Sarang Ahuja | Finance

Leader, Financial Expert, Game Changer

Tag: financial savings

Talking to your Kids about Finance—Sarang Ahuja

Talking to Your Kids About Finance

It can be tough to broach the subject of money with kids. After all, they likely haven’t had a real job or had to worry about their own finances early on in their lives. For children, adults appear to have their finances figured out, with magical credit cards that allow them to pay for everything and no knowledge of what goes on behind the scenes. Talks about the value of saving money are generally the baseline measure taken to help kids understand finance, but even then, the idea of spending and saving money may seem a world away to them.

I’d like to share a few of the ways that you can talk to your kids about money in a way that can prepare them for the future.

Explain how your finances work.

Children are renowned for their curiosity, and when speaking with them, it helps to treat them like people and not talk down to them. That said, it can be difficult to explain finances in terms that they would readily understand. But some of the basics—how a credit card must be paid back, how monthly expenses can define a budget—can be crucial in giving your children a sense of the effort that goes into managing money.

With the amount of automation that comes with managing finances, it can seem like an effortless process to an outsider, something that anybody can tell you is certainly not true. Dissect the accounts, payments, and taxes that go into every transaction with your children. You’ll likely find that they’ll have plenty of questions of their own.

Teach Shopping Habits.

Make your kids into smart shoppers by showing them the ways that you compare goods when shopping. Note to them the size and price, and experiment with different brands to spark a discussion about whether or not paying extra for a certain brand is worth it.

Work On Saving Goals.

Saving is one of the basic tenets of financial management, but to what end? Work with your children and encourage them to set saving goals, even if they’re relatively minor. Is there a new game that they want? Talk to them about the price and how long it will take to save up for it. If they get a regular allowance, help put in perspective how far their money goes. Start a savings account for your child, and teach them the value of setting funds aside for the future. Talk to them about setting aside things like birthday and holiday money in this account.

Set a Budget.

This one is more geared at older kids coming up on their teens, but breaking down monthly expenses and comparing them to income is a valuable lesson. As a child, it can be easy to forget about the transactions that keep an individual afloat, from rent to food to car payments. Create a somewhat simplified budget with them, giving them a better sense of how you allocate your finances each month, and give them the chance to plan one of their own.

Invest Wisely.

Once you’ve covered a lot of the basics, talk of stocks and investment can help kids understand the value inherent in businesses. Make it a family activity; have every individual track a stock and discuss the highs and lows that it goes through over the course of several weeks.

Teach Giving.

With all of the pressure to accumulate enough cash to balance a budget, it is still important to teach your children that, at the end of the day, there is still always someone less fortunate that is worth giving back to. Encourage them to research different charities, and perhaps even foster their own fundraising efforts for giving back to the cause of their choice.

After all, it’s not just about encouraging them to be better spenders, but encouraging them to be better people.

Financial Recovery (1)

Financial Recovery—Acknowledging Your Money Missteps

When it comes to personal finance, it can be easy to continue spending on something that offers you little to no value with a disproportionate level of attachment due to resources you’ve already expended. This is known as the sunk cost fallacy and can cause individuals to act against their best interests and spend more than necessary. When this happens, the best course of action is to ignore the amount already spent and move along, even if this is difficult. Similarly, if you’re caught up in another bad financial habit, the solution is always to acknowledge the issues with your behavior and adjust accordingly. With that in mind, here are a few financial mistakes that are easy to make, but also easy to recognize and fix.

Not planning for a major life change

When something major occurs in your life, you should attempt to anticipate and deal with it as soon as possible. Changing jobs and careers is perhaps the most jarring financial change to make, but the expenses and time associated with major events such as weddings and the birth of a new child can tax you more than you’d expect.

Take advantage of the time you have before the event occurs. When it comes jobs, don’t quit until you’re absolutely certain you’ll be able to support yourself between jobs. Setting up a new job is half the battle, but the other half can often involve pursuing other sources of income that can support you in the interim.

Not tracking online payments

When it comes to online payments, never assume that payments are being made automatically. Even with autopay on, make a list of websites that will be charging you and find time to check them after every payment is made. It can help save you from unexpected late fees and save you the hassle of having to call companies to talk about your payment.

And, as previously stated, never hesitate to let go of a recurring payment if you feel you are no longer gaining value from it.

Not having a budget

Building a budget may seem like a daunting prospect, but there are tried and true rules that can help you easily plan out where your money goes every month. One of the most prominent is the 50/20/30 rule, which states that you should allocate 50% of your monthly funds to necessities, 20% to retirement, savings, and debt payment, and 30% for lifestyle expenses, which involve everything else. You’ll need a way to track this budget, and some online services make it easy, but much of this can be done by writing down relevant information.

Not building additional sources of revenue

Sometimes, time limitations make this difficult, but securing or setting up alternate streams of income can give you more breathing room month to month. This can involve taking on freelance projects, securing a part time job, or even selling old items that you no longer need. Be flexible, and ensure that you have the time to properly dedicate to side projects.

Not having long term goals

Things like retirement can seem like ages away, but knowing the eventual outcomes you are trying to achieve go a long way toward your planning tactics. For that matter, it’s not enough to simply have a goal; you need to know the steps that you want to take to reach that goal, and do the proper research and preparation to ensure that you’ll be able to act on it when the time comes. This can involve managing your debt, creating an emergency fund, and putting serious thought into where you allocate your savings.

TedTalks Finance: Shlomo Benartzi and Saving for Tomorrow

When it comes to finance and personal savings, it is often easy to say that you are going to save for the next week. But what about now? What about today? Generally, we as a public have assumed a mentality that is driven by our intrinsic desires to spend. In this TedTalk, Economist Shlomo Benartzi discusses the biggest obstacles when it comes to saving for your retirement. He includes various psychological behavioral factors that questions our mentality so that we can reflect and internalize on our true priorities.

Evaluate Your Finances, February Edition

finance

With a month already into the new 2016-year, the resolutions for a financially healthy and fruitful future may find its way at a close. For many of these resolutions, these intrinsic financial goals have motivated millions of Americas to evaluate their personal finances holistically. But, like with any motivating push, the timespan can oftentimes be short-lived.

Before you hang up the cleats and veer away from your bank statements, think back about why you wanted to save. Reflect on your goals for the future and critic what your funds and savings were within the past month. This type of practice is a necessary starting point to help you get back on track in evaluating your financial goals for the year.

Once you have self-reflected on those objectives, take a few hours to evaluate your finances more specifically. Below, you will find seven key financial metrics you should examine thoroughly. These numbers will allow you to see where you are currently are and what you need to do to reach your goals. Remember, the more you know, the better off you will be in the future.

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1. Know Your Net Worth

One of the most important metrics you should evaluate is simply your net worth. By definition, your net worth is the amount by which your assets exceed your liabilities. Another way to look at this is the overall value of everything you own minus your debts. This number will allow you to measure the status and heath of your personal and professional finances, while also setting you up financially for your future goals. To accurately determine your net worth, use this tool here.  This will allow you to

2. Know Your Debt Levels?

The next step is to look at your debt and expenses. Start off by evaluating your 2015 debt levels. Then compare them to a month-by-month spread. Here, it is important to go beyond the numbers and see what you can do to optimize your financial situation. Ask yourself these questions: What was your biggest expense? Did you borrow any money within the past twelve months? What can you do to pay down your debt faster? These overarching questions will allow you to strategize and plan a way you can save even more.

3. Retirement Planning

For some people, this may be a new concept. For others, this is seen as a bi-weekly ritual. Like it or not, time will always be never-ending. Because of this, you need to make it a point to plan a retirement budget. A simple approach is to assess whether you are contributing any amount to a 401K, IRA, or retirement account set up by work. If not, try and find an option that will allow that. Once that is set up, try and find a way to optimize your savings. The best way to do this is to think about your goals. Think about what you are looking for twenty years from now and how much you should have at that point. This will provide you the necessary incentive to continue, and possible increase, your savings.

4. What is your Credit Report Score?

One of the best indicators of analyzing your personal financial health is to evaluate your credit score. You may have heard this phrase thrown around when you are looking for an apartment or looking for a new credit card. Whatever is the case, having a strong credit score can alleviate any pressures in specific financial situations. To get your credit report for free, check out annualcreditreport.com.

5. Savings

Outside of your retirement, there are a variety of different aspects when it comes to savings. One of which is the cash position that can be handled in a short-term use. And the other is for unexpected emergencies. This is usually what we call an emergency fund. At the end of the day, we cannot predict the future. There are unforeseen events such as a hospital visit or a car crash that will require us to have a lump sum ready to use. If you have not already set up this type of account, I would strongly advise you to begging saving for your emergency fund. Remember, just because you own a crystal ball does not mean you can predict the future.

6. Student Loans

This is more for the fresh college graduates who are seeing the adult world for the first time. Unless you were on a scholarship or you were fortunate to have your parents pay for your education, student loans may be the dark cloud following you everywhere you go. The best way to tackle this problem is by knowing the monthly amount. This goes back to the second financial metric, “Know Your Debt Levels.” By having a conceptual understanding of this expense, you will be able to control how you are going to pay it off and how much you can save each and every month.

7. Future Investment Opportunities

If your investment is financially healthy, you should begin exploring other investment opportunities. If, however, you are hesitating about the situation, talk to a financial expert. Either way, exploring different avenues and finding new ways to grow your money other than work can be incredibly beneficial to your campaign.

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