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 |  A journey of self-improvement - or not. |
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Sup? I'm Char. You may know me from timeless classics such as
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[Embed For Use By Upgraded+] Believin' all the lies that they're tellin' ya Buyin' all the products that they're sellin' ya They say jump and ya say "how high?" Ya braindead, ya got a fuckin' bullet in ya head |
Artist: Pink Floyd Song: Money [Embed For Use By Upgraded+]  Prompt via "30-Day Blogging Challenge ON HIATUS"  : If you were to give a TED talk, what would it be about? Sometimes a prompt just reads my mind. We got to choose our own topic yesterday and I was kicking myself for not giving some financial advice.  My TED Talk would 100% be about personal finance. I've spent the past 4 years learning accounting, finance, and economics. I've been working in the community to help individuals and small businesses with financial budgeting and planning.There are some things I hear over and over. I just want to wipe out all of the financial misconceptions! People are so scared finance because financial stress is so immensely draining. You don't have to be scared of finance. You don't have to be rich to take care of your finances and you certainly don't need to be a genius. Trust me, I'm a very average person in both regards.  NOTE: This is for personal finance in the United States. I don't have enough international finance experience to give advice in that regard. Things you should know about personal finance: Credit cards are NOT bad. I've spoken to many people who have beamed at me proudly and proclaimed, "I don't have any credit cards!  " Great, so you don't have credit card debt, but you aren't particularly doing yourself any favors. Credit is very important and I have one of the highest possible credit scores a person can have.Credit cards help you build credit. Put all of your groceries, bills, gasoline, etc. on credit cards and pay them in full each month. Do not fear loans. Certain debts are perfectly okay. It's better to get a decent car on a manageable monthly payment than it is to drive an unreliable car that constantly breaks down and needs work. What you're doing when you put bills on credit cards and then pay them off or get a necessary loan and pay all the payments is prove to companies, "Hey, you can trust me. See? People loan me money and I pay it back on time consistently." Don't be afraid of these types of debt. Just have self-control and only put on a credit card what you're able to pay back in full that month. Moving up a tax bracket is perfectly fine. I've had people tell me, "Well, I don't want to move up a tax bracket because then I'll be taxed more and actually end up earning less!" That's not how tax brackets work at all. The United States has what is called a marginal tax rate system. You are only taxed the higher tax rate on the income that falls into that higher tax bracket. Example: Tax rate Taxable income 10% $0 to $9,700 12% $9,701 to $39,475 22% $39,476 to $84,200 24% $84,201 to $160,725 These are the applicable tax rates for 2018-2019. Okay, so say you're earning $35,000 of taxable income a year. You owe 10% on $9,700 (= $970). You owe 12% on the remainder ($35,000-9,700 = $25,300) and 12% of $25,300 = $3,036. Total amount in taxes owed = $970 for the $9,700 at 10% + $3,036 for the remaining $25,300 at 12% = $4,006. But what's this! A new job! AND it pays $45,000 in taxable income.  You lucky bastard! "Buuuut, now I'm in a way higher tax bracket 22% vs 12%??? It's not even worth it!  "Fear not! Your new tax bill looks like this: 10% on $9,700 = $970 12% on $29,775 = $3,573 22% on $5,525 = $1,216 Total taxes owed = $5,759 New bill ($5,759) - Old bill ($4,006) = $1,753 more owed under new salary. But, your taxable income was $10,000 more annually. That means you're making ($10,000-1,753) = $8,247 more annually with your new job!  Long story short, don't fear moving up a tax bracket. Don't go cheap on necessities. You need dish soap, right? For the love of all that is holy, don't go to the store and get the cheapest $0.69 bottle of dish soap. It will be runny, watery, and utterly useless. Same goes for toilet paper, sanitary products, shoes, tires, makeup, condoms, trash bags, etc... People always start to tell me about this really good off-brand WHATEVER they get at the store. Cool. If you know of a high quality, uber cheap toothbrush, go for it. But keep in mind that not buying the cheapest thing doesn't mean you have to buy the most expensive thing. There are grey areas. You don't want to buy the $0.60 4 rolls of toilet paper. Trust me. You will go through it so quickly because it's like half of 1 ply. So unless you plan to not clean yourself properly after using the bathroom, you 100% will need to buy more very quickly. It adds up. That doesn't mean you need to go to the store and buy the most expensive quadruple-ply name brand toilet paper. Find a quality, affordable middle ground on these types of products. Your quality of life will be better and your pocketbook will thank you. Buying is not necessarily better than renting. I've heard people say that "paying for rent is like burning money." Nope. Not even close. You have to have somewhere to live. Buying is not always the best option. For example, if getting a mortgage is going to put you up to your neck in a monthly mortgage payments because you can't afford a larger down payment right now, renting while saving may be a better option. If you can only afford a house in a rundown area where property values are dropping by the day, you may find yourself with a depreciating asset. If you have no idea where you want to live and are potentially planning to move soon, it may not be a good idea to commit to a 30-year mortgage. Keep in mind that nothing is promised when buying a house. Maintenance and upkeep falls squarely on your shoulders. If a renter's air conditioning goes out, they call their landlord and their landlord must fix the air conditioning at no cost to the renter. If you buy a house and the air conditioning goes out, you may be looking at a $5,000+ bill. Inspections can't and don't catch everything. I've encountered and personally known many people whose houses passed inspection only to have a major malfunction within the first couple years of ownership. You also need to consider property taxes, homeowner's insurance, and HOA fees when buying a house. So, no, renting an apartment or property is not "literally burning money." There's no such thing as a guaranteed appreciating asset and there are plenty of logical reasons for a person to rent instead of purchasing.Every person can do a financial budget. You don't need to have extensive financial planning knowledge. You don't need to know how to use excel. You don't need to know how to do accounting. You don't need to be rich. You don't need to hire a professional. It's as simple as this: Money inflow vs. Money outflow How much money do you have coming in each month? How much money do you have going out each month? Here is how you create a financial budget:  Step 1: List your fixed monthly inflows of cash. Do you have a job? Do you get paid every two weeks? Is it the same amount every two weeks? If so, this part is very easy. If your income varies, find your average monthly income. You know better than anyone how much money is going to enter your bank account this month. Do you get government benefits? Is it the same amount each month? Whatever the case, find this amount first. Step 2: Find your fixed expenses. Fixed expenses are consistent amounts you pay every single month. Examples: Rent/Mortgage, Car/Homeowner/Renter/Health/Life Insurances that are paid monthly, Phone bill, Internet/Cable bill, Car payment, Medications, Any monthly debt repayments, Electricity/Water/Other utilities (you should generally know what these are each month even though they may slightly vary depending on the season). Step 3: Find your variable expenses. Variable expenses are expenses that change each month. A lot of people spend a variable amount on groceries each month. You might have a rough range, but if it changes quite a bit depending on your mood or how often you get takeout, this is a variable expense. Other things are quarterly bill payments (some people pay certain insurances quarterly or yearly), discretionary spending (movie tickets, concert tickets, trips, starbucks, shopping at the mall, eating takeout, getting your hair or nails done, buying books ( )), gasoline, car maintenance (oil changes, rotating tires, etc.), and other non-regular expenses. Step 4: Find where you can save money. In case you haven't guessed it, it's VERY difficult to save money on fixed expenses. Sure, you can cut your cable TV if you want. You can lower your phone bill, maybe. But otherwise, those are just expenses that you're going to have each month regardless.Most people have no idea how much money they spend on variable expenses, especially those discretionary items. How often do you stop off for takeout instead of eating something at home? How often do you grab a coffee when you're out, or see some clothes or books on sale that you can't pass up? I don't know the answer to that, but you can look at your past statements and figure that out really quickly. A lot of people don't even realize that they've just spent $100 on groceries for the week and then ended up getting takeout 3 times for a total of $50 in a week while the groceries they bought are sitting at home going bad. Figure out where you can potentially cut costs. Step 5: Figure out how much discretionary income you really have in the first place. Take those cash inflows (your income) and subtract out all of the the fixed expenses. Now, take that remainder and subtract out all of the variable costs that are necessities. Yes, gasoline is a variable cost, but go ahead and find an average given your past gasoline expenditures and subtract that out. Same for quarterly insurances, common car maintenance bills, and groceries.Now look at your remainder. Step 6: Emergency funds. Yes, you need emergency funds. We all do. You never know when you're going to fall ill and be out of work, have to fix something more major than common maintenance on your car, or lose your job. The goal is to have 3x your monthly income in an emergency fund. That means if you make $2,000 a month, your goal is to have $6,000 in emergency savings. This will cover your basic needs in case of an emergency.If you can't do that right now, don't panic. That's what you're striving to reach. But, you have to know, that if you're nowhere near having an emergency fund, you sadly don't have anything left in your discretionary income. Basically, you don't have any "fun" money. That doesn't mean you can't do fun things, but you should really try to limit things like starbucks, takeout, and splurging on sales for items that aren't necessities. Step 7: Keep up with your budget. You've seen now how much money you have leftover at the end of the month. You've thought about your emergency funds. If you do have some money leftover, congratulations! Go see a movie or something to celebrate. If you don't have any money leftover, you can at least see how your income is allocated and which areas you can try to reduce costs in. Just keep in mind, as I said before, don't try to go ultra-cheap on things that are going to end up costing you more money in the long run. Update your budget as your income and expenses change. This is very similar to a diet in that you SHOULD NOT think of it as a diet. Think of it as a lifestyle change. You're fundamentally changing your behaviors, be it eating habits or spending habits. There is no end date to either. I've tortured you enough! Some of this stuff might seem common sense, but there's a difference between generally knowing something and actually doing it. Unfortunately, my field isn't in motivation. Knowing is half the battle. Don't be scared to roll up your sleeves and dig into your finances. Your financial situation remains the same whether you're informed of it or ignorant to it, so give yourself a leg up.  Money, get away Get a good job with good pay and you're okay Money, it's a gas Grab that cash with both hands and make a stash |
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