This month: Why do people stay in debt?, Financial milestones for your 60s, Climbing credit card interest will eat tax cuts and wage increases, Beware student loan repayment scams, Mobile banking replacing bank branches…
People are afraid of change. If you have always charged on credit cards, or had a car loan, then you may have become conditioned to believe that paying tons in interest is normal. People know what to expect and it feels comfortable.
Yes. People need to realize that no amount of stuff will make you happy and, at some point, too much stuff can actually cause both financial chaos and stress in your life. (The more stuff you have, the more stuff you have to take care of.)
We hear a lot about retirement planning when you?re young, but what should you be shooting for when you?re staring retirement in the face? These 6 financial targets may help give you some direction:
1. Have a fully loaded emergency fund
In the years leading up to retirement, having three to six months’ worth of living expenses in the bank will help you avoid debt later in life, and give you a measure of security as you look at letting go of that paycheck.
When you’re at the end of your working career, the last thing you need is for an unplanned bill to disrupt your financial plans.
2. Have 10 times your ending salary in a retirement account
While no one knows how long they will live there is no guarantee that you won?t run out of money. As a general rule, it’s smart to enter your full retirement with a minimum of 10 times your ending salary in an IRA or 401(k).
While Social Security will serve as a steady income source, it’ll only be enough to replace about 40% of the average worker’s pre-retirement earnings.
3. Pay off your mortgage
Once you stop working, you’ll be on a fixed income, so you’re better off not having a mortgage payment around to eat up a substantial chunk of it.
Unfortunately, an estimated 30% of seniors 65 and over continue to carry mortgage debt.
4. Eliminate credit card debt
If you have credit card debt, pay it off before making your retirement official. If you have credit card debt and a mortgage, pay off your credit card first.
Chances are, your credit card is charging at least double the interest rate you’re paying on your mortgage, which means the longer you carry a balance, the more money you stand to throw away.
5. Buy long-term care insurance
We don?t know what is going to happen to our bodies in the future. Medicare won’t cover long-term care. That’s why it pays to secure long-term care insurance during your 60s if you haven’t already. If you wait too long you can risk getting denied, or paying higher premiums.
While most Americans don?t believe they?ll need long term care, in reality, 70% of those turning age 65 can expect to use some form of long-term care during their lives. – AARP
6. Learn how Social Security works
It?s critical to understand how Social Security works so that you can plan a filing strategy ahead of time. The age you choose to file for Social Security could cause your payments change. You need to understand how and why.
Don?t ever file for Social Security before you?ve done your research.
70% of Americans carry a credit card balance from month to month.
The current average APR is 16.8%.
The average credit card balance is $5,700.
Credit card debt is growing at a rate of 4.7% while wages are growing at only 3%.
More families than ever have zero or negative wealth, excluding their homes.
Household net worth has decreased for all income groups since 2007 ? except the top 10%.
Net worth for the richest Americans is up 27%.
Net worth of the middle class has decreased 20-30%.
The wealthiest 10% now own about 75% of the nation?s total household wealth – up from less than 35% in the 1970s.
The nation?s richest 0.1% now own as much wealth as the bottom 90% .
For the bottom 90% – the ability to build wealth depends on the ability to save (which is impossible when interest rates are rising and eating into their earnings.)
The personal savings rate, at only 2.8 %, is heading in the wrong direction.
The Future Prediction
Ok, keeping the above statistics in mind, consider this – The Fed?s prediction is that the federal interest rate is on target to reach 3.4 percent by the end of 2020 from the current 1.9 percent. This means you?ll be paying more to get a mortgage, a new-car loan, or to carry a balance on your credit card. How much more? Possibly enough to absorb whatever extra income you might be enjoying from lower tax rates or higher wages.
Those who benefited the least from the recent tax cut ? wage workers, farmers and anyone else not in the top 10% of earners ? will have to pay the most ?in interest to mitigate the damage that the tax cuts caused to the economy. This could result in hundreds of dollars in additional interest every year per household for those carrying credit card debt.
Raising rates now, perversely, gives the Fed a monetary tool with which they would be able to fight the next recession ? by cutting those rates.
Massive student loan debt can make you feel desperate. But don’t get scammed. The Federal Trade Commission and Better Business Bureau are warning consumers about an increase in student loan repayment scams.
The FTC recently reached two multimillion dollar settlements with a shady student debt relief company and a law firm that preyed on desperate consumers with student loan debt. They both falsely promised to lower payments through alleged enrollment in student loan forgiveness or other programs – for a fee. They also lied about being able to improve credit scores – for a fee. Some scammers might also claim that they can save you money by consolidating your loans for you – for a fee.
Here?s the thing: ?
If you are eligible for loan deferments, forbearance, repayment forgiveness or loan discharges, you can do it yourself without a fee. Same with loan consolidation. ?
The FTC and BBB offer some tips to give these scammers a miss:
Go to bbb.org to check out companies before working with them. ?If you have been a victim of a scam, report it at bbb.org/ScamTracker
Go to the FTC page to check out student loan debt relief scams on record as well as tips to avoid them.
Never pay a fee upfront for help
Never share sensitive information, such as your FSA ID.
Scammers often have official-looking names and claim they have special access to certain repayment plans. They don?t.
Scammers will rush you saying you could miss qualifying for repayment plans, loan consolidation, or loan forgiveness programs if you don?t sign up right away. You won?t.
Legitimate repayment programs such as loan deferments, forbearance, repayment and forgiveness or loan discharges are FREE to access through U.S. Department of Education or your loan servicer at no cost.
The rapid adoption of mobile banking has allowed big banks to shrink the number of expensive branches they operate. Traditional banks are being forced to innovate due to?competitive pressure from Silicon Valley as tech pushes into finance.?Amazon (AMZN), Apple (AAPL) and Facebook (FB) are all moving into financial technology.
Big banks are even working together on mobile payment systems. Bank of America teamed up with Wells Fargo (CBEAX), JPMorgan Chase, and other big banks to build Zelle, a digital payment service that rivals PayPal(PYPL) and Venmo. More than $25 billion moved through Zelle during the first quarter of 2018.
Big banks have sunk hundreds of millions of dollars into new technology aimed at luring customers online.?Bank of America?(BAC)?stated that deposits made on mobile devices are outpacing those made at branches for the first time. Some day branches may be a thing of the past.
Carbon offsetting, is a type of sustainability solution that encourages individuals and corporations to reduce their ?carbon footprint? by investing proportionally in other environmental conservation projects of some nature elswhere. These projects could be anything from planting trees, investing in environmental projects and green technology, or buying renewable energy contracts from solar and wind farms. This means that companies can pollute, and then make up for it by doing ?good? elsewhere.
For example, Google recently announced that it is now 100% ?carbon neutral,? which means that it has allegedly purchased enough solar and wind contracts to balance the amount of carbon it spews into the environment. While Google has stated that its goal is to ?get to a point where renewables and other carbon-free energy sources actually power (its) operations every hour of every day,? in the meantime Google is purchasing renewable energy outside of the region where it actually spews carbon.
We are exporting our environmental responsibilities. How is this sustainable?
The world has entered a new era of ?conscious capitalism? where it has become fashionable to acknowledge profit?s negative externalities. But tackling urgent, irreversible climate change ? means reckoning with the difficult truth that we need structural shifts in the way we consume and produce.
In an effort to address these concerns, the 2nd Green and Sustainable Chemistry Conference was held in Berlin last year. The conference gave industry leaders from companies such as The Dow Chemical Company, DuPont, Merck and Covestro a chance to debate what counts as ?green? and ?sustainable? for their organizations. The conference resulted in five key areas the panelists agreed were critical to inspiring a more sustainable chemical industry.
Green chemistry needs to anticipate the problems it aims to solve. Aligning industry efforts with the UN Sustainable Development Goals cannot be done without looking at chemistry?s role.
Green chemistry should not aim to justify negative perceptions of other elements of chemistry. Rather, it should focus on how to build upon the innovation of the chemicals industry and position itself as the next progressive step.
Break down the green chemistry silo. Sustainability needs to address how users experience products, and how they can recycle and dispose of them.
Involve the circular economy into the product life cycle. Chemical innovation is a cross-disciplinary effort; working collaboratively to create sustainable products provides an opportunity to promote the positives of green chemistry.
Inform the public and demonstrate the value of safe, sustainable chemistry. Ensure that the public understands why a product is more sustainable than conventional alternatives, and what this means practically for the consumer, the environment and the industry.
The World Bank estimates that between 2011 and 2014, the number of unbanked adults dropped by 20 percent to 2 billion. Why? Innovations in technology? particularly mobile money, which is helping to rapidly expand access to financial services in Sub-Saharan Africa.
A study by MIT estimates that in Kenya, access to mobile-money services increased daily per capita consumption levels by 2 percent, lifting people out of extreme poverty. By 2015, more than 270 mobile-money services were operating in 93 countries, with an estimated 411 million accounts.
Bitpesa is taking it a step further by offering cross border payments between Africa and the rest of the world. BitPesa is a digital foreign exchange and payment platform that leverages blockchain settlement to reduce the cost and increase the speed of business payments to and from frontier markets.
Bitpesa is the first company to create a market between an African currency and Bitcoin, the first company to create a market between mobile money and Bitcoin, and the first female founded crypto exchange in the world.
Companies with user data carry inherent ESG risks. For Facebook, data privacy is the major governance risk it carries.Since the Cambridge Analytica story first broke, Facebook stock fell 16% through April 5th. Funds which incorporated Facebook stock were hit hard by its data controversy.?
Loosely governed private data, the root cause of Facebook?s current trouble, is among the major environmental, social, and governance (ESG) risks for 2018 highlighted in a recent report from Sustainalytics, Morningstar’s ESG-research partner.
As a result, some investment funds now are lumping Facebook in with big polluters and other corporations they consider ethically challenged. BetaShares Global Sustainability Leaders ETF, the largest ethical ETF traded in Australia, removed Facebook from its fund.
Nordea Bank, the biggest bank in the Nordic region also blacklisted the Facebook stock, no longer allowing its sustainable investment unit to buy any more stock in Facebook due it?s privacy risks. As a group, such risks are referred to as governance risks, representing the ?G? in ESG. Today, governance is increasingly a core aspect of many portfolio managers? investing processes.
As a provider of a true-to-label ethical ETF, we have been careful to ensure there is diligent and ongoing monitoring of the constituents of the fund, to ensure the ETF continues to meet its objectives and those of its investors. – ?Alex Vynokur BetaShares CEO
Though Facebook has already announced some new policies, Zuckerberg?s response has run along the lines of ?we?re fixing it, but this will take years.? ?But when FastCoDesign challenged San Francisco design firm NewDealDesign to design a more transparent and honest Facebook, its designers fixed some of the social network?s biggest problems in less than a week. Here is an overview of what they came up with.
Force all app developers into agreements that promise they don?t save your data on their own servers.
When you?re logging into an app through Facebook for the first time, show a more specific breakdown of what the app sees, and exactly how the app plans to use your data.
Users should have the option to use any app and choose to share nothing at all with a third-party company. It would simply verify that you are who you say you are through Facebook.
Facebook should put simple reminders about which apps are accessing your information into your feed on a regular basis.
When you type in Messenger, a pop-up should come up every now and again explaining that this supposedly private discussion is actually being recorded. It should do the same thing for text and photo posts in your feed.
Facebook and other services should be constantly explaining what they do to the user, not having them sign a one-time contract and burying the information in deep settings and legal agreements.
Finally, maybe we wouldn?t care so much if Facebook was both more transparent about how our data was being monetized, and if it cut the user in on the deal. Facebook is now making roughly $20 per U.S. user, per quarter.
If Facebook can?t win back the public?s affection, perhaps it can buy it instead. Cut us in!
This week’s conscious capitalism in the news: Impact investing -?What is it? Can anybody do it? Greenwashing -?What is it? Who’s doing it? How can you spot it??A tsunami of women impact investors on the horizon, The Gap Inc. steps up its sustainable water game, and more…
Traditionally, we pay our bills, make our investments, and perhaps, if we have something left over, write a check or two to our favorite charity. Impact investing takes care of the last two in this list. Combining philanthropy and investing gives us the opportunity to both vote with our dollars and generate a return.
What is impact investing?
Impact investments are investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return. – GIIN
Impact investing opportunities generally involve organizations that have a stated mission or purpose. This could be anything from creating affordable housing domestically, providing clean water to those without it in developing countries, or reducing the pollution in our oceans.
Do I have to be an accredited investor to participate?
No. Anyone can do it. There are several ways everyday folks who are not accredited investors can take advantage of generating returns (both monetarily and materially) and making an impact in an area they care about.
Mutual funds, ETFs, and Separately Managed Accounts
There are increasingly more and more mutual funds that promote environmental and social causes. More recently, financial technology has made investing in green or socially responsible mutual funds available to everyone without the need for a broker. Companies like Swell offer investment opportunities for as low as $50.
Community Supported Agriculture (CSA) initiatives are steadily increasing across the country. Put simply, an investor subscribes to a particular community farming organization, or harvest, and receives, as a return, food directly from them. This paradigm cuts out the middlemen and gives investors access to fresh, healthy food. (Look into any CSA initiatives in your area.)
Microfinancing provides small loans towards projects that have a social return. It could be providing microentrepreneurs at the base of the economic pyramid with small business loans. It could be providing funding for a new school in a small developing corner of the world. There are a myriad of opportunities out there. Google away. Microfinancing institutions connect the investor to the project so that you can invest in a space that you both believe in and believe has the potential for financial success.?
Buying shares in green tech supports a needed move away from fossil fuels in a competitive and booming industry. These opportunities can range from solar, wind, geothermal, and hydro to efficient building materials, energy storage and more. This space is growing rapidly and offers a variety of options.
We have the tremendous opportunity to not just keep pace with the traditional capital markets, but to reinvent them entirely. The decisions we make today have the potential to shift attitudes, transform systems, and build the sustainable economy of the future. – GIIN 2017 Annual Impact Investor Survey
The buzz in the investment world about women investors is that because women are generally more likely to search for products and companies with connections to what is important to them, they are also more likely to engage with investments where issues of social responsibility and the environment are prioritized.
It is said that women investors generally tend to take a more holistic approach to investing as they are more interested in investments that support their values in tandem with financial returns.
A study?of women aged 25 to 70 with household income over $75,000?by Calvert Investments?reflected that 95% of ranked “helping others,” and 90% ranked “environmental responsibility,” as important.
Currently, women control 51% of the personal wealth in the United States. That $14 trillion is expected to rise to $22 trillion by 2020.
Meanwhile, Impact investing has grown into a multi-billion dollar market. The Global Impact Investing Network (GIIN) anticipates that impact investing market will continue to expand to $500 billion by 2020.
An increasing number of companies are working towards attracting women investors who are committed to seeing social and environmental returns along with their financial returns. And they are using social media and influencer marketing to do it.
The coupling of a new breed of investor with a new breed of investment vehicle, both of which prioritize environmental, social and governmental concerns, is a potential tsunami push for creating social and environmental change within the markets. If the financial experts making these predictions are correct, we should see some exciting stuff happening soon.
The Roadmap details six categories of action to drive progress:
Strengthen the identity of impact investing by establishing clear principles and standards for practice;
Change the paradigm that governs investment behavior and expectations about the responsibility of finance in society via asset owner leadership and updated finance theory;
Design tools and services that support the incorporation of impact into the routine analysis, allocation, and deal-making activities of investors;
Develop products suited to the needs and preferences of the full spectrum of investors, from retail to institutional and of various types of investees;
Increase the supply of trained investment professionals and the pipeline of investment-ready enterprises through targeted professional education;
Introduce policies and regulation that both remove barriers and incentivize impact investing.
The Roadmap also discusses broader trends that will affect investing overall such as automation, fintech, blockchain, big data, crowdfunding, and wealth transfers to women and younger generations. While the report acknowledges the distance that impact investing has come over the last decade, it does not shy away from the challenges facing our world today.
Notwithstanding the progress to celebrate in the impact investing industry, the needs to address continue to loom large. Exploding inequality is kindling great political turbulence in many parts of the world, even as close to a billion people live in poverty .- Roadmap for The Future of Impact Investing, GIIN.
Since 2014, Gap Inc. projects have saved more than 2.4 billion liters of water. Recently, Gap Inc. has announced a new goal of saving 10 billion liters of water by the end of 2020 – ?the equivalent of the daily drinking water needs of 5 billion people – by committing to continue both product innovation and efficiency improvements at fabric mills and laundries.
In addition, Gap Inc. is taking action globally to reduce its environmental footprint in its retail operations and across its supply chain. It has committed to a 50% reduction of greenhouse gas emissions in its owned and operated facilities globally, and to divert 80 percent of its waste in the U.S. from landfills by the end of 2020.
We believe that access to clean and safe drinking water is a fundamental human right, so we strive to ensure that the process of making our clothes is safe for people and communities. It?s not only the right thing for people and the planet, it?s also crucial for our business growth. – David Hayer, Senior Vice President of Global Sustainability and President of Gap Foundation at Gap Inc.
Environmental, social and governance (ESG) indices are sometimes overgeneralized in the media as a mere trend from the conscious capitalism movement?when in reality, they are a superior form of risk management.
Projects such as mining, fossil fuel extraction, chemical plants, pipelines, and factories carry intensive risk that can not only affect the environment, employees and surrounding inhabitants, but also investors. One need not look any further than the BP Horizon incident which destroyed shareholder wealth by 55% and resulted in billions in fines.
Banking and insurance industries are particularly interested in being able to access information on infrastructure projects. And corporations themselves are increasingly interested in monitoring and evaluating their own ESG risks in their supply chain.
RepRisk is a global business intelligence provider for due diligence on ESG and responsible business conduct risks. Using AI and human analysis, Reprisk focuses on companies and projects exposed to ESG risk. Reprisk has now included new data on over 25,000 projects in addition to over 100,000 private and public companies. Data is key in evaluating ESG risk for all stakeholders.
Business conduct risks related to human rights, labor, the environment, and corruption can now translate into reputational, compliance, and financial risks for a company. – RepRisk
BP rebranded from British Petroleum to Beyond Petroleum, but it is still predominantly an oil and gas company. Now the Norwegian company Statoil is proposing to change its name to “Equinor.” The rebranding will cost? $32 million. Why are oil companies doing this?
Some oil companies have been attempting to distinguish themselves as ?energy companies? rather than ?oil companies? under increasing public scrutiny. In short, while the companies themselves change very little, they hope that the public perception of them will change. This is called greenwashing.
Statoil, stated that it intends to ?build a material industrial position within profitable renewable energy, and expects to invest 15-20% of total capex (capital expenditure) in new energy solutions by 2030.? So, what they are really saying is that in 12 years they plan to have a capital expenditure that is at least 80% fossil fuels.
Last October, San Francisco Bay Gourmet Coffee (owned by Costco and JBR Inc.) unveiled it?s compostable? Keurig-compatible ?No Waste OneCup.? At the time, the company labeled the ?OneCup? coffee pods as a ?No Plastic Cup,? but the ring, mesh, and part of the lid were all made of plant-based plastic.
California has a complete ban on biodegradability claims tied to any products containing plastic. A lawsuit was filed against Costco by 25 California district attorneys? offices.
In addition to paying the $500,000 in civil penalties and costs, Costco and JBR Inc. can no longer sell plastic coffee pods advertised as ?biodegradable? in California. In addition, they must obtain specific scientific certification in order to sell any pods advertising the ?compostable? label.
California consumers trying to help reduce the problem of plastic waste in landfills are often misled to believe that plastic products labeled as ?biodegradable? will break down in municipal trash. – ?Alameda County District Attorney Nancy O?Malley
Greenwashing occurs when a company spends money to try and appear ?green? via advertising and marketing without implementing business practices that avoid or minimize destructive environmental and/or social impacts. “Eco-friendly” is all the rage today, so companies may market as ?eco-friendly? whether they are or not. This leaves it up to the consumer to determine whether companies are living up to their claims.
A Canadian-based environmental marketing agency has developed a seven-part test to evaluate green claims. TerreChoice?s ?Seven Sins? of greenwashing can give you an idea what to look out for:
The Hidden Trade-off: ?A product that claims to be ?green? in one aspect, but isn?t in another. For example, paper from a sustainable forest that was processed using chlorine.
No Proof: ?An environmental claim that cannot be substantiated by easily accessible supporting information, or by reliable third-party certification. For example, tissue that claims a certain percentage of post-consumable recycled content without any evidence.
Vagueness: A claim that is so poorly defined or broad that its real meaning is likely to be misunderstood. For example, the phrase ?all-natural.? Arsenic is naturally occurring, too.
Worshiping False Labels: A product that uses words or images to give the impression of a third-party endorsement where no such endorsement exists. For example, a green leaf on a detergent bottle that is not a reputable certification, but merely an icon. Make sure certifications actually mean something. Green Seal, Energy Star, EcoLogo, USDA Organic and FSC (Forest Stewardship Council) are reputable labels.
Irrelevance: An environmental claim that may be truthful but irrelevant. For example, ?CFC-free? is a frequent claim despite the fact that CFCs are banned by law.
Lesser of Two Evils: ??Organic cigarettes,? or ?fuel-efficient? SUV.
Fibbing: Environmental claims that are simply false. For example, products claiming to be Energy Star certified that aren?t.
The trend toward ‘eco-friendly’ or ?green? products is a good one. Unfortunately, not all companies will color?within the lines. Take a closer look at the claims companies are making and decide for yourself whether or not you buy them.?
I?m sure there are more people out there like me, people who woke up one day and realized that they were fucked. Over 50, broke and in debt, I’d been living month to month for years.?When I read about how to invest for retirement and see those little graphs that show how much you would have saved if you’d started socking money away years ago, I feel completely defeated.?
I?m going financially backward, and I?m getting older.
Trying to stretch each paycheck to cover childcare, your kid?s needs, the bills – you really don?t think about what you will be up against when you?re older.?I used to have a three-month whiteboard on my kitchen wall. I would faithfully update it with my son?s soccer, football and Taekwondo practices. Fees. Where he was going after school when I was at work. More fees.?I remember having to start saving in February to pay for his summer camps, aka ?childcare,? because adults don?t get summers off from work. (Why are we and our kids on different time schedules anyway?)
Then they go to college.?I tried to get him through without a student loan. I failed. That last year I cosigned a loan. It?s a huge burden for him now as he applies to law school. We chat online about how large of a loan he would need for the schools he’s interested in. We discuss how to come up with all of the application fees without him incurring more debt.?I wish I could help him, but I’m tapped out, broke and in debt.?
Save for retirement?
When you become vividly aware of your financial vulnerability, it?s like waking up to a bad dream. ?Wtf were you thinking? That you would never be old???We all truly have but two choices: get old or die.?I certainly didn?t imagine that I would be dead, so how did I fail to imagine that I would still be alive, only older … broke and in debt?
The fear. The overwhelm. You want to run away from it. To do the exact opposite of what you need to do. I froze for a long time. Deer in headlights. I had no idea where to begin. At first, it took me a while to fully accept where I was. Then it took me even longer to learn to let go of how I got there.?And when I finally started researching, I found out that I wasn?t alone.
The hardest part isn?t starting, it?s getting out of your own way so that you can.
Money is loaded with emotional baggage. Fear, regret, greed, angst, sensuality, illusion. Behavioral economists have been studying this for years. Apparently, when you are experiencing scarcity of any form – time, money, love – it can affect you cognitively to the extent that you can make poor decisions, decisions that increase scarcity. Scarcity mindset. It decreases your ability to plan while increasing your impulsiveness.
I have friends whose debt is greater than half their home?s value. When they get a windfall, they buy season passes to something. Or a new toy. In that same breath, they might mention how they wished they hadn?t taken that 2nd or 3rd mortgage. ?The things we could have done with that money!? These are good people, smart people! It became apparent to me that when you are used to living month-to-month, you are used to spending all of your money every month.?And this got me asking some deep questions about my relationship with money.
What is money anyway?
Digits in a ledger, with the power to dictate how we spend our waking hours. So, really important digits in a ledger. But the financial world can be intimidating. Take compound interest, for example. That thing that will definitely bleed us out if we?re broke and in debt, or could possibly multiply our money if we?re invested. While the theory itself may be simple to understand, the actual calculation is a far cry from balancing a checkbook.
The more you learn about money, the more you wake up to how crazy debt is.?Yet it’s up to me, and only me, to rid myself of any ignorance of something that has such immense control over my life, how I spend my time, where I can go, and what I can do.?I know I have baggage around money. But at this stage in the game, I also know that I don?t have time to uber-analyze why.?Because the other thing that goes with saving money is time. You need them both.?And I?m running out of time.
So, I decided it was time to learn how to crawl out of this mess. And to do this, I had to first stop freaking out about it. My odds of facing this challenge with a self-deprecating mindset were low. I tried to treat myself with compassion and forgive myself.?I had to start, somewhere.?And when you’ve been using your credit cards as a source of income, looking at your?credit card statements isn’t fun. It brings up?a flood of negative feelings. I tried my best to do it with the cold eye of a surgeon?s scalpel. Void of emotion.
I approached it like a puzzle. Like a game. Something separate from me.
First I looked for any recurring payments that I might have set up and forgotten about. Book club websites, Skype, Amazon Prime, Netflix, memberships… I canceled them all. It felt cleansing. Did I notice? At first, a little bit. Then?I stopped using credit cards completely. This took a huge change in mindset. I?d always looked at credit cards as that go-to?when something came up.
No longer could I visit my family on holidays. You search for hours to get a good price on a ticket and end up paying in interest what it would have cost you to fly first class. No longer could I buy that new thing because it was on sale.??I had to charge it but it was 20% off!? Five years later, you?ve paid double for the thing that you’d already gotten rid of two years prior. Crazy!
How I Hacked Peace Of Mind
The first rift between my emotions and money occurred when I began to see that money had nothing to do with spending. Spending was something I did. Money is just a tool. And I had some problems that only that tool could fix. If I truly wanted to get out of debt forever, I had to create a platform where going back into debt at the slightest mishap or desire was off the table.?I had zero savings. Everything always went somewhere. Why couldn?t I just leave it alone? Just let it sit there and ignore it?
I started to ignore the money in my account in the same way I had been ignoring my debt. I pretended that it just wasn?t there, and continued living as if I just didn?t have any to spend.?So far I?ve saved a couple months’ worth of monthly expenses. Ten years ago that much money would be vacation fodder. Today, I want to be alright with myself more than I want a couple weeks of hotels and airplanes and souvenirs. A vacation would be lovely but it would also set me back in time.?And I?m terrified that I won?t have enough time.?Who is going to take care of me if I get sick? The government? Ha!
My biggest fear is that I will die broke and alone in some shit apartment, and no one will know until they smell the body.
Just recently, I?ve begun to learn a bit about how to make money grow. Not by reading expensive and complicated financial books or hiring a financial advisor, but by actually doing it on a tiny scale. Nothing I can?t afford to lose. Like 25-100 bucks a month. I?ve lost nothing yet. I?m diversified?(don?t put all your eggs in one basket).?Microbalances. (Tiny amounts.)?You can see what it?s doing and learn without hurting yourself.?I started picking up part-time gigs. I stopped buying coffee and other little crap throughout the day. I bought a cheap unlocked smartphone and a budget sim to get out from underneath my ridiculous cell phone contract.
The internet can open doors for you if you use it.
The internet gives us access to free financial information. I started reading Investopedia, watching Youtube videos, investment for beginners blogs, anything. I discovered that I didn?t need some professional financial person to introduce me to the world of finance and investing, and I also learned that you don’t have to be rich to invest.
Today there are services for people just like me to learn about investing by doing it on a small scale. I started learning about?roboadvisors, fintech sites, cryptocurrency.?And then another weird thing happened. I actually became interested. The financial world was no longer a necessary evil, it was fun. Bit by bit the little pieces of financial jargon were no longer as mysterious as Chinese characters. They began to have some context.
It’s easier to play the game when you are interested in it.
As I became aware of my feelings around money, angst, excitement, stress, fear, greed, desire, depression, sensuality, I tried to be mindful of them and acknowledge them without getting involved. I also began to challenge my thoughts, to get used to the discomfort of these emotions, and just sort of check them out rather than let them dictate my behavior.
I’ll be honest, it isn?t very pleasant at first. Perhaps this is why so many people pay high fees for brokers to make decisions for them so that they don?t have to get involved. But it?s getting easier. I?m learning. And the more I learn, the more I realize that I’m not alone in the struggle to extricate emotions from money issues.
I found out that even Wall Street and emotions are not mutually exclusive. I laughed out loud when I discovered that you can check the emotions of today?s market on CCN?s Fear and Greed index.? Nobel?Prize Winner Robert Shiller, professor of economics at Yale, talks about the relationships of the stock market and human emotions. He says that bubbles and crashes involve the human psyche on a mass scale. And it all makes sense. We can separate nothing from our humanness.
Money is a human creation.
Flipping The Script
We needn’t be?ashamed to discover that our emotions around money may have been causing us to make long-term financial mistakes. Many of us inherited weird stuff from our parents and culture around money.
We shouldn’t be afraid of not knowing enough about the financial world to start learning. Many of us have zero financial education. I remember having a one-off class on balancing a checkbook in Middle School. That?s about it.
Couple this lack of financial education with the aggressive marketing and consumerism we have been subject to from impressionable ages thereon, and you have an interesting mix of bullshit running malware through your head when it comes to managing money. My senior year in college I received countless pre-approved credit card offers after starving to death to work my way through school for years as a single mom. It was like a feast. My new consumer debt slipped right in next to my student loan. I was a good little American.
We are programmed to comply on a daily basis. A new phone. A new car. New, new, new. We need the latest iteration of everything. We have a twisted and erroneous idea of a success. It is empty. Short-lived.
We are leveraging our future for the appearance of success.
We get into debt, get out of debt, get into debt, get out of debt.The cycle is insane. And a lot of us have been doing it for a long time.
I?m intent on shattering this financial pathology.?A few more months of saving and I will be able to attack those credit card balances so I can stop the bleeding once and for all. I imagine the joy I will feel when they are gone. I know it won?t be easy. And I now know it’s going to take some time. But I can use that time to learn about how to grow the money I will get to keep after I?ve finished. And I can use that time to heal from the twisted mentality that has kept me swimming in this financial toilet bowl for years.?
I?m over 50. I’m broke and in debt. I?m at Ground Zero.
So fucking what.?It?s a mathematical puzzle game. And I?m going to learn how to play it.
The stories in Life are real. Sometimes the names are changed at the author’s request.
Send us your story if you’ve been duped, on the road to financial recovery, conquered your finances, or want to give feedback. firstname.lastname@example.org