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Money

Why Money Is Important

In this article we will discuss why money is important. In addition, we will talk about how to save money, how to budget and how to build wealth.

Many people in America are drowning in debt, have no savings and no investments. We will show you why money is important and how to begin paying off debt quicker, save money faster and learn about investing. We will also touch on investing subjects such as commodities, stocks and real estate.

The good news is that you can begin growing your wealth immediately once you understand why money is important. Learning to be disciplined and make small sacrifices today can mean more financial security for the future.

The primary reason why money is important is that money gives you options. For example, if you have ever felt powerless or hopeless, it was probably related to a lack of money. Some people are quick to criticize those who seek their fortunes; however, having money provides you with options. Having extra money not only gives you options, but it provides you the power to save money on purchases by not using credit, which is why money is important.

Budgeting

The first and perhaps most important tool in your finance tool box is budgeting. The point of budgeting is to gain control of your money. You want to keep more money and pay less to others. That’s how you win at the game of money and budgeting is a powerful “hammer” in your tools on finance.

While creating your budget and assessing your financial situation, it is likely that paying down debt will be critical to your success. You must begin understanding what has brought you to this point in life. Begin to look in detail at how you spend money and create a budget. You will also start making plans and setting goals. Finally, you will learn discipline and begin using proven methods for keeping more money.

Create a Budget Now

One of the best tools on finance is learning to budget. That is, it’s important to keep track of your money. A budget can help you track and control your money. This is one of the reasons why money is important. Having a balanced budget means spending less of your paycheck. Preferably, you will have some money left over to pay off debt and save for the future. In short, everyone should budget, whether you are a large corporation or just one person.

Eliminate Unnecessary Expenses: Designer Clothing, Eating Out, Overdraft Fees and Shopping Sprees

In many cases, one of the tools on finance is through frugal living. This simply means spending less than you make. Moreover, creating a simple monthly budget can assist you in determining whether you are meeting your goal. In addition, learning to be frugal can help you steer clear of debt in the future. For example, when you eliminate extra expenses that are unnecessary, you will have more disposable income available for saving. As a result, saving money from disposable income can help you better understand why money is important.

It is helpful to make a list of what expenses are needs and wants. For example, paying for electricity is needed; having a spa membership is a want.

In addition, you will also want to figure out ways to cut spending. This will help you save more money quickly. Ideas for Budget Items to Cut:

  • Memberships (Spa, Gym, Entertainment, etc.)
  • Subscriptions (Magazines, news, etc.)
  • Eating Out
  • Cable
  • New credit card spending
  • Traveling/vacations

Stop Using Credit Cards

Another one of the tools on finance is discipline. If you are starting a budget, you probably have credit card debt. The problem with credit card debt is not the debt, it’s the interest. First, every day that you maintain a balance on your credit card, interest compounds. Compounding interest works against you when you’re trying to pay off debt. Getting rid of credit card debt requires discipline to spend less and save more. In addition, it will help you better understand why money is important.

How Budgeting Helps You:

  • Improve your credit score
  • Save for emergencies
  • Save and invest for retirement
  • Stop wasting money and curb bad habits
  • Promote a healthy, meaningful lifestyle
  • Buy a new home or upgrade your existing home
  • Obtain financial freedom

Creating a Budget: Step by Step

Determine Your Income, Expenses and Calculate Disposable Income

Having a balanced budget means spending less of your paycheck. Preferably, you will have a significant amount of money left over to pay off debt and save for investing. In short, everyone should budget, whether you are a large family or just one person.

One of the best tools on finance that we will be describing is a monthly budget. Many people pay bills once per month and may get paid once or twice per month. In a simple example budget, you can create a column for expenses and a column for income. At the bottom of the page, you can total each column and the difference in the totals is either how much money you have left over or how much money you are short at the end of each month.

Step 1: Determine Your Income

Figuring out what your income is for the month is usually pretty simple. If you get paid every two weeks, then your income is the amount that gets deposited into your bank account. This is the amount that is left over after taxes are taken out. Make sure to account for each time you get paid in the month. If you don’t know what you get paid, you can look at your W-2 Tax form. Knowing what your income is and where it goes can help you better understand why money is important.

Step 2: Determine Your Expenses

Determining what your expenses are will take more time. There are several ways to determine how much you are spending each month. One way is to keep receipts and use bank statements to figure out what was spent each month. The second way to determine what you spend is to begin writing down each expense as it comes along during the month.

Step 3: Put all the Budget Pieces Together

Now that we know what our expenses and our income are, we can add up everything to determine if we are over or under budget. The goal of having a balanced budget is so that our expenses are less than our income. For example, if your income is $2,000 per month and your expenses are $1,500 per month, then you have $500 leftover each month ($2,000-$1,500 = $500).

Cut Expenses and Control Spending

Budget Not Balanced? Remove Expenses (Wants) from Your Budget: Memberships, Subscriptions, Etc.

If you are having trouble finding extra money in your budget, it may be time to cut expenses that are considered “wants.” No matter what kind of budget you have, it’s vitally important that you cut expenses. First, start by finding areas in your life where you can make cuts. It is helpful to make a list of what expenses are wants and needs. For example, paying for electricity is required; having a spa membership is not.

Learn to Live Below Your Means

Reduce Bad Habits like Eating Out, New cars and Designer Clothing

It’s critical that you form good money habits as you learn why money is important. In many cases, frugal living is the cornerstone of wealth creation and building wealth. This simply means spending less than you make. A simple monthly budget can assist you in determining whether you are meeting your goal. And these good habits can carry forward for a lifetime.

Unfortunately, living frugally is not popular in the 21st century. Popular culture dictates what “normal” consumer behavior looks like. And it’s considered normal to go out and spend money at restaurants, on vacation, etc. In addition, it’s “normal” to buy a big house and drive a new car. Creating the best budget planner will help with this.

Financially successful people don’t ascribe to normal behaviors. Those who attain financial success only purchase what is needed. They don’t buy new cars or fancy things. As a result, the extra money saved from this frugal behavior is put to work in investments.

Beware of Credit Cards and Debt

Credit Cards Can Create Painful Financial Lessons for You by Overspending and Interest

One dangerous lesson to learn is overspending on credit cards. In the modern era, gaining access to credit is far too easy.

Having a credit card can be a double-edged sword for anyone. First, using a credit card can be a learning tool about how debt works. In addition, you can learn about paying bills each month. However, there’s a risk that comes with credit: overspending. When you spend more money than is allowed on the credit card, or spend more than can be paid back, it can be a painful lesson in finance. But, sometimes difficult lessons can be valuable and last a lifetime.

If you make a mistake with a credit card, or overdraft an account, it can become a learning tool. Use the situation as an opportunity to learn from the mistake and implement better budgeting habits. Everyone learns the lesson of debt and compounding interest when we have to pay back what was borrowed, plus interest.

Saving Money

Most Americans Don’t Save Enough Money; Saving Requires Sacrifice

According to Business Insider, the average American Family has approximately $40,000 put aside in savings and investments. While this may sound like a lot of money, it’s not. Think of your monthly expenses and then consider for how long you could live on $40,000. Finally, the answer is you need much more money than you have now.

Saving money can be difficult. In many cases, saving requires that you make sacrifices in your life. For example, you might have to continue driving an older car instead of buying a new one, or do home repairs yourself instead of calling a professional for help. Obviously, no one enjoys making sacrifices. However, saving money can help you better understand why money is important.

Create the Habit of Saving Money

Saving is a habit that can be learned over time and simply requires discipline. Become determined to reach your financial goal. Your personal determination to learn how to master the tools on finance will help you keep more money.

In addition, develop good habits of saving money. In the classic personal finance book, “The Richest Man in Babylon” by George Clason, the author implores the reader to set aside at least 10% of your earnings. This is a great rule of thumb for saving and investing because removing only a fraction of your income each month will likely not even be noticed or missed. Yet, this small amount of money is the seed needed to grow wealth.

Set Goals: Learn to Save Money Every Paycheck

Put Aside 10-15% of Your Regular Income for Investment

One of the habits that are important related to tools on finance is learning to save some of each paycheck. Make it a personal goal to save 10-15% your paycheck each month. After a short time, you will realize that you don’t even miss the money.

Make saving 10-15% of each paycheck easy by setting up an automatic money transfer to their savings account. For example, each time their paycheck is deposited into the checking account, have an automatic transfer set up that moves money into the savings account. Some people find it helpful to have a savings account that is in a different bank. This reduces the temptation to spend savings.

Saving a small portion of your regular earnings is far from a new concept. Financially successful people have been doing it for hundreds or thousands of years. Saving can be a great tool when it comes to money management for you. Read the Richest Man in Babylon to learn more.

Investing Process

Establish Goals, Assess Personal Finances, Determine Risk, Develop Timeline and Begin Funding Your Investments

Learning about the investing process can be challenging if you are new to investing. In the old days, investing was simple: stocks, bonds and real estate. Today, investing has become much more complicated with hundreds of choices that may be very complicated to understand.

The good news is that your investment portfolio can be as simple or as complicated as you want it to be. In addition, you don’t have to be rich to begin investing. In this article we will lay out a clear, 5-step approach to the Investing Process you can use to organize how you invest and master the tools on finance.

Summary of Investment Process

  1.  Establish Goals
  2.  Assess Personal Finances
  3.  Determine Risk Tolerance
  4.  Develop Investing Timeline
  5.  Begin Allocating Funds for Investment

Step 1: Establish Goals

The first step in the Investing Process should be to determine what your financial goals are and what you wish to accomplish. Where do you see yourself in 10, 25 or even 50 years? The average life expectancy for Americans is around 78 years. However, you may have family members that live to be in their 90s and beyond. If you retire at 65 and live to be 95, will you have enough money invested to last through your retirement years? Clearly, investing for your retirement can be a critical part of why money is important.

Write Down Your Goals

If you want to retire at 65 and move to Portugal, then included this as part of your written goals. Begin by creating a journal, a spreadsheet or plan where you list exactly what you have planned for the future. This serves two purposes. First, writing down your goals makes what you want explicitly clear. It gives you a starting point and also provides you with the details that you will need to determine how you will reach your goals.

Second, the purpose of planning out your financial goals on paper (or electronically) is that you are signaling to yourself and others what you want. History has proven that the psychology of desire and intention is a powerful tool in accomplishing goals. Many wealthy investors credit their personal wealth and success to the philosophy outlined in the book, “Think and Grow Rich” by Napoleon Hill.

Step 2: Assess Personal Finances

Learn to Budget, Save, Pay Off Debt and Live Below Your Means

Budgeting is one of the critical steps that can help you take control of your life and control personal finances. In addition, preparing a budget allows you to not only know where your money goes, but also allows you to plan where your money will go in the future. Finally, it’s important that your money works for you, not against you in your investments.

Step 3: Determine Risk Tolerance

What is Your Level of Risk?

Active Versus Passive Investing; Aggressive Versus Conservative Investing

Determining your risk tolerance is an important part of the tools on finance. To start, you must determine what style of investor that you are. First, the major categories of investment include active management or passive management. For example, a portfolio manager can determine what investments are in your fund and make decision for you using passive management; however, active management means that you reserve more control of your investments and perhaps you even use online services to trade individual stocks on a daily basis.

Second, you must determine if you are an aggressive or a conservative investor. Aggressive investing is utilized by those who want to take more risk and capture greater returns. This type of investing is considered acceptable for younger investors and for savvy investors who want to dedicate a small portion of their portfolio to higher risk. Conservative investing is a lower risk style of investing. Returns tend to be lower than the aggressive style, but come with lower risk. This style is best for those that desire lower risk and those who are getting closer to retirement age.

Step 4: Develop Investing Timeline

Estimate Retirement Age and How Much Money You Need to Retire

How old will you be when you retire? This is one of the questions that you want to answer during the Investing Process so that you can gauge your progress toward retirement. In addition, you can set goals for how much money you need when you reach the milestones of 30, 40, 50 and 60 years old and so forth.

Determine How Much Money You Need to Live on

You Will Need 70-80% of Your Current Salary for Retirement Expenses

While thinking about budgeting, take a closer look at how much money you need to live on each month. For example, what basic amount of money do you need each month to cover expenses? You need enough money to pay for a place to stay, food, electricity, etc. Don’t include things like vacations, luxury items or entertainment. Once you determine how much you need to live on, you can then start to figure out what retirement expenses look like.

Another common rule of thumb for estimating how much money you need when you retire is the 70-80% Rule. In other words, many experts believe that you will need at least 70-80% of your current income to make ends meet. For example, if you bring home $3,000 each month, then you will likely need approximately $2,100-2400 each month in retirement. This is a realistic way of estimating what you need to retire if you don’t want to do complicated calculations or spend a lot of time on the topic.

Step 5: Begin Allocating Funds for Investment

This step is the final step in the investment process. First, you will begin depositing money into your investments. The easiest way to start is to allocate a percentage of your earnings each month. You will then review your investment portfolio each year with your investment advisor to determine whether it requires changes. Your investment advisor can help you through the process of investment and help you better understand why money is important.

Ideally, your investments will be divided into groups, with a certain percentage of your total investment allocation going to each group. For example, you may have chosen to invest in stocks, real estate, precious metals and cryptocurrency. You may be investing 50% in stocks, 25% in real estate, 20% in precious metals and 5% in cryptocurrency. Obviously, the percentage allocated to each group you choose will be determined based upon your risk tolerance.

Dollar-Cost Averaging

Many wise investors use “dollar-cost averaging” as a part of their Investing Process. Dollar-cost averaging is simply dividing up the amount of money you have to invest over a longer time frame. For example, let’s say you have $1,200 to invest in the year 2021. Then each month, you will invest $100 ($1,200/12 months = $100/mo.). Your $1,200 investment would then be dollar-cost averaged over a one-year period.

This investment methodology means that you invest the same amount of money each week or month, no matter if the market goes higher or lower. Dollar-cost averaging takes the emotion out of the Investing Process and simplified investing. It also prevents investors from making bad decisions.

If you don’t know how much to invest, then start out with a simple plan. Each month, divert 10-15% of your earnings to investment(s). An example would be investing in a 401(k), Investment Retirement Account (IRA) and/or real estate. Year after year, your money will grow and work for you during the Investing Process to create wealth. Seeing your wealth grow year after year will help you realize the power of compounding interest and realize why money is important.

Diversify Investments

No one can predict the future to know what investments will do well and which ones will fail. As a result, we can improve our odds of success in investing my diversifying our investments. Diversification of investments means spreading your money over different investment sectors. For example, you may want to have some stocks, bonds, real estate and precious metals in your investment portfolio.

Find a Good Financial Advisor

Many of the topics discussed regarding personal finance and investment complicated and you probably need the assistance of a financial advisor. A financial advisor can help you make better informed decisions about how to best invest your money. Be careful to select an advisor who is knowledgeable in their industry and who has a proven track record regarding investment.

Unfortunately, many “financial advisors” are simply sales people who know very little about investment and are simply trying to earn a commission by locking in your business. Do your research to find the best candidate. In some cases, good financial advisors charge an upfront fee for consultation because they do not earn a commission from helping you with investing.

Real Estate Investing

Many experts are predicting the real estate market in 2021 will be in decline. However, after the COVID-19 lock down in the United States in 2020, things seemed to calm down. At the beginning of 2021, the Wall Street stock market prices were higher, real estate prices were going up in many places and things seemed to be improving.

Americans are Moving from States Like New York and California in Large Numbers

It’s important to understand that real estate prices are going down in some areas and up in others. However, there will be winners and losers in the housing market crash 2021. For example, it appears that in the short term, a divided real estate market may present itself.

Current data being reported in the media shows people leaving larger coastal cities and going to smaller inland cities. For example, Californians have been moving out of California to places like Washington, Arizona and Texas in record numbers. This is not a new phenomenon and the trend appears to be gaining speed.

Real Estate Investing Step by Step

On a positive note, 2021 and 2022 may be an opportunity to begin investing in real estate. In addition, never before has investing in real estate been easier. Investing in real estate can be a great piece of your tools on finance. Today, anyone can purchase investment houses for generating passive income. In addition, you can use the “BRRRR” method to leverage multiple properties so that larger passive incomes are generated from your investment houses. BRRRR stand for buy, rehab, rent, refinance and repeat.

Step 1: Buy Investment Property

Buy Undervalued Properties and Calculate Profitability Before Jumping In

Once you have narrowed down the kind of property you want to specialize in, such as apartments, duplexes or single-family homes, it’s time to buy. First, you will want to search for investment houses that are undervalued or significantly discounted. Many investors credit their profit margins to buying investment houses at prices that are significantly below the potential market value.

Step 2: Rehab Investment Property

The next step in the BRRRR process is to begin repairing and renovating (rehabbing) the investment property. The object of the rehab is to quickly conduct repairs that will make the home appealing, safe and add value to the property. In addition, you want to rehab the property as quickly as possible. Furthermore, the quicker the process of rehab is complete, the quicker you can begin earning money from rental income.

Step 3: Rent Investment Property

After completion of the property rehab, it’s time to find a tenant for your property. A good tenant will consistently provide income (in the form of rent) for your investment. Furthermore, a good renter will take care of your property and not allow it to be damaged. Carefully determine what the market rental rate is for your area. In turn, this will ensure that you quickly find a renter and the property doesn’t sit vacant for months. In addition, you will want to properly vet potential tenants to make sure you find renters who are the best fit.

Step 4: Refinance Investment Property

Challenges of Working with Lenders, Obtaining Financing and Economic Cycles

The third “R” in the BRRRR process is refinance. After rehabbing the property and finding a renter, you can begin to look for a lender. The refinancing process means you will be working with a bank to borrow money based upon the remaining equity in the property. Essentially, you will have the property you purchase appraised and approach a bank to begin refinancing the property. You can later use some of the money from your refinance to purchase a new investment property.

Step 5: Repeat the Process

If everything lines up correctly, the BRRRR method will be a success. You will find an undervalued property, buy the property, rehab and rent it and then obtain financing that you can use to buy the next property. You can then repeat the process of acquiring investment houses. If the BRRRR method is successful, you will be generating a net profit each month.

Focus on One Type of Real Estate, Such as Single-Family Homes, Duplexes, Apartments, Etc.

One of the recommendations made by real estate guru Ken McElroy is to narrow down the kind of rental property you want to buy. Many investors get caught up in trying to find the perfect property. However, they can get bogged down in the minutiae and complications of searching through so many different kinds of properties. This can lead to mistakes or errors, which means lost money.

Instead, McElroy recommends focusing on one particular kind of property for investment, such as only buying apartments or only investing in duplex properties. Narrowing down your focus on one type of property will allow you to become a true expert in that property type. In addition, you will automatically narrow down the list of properties that are for sale to a manageable number.

Gold

Many Investors Believe that Gold and Gold Mining Stocks Will Perform Well in the Future

The gold mining industry has been overlooked for many years. Moreover, precious metals have been unpopular and considered irrelevant. Since the 1990s, investors have been advising others to invest in stocks for pensions and 401(k) investments. In short, this advice was largely correct. As a result, Wall Street has hit all-time price levels in the past 20+ years. However, things may have shifted in 2020. Consequently, could this be the time to invest in goldmine stocks?

Gold Has a Limited Supply and Growing Demand

The Supply of Gold Is Finite; Demand for Gold Includes Industry, Jewelry and Money

There is a limited supply of gold on Earth. Moreover, gold miners throughout the world have a finite quantity of gold available for mining. At some point, the amount of gold removed from mines will diminish and become zero.

At the same time, gold demand continues to grow. For instance, gold has many uses in technology, jewelry, medicine and money. Jewelry made of gold has been popular for millennia. In addition, gold continues to grow in demand and popularity, especially in Asia. In fact, 70-80% of gold mined today goes to create jewelry. All of these factors influence the gold price forecast.

Also, there are many industrial uses for gold including electronics, aerospace and medicine. For example, gold is a very efficient conductor of electricity. This property is utilized in many electronic components such as cell phones and computers. In addition, gold is a superior element to work with in dentistry. More important, gold is non-reactive, malleable and has anti-bacterial properties.

Gold in Your Portfolio

It is common to hold anywhere from 5-10% of an investment portfolio in gold. In fact, there are some very large international investment portfolios that hold as much as 30% of assets in gold.

Buy Gold as Physical Coins/Bars or Goldmine Stocks

Investing in gold has never been easier. Gold merchants and brokerage firms are competing for your business online. If you want to purchase physical gold, you can do this at your local coin shop.

Another option for purchasing gold is buying online. Buying from a website has become more secure in recent years, but you must do diligent research to verify the buyer. Only buy from established suppliers that have been around for a long time and have positive feedback. Preferably you can get a recommendation from a friend.

Finally, buying gold stocks is just as easy as buying stock in GM or Amazon. Many online brokerage firms offer the ability to buy these shares for a reasonable fee.

Plan of Action

Wrap Up on Why Money is Important

Many successful investors have realized why money is important and have made it a priority to get more money. Learning what has worked for other successful people is the easiest and most secure strategy for success with money. Moreover, successful people get up early each morning and focus on their goals. Saving and investing money is a priority to them and their focus is on earning and business. Many successful people make time for self-development activities, such as exercise and meditation. And they make these habits part of their daily ritual.

Never forget that perseverance is the key to success. When you develop discipline around saving and investing, you will be successful at understanding why money is important. However, success doesn’t happen overnight. Be consistent and persevere in your quest to harness the tools on finance.

Want to learn more about saving and investing?

Read More:

Ways to Save Money on a Tight Budget

10 Things to Know Before Starting a Budget

The Best Budget App

How to Make $200 Fast

Best Budget Planner

Home Buying Power

Financial Planning Services

Value Investing Books

Wealth Building Cornerstones

Best Investing Books of All Time

How to Become a Millionaire from Nothing

How Much Savings You Should Have at 40

Why Saving Money is Important

Debt Elimination

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.

Categories
Debt

Macy’s Credit Card Payment

We will discuss your Macy’s credit card payment, the benefits of the Macy’s credit card and how to better manage your money and your credit score. We will also show you ways to get out of debt.

If you are searching for the Macy’s credit card payment login, click Here.

The Macy’s credit card offers a lot of perks and benefits for users. First, you may be eligible for up to 5% back in rewards on Macy’s purchases. To qualify for the maximum Platinum card, you must spend more than $1,200 annually. There’s also the Macy’s Gold Card and the Macy’s Silver and Bronze Cards as well. These cards offer lower rewards for purchases.

Here’s a breakdown of the benefits currently offered by the Macy’s credit cards:

Platinum (spend more than $1,200 annually at Macy’s)

  • 5% back in rewards on Macy’s purchases
  • Free Shipping, no minimum at Macy’s with Macy’s credit card
  • 25% Off any day w/ Star Passes
  • Star Money Bonus Days
  • Perks/Offers: special deals/offers based on your favorites
  • Birthday Surprise on your birthday
  • Earn rewards outside of Macy’s (3% at restaurants, 2% at gas/grocery, 1% everywhere else)
  • Easy online Macy’s credit card payment

Gold (spend $500-$1,199 annually at Macy’s)

  • 3% back in rewards on Macy’s purchases
  • Free Shipping, no minimum at Macy’s with Macy’s credit card
  • 25% Off any day w/ Star Passes
  • Star Money Bonus Days
  • Perks/Offers: special deals/offers based on your favorites
  • Birthday Surprise on your birthday
  • Earn rewards outside of Macy’s (3% at restaurants, 2% at gas/grocery, 1% everywhere else)
  • Easy online Macy’s credit card payment

Silver (spend $1 – $499 annually at Macy’s)

  • 2% back in rewards on Macy’s purchases
  • 25% Off any day w/ Star Passes
  • Star Money Bonus Days
  • Perks/Offers: special deals/offers based on your favorites
  • Birthday Surprise on your birthday
  • Earn rewards outside of Macy’s (3% at restaurants, 2% at gas/grocery, 1% everywhere else)
  • Easy online Macy’s credit card payment

Bronze (no spending minimum annually at Macy’s)

  • 1% back in rewards on Macy’s purchases
  • Star Money Bonus Days
  • Perks/Offers: special deals/offers based on your favorites
  • Birthday Surprise on your birthday
  • Earn rewards outside of Macy’s (3% at restaurants, 2% at gas/grocery, 1% everywhere else)
  • Easy online Macy’s credit card payment

Statistics on Debt

Mortgages, Credit Card Debt, Auto Loans and Student Debt Increased in 2019

Mortgage loans are by far the largest portion of debt for consumer loans. The majority of American families that buy a home need financing. According to the Federal Reserve, approximately 2/3 of families in 2019 held mortgage debt on their home. And many consumers are drowning in debt.

Debt from credit cards is the most widely held and most common debt among different groups of consumers. This group is also the one who are typically over their heads in debt. In 2019, the median balance for credit card debt was $2,700. According to Federal Reserve data from 2016-2019, credit card debt among families increased. Unfortunately, approximately 45% of all families carry a credit card balance of some kind.

Student debt is the greatest source of debt outside of mortgage debt. According to US News & World Report, the average total debt of graduates who took out loans exceeded $30,000 in 2019. This number has been increasing since at least 2019, when graduates only had approximately $23,700. According to Federal Reserve data, from 2016-2019 student loan debt among families increased by 10%.

Auto loan debt has been skyrocketing for consumers for years. According to Experian, approximately 85% of all new vehicles are financed. In addition, there was approximately $1.2 Trillion of outstanding auto loans in the United States in 2019, up approximately 15% in the past 3 years.

Debt and Loan Payment Challenges

Lenders and Borrowers Have Different Ideas of How Much to Borrow; Easy Credit and Low Interest Rates Have Made Borrowing Easy

Often, families struggle to pay off debt or even make minimum payments on their debt. People lose jobs, get divorced or encounter other financial hardships that make it difficult to continue debt payments. Not being able to make payments can make you feel like you are drowning in debt.

When a person initially borrows money for a house or a car, they make an estimation of what they can afford. For example, if you make $35,000/year and you have other bills, you know that you probably shouldn’t borrow $120,000 for a new Ferrari sports car. This amount of debt would be beyond your ability to re-pay.

However, in the 21st century, lenders have made borrowing larger sums of money much simpler and easier. Record low interest rates and low barriers to credit have made borrowing money a dicey game. On the one hand, sales people who work for lenders frequently benefit from making more loans to clients, whether the client can re-pay the debt or not. Yet, clients may be unaware of the difficulty of repaying the loans because of the loan terms or changing circumstances.

How Do I Get Out of Debt?

The first step to getting your head above water and paying down debt is to assess your financial situation. You must begin understanding what has brought you to large amounts of debt (hint: your Macy’s credit card payment is one of these things). Begin to look in detail at how you spend money and create a budget. You will also start making plans and setting goals. In addition, you will learn discipline and begin using proven methods for keeping more money.

Create a Budget Now

One of the best ways of paying down debt is to learn to budget. That is, it’s important to keep track of your money. And a budget helps you achieve that objective. Having a balanced budget means spending less of your paycheck. Preferably, you will have some money left over to pay off debt and save for the future. In short, everyone should budget, whether you are a large corporation or just one person.

Live below your means

Eliminate Unnecessary Expenses: Dining Out, New cars and Designer Clothing

In many cases, frugal living is the cornerstone of financial success. This simply means spending less than you make. Moreover, creating a simple monthly budget can assist you in determining whether you are meeting your goal. In addition, learning to be frugal can help you steer clear of debt in the future. For example, when you eliminate extra expenses that are unnecessary, you will have more disposable income available for saving. As a result, your savings from disposable income are how to save money from salary.

Cut Expenses and Control Spending

List Items to Remove from Your Budget: Memberships, Subscriptions, Etc.

No matter what kind of budget you have, it’s critically important that you cut expenses. Before you start your budget, begin finding areas in your life where you can make cuts. Cutting expenses will help you discover how to save money from salary.

It is helpful to make a list of what expenses are needs and wants. For example, paying for electricity is needed; having a spa membership is a want.

In addition, you will also want to figure out ways to cut spending. This will help you save more money quickly. Ideas for Budget Items to Cut:

  • Memberships (Spa, Gym, Entertainment, etc.)
  • Subscriptions (Magazines, news, etc.)
  • Eating Out
  • Cable
  • New credit card spending
  • Traveling/vacations

Stop Using Credit Cards

If you are starting a budget, you probably have credit card debt. The problem with credit card debt is not the debt, it’s the interest. First, every day that you maintain a balance on your credit card, interest compounds. Compounding interest works against you when you’re trying to pay off debt. Finally, getting rid of credit card debt will keep you from having to make your Macy’s credit card payment each month. Furthermore, you will be out of debt.

Save Money Every Paycheck

Put Aside 10-15% of Your Regular Income as Savings

One of the habits that you want to form that will help you reach your savings goal is to start saving each paycheck. Make it a habit to take 10-15% of each paycheck and save it. After a short time, you will realize that you don’t even miss the money.

First, make saving 10-15% of each paycheck easy by setting up an automatic money transfer to your savings account. For example, each time your paycheck is deposited into your checking account, have an automatic transfer set up that moves money into your savings account. Some people even have a savings account that is in a different bank to reduce the temptation of borrowing from the account.

Finally, saving a small portion of your regular earnings is far from a new concept. Financially successful people have been doing it for hundreds or thousands of years. Read The Richest Man in Babylon to learn more.

Always Keep an Emergency Fund

Save $1,000 for Emergencies such as Car Repairs, Home Repairs or Medical Emergencies

Unfortunately, emergencies happen to all of us. Having money for an emergency is critical. Many investment and debt consultants recommend that you start with $1,000. However, it is difficult to save money if you have to pay your Macy’s credit card payment each month. First, pay off your debt.

Emergencies can come in many forms. Examples of emergencies you should be prepared for include medical issues, home repairs, car repairs, natural disasters, etc. Once you reach your goal of $1,000, start saving for the longer term. Some experts recommend having 3-6 months of salary saved for emergencies.

Saving for emergencies should probably be one of the first things that you do, even before saving for retirement. Make it a priority in your budget and you will rest better at night knowing you have prepared for the future.

Keeping Up with the Joneses

Don’t Pay Attention to What Others Are Doing: Focus on Budgeting

Don’t get caught up trying to keep up with the Joneses. Who are the Joneses? Mr. and Mrs. Jones are your neighbors who live in the big, two-story house. They just bought a new SUV and a new boat. The Joneses always seem to have flashy, new things. They have to pay their Macy’s credit card payment each month, along with many other unnecessary bills.

It takes some discipline and habit changes, but in order to be successful at your budget, you must forget about what the Jones family is buying. Remind yourself buying new things prevents you from getting ahead and puts you further behind in debt. Moreover, what’s important is sticking to your budget so that later you can have financial security. 

Increase Your Income

Great Ways to Earn Extra Money Include Seasonal Work, Side Hustles and Starting a Business

Some people who complete their budget may realize that they don’t have enough money to start saving. Perhaps all your money goes to bills each month, or you just have a lot of family and friends for which to buy gifts.

The best ways to make more money fast:

  • Sell Things You Don’t Need
  • Rent Out Your Room or Car
  • A Side Hustle job
  • Borrow Money (Last Resort)

One little secret that successful people don’t often share about their success is how hard they work. Successful people often work 2-3 jobs, work long hours and work to do things that no one else wanted to do. Working hard at a side hustle may be one of the best ways to save money on a tight budget.

It’s not glamorous to deliver pizzas or wash cars for money. However, sometimes to get ahead you have to swallow your pride and do what is necessary. I’m not suggesting that you do anything illegal to make money; on the contrary, there are plenty of legal jobs that will earn real money for you.

Hopefully, you find these suggestions and solutions helpful on getting out of debt. Many of the fixes for debt problems require sacrifice and discipline. But they are proven methods that work and will allow you to live a happier, more secure and freer lifestyle. Piggy Bank Coins encourages you to pay off your debt, make your final Macy’s credit card payment and begin living a life of freedom from debt.

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Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We do not endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.

Categories
Money

How to Save a Million Dollars

A detailed plan for how to save a million dollars, including budgeting, getting out of debt and the secrets of how millionaires save.

There are over 18 million people in the United States who have a net worth of one million dollars. In fact, some of those millionaires probably live in your neighborhood. Perhaps they even live next door or work with you.

There’s a popular belief that millionaires attain their money the easy way: inheritance, winning the lottery or through criminal activity. The truth is that the majority of millionaires discovered how to save a million dollars. In the book, “The Millionaire Next Door”, by Dr. Thomas Stanley and Dr. William Danko, it is revealed that most millionaires surveyed were self-made. These men and women started from scratch, with little to no money, and worked hard at saving and investing.

The Shocking Truth About Saving Money

Many People Get Bogged Down in Credit Card Debt, Preventing Them From Saving and Investing

In a December 2019 article by GoBankingRates, it was noted that approximately 70% of Americans don’t have $1,000 in savings! In fact, most people don’t have any savings.

This is a shocking statistic that shows how access to credit cards and lending have dominated our society. Unfortunately, Americans have adopted the idea that borrowing money for most things is normal. Yet, just a few generations ago in the early 20th century, people learned the hard way during the Great Depression that borrowing can lead to financial ruin. Having no savings puts you in a dangerous financial place.

A critical part of billionaire Warren Buffet’s investment strategy is saving cash. Historically, people’s lives depended on saving money. If a natural disaster struck or just bad luck, people could fall back on the money they saved to stay alive. Today, life is easier. Credit is widely available to most people and we frequently borrow money for cars, houses and purchases on credit cards.

But, saving money is a critical part of how to save a million dollars for several reasons. First, learning to save money requires that you learn not to spend your money. Warren Buffet famously said that the most important rule of investing is “to not lose money.” The lesson is don’t spend all your money. Instead, save some money. Saving money is an excellent habit to learn and maintain.

Second, saving money will give you the confidence to seize opportunities when they arise. When people live paycheck-to-paycheck, they waste their time struggling with bills, instead of focusing on future wealth creation. In addition, as your income becomes more limited in old age, you will depend on cash savings to pay for things like medical care and expenses.

Make Saving a Habit

Saving is a habit that can be learned over time and simply requires discipline. Become determined to reach your financial goal. Your personal determination to learn how to save a million dollars will help you develop the discipline to save.

In addition, develop good habits of saving money. In the classic personal finance book, “The Richest Man in Babylon” by George Clason, the author implores the reader to set aside at least 10% of your earnings. This is a great rule of thumb for saving and investing because removing only a fraction of your income each month will likely not even be noticed or missed. Yet, this small amount of money is the seed needed to grow wealth.

Save Money Each Paycheck

10-15% of Your Income Should Be Invested

You don’t have to be a business owner or entrepreneur to be a millionaire. There are many millionaires who live simple lives. They work 9-5 jobs every day, just like you.

One of the keys to their success is having a consistent source of income. Every month, or each paycheck, they divert 10-15% of their earnings to investment(s). An example would be investing in a 401(k), Investment Retirement Account (IRA) or Real Estate. Year after year, your money will grow and work for you to create wealth.

Make saving 10-15% of each paycheck easy by setting up an automatic money transfer to your savings account. For example, each time your paycheck is deposited into the checking account, have an automatic transfer set up that moves money into the savings account. Some people find it helpful to have a savings account that is in a different bank. This reduces the temptation to spend savings.

Live Below Your Means

Reduce Bad Habits like Meals Out, New Cars and Unnecessary Items

Forming good financial habits is critical for learning how to save a million dollars. In many cases, frugal living is the cornerstone of financial success. This simply means spending less than you make. A simple monthly budget can assist you in determining whether you are meeting your goal. And these good habits can carry forward for a lifetime.

Unfortunately, living frugally is not popular in the 21st century. Popular culture dictates what “normal” consumer behavior looks like. And it’s considered normal to go out and spend money at restaurants, on vacations and the like. In addition, it’s “normal” to buy a big house and drive a new car.

Financially successful people don’t ascribe to normal behaviors. People with the millionaire mindset only purchase what is needed. They don’t buy new cars or fancy things. As a result, the extra money saved from this frugal behavior is put to work in investments.

Develop a Budget

Budgeting Creates Consistency, Promotes Money Tracking and Teaches Budget Balancing

Being without a budget is like going on an adventure without a map. Your budget is your map to how to save a million dollars. When you create a budget, start by writing down in detail what your expenses are each month. Use paper, spreadsheets or whatever works. Provide as much detail as possible when listing your expenses. You may find it helpful to review past bank statements and receipts.

Having a balanced budget means spending less of your paycheck. Preferably, you will have a significant amount of money left over to pay off debt and save for investing. In short, everyone should budget, whether you are a large corporation or just one person.

There are many budget options online, including spreadsheets, mobile apps and even printable budgets. Check out our “Best Budget Planner” article for more detailed information and recommendations on how to make a budget.

Beware of Credit Cards and Debt

Credit Cards Can Prevent You from Saving a Million Dollars

One dangerous lesson to learn is overspending on credit cards. In the modern era, gaining access to credit is far too easy. The big risk that comes with credit is overspending. When you spend more money than is allowed on the credit card, or spend more than can be paid back, it can be a painful lesson in finance. But, sometimes difficult lessons can be valuable and last a lifetime.

If you make a mistake with a credit card, or overdraft an account, it can become a learning tool. Use the situation as an opportunity to learn from the mistake and implement better budgeting habits. Everyone learns the lesson of debt and compounding interest when we have to pay back what was borrowed, plus interest.

Pay Off All Debt

Most millionaires did not get rich by borrowing money. In fact, most people with a significant net worth avoid debt. They know that when you have debt, money is working against you. So it’s important to pay down all your debt prior to taking the next steps. Later, you can make your money work for you, not against.

Develop a Financial Plan

Learning how to save a million dollars requires a financial plan. Write down the details of what you want to achieve in your plan. If your goal is to own one million dollars in real estate, then plan accordingly. Include details of how you will acquire money to invest and how it will be allocated. In addition, set a timeframe for when you expect to achieve your goal. Your budget will be an addendum to the plan. Finally, review the financial plan frequently and assess your progress.

Develop Good Habits

Good Habits Include Budget Control, Staying the Course, Investment Knowledge and Discipline

Developing millionaire habits is critical on the path to acquiring wealth. Once you’ve established your goals and your financial plan, you must implement good habits. Good habits include:

  • Budget Control
  • Staying the Course
  • Investment Knowledge

Budget control means that you operate under a balanced budget. Spending is controlled so that remaining cash flow is routed toward smart investments. Good investments are critical for converting thousands of dollars into millions of dollars.

Staying the course requires that you consistently repeat what you are doing, so long as you are successful. If something doesn’t work, it can be changed. But the power of earning from compounding interest is continuously investing money.

Being a good investor requires that you continuously educate yourself. You want to learn as much as possible about your investments. You will accrue knowledge and wisdom on different investment strategies over time.

Invest Early As Soon As Possible

Start developing the habits of how to save a million dollars early. Many millionaires credit their success not to windfall earnings, but to incremental investing over long periods. Compounding interest is a powerful tool that can work for you in growing your wealth.

Grow Your Income

Maximize Your Income by Starting a Business or a Side Hustle

There are many ways that you can improve your income. For example, start a small business out of your home. Explore what you like to do in your spare time and determine if you can make money doing it. For example, photography can be a hobby or a business.

Great Ways to Earn Extra Money Include Seasonal Work, Side Hustles and Starting a Business

One dirty little secret that successful people don’t share about their success is what they had to do to become successful. Successful people often work 2-3 jobs, work long hours and work to do things that no one else wanted to do.

It’s not glamorous to deliver pizzas or wash cars for extra cash. But sometimes to get ahead you have to swallow your pride and do what must be done. I’m not suggesting that you do anything illegal to make money; on the contrary, there are plenty of legal jobs that will earn real money for you.

Seasonal Work

Seasonal Jobs Include Retail Workers, Tax Season Workers and Vacation Season Workers

During the holidays, seasonal workers are needed in most areas. The Fall holiday season is the busiest shopping time of the year. Employers hire extra staff to help with the higher demand from customers. Examples include retail sales, delivery drivers and merchandise stockers.

Other seasonal jobs include working in the tax industry during tax season and working festivals and resorts during the summer or winter vacation season.  

Side Hustle

Having a side hustle has become more common these days. Unfortunately, many people work a second job simply to make ends meet. But there’s no shame in working hard to get ahead. Common side hustles today include:

  • Uber/Lyft Driver
  • Food/Grocery Delivery
  • Dog Walking and Sitting
  • Babysitting
  • House Cleaning
  • Gig Economy Services (Fiverr)
  • Freelance Work Online
  • Tutoring
  • Wash and Detail Cars

Build a Business

There are Great Opportunities for Starting a Business, Including Service Industry Business, Home Based Business and Home Sales Business

There has never been a better time to start a business. The opportunities are endless for someone willing to put in the work. You can start a business locally in the service industry, such as delivery, massage, home/car repair, pet sitting/walking, babysitting, etc. None of these businesses require an office or a startup cost.

If you don’t want to start local service business, you can work from your computer at home. Sell things online on Amazon, EBay, Etsy, Facebook Marketplace or other platform. You can buy and sell new or used items. Make your own brand. There are many options for selling goods online.

Also, you can sell services online. Are you good at building websites, social media or marketing? Many businesses now have an online presence and they need marketers and SEO consultants to help them reach customers.

Wrap Up for How to Save a Million Dollars

Operate a Business, Network and Work with a Financial Team

First, many millionaires reach their goal quicker by operating a small business. Owning a small business allows you to control how the company operates and take more profit for the extra labor you put in.

Second, maximize the networking that you do with others. Participate in conferences or just promote contact with like-minded people in your area. The network effect can have positive financial benefits for you. Don’t isolate yourself.

Finally, surround yourself with a financial team. Seek out a respected tax professional, attorney, business coach, etc. Sometimes an ounce of prevention is worth a pound of cure. Staying in good legal standing with state and federal regulations can help you grow. In addition, these professionals can save you money in the long term.

Implement Millionaire Habits

Learning what has worked for other successful investors is the easiest and most secure strategy for success with money. Moreover, successful investors get up early each morning and focus on their goals. Investing money is a priority to them and their focus is on earning and business. Many successful people make time for self-development activities, such as exercise and meditation. And they make these habits part of their daily ritual.

These guidelines are the simplest path on how to save a million dollars. Want to learn more about saving and investing?

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