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Show Notes
Chonce Maddox joins us to talk about paying down student loans. Like many saddled with student loan debt, Chonce has struggled to make ends meet. In this special episode, recorded live on the Ally podcast stage at FinCon.
Chonce is a successful freelance writer who covers personal finance topics for a variety of outlets and writes at MyDebtEpiphany.com. In this episode, we talk with Chonce about setting intentions, changing your money mindset, and using all the tools available to you in order to pay down debt and crush student loans.
Listen to the audio podcast above.
Hosted by Harlan L. Landes and Miranda Marquit Produced byadulting.tv Edited and mixed bySteve Stewart Music bybensound.com
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Rent due but bank account empty? Before you start packing your bags, let’s look at your options. Read More...
Sometimes there are moments when money is a little tighter than usual. A check is coming in late, your hours were cut unexpectedly, or an unplanned expense pops up. Typically, when those moments happen it’s at the most inconvenient time possible. And, it’s especially stressful when these situations crop up around the first of the month when rent is due.
If you’re finding that there is more month than money and that it’s painfully, glaringly obvious that you’re going to be late for rent, there are a number of actions that you can do to take control of the situation before the situation takes control of you.
Don’t panic.
First, and most importantly, don’t panic. I’ve made my worst financial decisions every single time that I’ve allowed panic to dictate my actions. One of the constants about money is that it ebbs and flows. If you’re in a low-income flow situation and you begin to panic, you will begin to make choices that will be more expensive over time. Some of those decisions include:
Borrowing money – If you’re already broke, borrowing money is just not going to work out for you in the long-run. Umm….because you’re already broke. You will then be on the hook for any overdue rent money and the money that you borrowed.
Payday loans – I’ve had these and it feels like they should be helpful. Basically, you borrow on upcoming income. But, you are also charged a ridiculous amount of interest that you already can’t afford because you’re broke. Just avoid these like the plague.
Shutting down mentally – This one is hard. I actually struggle with this a lot. Sometimes I will just shut down and kind of avoid what’s going on. Not good. Again, this will make a bad situation even worse. You have to be mentally present in order to deal with the financial issue at hand – you’re going to be late for rent.
Take control.
Fortunately, there are a number of actions you can take to take control of the situation and hopefully never be late again.
If you’re going to be late on your rent because you need an extra $100 dollars, spend some time thinking about where you can get that extra money and begin hustling. If you’re late because you just don’t have the entire amount…again, start hustling. The sooner you begin working to bring more cash in the sooner you can resolve the issue.
If you are one month out and you can already tell that you don’t have money for rent-you’re in luck. Thirty days out is plenty of time to focus on growing your income. Not sure what you could do to bring in more cash? Here are some ideas:
Animal sitting – I’m not a huge animal person, but if it came down to it, I could doggy sit for a couple of days. I can love on the dog and then return it to its owner and get paid to take care of it. It’s a win-win because I would get puppy time without dealing with all of the long-term stuff and get paid. If you live in an animal crazy city like Denver, you could get started pretty quickly on earning some extra cash in about a week.
Sell your stuff – Americans are notorious packrats. We have a ridiculous amount of stuff in our homes. Sell it via:
1. Craigslist – But, do it at a safe location. There are many cities where you can do the pick ups and drop offs of items at designated safe areas (typically police stations)
2. Have a yard sale – if it’s still warm enough to rock a yard sale, DO IT! I’m continuously amazed by all of the stuff people will buy.
3. Sell your clothes – For this to work, you need to have really nice clothes with good resale value.
4. Sell your bigger items – If your situation is especially dire, sell: your car, your high-end electronics, etc. If you sell your car, you will also free up additional cash because you won’t have to pay for insurance, car maintenance, or gas.
Sell your expertise – Necessity is the mother of invention. Sell your expertise. If you are looking to grow your income, think about what you are considered an expert at and set up a day to teach people how to do what you do.
Talk it out.
Review your rental agreement. Again, if you’re going to be late because you’re a little short of cash, also look at what you will be charged in regards to late fees. Late fees vary but could make a bad situation much worse really quickly.
Communicate. There is nothing worse than catching your landlord off-guard. If you’re hustling, and the money is just going to come in after your rent is due (and you know it) talk to your landlord and continue to hustle your ass off.
There is nothing worse than being late for rent, but, there are a number of ways to manage the situation proactively. Good luck!
Have you been late on your rent, or close to it? How did you handle it? Let us know over in the #Adulting Facebook community.
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Choose one of these best bank accounts to handle your finances like an adult. Read More...
If you don’t have a bank account yet, you should open one. (Continue reading for some suggestions.) Anyone who earns money from a job or any other source — even if there isn’t a lot of money to spare — should be using a checking account at the very least.
My bank tells me I’ve been a customer since the year I turned 13, so whether it was from an allowance, from taking care of my neighbor’s cat while they were on vacation, or from my first job in retail, I was at least trying to have a positive money attitude, inspired by my parents.
It’s possible to be successful without a bank account, but without one, you’ll have obstacles in today’s society. You can work at a job where you’re paid cash, or you can use check-cashing services at Walmart or storefronts. Prepaid debit cards can help you buy things in an increasingly cashless environment. But all these workarounds are expensive and limit your financial possibilities.
Bank accounts can be expensive, too, and many of these financial corporations will try to fleece you at any opportunity with overdraft fees, minimum balance requirements, maintenance fees, and ATM fees. The list of hidden fees seems to go on forever. Avoiding fees sometimes requires some attention, but when you can, checking and savings accounts are much better than “alternative banking products.”
You don’t need to go crazy. You can do everything you need with one checking account, but to make the most out of benefits banks have to offer, you’d need one savings account as well. That will help you earn interest on the money of yours you let the bank use — yes, when you deposit money in a bank account, you’re letting the bank use your money, so they should be giving you something in return (in addition to your ability to withdraw any amount of your money at any time).
I prefer the KISS strategy when it comes to bank accounts: Keep It Simple, Stupid. (No offense.)
Choose one of these best bank accounts to open.
Best Overall Bank Account for an Adult.
Fidelity Cash Management Account. This is the best example of the KISS method of banking. It’s a checking and a savings account in one, though the amount of interest you earn is minimal. But for a primary bank account, that’s just fine. Everything is free. Let me repeat: Everything is free. There’s no minimum balance. When you want to use an ATM, the owners will charge a fee, but Fidelity pays you to cover that fee.
You receive free checks to use. (You should learn how to use a checkbook and how to write checks if you don’t already know.) You can deposit any checks you receive using an app on your phone. Of course, you receive a debit card to access your money using an ATM or for purchases. Open a Fidelity Cash Management account.
Best Bank Account for an Adult Who Doesn’t Trust Banks.
Your local credit union. Not a fan of the financial industry? Credit unions don’t answer to Wall Street, so they’re not always trying to profit from their customers. Credit unions are owned by their members (who are also their customers), so it’s a system that makes the needs of the customers their priority.
Many community credit unions are open to anyone, but some have restricted membership. Navy Federal Credit Union is one of the best-reviewed credit unions out there, but you need to be affiliated with the military or the Department of Defense (or have an immediate family member who is) in order to join.
The Navy Federal Credit Union e-Checking is that organization’s best option taking all the facets of banking into account.
An independent credit union may also be the best option for Socially Conscious Adults. (Trump fans should head to CitiBank or Wells Fargo; the president owns stock in these companies.) Search for a credit union.
Best Bank Account for an Adult With Limited Mobility.
The branch that’s local to you. For a while in my adult life, I didn’t own a car. That really limited my ability to get around to a distant branch. This might apply to someone who lives in a walk-able city, too, like New York City.
Convenience is an important factor in choosing a bank account, sometimes more than a tiny bit of interest you might earn. So if you have a bank within a walking distance of 60 seconds, no one would ever judge you for choosing that bank’s free checking option over another bank.
Almost every bank account in existence today can be managed online, so there should be very few things you need to actually travel to a branch for. But sometimes, something comes up. But any online account should also be good for someone without access to transportation. Ally Bank is a strongly-reviewed online bank with a standard checking account. Simple is another interesting choice.
Best Bank Account for Adults Who Earn Interest.
Synchrony High Yield Savings. If you want just one bank account, choosing a checking account like one of the above. If you’re ready to have both a checking account and a savings account, and you’re moderately good at managing your money, a high yield savings account is a good choice for a second bank account.
And in recent years, Synchrony has offered one of the highest interest rates around. As of right now, that’s 1.05% APY (annual percentage yield). What does that mean? If you deposit $1,000 on day one and do nothing else, on day 366, your balance will be $1,010.50.
Not a huge increase, but it’s better than ending up with less. And we’ve been at a low point in interest rates. They will rise in the future — we just don’t know when. Open a Synchrony High Yield Savings account.
Best Bank Account for Adult Entrepreneurs.
Citizens Bank Clearly Better Business Checking. It’s important to separate your business finances from your personal life. If you develop a business, or you start earning money from your hobby in a serious way, you’ll want a business checking account. Make your business official with the state and federal governments, then open this account.
There are no maintenance fees and no minimum balance requirement, so it’s perfect for your side hustle. The bank offers 200 free check transactions, which should be sufficient for most small businesses. Open a Clearly Better Business Checking account.
If you have a bank account, which account do you have?
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Don’t let your fate rest in one person’s hands. Read More...
Sure, I wanted to grow up to be Madonna or even Stevie Nicks. But, for many reasons (obvious and not so obvious) that was never going to work out. I got into business — much to the relief of my parents. That worked out pretty well. I made it to middle-management and life was easy.
Then, I got the bug!
I couldn’t work for someone else any longer, wanted to do my own thing, and I knew what I wanted to do. Then, life wasn’t so easy. The life of an entrepreneur is a roller coaster. However, I wouldn’t change it for the world because now that I’ve survived the good, the bad and the ugly, it’s excellent.
One of the reasons my business is good to me is that I’m no longer reliant on one stream of income. The second and better reason is I’m no longer reliant on one person for my income. Finally, there’s diversity in what I do. Today, alone, I’m working on three of the incomes streams I mention below. If I wanted to, I could choose to do none of them.
To me, that speaks to the power when you diversify your income streams if you want to be an entrepreneur today. Here are my recommendations for you to consider and how I’m using (most of) them.
1. Monetize your blog.
You already know that I want you to become a blogger. I want everyone to become a blogger. I think blogs are as important as resumes. Plus, they can create the opportunity for you to go solo. There are many benefits to having your blog, some of which I’ll include in the following.
One of the easiest ways to make money from blogging is to monetize your blog. Google Ad Sense and Amazon Affiliate Links are probably the two most popular and accessible ways to monetize your blog. There are other companies you can you, but these are the only two I’ve used, so I don’t want to mention them.
When I first started blogging, we used Google Ad Sense that included a banner ad at the top and bottom of our blog and a square ad on the right rail of our blog. Choosing specific parameters, I permitted Google to rotate ads carousel-style on my blog.
Because you make money when people who visit your blog click on these ads, the more traffic you have, the better your return on your investment (ROI). Over time Google Ad Sense and their competition have decreased in their ROI, but they’re still an easy way to make money when you start blogging.
I use Amazon Affiliates for two reasons. The first is I have more control of what I promote on my blog. I don’t run the risk of advertising the vacuum cleaner of the week to my audience who has no interest in vacuum cleaners.
On top of that, I don’t have unrelated banner and square ads taking up real estate on my blog. Amazon Affiliate links are a better way than Google Ad Sense to make money in our experience. We have a blogger friend whose whole business is based on Amazon Affiliate Links.
2. Add affiliate marketing to your blog.
The most lucrative marketing strategy, at least for me, is affiliate marketing. Affiliating marketing is when you establish a relationship with a company to promote or sell their product on your blog.
The reason affiliate marketing is lucrative is two-fold. First, the affiliate payouts are better — at least for the companies I partner. My blog is about personal finance for the LGBTQ community, and all my affiliates are finance related.
The second reason affiliate marketing is lucrative is because I only affiliate with partners that can serve my niche. For example, when I talk about the benefits of refinancing a loan, I can link directly to an affiliate of mine that does that. My readers don’t see an ad for the vacuum cleaner of the week when I’m helping them lower their interest rates.
Another friend of mine has a course about making money with affiliate marketing. If this is something you want to learn, check it out.
3. Start freelance writing.
Freelance writing has been good to me, but it took me a while to earn credentials to become a freelance writer. I’m glad about that. Of course, I wanted to get paid for my writing the first day I started blogging. When I look back on my first blog articles, though, I recognize that they’re horrible.
Blogging for myself for years helped me find my voice and style — learn more about being a better writer. That time was valuable.
When you’re ready to write for others, it’s worth it. It’s helpful, though not necessary, to find clients in the niche you’ve established for yourself on your blog. I’ve seen it’s easier to sell yourself because your portfolio aligns with your potential client’s needs.
That said, I write for Adulting, which isn’t exclusively about personal finance. It’s been fun and worthwhile for me.
Another friend of mine has a course that teaches you how to become a freelance writer, even making it your primary income stream. If this interests you, I highly recommend her course.
4. Connect with brands for brand partnerships.
Brand partnerships are fun! I’ve done everything from simply attending an event to being part of a game show.
As your following grows on your blog, and as your email list gets bigger, and as your social media presence grows, you’ll become an “influencer.”
Fancy, huh?
Simply advertising on television and radio aren’t marketing strategies anymore. Brands partner with people or other businesses that have a following to generate interest and excitement in their products and services.
For this income stream, Twitter has been invaluable. Twitter’s struggling, and many think Twitter’s dead, but for me, it’s been great because it’s the primary way that I’ve been able to connect with top brands in my niche.
Again, I’ve only partnered with brands I believe in, and that align with my business’s mission. I don’t want to bring my readers to an event where they’ll be sold something that will sabotage their goals and our relationship.
As my social media following has grown, I’m having discussions with brands that aren’t in my niche but with whom there could be a symbiotic relationship.
5. Become a public speaker.
Public speaking is also fun after the nauseous pit in your stomach goes away, at least for me. Now that I’ve overcome that feeling, public speaking has been good to me.
Having a voice on your blog makes getting into public speaking because people and businesses want to know what you have to say before they hire you to say it. Again, having a social media following helps, too. Companies like it when you can attract an audience to an event.
Public speaking can be very lucrative once you’re even slightly established. If you get into public speaking, you’ll do some gigs for free. Just like with your first articles, you’ll eventually feel that not getting paid for your first public speaking gigs is a good thing.
Once you’ve gotten better at the craft, the trajectory to earn good money is slightly less than vertical. An added perk with public speaking in cities where you don’t live is that the people and businesses that hire you expect to pay for your travel, hotel, and some food.
Another friend of mine has a public speaking course, that’s all about how to get into the public speaking space. It’s the course I use and some of his templates I still use today.
6. Become a podcaster.
Honestly, I fell into podcasting totally by accident. Thank heavens I did fall into it.
I love podcasting because it’s a wealth of information. I’m gay. My husband’s gay. Our platform is personal finance for the LGBTQ community. One might think that I know my community inside and out. But I don’t. There is so much that I don’t know — and my podcast helped me see that.
When I learn something new on my podcast, I research it and learn how my business can help. This new knowledge gives me content for future podcasts, freelancing writing, and articles for my blog that link to affiliates with solutions. See the cycle?
Podcasting has also been a good income stream for me. Some of my brand partnerships have happened in part because I’ve included my podcast as a selling feature with the partnership. Also, because brands want to connect with my niche, the LGBTQ community, brands have asked to sponsor my show.
7. Sell courses.
I’m creating my first course now. As you can see from all my recommendations above, many online entrepreneurs create courses on topics they’re capable of teaching. Even before you start doing any of the above, you may already be an expert in something you can teach.
That’s great! Don’t wait. Create your course. Make your course your main platform.
Is it easier to sell your course after you’ve generated a steady stream of traffic to your site and after you have a substantial social media following? Yes.
Is that the only path? No.
I have another friend/colleague, who established her course as her platform and her blog traffic and social media following followed.
Being creative with marketing your course may make my above recommendations easier or unnecessary.
8. Be a social media manager.
My next two recommendations aren’t income streams for me, but I know many people for whom they are.
Social media is essential for bloggers. It can be a full-time job itself. In fact, for many bloggers, it is. That’s why they hire out their social media to social media managers. As your business, brand and social media following grow, it’s harder to stay engaged with your social media followers personally. Your blog traffic and your social media following are your bread and butter. Don’t dismiss it.
The good thing about becoming a social media manager is that if you like (or are already good with) one or more social media platforms, research on YouTube and with podcasts how to become a social media manager for someone else, and you can make yourself a nice income.
As with anything, you may need to start at the bottom of the income ladder, but it won’t be long before you can make this a part of your income stream.
9. Help others by becoming a virtual assistant.
Though I haven’t been a virtual assistant, I desperately need one. The job description for a virtual assistant is broad, and you can define it on your terms. Virtual assistants:
Manage emails
Manage calendars
Manage social media
Help with editing
Website/blog design
Research
Act as personal assistants
Other random items
What and how much service you provide will help determine how much you charge, commensurate with experience. If you need, start out simple and small. As time goes on, add more skills to your resume and increase your prices.
The most significant selling point of being a virtual assistant, in addition to the income stream, is that you virtually assist from literally anywhere in the world. It’s in the job title. Want to work from Idaho Falls? Do it. Want to work from a beach in the Caribbean? The option is yours.
These are just nine ways you can diversify income streams. They’re not the only ways. Hopefully, these nine will get your entrepreneur brain churning on all the ways you can make money in addition to working for your boss or working for yourself.
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Show Notes
Emma Johnson, author of The Kickass Single Mom: Be Financially Independent, Discover Your Sexiest Self, and Raise Fabulous, Happy Children and blogger-owner of http://wealthsinglemommy.com/ joins Harlan and Miranda today to share tips about living a great life while being the single parent of children.
We talk about dating, money, and how you can feel empowered and love being a single mom without hating men. We also look at taking charge of your finances and rebuilding your life on your own terms.
Emma Johnson is the author of THE KICKASS SINGLE MOM: Be Financially Independent, Discover Your Sexiest Self, and Raise Fabulous, Happy Children, creator of the immensely popular blog, WealthySingleMommy.com, and host of the podcast, “Like a Mother,” where she explores issues facing professional moms like herself. She is a writer, journalist, entrepreneur, former small-town Midwesterner, and current New Yorker. Since launching her blog four years ago, she has become the leading voice of single motherhood in the popular media and has been quoted in The New York Times, The Wall Street Journal, U.S. News and World Report, Women’s Day, and NPR, among others.
Hosted byHarlan L. Landes and Miranda Marquit Produced byadulting.tv Edited and mixed bySteve Stewart Music bybensound.com
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!
Does the thought of investing scare you because you need a lot of money to get started?
That’s one of the biggest reasons people are missing out on the best way to build wealth over the course of their lives. It’s hard to just take that first step when you’re also concerned about feeding yourself or your family, covering your rent or mortgage, and affording every other necessity in life.
But you don’t need a lot of money to start investing. For example, $10 a week can turn into $75,000 if you give it some time. Here are a few ways to make that happen for you.
WealthSimple.WealthSimple arrived in the United States after its success in Canada, and its strength is its cost. When you’re starting out with investing, you don’t want fees digging into into your profits.
There’s no charge to transfer money from a bank account into your WealthSimple account. I started out with a $10 weekly investment, but you could start with $5 a month if you want, or if that’s all you can afford right now.
When you sign up, you fill out a short questionnaire to determine how your money should be invested with a mix of exchange-traded funds — one of the most frugal ways to invest in stocks and bonds. You can accept their suggestions — and if you’re new to investing, that’s what we would suggest you do — or change them to suit your tastes if you have a little more experience with investing.
If your account stays under $5,000, you will not be charged any fee for the first year. Above or after that, the management fee is a small 0.5% — though, if you find yourself with more than $100,000 invested, they’ll reduce your fee to 0.4%. This is a great deal when it comes to investing, especially if you’re starting out with just a little bit of cash to invest.
LendingClub. If you’re open to a different kind of approach to investing, take a look at LendingClub. Rather than investing in stocks and bonds, you’re investing in loans. The returns are similar to stocks, and the risk is managed. The only drawback is that your investment is a little less liquid. That means if you need the money you’ve invested in an emergency situation, it might be hard to withdraw immediately. (That’s why it’s always best to have an emergency fund.)
LendingClub helps you pick out the best investments and gives you a good idea of what you can expect to return. You can use your investment to create an income stream. There’s a higher minimum investment of $1,000, but you can save up in a savings account until you are ready to start. After that, you can increase your investment with only $25.
Ally Invest. Ally Invest is a discount brokerage with truly low prices. Yes, the $4.95 fee per trade will cut into your profits if you invest small amounts in stocks or ETFs. If you want to invest frequently, WealhSimple mentioned above might be a better option, though your investment selection is limited. On the other hand, Ally Invest really lets you take control of your investments. There’s less guidance, but more flexibility.
Ally Invest used to be known as TradeKing, which made its name as one of the most popular discount online brokerages.
There are three great options above for getting started with your investment portfolio. This is something every adult should have, and every adult should invest for their future, regardless of how difficult it might feel to let go of even $1 of cash today. Your future-you will thank your today-you if you just take one simple step forward today, even if it’s not a huge step. Thankfully, these resources are here to help you out.
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Everywhere you look, someone wants to know your credit score. The credit game is serious business. It can impact whether or not you can get a loan for your home, and can even influence your auto insurance rate in some states.
In fact, there is some indication that your credit matters when you’re looking for a date. Increasingly, the credit game is part of the dating game.
So, what do you need to know about credit? And how can you make sure that your credit is good credit? Harlan and Miranda tackle this issue in this week’s episode.
How to develop good credit habits that can result in a good score.
For this week, our DO NOWs are about making sure you are checking your credit and financial accounts regularly. Check your credit report, set up with a consumer credit site, and create a schedule for monitoring your accounts.
This week, a reader asks how they can repair their credit. With the credit game, though, you don’t always need someone else to take care of business. We talk about what a credit repair company can — and can’t — do.
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Insurance feels like a waste of money. However, the reality is that you probably need it. Without it, your assets — meager as they may be — are at risk.
When you buy the insurance you need, you can cover your assets in many situations. Let’s be real: if you totaled your car, and you still owe money it, could you really afford to buy a new car right now? Plus, you’d still have a loan to deal with.
In this episode, we look at the disturbing reality that insurance is a necessary part of financial planning. In some cases (like health insurance and auto insurance) it’s even the law.
We’ll help you figure out what insurance you need to be effective.
Concepts
How insurance works.
Ways insurance can keep you from ending up in a worse financial situation.
Types of insurance required by law.
Insurance policies everyone should have.
Insurance policies that can be beneficial, depending on your situation, but that aren’t for everyone.
Types of insurance policies you should avoid.
Tips for figuring out what insurance you need.
This week, DO NOWs look at what you need to do in order to get the insurance you need. This includes writing down your needs, and documenting what you have in your home so you’re ready in case of a claim.
This week’s listener question looks at how you can feel better about the whole insurance thing. We look at ways you can get over the idea of “wasting” money on insurance.
Become a Friend of Adulting
To get Adulting delivered directly to your device, subscribe using Apple Podcasts, Stitcher, Google Play, or your app of choice.
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!
More than 6.5 million people in Florida were instructed to evacuate before Hurricane Irma struck the state. Leaving everything behind is not easy for a family — and it’s not cheap. While insurance may cover damage due to the storm, how do you handle the expenses you have when you need to change your plans with a moment’s notice?
You need an emergency fund. It’s one of the first steps for preparing for the unexpected — and handling your money like an adult. If you don’t have an emergency fund yet, you need to start it now.
Here are some of the best banks for emergency funds today — because they pay out some of the highest rates.
My friend’s brother lives in Florida, and his home was hit hard by Irma. He, his wife, and his daughter secured their home as well as possible and left town, driving with thousands of others north, away from where the hurricane would do the most damage. Because he had an online savings account with CIT bank, an emergency fund for the family, they were able to come up with the money they needed to get out of town and stay in a hotel for a few days before reaching family.
Start that emergency fund now.
Add to your emergency fund little by little. Transfer a small portion of every paycheck. It won’t hurt you to miss 1% of your pay today, and it will help you later when you need to come up with money fast.
Could you make more money by investing your money in stocks instead of a savings account? Sure, but it could take more time to withdraw the value of those stocks when you need the money, and chances are good you’ll need the money at a time when the stock value is lower than you’d hope.
Add the taxes you have to pay on top of that, and it’s easy to see why investing is not a good option for money you might need in an emergency. That’s why high-yield savings accounts are the best options for emergency funds — like the one you need to withstand the next hurricane.
Choose a bank below to start your emergency fund.
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Amassing debt is easy. It’s a lot harder to answer the “how” and “why”. These answers can help you avoid mistakes and they can help you remedy them. Read More...
When the topic of credit card debt came up on the Adulting editorial calendar, it only made sense to assign it to one-half of the Debt Free Guys.
In case you’re not familiar, my husband and I acquired $51,000 in credit card debt despite having years of experience in financial services. The reason we amassed that impressive total was that we were living and spending unconsciously and trying to make up for years of insecurity and self-doubt.
Our story is just one example of how people find themselves in more debt than they can handle. There are numerous reasons why people get into debt. Below is a list of what to look out for so you can avoid getting into debt yourself. And if any of these describes your story, know that there is a way out.
Don’t know their financial goals.
It’s my belief (and my husband’s) that more people are in debt than there needs to be because they aren’t clear on what their financial goals are.
It’s like knowing your destination when you’re in the car. The very first and most important thing you need to know is where you want to go. You can have the nicest car, years of experience driving, and it may be a beautiful, bright, and sunny day. But if you don’t know where you want to go, you’ll never get there.
This issue was my challenge. I didn’t know what my financial goals were and so I spent my money on any and everything. I sought short-term, easy satisfaction rather than long-term, secure satisfaction.
Don’t know their life goals.
The sister reason why people get into too much debt is that they aren’t aware of their life goals. Financial goals and life goals are not synonymous.
For example, our stepson just graduated high school. He recently asked for help to create a plan to ensure he’ll be financially secure, not necessarily wealthy, but stable. Financial security is his financial goal. After doing some exercises with him, we’ve since attached a dollar sign to what financially secure means to him and how to get there.
His life goal is to be an artist. He’s currently interested in videography and photography and is going to college for photography. He knows there’s a chance he won’t make a fortune in photography, but in that instance, his financial goals will support his life goals.
Without knowing what you actually want and developing a strategy to get it, you’ll go in any direction the wind takes you. Have you met people like that? Every time you meet them, they have a new goal, they’re moving elsewhere, they’re focused on something new.
Try to keep up with the Joneses.
It is challenging to live in such a consumption society. Everywhere you turn, someone has something newer and nicer than you. Whether it’s your neighbor or the guy on television who you want to be like or be with, it’s easy to get sucked into competitive consumption.
My sister and brother-in-law experienced this in their neighborhood. Theirs is an interesting case study. They lived in a quiet area full of homeowners about their age and children all about their children’s ages. They were all middle-income earners, all within the same income bracket.
Sure enough, when a neighbor did an upgrade to their home, suddenly several other neighbors did upgrades. When someone bought a new car, suddenly there were new cars all over the neighborhood. It all ended finally when one couple said they had to move away because the competition was hurting them financially.
Trying to keep up with The Joneses is like trying to live someone else’s dream. In either case, you’ll never achieve true happiness if you’re living someone else’s life.
They don’t know how to manage money.
Most of us never learn how to handle money. It’s a major disservice of our school system. We motivate and encourage our students, regardless of student loan debt, to get the best and highest job possible, and yet they don’t know how to manage their money.
Being financially secure is not contingent on how much money you earn, but how you handle the money you do earn. With the accessibility of the internet, there is a host of financial information at anyone’s fingertips.
They live and spend unconsciously.
This issue is synonymous with sticking your proverbial head in the sand. Often people live and spend unconsciously because taking the time to learn about their financial situation would mean they’d have to live and spend better. Whether they earn too little income to support their lifestyle or are trapped in an increasing cycle of amassing debt, they continue not to pay attention because it’s easier than addressing the truth.
Unfortunately for many, they learn Stein’s Law the hard way. That law says that if something can’t go on forever, it won’t. Stein’s Law is why most of the emails my husband and I receive are from people who are about to file bankruptcy or have reached retirement age and can’t retire.
They just divorced.
Divorce can be paralyzing to one’s life and finances. No part of divorce is fun, and it can leave both parties bruised emotionally and financially.
Not only is divorce itself expensive due to legal and court fees, but the division of assets rarely seems fair to both sides. The compound effect is that contractual obligations, such as requirements to repay debts, don’t disappear when you divorce.
Over 75% of Americans are in debt. It’s logical to conclude that 75% of couples in America who get divorced also have debt. Those debts must still be repaid despite the status of your marriage.
They have unexpected or large medical bills.
Healthcare in the United States is not getting cheaper, and a health scare or issue can easily wipe out one’s life savings. Even with an increased usage of HSA accounts and access to retirement funds to cover medical expenses, the wrong ailment can ruin one’s financial life.
People don’t make logical decisions when they have an addiction. You might automatically assume that this point is about gambling. To be sure, gambling does ruin a lot of people’s financial lives. They lose life savings and acquire numerous, even sketchy forms of debt.
This point also applies to people with drug and alcohol addiction who may make poor financial decisions that can cause them to acquire debt. It’s easy to get wrapped up in letting debt subsidize your addiction.
They don’t understand how credit cards work.
In part, because many people don’t understand money, most people don’t know how debt works. We receive too many emails from people saying that they weren’t aware that their interest rate could increase. They assume that the only reason their credit limit increased was that they’re doing well financially. They assume that the only reason they were offered a credit card was due to their creditworthiness – because they’re doing well with their existing credit cards.
That’s simply not true.
Just as with purchasing investments, it’s important for people to understand the nuts and bolts of how credit works. This is where reading the fine print helps and reading personal finance blogs that you can trust helps even more.
They’re unemployed or underemployed.
Even though the economy has been recovering since 2008, and wages are increasing, too many people are unemployed or underemployed. The economy is changing, and more jobs are being automated.
It’s incumbent upon American workers to increase their skill-sets and diversify income streams. This is one of the reasons why I recommend to everyone –everyone – to start a blog. Regardless of your career or skill set and regardless of what direction you want to take your career, a blog is a critical component of future career and financial success. Some people, in fact, think having a blog is more important than having a resume.
These are the top 10 reasons why many people find themselves in more debt than they can manage. Once you know what to look out for, it’s easier to avoid the mistakes. If you see yourself in one or more of the reasons above, now that you know your problem, you’ll more quickly remedy it.
Have you experienced one or more of the reasons above? Were you able to climb out of debt? We’d love to hear about it in the #Adulting Facebook community.
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