing for savings — except these payments will be to yourself. If you have direct deposit with your employer, you can often request that your company take a percentage or a dollar amount and put it into a separate account — like a savings account. You can even set up different accounts for different purposes, such as capability fund savings, vacation, retirement and so on.
Budgeting your paycheck and putting money aside for specific purposes is a great way to stick to a monthly plan — and ultimately, reach your goals. You can do this by separating cash into different envelopes — or by having specific amounts of your paycheck sent directly to separate accounts.
You could also use an app like Digit that will automatically save for you every time you make a purchase.
4. Monitor your spending.
Online banking and all types of apps make it super easy to monitor your spending.
If you want to use an app, Mint.com and Personall Capital are great tools that can help you monitor and track your spending.
It’s also a good idea to spend a little time each week managing your money – planning for anything new that may be coming up or new ways you can reduce expenses. The groundbreaking book The Millionaire Next Door revealed the strong correlation between time spent planning and considering personal finance and the accumulation of wealth.
5. Refine your spending habits.
Credit cards can run wild if not kept in check. One recent study found that people spend 12% to 18% more at fast-food restaurants when they use plastic instead of cash. So whether you’re paying with cash or plastic, figure out what items you’re spending money on that don’t fit your values, then make adjustments and dump the rest into a savings account! You might also want to use the old-fashioned envelope method to reinvent your spending habits.
It can be difficult to change our choices once they become ingrained as habits, but realizing that you might have a habit that needs changing is half the battle. You can change your habits if your ‘why’ is strong enough — but don’t beat yourself up if you don’t get your spending habits the way you want them the first time around.
6. Bounce back quickly & learn from mistakes.
If you mess up, don’t worry too much about it! Just resolve to get back on the horse as quickly as possible. All isn’t lost if you happen to make one bad move — just fix it as quickly as you can, and make it a priority to get back on track.
Learning second hand from other people’s financial mistakes is definitely a preferred option when it comes to anything in life. But if you happen to make some financial mistakes yourself, just take it in stride and commit to doing better — now that you know better — for the future.
7. Leave room for fun & rewards.
Fun doesn’t have to be expensive, but having just a little bit of it built into your budget can definitely help you enjoy the journey!
For example, if you hit a savings goal, reward yourself with something fun that you want to do that fits within your budget. If you have weekly or monthly goals that lead up to a larger savings goal, reward yourself with something budget-friendly when you hit that weekly or monthly goal. This could be anything from going to the movies to budget-friendly dinner out to buying yourself something small to reward and remind yourself of the milestone you’ve hit.
As long you don’t go crazy, you can have your cake and eat it too by having fun built into your savings plan.
So there you have it, 7 steps to help you create a savings plan that’s right for you. I’d love to hear from you, tell me how you set up your savings plan.
No one plans to fail, they just fail to plan. Let me help you start your savings plan. Book a consultation with me.
I’ve been holding this post just for this month, Black History Month, in order to spotlight those in the African-American community that are doing their part to close the wealth gap. If you haven’t read my post about the wealth gap and how we can close it, then I invite you to go here and do so.
Today, I want to spotlight a gentleman who is doing his part to help close the wealth gap in the African-American community. Pastor Andy Ragland.
Last month, I had the privilege to attend a personal finance conference here in my city. The conference was entitled Money Matters: Put Some Muscles In Your Money. This seminar was conducted by local pastor, Pastor Andy Ragland of Christian Fellowship Church. In this seminar, Pastor Ragland teaches personal finance from a Biblical perspective.
About Pastor Ragland
Pastor Ragland has been teaching personal finance since 2003. He’s has spoken all over the United States, teaching Biblical principles to personal finance. He also offers personal finance coaching where since 2003 he has taught over 200 people how to escape financial bondage and be good stewards over that which God has given them. Out of the people, Pastor Ragland has taught, he boasts a 50% ratio of those remaining consistent in their money management and remaining debt-free.
I had a chance to sit and talk to Pastor Ragland after the seminar and here is what he had to say.
Tracie Threadford: What is the biggest thing we, as a community, can do to close the wealth gap?
Pastor Ragland: Continue to enlighten through teaching. We must create the dialogue, we have to talk about it. Talking is essential because when we talk about it we create buzz. Once we create buzz, it becomes a fad. Just as the #metoo became a fad, we in the personal finance realm have to make personal finance a fad. We have to continue to talk until we have the attention of those who need our help the most.
TT: I noticed the number of people that you invited to the seminar, versus the number of people who actually showed up. Does that disappoint you and what makes you go on in spite of?
PR: No it doesn’t disappoint me, it used to but not anymore. Not in the sense of, oh I am sad but it does disappoint me because I know my people need this education. I also know that those that want change will come and they will stick with the program, and that keeps me encouraged and makes me get up and continue to do the work that I was created to do.
TT: One of the things I feel we can do to close this wealth gap is teach financial literacy in school. What is your view on that?
PR: Absolutely. That goes back to creating the dialogue. If you teach in school or at home that one needs to go to school, get an education, then go on to get a good job; you certainly should teach me how to manage the finances that you want me to be able to make. My motto is Make, Manage and Multiply.
Know your limitations
Having a budget/spending plan teaches you self-control. Self-control and discipline are crucial when handling your finances. Pastor Ragland went on to say, ” The problem is you really like you! You convince yourself you deserve this or that because you work hard.” I know I have said that same thing a million times. In his analogy of you liking you too much, he drives home the fact that your money is a direct representation of how much control you have. “You know what to do but you don’t do it.”
Time is money
“Rich is a status, wealth is a lifestyle. Oftentimes, we spend too much time with people who are not trying to accomplish what we are.” Your time is valuable. You spend eight hours a day or more, working to gain income, but what you do with that income shows you don’t value your time. Pastor Ragland said that the reason he wears nice watches is that he values his time. Trust me, if you ever see him, he really does wear extremely nice watches. In the finance game, you don’t have time or money to waste. If you aren’t already taking the necessary steps for retirement and legacy, you still have time and the time to start is now. Remain focused, set a plan in motion and work the plan.
My question to you reading this is what can you do right now to earn extra and cut costs? Here’s a little bit of what I do. I do makeup to earn extra money. That money has a purpose, I save the money until I get enough to open a CD, or invest it in some way. For more on saving and earning extra income be sure to revisit a couple of my articles on saving and earning extra income.
Your money is a business
“You are the CEO of your finances, your money is a business and you should treat it as such. You don’t have to support every cause that is presented to you. If someone asks you to buy a ticket from their child or brings one of those candy fliers to you, it is ok to say no and not feel bad about it. I tell people that the corporation has made all of its charitable contributions for the year, but we will put you on the calendar for consideration for next year. This is how the big corporations do it, they have all of their charitable giving on the calendar at the beginning of the year and distribute it as necessary.”
This is one that I personally will be using, because it was funny and because he was correct. I am the CEO of my money and my money is my business. We all have been present with will you support my child in such and such. I know that I have a niece that is a cheerleader and grandchildren who are school age who sell things all the time. Heck, I am selling Girl Scout cookies right now. Do I intend to give, of course, I do, but Pastor Ragland opened my eyes to the fact that it is ok not to if I don’t want to. I will still support others in their endeavors but from an allotted spending amount that my husband and I will set at the beginning of each year. Once that money has been used then the answer will be, “The corporation, W&T Threadford LLC, has made all of their charitable contributions for the year, but we will be happy to put you on the calendar for consideration next year.” This not only liberates me but by using the word consideration, it lets that person know I will think about this cause and see if it is something that aligns with my charitable giving goals. It does not guarantee that they will receive that contribution it just lets them know they are on my radar and it is a possibility that I will buy that raffle ticket next year.
It is a process
You don’t become financially free overnight because you didn’t get in the financial situation you are in overnight. It is a process. You have to walk in the season you are in right now. If your finances don’t allow you to go shopping and ball till you fall, then don’t do it. “If you want to see something different, you have to do something different. Your job is just your income, not your increase. ” Pastor Ragland was preaching then!.
Again, I agree. There was a time when I could not enjoy the creature comforts that I enjoy now because I just didn’t have the money. I was ashamed and I was hurt I wanted to do all the things I saw the proverbial “Joneses” did and I couldn’t. You know why I couldn’t? I was broke and knew that I didn’t want to be broke. I knew I wanted more out of life for myself and my children.
One day I was going to be a grandmother and I would want to give those grandbabies everything and I could and leave my children and grandchildren a legacy. Begin the process today to get your finances in order. If you are in debt, then write down everyone you owe, including any family or friends.
Stop using credit, because with credit you are spending money now that you will earn in the future. “You must block your money from going out. When your money does not have a purpose you flounder around in the financial world. When the purpose is unknown, destruction is sure.” He said a mouthful then because I used to be in that same situation. You have to have a game plan, you have to prepare. Pastor Ragland gave five ingredients to prepare and if you know me then you know I am going to share them. I want to see everyone succeed in the game of finance.
Ingredients To Prepare
1. Assessment- Preparation begins with knowing what to prepare for. Write down everyone you owe. Determine where you are and where you are headed. Examine what the conditions will be along the way. Determine what price you are willing to pay to get to where you want to be.
2. Alignment- Although you know where you are going, you still won’t make it unless you line up right. Good alignment makes success possible. Bad alignment makes success impossible. You can’t just work hard, you have to do the right work.
3. Attitude- Your attitude determines your altitude. Lazy people rarely prepare, but diligent people do prepare. Don’t be fooled, however, even the diligent get tripped up by the neglect of their attitude. You must have a positive attitude about yourself, your spouse (if you are married) and your situation.
4. Action- Ultimately you have to take action. It means being ready for the first step when the time comes. Without action, preparation has no purpose.
Here are some final words from Pastor Ragland. ” Courage is going forward in the face of fear. Become a process thinker, getting ready requires thinking ahead. By thinking ahead you recognize now what you will need later. Do more research, people in just about every profession or situation use some kind of research to improve themselves. Learn from mistakes. The greatest prep tool can often be a personas own experience. Be willing to remain faithful and stay the course until the end.
While Pastor Ragland not only teaches personal finance, he is an example of his own teaching by keeping his expenses low and his income high. He is doing his part to close the wealth gap in the African-American community by Making, Managing, Multiplying and putting some muscle in his money and he wants to show you how to do the same.
We here at traciebthreadford.com salute you, Pastor Ragland, and all you do to close the wealth gap in the African-American community. If you know of someone who is working to close the wealth gap in the African-American community, I want to know about them. You can nominate them by sending me an email at Tracie@traciebthreadford.com telling me what they do and how they do it and I will feature them on my blog. This will now be a monthly feature on the blog and I am ready to hear from you.
Often overlooked, there are serious disparities in the African-American community when it comes to amassing wealth. While this may be a topic that people want to sweep under the rug, it is a topic that needs attention. Why is there such a vast gap between African-Americans and other ethnicities when it comes to amassing wealth? Wealth is defined as being the value of homes, automobiles, personal valuables, businesses, savings, money, and investments.
According to the Survey of Income and Program Participation (SIPP) in 2011 the average Caucasian household had $114,000 wealth holdings, compared to $8348 average for Latino households and just $7113 average for African American households.
The study also found that 73% of Caucasians own their own home compared to 47% of Latinos and 43% of African Americans. Furthermore, African Americans saw less of a return in wealth on their investment of homeownership than Caucasians.
Historically, wealth that African-Americans have managed to amass, has been taken from us by way of force. Don’t believe me? Take, for instance, Seneca VIllage. Seneca Village once stood where part of the famous Central Park stands today.
For those of you who don’t know about or never heard of Seneca Village read on. It was a settlement of mostly African-American landowners in the borough of Manhatten in New York City. It was founded in 1825 by free African-American people and was the first such community of its kind in the city. African-Americans were not the only minorities there, others included Irish and German immigrants and quite possibly some Native Americans.
This community, comprised of about five acres stood where 82nd and 89th Streets and Seventh and Eighth Avenues would be now if Central Park had not been built. It was home to at least 350 people, three churches, two schools, and two cemeteries. It existed until 1857 when due to eminent domain, it was torn down to build Central Park. Basically, it was taken by the government.
That wasn’t enough for you, how about Greenwood a neighborhood in Tulsa, OK also known as Black Wall Street. It was one of the most prominent concentrations of African-American businesses in the United States in the 20th century. Popularly known as “Black Wall Street”, until the Tulsa riot of 1921. During this riot, instituted by the Oklahoma state government and Caucasian residents, hundreds of African-Americans were slaughtered and the community burned and pillaged in hours. Once again, our enterprise was taken.
While those are two instances, I am sure if time permitted I could give you more. My question is what happened to us as a people after these two instances? Did we just give up on creating our own enterprises? Why has there been such a disparity in African-Americans creating wealth since the 1930’s? Have we become complacent in that we are used to our land and our ideas being taken from us that we just don’t even try to build wealth anymore? While I can’t answer those questions for anyone but myself, I would like to offer some suggestions that we as African-Americans can do to close this wealth gap.
Begin to save. Find way’s to boost your savings for things such as what some experts call an emergency fund, which I like to call a capability fund. I know many are living paycheck to paycheck. However, finding a way to save 10% of your take-home pay each payday will make you more prepared in case a situation arises that needs financial attention. Boost your retirement savings. If you need help or ideas to boost retirement read 10 Tip’s To Boost Your Retirement Savings.
Become financially literate. In the information age, financial literacy materials are not hard to find. For example, this blog has a wealth of information to aid you in increasing your financial literacy. Your local library has a wealth of materials (no pun intended) to help you along on your financial journey. Commit to learning something new each month that will improve your financial situation.
Pursue Entrepreneurship. Take that hobby or craft that you are passionate about and turn it into a business. This will help you earn extra income to pay off debt, put in your savings account or invest in your retirement account. Extra income is always a plus and can be used in many way’s to aid you in creating wealth.
Invest windfalls. I have heard tax time referred to as “black folks Christmas” because African-Americans tend to use their income tax to afford items otherwise unaffordable throughout the year. I know, because I have been there. When I learned better I began to do better. Take windfalls and fund your IRA, your mutual funds, or invest in stock options. Let that money work for you over time.
Live within your means. I know this may be easier said than done for some as it was for me at one point. However, once I learned the difference between a need versus a want it became a way of life. While my husband and I make a considerable salary at our jobs, we still live off the money we made at our last lowest paying jobs. Mine was $12.88 an hour and his was $16.00 an hour for a total of $28.88 an hour. We have learned to keep our expenses low and our income high. This has afforded us to pay off debt, purchase income producing properties, and live a life designed by our core values. We value quality over quantity. Yes, we have nice things, but we learned how to save and pay cash for them rather than creating debt to obtain them. We practice delayed gratification in this microwave society.
Financial literacy and wealth creation don’t happen overnight. With determination, the right mindset, discipline and the development of a spending plan, it can be done. It may not be easy. It may take trial and error to find the right balance, but it sure will be worth it all in the long run.
In honor of Valentine’s Day, my husband agreed to let me share some of our private money conversations, as long as I don’t go too far. Big Daddy is the nickname I have for my husband, but for those of you who don’t know, his name is Willliam. Now because of our busy schedules, most of our talking is done late at night. Get your mind out of the gutter, hence the title Pillow Talk. When we decided to write this blog post, it took many different directions. I wanted to vlog but he didn’t, so my blogging coach Javacia, suggested an interview style post. With his approval that is what we went with. So here are the musing of late night chatter between me and Big Daddy. I call it interview with a Vampire lol just kidding.
TBT: Do you remember when we were broke and could barely keep a roof over our heads?
BD: How could I forget? You won’t let me. Every time I get ready to spend money you always remind me of those lean years.
TBT. I remind you cause one of us has to have sense when it comes to the money.
BD: I do have sense girl quit playing. I am not going to do anything to drive us back to the poor house.
TBT: You better not, cause you will be on that drive by yourself, think it’s a game.
BD: Remember you said for richer or for poorer till death do us part.
TBT: Yeah I remember, so what color would you like to be buried in. You can always ride to the poor house in a hearse.
TBT: What would you advise couples who find themselves in the same situation?
BD: Well, I would tell them what I heard you say while we climbed out of our situation and that was, ” This won’t last forever, we have just got to stick with the plan.” (Y’all, I can’t believe he remembers that he doesn’t remember what I want from the store most of the time)
BD: A couple has to have a plan, but before they can begin to plan they must have a goal. Goal setting is important in finance. Our goal was to get out of debt, start saving money, stick to a budget and plan for legacy. I can remember sitting down with you trying to figure out where all the money was going. I won’t point fingers but what I will say is that both parties have to acknowledge their part in getting into the situation they are in.
TBT: Yes, all of that is true. We both came from backgrounds that caused us to spend for different reasons. Mine was because I was used to having the best of everything and you well you weren’t. Both need to sit down and figure out what is important and what they want their financial life to look like.
TBT: If you had to advise a young couple on how to achieve what we have achieved what would you tell them.
BD: Girl you not sleepy yet? Ok I know you just want to see if I was paying attention all these years. Here are my tips
Be open about your spending habits before you say I do. I think if we both had really known how the other one viewed and spent money we would have avoided some of our problems. Also, couples need to make each other aware of any debts they are bringing to the marriage. Don’t be afraid to tell the other person if you do or don’t know how to manage money.
Be clear on who will pay what. If one earns significantly more than the other divide the bills accordingly. I remember we were in so deep that you wouldn’t let me touch any money until all of our living expenses were paid. Then we had to work on my debts and then if there was anything left we divided it. We did this until all of my debts were paid because you took the easy way out and filed bankruptcy.
Set financial goals together. Know what you value that way you can spend or not spend accordingly. You and I value the same thing, family and leaving a legacy so it was a no-brainer on how to set our finances to do just that.
Set a budget. I swear if I go one cent over budget I know you will be angry. It may take some time to figure out a budget that works for you but you have to keep at it until it works. Don’t give up!
Make financial decisions together. If there is a purchase to be made, discuss it. I remember when we used to decide how much we were going to spend at the grocery store. You would have that darn list, all those sale papers, and coupons. I would hate going to the store with you, but it was fun watching you save on the grocery bill. I used to think it was dumb that we talked about every purchase, but when I look back it was one of the best things ever.
TBT: I think those are great tips Big Daddy. We both learned some very important lessons back then that have served us well over the years.
BD: Yeah we have girl now can I go to sleep?
TBT: Yeah boy go to sleep.
BD: Give me some lip and turn off that light so I can get some shut-eye old crazy girl.
Well there you have it, I always give my tips but on this Valentine’s Day, I let Big Daddy give his. I hope you couples out there enjoyed his rare appearance on the blog. Happy Valentine’s day from The Threadfords!
Spring break is right around the corner. What will you do with your children for this much needed week of relaxation? Whatever you decide to do whether travel or take a staycation and visit local sites, it doesn’t have to leave you penniless when it’s over. Today I will tell you how to make the most of your spring break on a budget.
I have grandchildren around the same age as my nieces and nephews, so they enjoy doing some of the same things. My sisters and I have a fun spring break planned for the children. That brings me to how we are doing spring break this year and how you can do it without going to the poor house.
1) Plan ahead
Do you and your friends or siblings have children around the same age that like to do the same things? If so then consider pooling your resources. Last summer, my sisters and I sat down and planned the children’s spring break. We decided this year we will stay in our great state of Alabama, a staycation of sorts.
2) Pool your resources
Since we have seven youngsters between us to entertain we all pitched in and rented a room at a local hotel that has an indoor swimming pool. We rented it for the weekend using my FREE AARP discount. My husband qualifies for AARP and I get the privilege of a free spousal membership, even though I am still a tenderoni. What discounts can you use to save on fun activities? Does your city or state have an entertainment book with coupons? Are you a military family? Does grandma or grandpa have any discounts they can use for you?
3) Find free or low-cost activities
While our state parks aren’t exactly free, the one we are visiting is only $5 a carload. My sister drives a suburban and we can all fit. Let’s see $5.00/3 adults is roughly $1.67 each. Then we all pitched in to rent a cabin for two day’s, so the children can go hiking on one of the beautiful nature trails. We are all pitching in to buy groceries so we can cook in the cabin and make smores around a campfire.
4) Set a budget
Mind you I have four grandchildren that I will be spending spring break with. So before the pooling resources activities begin, I still have to do things with them for four days. I get them the weekend before spring break so that weekend we will stay in and watch movies. Did I mention those movies will be on Netflix which is only $12 a month. Watch away little grandbabies watch away. The Monday and Tuesday of spring break, we will visit the Birmingham Museum of Art where admission is free. We will also visit some notable landmarks here in our city that are free. My budget for those four day’s is $100. We will eat breakfast at home, and pack a fun lunch to have while out and about.
For those of you who opt to go out of town, check resort or theme park websites for discounts. You never know what great deals you might find. Also, if you are going out of town try and visit somewhere you have family that you can stay with. Make sure to offer a token of thanks in the form of cash for the stay.
Don’t have any family where you are visiting? Not a problem. If the place you are visiting is a vacation/destinations hotspot, try booking your room at an adjoining town. Some of them are just as beautiful as their popular neighbors and could prove to be more affordable.
Whatever you do for spring break, have fun, be safe and don’t break the bank.
I don’t know about you, but I can’t wait until the day I retire. Whether you plan to retire early or work a few more years like me, it’s never too late to boost your retirement savings. Whether you just started working or you’re nearly done, you can still potentially grow your nest egg.
When planning for retirement, the truth is that the earlier you start saving and investing, the better off you will be, thanks to the power of compound interest. Even if you began saving late or have yet to begin, it’s important to know that you are not alone. There are steps you can take to increase your retirement savings. It’s never too late to get started.
Consider the following tips, which can help you boost your savings, no matter what your current stage of life and pursue the retirement you envision.
1. Focus on starting today
Especially if you’re just beginning to put money away for retirement, start saving and investing as much as you can now, and let compound interest have an opportunity to work in your favor. Compounding is the ability of your assets to generate earnings, which are reinvested to generate earnings, which are reinvested to generate their own earnings. The more you can invest when you’re young, the better off you’ll be.
2. Contribute to your 401(k)
If your employer offers a traditional 401(k) plan, it allows you to contribute pre-tax money. This can be a significant advantage. Say you’re in the 15% tax bracket and plan to contribute $100 per pay period. Since that money comes out of your paycheck before taxes are taken, your take-home pay will drop by only $85. This means you can invest more of your income without feeling it as much in your monthly budget.
If your employer offers a Roth 401(k), yes a Roth 401(k) not Roth Ira, which uses income after taxes rather than pre-tax fund, you should consider what your income tax bracket will be in retirement to help you decide whether this is the right choice for you.
3. Meet your employers match
If your employer offers to match your 401(k) plan, make sure you contribute at least enough to take full advantage of the match. For example, an employer may offer to match 50% of employee contributions up to 5% of your salary. That means if you earn $50,000 a year and contribute $2,500 to your retirement plan, your employer would kick in another $1,250. It’s essentially free money. You better get that money, don’t leave it on the table.
4. Open an IRA
Consider establishing an individual retirement account (IRA) to help build your nest egg. You have two options, the Traditional IRA and the Roth IRA. A Traditional IRA may be right for you depending on your income and whether you and/or your spouse have a workplace retirement plan. Contributions to a Traditional IRA may be tax-deductible and the investment earnings have the opportunity to grow tax-deferred until you make withdrawals during retirement.
If you meet the income eligibility requirements, a Roth IRA may be a good choice for you. They are funded with after-tax contributions, so once you have turned age 59½, qualified withdrawals, including earnings, are federal-tax-free (and may be state-tax-free) if you’ve held the account for at least five years.
5. Take advantage of catch-up contributions if you are 50 or older
One of the reasons it’s important to start saving early if you can is that yearly contributions to IRAs and 401(k) plans are limited. There is good news though. Once you reach age 50, you’re eligible to go beyond the normal limits with catch-up contributions to IRAs and 401(k)s. So if over the years, you haven’t been able to save as much as you would have liked, catch-up contributions can help boost your retirement savings.
6. Automate your savings
You’ve probably heard the phrase “pay yourself first.” Make your retirement contributions automatic each month and you’ll have the opportunity to potentially grow your nest egg without having to think about it. Make automated regular contributions to your IRA. Here is a little more information on how to automate your savings.
7. Rein in your spending
Examine your budget. You might negotiate a lower rate on your car insurance or save by bringing your lunch to work instead of buying it. Determine where your money is going by tracking your spending. Find places to reduce spending so you have more to save or invest.
8. Set a retirement goal
Knowing how much you’ll need not only makes the process of saving and investing easier but also can make it more rewarding. Set benchmarks along the way, and gain satisfaction as you pursue your retirement goal.
9. Stash extra funds
Extra money? Don’t just spend it. Every time you receive a raise, increase your contribution percentage. Dedicate at least half of the new money to your retirement plan. I know it may be tempting to take that tax refund or salary bonus and splurge on a new designer purse or a vacation, don’t treat those extra funds as found money. Treat yourself to something small and use the rest to help make big leaps toward your retirement goal.
10. Consider delaying Social Security as you get closer to retirement
This is a big one! Did you know that for every year you can delay receiving Social Security before age 70, you can increase the amount you receive in the future? Age 62 is the earliest you can begin receiving Social Security retirement benefits, but for each year you wait (up until age 70), your monthly benefits will increase.
The additional income adds up quickly. Pushing your retirement back even one year could significantly boost your Social Security income during retirement.
Recognizing the need to put money back for retirement is the first step. Understand how much you want to put away for retirement, and find creative way’s to increase your contributions. Making the effort now will help make your retirement something to look forward to and help you not to worry about retirement.