Last year’s finances were rough? No problem. Here’s how to make smart money moves. Read More...

The end of 2017 found many Americans scratching their heads in confusion. A massive tax cut bill was passed at the end of December, and let’s be honest, the whole year was basically crazy.

While it will probably take awhile for you to figure out what the tax bill means for you personally, there are a number of smart financial moves that you can put into place as you work through your next year’s financial goals.

Do a financial audit.

One of the most important financial actions that I take at the end of each year (and the beginning of the new one) is taking the time to do a financial audit. Let’s be clear, a financial audit is not an opportunity to rag on yourself for making financial mistakes. It’s an opportunity to look at what did and did not financially work for you in the previous year.

Financial audits are relatively easy to do but can be a little time consuming if you haven’t been using systems to help you look proactively at your finances throughout the year. I’m currently in the middle of doing my audit for 2017 and one of the expenses that I will be cutting back on is going out for coffee. I love going out for coffee and I typically only order the smallest sized coffee on the menu…and sometimes a little treat.

But, I’ve spent some time really looking at the math and those inexpensive visits added up to the equivalent of paying off a credit card. I average $5 per visit and typically go to the coffee shop five or six times every week. Six visits to the coffee shop equal $30 per week. Multiply that by four and that equals $120 per month or $1,440 spent in coffee shops during a year. That’s a trip to Colombia!

Where’s Your money going?

Besides looking at mindless spending habits, spend some time looking at your expenses. Be candid with yourself about what does or does not serve you well financially. Review the following:

  • Phone service. Is it too expensive? Do you have an opportunity to get the same or similar service for less?
  • Insurance policies. My car insurance policy has just come up for renewal. In my opinion,  it’s way too expensive, so I’m looking to change my car insurance and have begun researching different policies so that I can make the switch.
  • Groceries. This one is hard because you have to eat. Think about your grocery shopping habits. Ask yourself the following: do I go to the store too often? Do I experience a lot of food waste? Am I using my pantry staples and rotating them out? Do I take advantage of savings apps like Ibotta when I go grocery shopping?
  • Subscriptions. Spend time checking all of the services that you’re subscribed to and get rid of the subscriptions you’re not using. Don’t forget to check your apps! You may need to go to the Google store to unsubscribe or change certain app subscriptions.

When working through your financial audit, spend some time thinking about what is important to you financially and what you would like to have happen during the year with your money.

Be honest.

If you love getting mani/pedis, getting your beard trimmed by a barber (for the gents) or going skiing, be honest about that with yourself. As you work on your 2018 finances you may find yourself resistant to making certain financial changes because it feels like you won’t be able to do what you enjoy.

As you work on your 2018 budget, add line items for those activities or services that you enjoy and figure out what you’re willing to spend in a year on those items. Because you’ve worked through your financial audit before this step, you may find yourself lowering or increasing the amount that you’re willing to spend on different parts of your life.

I love going out for coffee and it’s an important part of my social life, but it’s not worth spending $1440 a year. I also love getting manicures and pedicures. But, I only did that once last year in Dallas as a treat. I would prefer to have these every other month if possible, so I’m looking at the cost for manicures in particular because I’m able to do a pretty decent pedicure.

Being honest about what you enjoy in your life will help you avoid overspending because you’ve already practiced honesty in your budget.

Make it mindless.

Sign up for a free money management platform such as Wize-Fi or Personal Capital to help you track your expenses. These platforms help alert users to different trends in their spending habits and, in some cases, may alert users to the amount of fees or interest that they are paying for different loans, credit cards, or services that they’re using.

If you struggle with saving money, set up automatic savings withdrawals. You may work with your human resource department to save more money in your 401k or automatically send money to a hard-to-get savings account.

Set up as many systems as possible to make achieving your financial goals as easy as possible.

Talk to a tax professional.

Given the changes to the tax code that were signed into law at the end of December, it may a good idea to speak with a well-vetted tax professional about what you should expect in regards to your tax situation in the upcoming years.

Set audacious financial goals.

But, before you do, read Overcoming Underearning by Barbara Stanny. Then, set some bad-ass financial goals for the upcoming year that are attainable, but a little scary. Then, as Barbara Stanny encourages her readers to do, take small consistent actions daily to help work you towards achieving the financial goals that you’ve set for 2018.

Good luck taking charge of your finances in 2018!

What are your financial plans for this year? Any specific tool that is helpful? Let us know in the AdultingHALP Facebook community.

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Every adult needs investments. It doesn’t have to be complicated, though. Invest today so you can live your best life tomorrow. Read More...

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You should start investing, like, yesterday. Any hesitation means you’re losing out on potential growth. You may have debt, you may be struggling to put food on the table, but what’s going to save you is going to be investing. Even if it’s just a little.

Do you even 401(k)?

If you’re lucky enough to have a job, and you’re even luckier to have a job that offers a 401(k) plan, you should take advantage of it. They’re not perfect, and some are better than others, but often your company offers you free money to take advantage of it.

This is part of your compensation, so you should do it. If you don’t, it’s like telling your boss to keep part of your paycheck because you don’t need it. So just get started with the 401(k) and worry about what to do with it later. We can help you with that, too, so check for the links below.

WealthSimple

If you don’t have a 401(k) plan, take matters into your own hands and open an IRA. WealthSimple is my favorite option because you don’t need to save up hundreds or thousands of dollars before you start. You can start right now with even $5. Or $100. Or $20. Whatever you might be able to spare — and really try to make it work.

Because the amount doesn’t matter, especially at first. It’s just about getting in the habit.

So open an account at WealthSimple today. There are no fees while your account is less than $5,000, and as you refer friends, you’ll eliminate fees as your account grows.

As you set up your account, all you need to do is choose the investing style that fits you, and WealthSimple worries about how your money is invested. It’s a good hands-off way to invest, so you can know that your money is invested the way you want. You can take your time to learn more about index funds and choosing investments on your own, and when you’re ready, move to a different platform. But you shouldn’t hold off until you know everything about investing. The most important factor is starting early, so that’s where WealthSimple comes into play.

Get handsy with Vanguard

If you prefer a more hands-on approach, Vanguard is the next best option. You do have to save up before starting with Vanguard, though. They have account minimums, and that might make it difficult for a lot of people. So start with WealthSimple, and once your account hits $5,000 (won’t that be a nice day?), move your account to Vanguard. I like Vanguard’s “Total Stock Market Index Fund.”

Whether you invest at WealthSimple or Vanguard, you should choose a Traditional IRA if you don’t have a 401(k) or a Roth IRA if you do. That’s going to allow your money to grow without any kind of tax consequences until you retire.

The key is to just invest your money and leave it alone for 10, 20, or 30 years — or more. That’s the first type of investing you want to tackle.

So let’s say you’re a little more financially secure and you’re ready for taking some more advanced investing steps. You are contributing to your 401(k), you have an IRA, so you’re saving for retirement, but you want investments that will help you grow your net worth without having to wait for retirement. Well, now let’s look at what you should do about that, but only if you can answer yes to these questions.

  • Are you taking full advantage of your 401(k) benefits? That means investing at least as much to get the full matching contribution if your job offers it.
  • Are you maximizing your IRA? The government says most people are allowed to contribute up to $5,500 each year.
  • Do you have a sufficient emergency fund or plan? What happens if you lose your job and can’t find a new one right away? Do you have savings that will cover your living expenses?
  • Is your debt under control? You’re making progress with paying off your debt if you have any. With student loans, you’re paying at least the maximum each month, and with credit cards, you’re paying them in full every month or aggressively paying down old debt.

If you qualify, you are free to invest some of your extra money every month. It’s better than spending it, anyway. Vanguard is another good choice. But don’t fall into the trap of picking stocks or trying to predict what the “market” is going to do. You can’t beat the market, not consistently. So even for regular, non-retirement accounts, the best choice is the something like Vanguard’s Total Stock Market Index Fund, and the best place to get that is directly from Vanguard.

Don’t go to your local bank and ask about investments. They will sell you something you don’t need.

So don’t wait. Get started right now with WealthSimple or Vanguard.

Bonus alert! WealthSimple is offering $100 in bonuses to the first 100 new accounts from Adulting.tv readers and listeners! That’s $10,000 in bonuses in total just for our audience! You’ll receive $50 when you open the account and another $50 if you invest $100,000! Now, that’s a lot to invest. But we know that some in our audience might qualify. Regardless, get your $50 right away by opening an account at WealthSimple!

More Best Investing Accounts

If you’re not satisfied with WealthSimple or Vanguard, here are some more suggestions based on our experience at Adulting.tv.

  • Betterment. Betterment is another managed account like WealthSimple. It was one of the first automated managed investment accounts, and very popular with young investors who don’t want to choose their own funds, stocks, or bonds.
  • Fidelity. Like Vanguard, Fidelity is a discount brokerage that offers its own index funds as well as stock trading.
  • Ally Invest. Recently merged with TradeKing, Ally Invest is a discount brokerage that lets you choose your investments.
  • Capital One Investing. ShareBuilder is now Capital One Investing. They have low-cost trades, so this is a great option for dabbling with the occasional stock investing (but don’t go crazy making trades!).

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Choosing a health plan sucks. But it has to be done. Here’s how to do it with as little pain as possible. Read More...

Once in a while, we present Adulting.tv LIVE! Subscribe on YouTube to hear about future events, and share your questions about or suggestions for our next discussions!

Show Notes

Are you trying to figure out a health plan? During open enrollment, it can be difficult to decide what to pick. After all, there can be a lot of choices. You want to make sure you get the right one for you.

Today we’re joined by Jennifer Jackson from ADLT 101. She talks about the first time she tried to find a health plan. We’ll talk about how to make the most of your company options, and what to watch for the next time the government exchanges are open.

Health insurance is one of those things you need as an adult, whether you think you’ll get sick or not.

Find Jennifer on Twitter and Facebook.

You can always ask us questions in the #Adulting community on Facebook as well.

Watch the video above or listen to the audio podcast below.

Hosted byHarlan L. Landes and Miranda Marquit
Produced byadulting.tv
Edited and mixed bySteve Stewart
Music bybensound.com

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Your savings account is a freeloader. Put your money to work by investing now. Read More...

When I want something in another room, I send my son to get it. It’s what kids are for. The best way to get work done is to get someone else to do it for you.

That’s the principle behind investing. When you invest, your money does the heavy lifting. With $25 and a willingness to automatically transfer money into your first investment account each month, you can enjoy the benefits of letting your money work.

It’s not something that will lead to huge returns immediately, but over time you might be surprised to see how your money grows.

Get off your assets.

No one likes freeloaders. If someone is sleeping at your place, you at least want them to do the dishes. When your money sits in a savings account, it’s sleeping on the couch without helping out with anything.

You’ll never build the wealth you need for financial freedom if you don’t move your assets. Once you have built up a comfortable emergency fund, stop relying entirely on that savings account and open an investment account. It’s easy enough, even if you only have $25 to start.

Your first investment account should be with a broker that allows you to invest a small amount of money to begin with. There are accounts that allow you to start with as little as $5 a week. If you have a little more, you can start investing with a service like Betterment with $100 a month.

All you need is the same information you use to open a bank account, and your bank account information. Set up an automatic investment plan so that money is automatically moved from your bank account to your investment account. You can also use a service like Acorns to automatically invest your pocket change.

Have an open relationship with your money.

Don’t be loyal to one bank account or even to your first investment account. It’s ok to work your assets in any way that helps you build wealth.

Start with your company’s tax-advantaged retirement account. If your company offers a 401(k) and you contribute, you’re investing. Use that to your advantage, and take the biggest match possible. Many people don’t think of company retirement plans as investing, but it is. It’s the easiest way to open your first investment account, and you can reap benefits for years to come.

You don’t need to be a one-account investor, though. If you have the right information, you can open an account with an online discount broker (like TradeKing or E*Trade), robo advisor (like Betterment), or a “traditional” company like Vanguard or Fidelity. There are a number of ways for you to open different investment accounts to fulfill different purposes. If you don’t like what’s offered by your company’s plan, get the maximum match, then open an account with a different broker.

Get your money out there to make an effort. I was pleasantly surprised the other day to discover that my regular effort with my money has been paying off. I’ve been contributing to a travel fund, and my money has been busy. It’s worked for me, and with the help of compound interest, is already offering a great return.

How to open your first investment account.

When you’re ready to spread a little more canvas with your money, keep the following in mind:

Get personal.

You need identifying information to open an investment account. Your name, address, birth date, Social Security number, and bank account information will be needed. The law requires brokers to collect this information from you.

Have your personal information ready. Even if you open an account using the internet, having it nearby keeps you from being timed out of the session before you’re ready.

If you do open your investment account using the internet, make sure you are on a private connection. Do it from a password-protected network, not public Wi-Fi. This is sensitive stuff and you don’t want it out there.

Index funds are better to start.

They aren’t sexy, but index funds, which follow set groups of stocks, such as the Dow Jones Industrial Average, or the S&P 500, can be an easy way to get the most out of your investing dollar. You don’t have to pick stocks (which can get tricky), and you enjoy instant diversity.

Some discount brokers, like Acorns and Betterment, won’t let you pick your own funds. However, they usually have access to low-cost ETFs that are broad enough to provide you with the diversity and performance that keeps pace with the market in general. And that’s exactly what you need when you start out.

Do it in your sleep.

Put your assets to work while you sleep. Schedule automatic transfers from your account to the investment account. Most brokers offer an “automatic investment plan.” Sign up for it. It’s better when things happen while you’re not thinking about them.

Start small.

Even if you’re broke af, you can still afford to invest. With some discount brokers, it’s possible to automatically invest $5 a month. You eventually need to step it up and show your investment account some love, but starting small gives you the chance to let your money begin. The longer your money is at it, the greater the chance you’ll see bigger results down the road.

You still need to boost your contributions over time, though. As soon as you can, increase the amount you invest. You don’t want to sit on your assets when you have them. They should be out working hard for you.

The following, from Calculate My Wealth, shows you how you should be working your assets. Start investing $100 per month at age 22, and do it until you’re 65, and here’s what you could have:

invest

Unlike investments, that savings account is definitely a freeloader.

Make investing a priority.

There are a lot of things you could be doing with your money. Investing should be a priority. Yes, you need to pay down debt (especially if it comes with a high interest rate). And you have bills. You’d probably like to enjoy an evening out on occasion. But if you have even a little, tiny bit you can put toward investing, make it a priority.

In many ways, it’s about the habit. Start the habit of investing if you want to make a difference in your financial life. Once you get started and see the good results of your efforts, you’ll want to do even more investing.

Get started, and then look for ways to boost your contributions. No, $5 a week isn’t going to make all your retirement dreams come true. But if you start with that $5 a week, and then you make room to boost it to $10 a week after a couple months, pretty soon you’ll find that you have more money than you thought to invest.

Skip one night out a month. And invest the money you would have spent. Start a side hustle. Invest any money you make. Your account will build much faster that way.

Whether you make it a point to have money taken from your paycheck each month for your retirement account, or whether you invest your pocket change (or do a little of both!), the important thing is to get started and make investing a priority going forward.

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Free money can be fun money, but there are some other attractive uses for it too. Read More...

At the end of the year, we try to embrace the spirit of giving. It’s a great time to be charitable, both to our loved ones and to the less fortunate. But if you have an end of the year work bonus coming your way, it’s OK to embrace the spirit of receiving, too.

It just feels awesome to start the year with a nice, fat chunk of change. But think back to the end of year bonuses you’ve received in previous years – what happened to all that money? Did it go towards a pile of video games you never play? Did it pay for some new clothes you don’t wear anymore? Maybe it just wasted away in your bank account.

The fact is, most of us are pretty terrible at managing a windfall. Even financially-savvy people tend to get lazy when it comes to free money, because… well, it’s free money. What’s it matter if you spend it on something frivolous?

But the fact is, a windfall is also an opportunity. If used correctly, it can propel your life forward and help you get one step closer to your goals. If used irresponsibly, you’re squandering away a chance to improve your life.

This year, put that year-end bonus to good use. Here’s how to do it.

Pay off debt.

Every personal finance expert tends to agree with my first suggestion – the best thing to do with an end of the year bonus is to pay off any high-interest debt, such as credit card or personal loan debt. If you’re paying more than 7-8% on any loan, use your bonus to eliminate as much as possible.

Not sure what your interest rates are? Log on to your accounts or review your monthly statements to find out. Then, make a list of all your debts from highest interest to lowest. Pick the balance with the largest rate and apply it to your bonus payment. Paying off high-interest debt quickly can save you hundreds on interest and accelerate your repayment.

Save an emergency fund.

According to a 2016 study from the Federal Reserve, almost half of Americans couldn’t afford to pay for a $400 emergency with cash. If you fall into that category, the best thing to do with your bonus is use it for an emergency fund.

An emergency or rainy day fund should be used for events you can’t plan for, such as losing your job, being in a car accident, flying home for a loved one’s funeral and more. Routine procedures such as oil changes for your car or annual vacations don’t count as emergencies and should be saved for separately.

You should have at least $1,000 in your emergency fund, but more is definitely better. Three to six month’s worth of expenses is the standard, depending on your career and if you have a house and kids.

Meet with a financial planner.

What better way to use your bonus than to create a roadmap to financial freedom? If you’ve been putting off a needed overhaul of your finances, take advantage of your bonus to hire a financial planner.

You can find an affordable financial planner through the XY Planning Network or the Garrett Planning Network. Your bonus should be enough to pay for one or two sessions where you’ll learn how to budget, pay off debt and save for retirement.

Splurge smart.

When I was paying off my student loans, I typically put all my windfalls toward my debt, only keeping about 10% for discretionary spending. But every once in a while, I would take the whole amount and splurge on something I’d been eying for a long time.

For example, one year I took a birthday check and spent most of it on a trip to Spain with my boyfriend and a friend. It wasn’t the most practical or responsible decision, but the memories of that 10-day vacation will last me a lifetime.

Sometimes you can find a balance between buying something for yourself and buying something practical. You could buy a new bike so you can ride to work, a crockpot so you can meal plan ahead of time or even a subscription to Amazon Prime.

Of course, you can also go really wild and buy something just for fun, like the Nintendo Switch or a box set of “The Wire.” Sometimes you just have to live a little, but always make sure it’s something you really want. Every time I splurged while paying off debt, I used it for something I’d been obsessing about for months.

How to decide what to do.

If can’t decide how to use your bonus, give yourself a few days or weeks to think it over. There’s no need to figure it out immediately, and the longer you wait, the less likely it is you’ll blow the money on something inconsequential.

I’ve only gotten a work bonus once in my life, and I had several months to choose the best option. I eventually stashed it for a cross-country move to Colorado my husband and I were saving for.

Make a list of what your priorities are and how the bonus can help you. If your top goal is to buy a car, set the bonus aside for your new wheels. If you want to become a homeowner, use the bonus for a down payment. The only bad decision is to not to make one at all, letting the money sit in your bank account without going to good use.

What have you spent your past bonuses on? What are your plans if you have a bonus coming? Let us know in the #Adulting Facebook community

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Can you invest in college? Get started now even with just a little money. Read More...

This is a paradox, or at least a frustrating fact.

The best time to invest is when you’re young. When you’re 18 and first able to begin investing in your own name, you’re in high school or college. When you’re in high school or college, education is your priority, and you probably don’t have a lot of income — if any.

So how do you invest for your future when you’re broke and still in school?

Also, you are (or should be) trying to avoid debt, so maybe you’re paying for college yourself by working. Unless you had the foresight and desire to keep the cost of your education as low as possible (by going to community colleges, matriculating part time, or receiving a full slate of grants or scholarships), you’re working, and likely putting any money you’re making towards paying for school.

Your environment is not conducive to saving for the future. Unless you’re receiving a lot of financial support, you’re probably struggling with money for the four (or more) years you’ll be in college.

But investing while you’re in college isn’t impossible.

An Adulting.tv reader wrote in to ask us how to invest while in college. And it’s a popular question because college students are told that investing early is the right thing to do, but have no idea where or how to start.

In college, if you’re even just thinking about financial priorities, you’re several steps ahead. Don’t worry about whether it’s better to start paying off debt early or save for the future through investing or savings accounts. There are a number of competing priorities for your money. Whether you tackle just one or spread whatever small amount of money you have across all the priorities, you’re going to end up in a better position than you would have otherwise.

Pay off debt, including deferred student loans. Avoid credit card debt. Build an emergency fund. Invest wisely. Overwhelmed yet?

No one expects you to do it all right away. But do something.

Don’t wait until after college to begin investing. The early bird catches the worm of wealth. If you wait four years while you’re earning that degree, it will take more money invested faster to make up for whatever gains you missed out on.

Be up front with anyone who’s helping you financially.

Communicating is an important piece of whatever strategy you want to use when it comes to anything with your money. If your parents are assisting you financially, whether paying for a portion or all of your education, providing you an allowance, letting you live at home for free or reduced rent, covering your health insurance, or anything else that might help you with money, keep them in the loop.

You may be eighteen or older, technically considered an adult, but if you depend on adultier adults, it’s only fair to discuss your financial plans with them.

They may provide some insight, they may decide to offer more assistance, or they may just be proud that you’re seriously thinking about your responsibilities and your future. They’ll definitely appreciate your honesty, candidness, and desire to take your responsibilities seriously.

Set aside a small amount of cash.

The more you can invest now, the bigger the money will grow. It comes down to the choices you make. Do you choose to spend every weekend partying and spending money on getting turnt? Or can you cut back some and set aside your booze money for later? Do you buy your textbooks full price, or can you locate used editions and pocket the difference?

Alcohol or no alcohol, every student spend some money on something that might not be necessary.

Cutting back is only one way to increase your flow. Bumping up your income has the same effect, and thanks to the numerous ways you can increase that income, you may have more flexibility than you would when reducing expenses.

You may be already spending all your time outside of your studies working to cover your tuition. But maybe you can add another couple of hours of work each week without affecting your education. Maybe you can ask for a pay increase. Perhaps you can multitask or squeeze another small job in there. I made some extra cash in college by teaching professors how to build websites. I also had a campus job at one of our libraries.

Maybe you have skills that people will pay for.

Just get started investing.

Even if you’re still adding to you emergency fund, paying your tuition bills, or paying off debt, you can set aside some of your cash for investing. These days, there’s virtually no minimum amount of money required to open a good investing account.

Recently, I opened an investment account at WealthSimple with no initial deposit, and I started sending $10 a week there. That’s less than the cost of one meal, and a great place and amount to start.

Don’t worry about picking stocks, studying companies, or thinking about how all the crazy things happening in the world affect the market or the economy. Just invest using a fund that tracks the stock market as a whole — an index fund — because it’s unlikely you’ll do better than that. Even professional money managers don’t, so don’t fall into any traps.

I’ll describe the investment you’ll need to choose.

See what resources your college has for you.

My college had — and still has — an investing club. Today, the club manages $1.7 million of the university’s endowment and offers resources for students who want to invest. The student organization claims to have a methodology that follows the gist of the best investing advice: track the entire stock market broadly and don’t chase down individual stocks. Trying to predict the movements of one company, whether it will succeed or not in the short-term, is basically gambling. It’s a bad idea.

But according to the financial reports the investing club has posted online, which aren’t recent, they would have done better had they just invested in a stock market index fund like the S&P 500 instead of choosing other investments.

So take a look at your college’s investing club. Get to know people for whom investing is a priority. But don’t necessarily follow every piece of advice you are sure they will bestow upon you. Put your money in a low-cost stock market index fund or ETF. That’s. It.

A service like WealthSimple will make that easy for you.

You might want to try these investing services while in college.

I’ve used many investing services, and WealthSimple is currently my top choice. It easily walks you through making the right choices, connecting your bank account, and setting up automatic withdrawals. If automatic withdrawals scare you, it’s understandable. But any job you have — on campus or not — should be depositing your pay directly into your bank account. Forget check cashing services.

Automatic withdrawals are really amazing and one of the best ways to build wealth consistently. You can “set it and forget it.”

If your job pays you in cash for some reason, take that cash and open a bank account. Almost every bank offers free accounts for students.

Here are the best investing services to use.

  • WealthSimple. Again, my top choice. It’s amazing that I can send $10, or even less, once a week, and start building a nest egg. In 30 years, that $10 a week will become $37,000 thanks to the growth in the stock market. And assume you’ll increase your contribution as you earn more money. Compounding returns will make you a millionaire over time.
  • Betterment. Another popular low-cost, low-minimum investing service. WealthSimple, Betterment, and some other services are called robo-advisors. A financial advisory firm or investment advisors are normally people who help you make investing decisions — though watch out for some because they are also salespeople who care more about their bonuses than whether you make the best choices for your own money. But robo-advisors take the human element out, and let you provide answers to a survey to determine how much risk you’re willing to take and provide you with a low-cost strategy for managing your risk and getting the best return.
  • Vanguard. The above two options are good when you don’t have $1,000 ready to invest. They’re also “managed” investment services, so they make the decisions about which funds to invest in. With Vanguard you can do it yourself — and I find that to be my preferred method. You can choose which vanguard fund you want to invest in. For example, VTSMX is the symbol for Vanguard’s total stock market index fund, which is incredibly low-cost, and you never have to worry about it losing more money than the stock market entirely. So if you save $1,000 before you start investing, you can open an account at Vanguard.

Notice there aren’t a lot of options listed. To keep it simple, these are the only investment accounts I’d recommend. There’s no need to list 10 different investment accounts, because one of the above should suit every college student’s needs. Even yours.

What type of investment is best for college students?

There are investment accounts, investment types, and investments. The companies named above are investment accounts — or companies that offer investment accounts. Investment types are classifications that have to do with what the investment is for. And investments are the actual things — shares in companies, bonds, funds, etc. — that are held within those investment accounts.

If you are going to the Vanguard route, you will most likely be fine over the long term. Choose the Roth IRA investment type. Because this is a retirement account, it helps you be disciplined about your money. You won’t be as tempted to withdraw your money from the investment in order to buy something you don’t really need.

In return for holding onto your investment until retirement, you receive some tax benefits. There’s a yearly maximum (which may not be something you have to worry about while in college), but all of your investments grow tax-free until you reach retirement age and withdraw your funds. Otherwise, every year your index fund does well, you would have to pay some additional taxes (or your refund from the IRS will be lower).

You can also choose a Roth IRA if you invest with the WealthSimple or Betterment robo-advisors.

In other investment types, those that aren’t IRAs, you do have to pay attention to the tax bill. Mutual funds and stocks generate income, and all income is taxed by the government. As a student, you may wish to avoid or put off generating taxable income when you don’t have to, and that’s the benefit of a Roth IRA.

What investments are best for college students?

Stocks are simply the best investments for the long-term. Yes, even better than “real estate.” Just smile and nod when your roommate won’t shut up about his uncle who invests in real estate and real estate will never lose value and real estate is the only way to get rich.

Long-term is the best strategy to consider as a college student because it is the first priority for investments. And over the long-term, stocks perform the best. But you have to leave them alone and invest in a wide variety of stocks that reflect the entire market. The best way to do that is through the low-cost index mutual fund described above.

End of story. Period. Full stop.

What about the 401(k) while in college?

This might be surprising, but you can contribute to a 401(k) while you’re in college. 401(k) and 403(b) plans are retirement accounts that are offered by employers. If you’re working full time while going to school, see if your company offers a 401(k). Even if you’re working only part-time, have a seasonable job, or are an intern, you may have the option as well.

While investment options in 401(k)s aren’t always as good as what you might find at Vanguard for your Roth IRA, one priceless piece of the 401(k) is matched contributions. For example, your company might say that they’ll match everything you contribute to your 401(k), dollar for dollar. There is no better investment than doubling your money immediately. So you should definitely go for it.

Look for the investment within the 401(k) that is closest to an index mutual fund. Sometimes it’s the default choice, but sometimes it’s hidden.

One thing to watch out for is a vesting period. Some companies require that you stay employed for a certain amount of time before some of that matching money officially becomes “yours.” The matching contributions might not vest for a year, or might vest gradually over the course of a few years. You’ll still get the money you invested in the 401(k) to keep with you forever, but your company’s contributions might never materialize.

Also, your investments made in a 401(k) are done on a “before-tax basis,” so a contribution reduces the amount of income on which you have to pay income tax. And like a Roth IRA, your investments grow without any need to pay tax on gains. You will pay taxes on everything, however, not just the gains, when you reach retirement and withdraw.

It’s hard to know if you’ll stay with a company over the course of a few years — but from my experience, I know I’ve stayed with companies longer than I would have expected. Not while in college, though.

But shouldn’t we be concerned about the coming recession?

I would not be surprised in the least if we go through another recession sometime soon. Do not let this stop you from investing. If you’re in college today, you most likely remember something about the latest recession, the worst of which was from 2007 to 2009. Your parents might even believe we never really recovered from that period of time. But for the most part, the country recovered and prospered for a few years.

That won’t stop the next recession. Chances are, your investments will lose some value. That’s why you stay invested in a stock market index fund. It’s highly diversified, so you spread out the risk across hundreds of companies.

But when your investment loses value, as long as you’re focused on the future, you have the opportunity to invest more at a lower price. The only way the stock market has helped people grow wealth is by having these recessions. Investors who stay invested and take advantage of recessions as opportunities are the ones who see the most growth over a long period of time.

You only lose money when you sell your investments during a recession and you wait until the news tells you that the economy is great before investing again.

The bottom line: don’t panic when your investments lose value. If your other money habits are strong, like spending only what you can afford, building your marketable skills, knowledge, and employability (part of the reason you’re going to college — it’s not just to find a mate), and not making poor decisions, you’ll find ways to use a recession to your advantage.

3 investing tips for college students.

1. Start yesterday. You already failed at this one, but don’t give up. If you start today, tomorrow you will have succeeded with this very important suggestion. I was a big procrastinator in college, and maybe you are, too. I waited until the last minute to write papers and other assignments, study for exams, and perform research. Your future is hanging in the balance, and it’s so much harder to make up for lost time. Even a small investment today makes a huge difference in the future.

Starting as soon as possible will help you avoid these scenarios:

  • You’ll having to work harder to earn more money to catch up to how much you want to have to be able to retire or be financially independent.
  • You’ll have to continue working longer before you’re able to retire, or you may never be able to retire at all. That’s one of the biggest worries today’s college students have, especially when looking at the economy and society.
  • You will need to delay buying a house or starting a family. With this, many college students are convinced that they’ll never be able to accomplish either of these goals in a reasonable amount of time, anyway.
  • You will eventually experience losing a job without any kind of cushion. You won’t be able to handle your expenses while looking for a new job, so you will go (further?) into debt and the repercussions for yourself and whatever family you might have could be disastrous.
  • You’ll never surpass your parents in wealth and success and will also trail behind the progress of your friends.

If some of these potential outcomes scare you, they probably should. Getting control of your finances involves knowing your income and expenses intimately while also making the best investment choices. It’s a lot of responsibility, but it is achievable.

2. Ignore some of your college buddies. All you need to start is a diversified, broad stock market index fund or ETF, or something similar, whether you open an account at WealthSimple, Betterment, or Vanguard. For some reason, investing advice is something people give freely when they know very little. Make one correct bet on a stock, and suddenly they’re an expert and a genius.

In no other way has “trust the process” been better advice. This is the process you must trust. Buy a low-cost total stock market index fund whenever you can, repeatedly, over the long term, and don’t sell until the very end. If you maintain that process regardless of what’s going on around you, you weather all the economic storms. Eventually, you’ll need to sell — what’s the point in accumulating wealth if you’re never going to use it? But keep your long-term investing funds invested for the long term.

When you get to the point where you have enough invested that you no longer can work, you can shift your investments around from “growth” mode to “income generation” or “value” mode. But that’s the process later on — not while you’re still able to build wealth through saving and working like you are in college and in the many years following graduation.

3. Don’t let investing be your only financial goal. If you establish good financial habits during college, you’ll be much more prepared to invest more throughout your life and reach whatever financial goals you’re likely to have.

  • Track your finances so you always know where you stand.
  • Avoid debt, and pay off any student loans as quickly as possible.
  • Start building a savings account that will eventually become an emergency fund when you are no longer in school and have to support yourself fully.
  • Don’t neglect your bills and other obligations.
  • Use credit cards wisely by spending only what you can afford to pay for immediately.
  • Put faith in yourself and don’t rely too much on parents or employers to take care of you.

Did you start investing while in college? How did you find the money?

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You’re not a bad person for borrowing money to get a college degree. You may be smarter than some financial “experts” lead you to believe. Read More...

You finished your bachelor’s degree and you’re out in the real world. You’re feeling real pressure to find a good job along your career path. It’s those massive student loan bills. You dread opening them because they remind you of the four or more years you lived without a major concern about your finances.

Now your college education seems like a burden. What did your bachelor’s degree get you, anyway? You’re 22 and you don’t have a job yet. Or you’re 30 and you’re still not sure if you’re on the “right” path.

If you haven’t been ignoring the reality of your debt, with your head in the sand like I was for a few years after earning my bachelor’s degree, you’re fully aware that student loans — like all debt — reduce flexibility in your life. You can’t afford to delay your career. You can’t even afford to go out with your friends (but you probably will anyway).

And if it feels a little unfair that all you did was earn a college degree like your parents, it might be. The cost of a college education has grown much faster than income for most Americans.

While your parents could have afforded their education at a state college on their own by working through college, the economy doesn’t make that as easy today. At the same time, college students and millennials are told en masse by society (and maybe you’ve heard these a few times):

  • “You have no work ethic.” (What? I’m working harder than everyone I know just to survive!)
  • “You expect everything to be handed to you.” (NO. I just expect to be able to get by and be treated decently.)
  • “You want the best of what life has to offer without putting in the effort to achieve it.” (I’m more than willing put in the time and effort, but I’m not convinced that the system is set up for us to do more than chase a target that’s moving farther away faster than I can run.)

You’ve been set up to fail financially by the world while you were a teenager, and that same world does blame you unfairly. Well, we all have friends who embody the millennial stereotype — but not you, right?

Is college no longer worthwhile?

Financial experts are now making headlines by tearing apart the idea of higher education. Whether it’s due to the evolution of the curriculum over the years, or the lasting effect of the recent recession on the idea that the only worthwhile type of education is one that leads directly to a job that in high demand, loud voices are encouraging alternative paths.

When someone tells you striving to get the best education possible was a stupid mistake, and you should have gone to a trade school to learn a skill instead of getting a degree, don’t take it personally. And don’t feel bad. These are the two most important financial justifications for pursuing a college education:

But return on investment (ROI) isn’t the only benefit of a college degree.

Ignore the financial experts.

Here’s some more good news for those who are being told their degree is worthless.

If you grew up in a middle class environment, some of the opportunities colleges affords the world are privileges you all ready have. And financial experts take advantage of those who don’t recognize their own privilege, especially when it comes to talking about debt. Whenever the unemployment rate is high, we find more encouragement in the media of entrepreneurship as the singular path to a lucrative life, replacing of education.

You have probably heard at least one person tell you that education is overrated and the best path to success is starting a business. You don’t hear that most businesses fail and that a college education still plays a major role in financial aptitude, even for entrepreneurs.

  • A good educational foundation greatly improves someone’s ultimate entrepreneurship goals by enhancing the cognitive, business, and life skills that good entrepreneurs need.
  • Many of your anti-education role models had other types of assistance that you might not have, and the louder they talk about their success, the more they’re hiding about their privileges.

Sure, you should try to keep your cost of education low. Grants and scholarships are better than loans, of course. But now that you’re out of college, the goal is to manage the debt you do have, not allow the world make you feel guilty for prioritizing your future livelihood over buying a house immediately upon graduation.

So here’s what you can do.

Here’s the four-step plan to dealing with student loan debt.

1. Recognize that your debt does not make you a bad person, nor did you (necessarily) make a bad decision to pursue a college education. Yes, you may need to make some sacrifices now to manage your finances responsibly, but in most cases, the degree will be worth it.

That will be true even if you decide to change your career path, away from the focus of your degree! Any bachelor’s degree is better than no degree. If you didn’t screw around too much in the four-plus years it took you to pursue your undergrad education, and if you took a variety of courses and exposed your brain to a diverse array of ideas you wouldn’t have considered elsewhere, your education will never be worthless. It will continue to help you with whatever life you decide to live.

2. Get organized and pay attention. You can’t ignore your bills forever, so don’t even start ignoring. Tackle your responsibilities head on — and your student loan debt may be the first real responsibility you have in life for which there are consequences.

I ignored my bills for too long. Working at a low-paying nonprofit organization after college didn’t help. But I figured my life out and found a path that allowed me to totally eliminate all of my debt. This path wasn’t related to my college degree but I know that I succeeded thanks to my college experience.

3. Look at some of the options for helping you eliminate student loan debt. If you have federal student loans (and these are almost always better than private student loans), you can look into income-based repayment plans. If you’re just starting out in your career, you can lower your monthly payment to help you with cash flow.

You may qualify for loan deferment, so your payments are put on hold, and in some cases, you will not need to pay more interest while you wait for your deferment to end. If you don’t qualify for deferment, you may qualify for forbearance, which also gives you a grace period on your payments. But with a forbearance, you’ll still accrue more interest while you wait.

If you’re a teacher or you have a public service job, you may even qualify for the cancellation of some federal student loans. That’s not the only way the government is willing to help you. It is possible to get a tax credit for the student loan interest you pay.

I’m not going to suggest consolidating your loans, unless it’s with a federal consolidation at an interest rate that’s lower than what you have now. Now there are private companies willing to refinance your student loans, and there are some disadvantages; namely, you lose all the advantages for borrowers mentioned in this section.

And watch out; these private lenders pay financial “experts” bounties for signing up new borrowers through websites, and thus there are many more positive reviews on the internet than there would be otherwise. Still, you could end up saving some money — in exchange for a fee and limited flexibility — when you refinance with a private lender.

4. Pay it off consistently and regularly. Work out a plan to pay the student loans off well in advance of your schedule. Student loans will stick with you even if you need to declare bankruptcy (almost always), so do what you can to get rid of them as soon as possible.

And then celebrate! Because not only did you pay off your student loans, but you received a college education, and will most likely be better off in life than people who say you made a bad choice for getting a college education.

What about consolidating those student loans?

Getting a little technical, each year you borrowed money for college initiated a new loan. So you might have several different loans with different interest rates. I wrote above that I would only suggest consolidating this loans under certain circumstances.

The best option, if you have federal loans, is for a federal consolidation. But you may have private student loans, as will many students who have to borrow more and more to afford the education they’d like to pursue. You might want to consider using SoFi to consolidate. SoFi is a private lender that is focused on student loan consolidation. It takes less than two minutes to find out what interest rate you qualify for.

And if you do qualify, chances are good you can reduce your monthly payments. And if you’re struggling at the beginning of your career, allowing yourself some financial space to breathe may be worth the extra time it’ll take to pay off in the end. But you should carefully consider any important financial decision, think about the pros and cons, and put yourself in your future self’s shoes.

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You don’t have to be rich to start developing millionaire habits. Read More...

The best way to support Adulting.tv is to subscribe and leave us an honest review. Thank you!

We’re doing a special swap episode with Miranda’s other podcast project, Money Tree Investing. Check out this other podcast for discussions about investing and money. In this episode, Miranda talks to co-host Joe Saul-Sehy about how to manage money like a millionaire.

Plus, keep an eye out. In December, Adulting will make an appearance on MTI with a special swap episode!

Concepts

  • How do millionaires manage their money?
  • Looks at practical steps to help you manage money like a millionaire.
  • Reviews millionaire habits.
  • Learn about financial priorities.
  • Ideas for treating your money like a resource.
  • Practical tips for managing your money today so you can be a millionaire later.

Don’t forget to check out other great articles on Adulting.tv for information that can help you make your millionaire dream come true. These articles and resources will get you started on the right path to manage money like a millionaire:

Make $200 a Day With These 57 Side Hustle Ideas

3 Easy Ways to Start Investing When You’re Broke AF

Book Review: Set For Life by Scott Trench

Book: The Best Bank Accounts for Adults

Lifestyles of the Financially Independent

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Join the Friends of Adulting! Please leave an honest review on Apple Podcasts. We would really appreciate the feedback!

Like what you’ve heard?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Getting life insurance sounds like a real adult thing to do. Unless you don’t need it. Then you’re just wasting money. Don’t waste money. Read More...

It doesn’t get much more adult than buying life insurance. Coming to terms with your own death is a rite of passage as we grow older, and purchasing a life insurance policy is a sign that you care about what happens to your family after you’re gone.

But sometimes, it’s also a waste of money.

Accepting the reality of your own mortality and looking to protect your loved ones after you die is noble, but the funds you would spend paying for a policy can often be put to better use.

Life insurance has a very specific function, financially, and it often just doesn’t make sense to pay for it if you’re not at a certain stage in life. Imagine paying for car insurance when you haven’t even gotten your license – that’s the kind of situation many people put themselves into.

If you’re wondering whether or not it’s financially sound for you to purchase a life insurance policy, read ahead for more information.

When you don’t have kids or a mortgage.

I called my insurance agent the week after my husband and I got married and asked him if we needed to buy life insurance. He only asked me two questions: did we own any property together and did we have any kids? The answer to both questions was no, so he suggested we hold off.

Yes, if either one of us dies, the surviving party would have to change his or her lifestyle to compensate living on one income. Rent would be a bigger struggle, but neither of us would have to think about how to support a child or how to carry a mortgage by ourselves. Some days it seems odd that I don’t have life insurance even though I’m married, but I know it makes more sense to keep it this way.

However, we’re preparing to purchase life insurance next year once we buy a house. Getting out of a mortgage can take a while depending on the housing market, so it’s more necessary for a childless couple with a mortgage to buy life insurance than a couple that’s renting. If your partner dies while renting, it’s pretty easy to get out of the lease and move to a more affordable spot.

When you buy it for your kids.

During a staff meeting at my last job, someone brought up the idea of buying life insurance for your kids. I was confused. “Isn’t the whole point of life insurance to replace someone’s income?” I asked. But they disagreed.

Most of the parents in the room said they had bought life insurance for their children, in case something happened. But buying life insurance for your children, who don’t provide any financial value, is a waste of money.

Think about it: life insurance should prevent a family from having money problems if one of the earners dies. Since children don’t bring in any money (unless your kid is a famous child actor), your income would stay the same in the event of their passing – and your expenses would decrease. It’s also incredibly rare for a child to die before the parent, especially in their youth, so the odds of actually benefiting from a policy are extremely low.

Instead, you’re better off saving any money you’d pay for life insurance in an emergency fund, which will cover any potential funeral expenses. You can also put that money towards a college fund.

When you’re buying whole life insurance.

Most financial experts, including the legendary Dave Ramsey, tell people to buy term life insurance instead of whole. Whole insurance bills itself as a life insurance policy combined with a savings account. They claim that a user can build up cash value in his or her policy that the family can redeem once they pass away.

Because a whole life policy is designed to cover the customer for their entire life, it’s much more expensive than a term life policy. For example, when I input my information into a life insurance form, it tells me I qualify for a $25/month term life policy with a $500,000 payout. A whole life policy with the same benefit would cost $408.45 /month.

If you invest the $383 difference every month in an index fund earning 7% annually, you’ll have $1,011,550.80 in 40 years, or more than double the cash value of the whole life policy. Plus, you’ll have access to those funds any time – no waiting for an insurance company to pay out.

When you’re retired.

A few years ago, a friend of mine lost her father. As we were commiserating about the situation, she mentioned that his insurance policy had lapsed only within the last year. She remarked on what a shame it was that her mother wouldn’t be able to get any life insurance money.

Most retirees don’t need life insurance, especially if they don’t have a mortgage. Remember, the point of insurance is to substitute lost wages or pay for current bills. Since a retiree usually has few expenses, it’s not necessary for them to have a life insurance policy.

Have you purchased life insurance yet? What factors did you consider before taking that step? Let us know in the #Adulting Facebook community.

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Let’s be real. Stock funds are probably your best bet. But here are some other ideas for investing to build wealth. Read More...

The best way to support Adulting.tv is to subscribe and leave us an honest review. Thank you!

After you’ve been through a couple stock market crashes, it’s hard to get excited about investing. In fact, many millennials are wary of investing — especially investing in stocks.

On the other hand, we’re told that investing is an effective way to prepare for the future. So, can you build wealth without stocks?

It’s possible, especially if you forget notions of stock-picking. In this episode, we’ll look at how to build wealth without stocks, providing different ideas that you can implement to help you grow your nest egg.

Concepts

  • Reasons many people don’t like the stock market.
  • How the news can influence how you think about the stock market.
  • A look at some of the ways people feel the stock market is stacked against them.
  • Why you need to develop multiple sources of income.
  • How to use real estate to build wealth without stocks.
  • Different business ideas that can help you grow your wealth.
  • Using P2P lending as a way to build wealth without stocks.
  • Exotic alternatives like cryptocurrencies, forex, and precious metals.
  • The risks you need to be aware of if you decide to try to build wealth without stocks.
  • Why you should consider funds (even if they are stocks) as one way to grow wealth over time.

Use this week’s DO NOWs to evaluate your situation, figuring out what kind of risk tolerance you have and thinking about what investments might be most appropriate for you.

Our listener question this week deals with the investing systems you are likely to see advertised everywhere. We talk about how you can tell legit systems from the shady offerings.

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Resources

Millennial feelings about investing

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