Quite often, when a person receives a raise or promotion with an increased salary, overspending is the result. In those situations, financial experts recommend maintaining frugal spending patterns. This path will allow a person to avoid becoming a victim of “lifestyle inflation.” Many households earning hundreds of thousands of dollars have trouble avoiding debt and saving for the future. To prevent this situation, the following actions are recommended:
- Maintain your lifestyle and spending habits as you receive raises. Instead of a bigger house or new car, the increased income can be used to stabilize your financial situation and increase saving for future needs.
- Keep your average daily spending low.To avoid lifestyle creep, simply keep your typical day spending at a frugal level.
- Increase your automatic savings amounts. Consider saving an amount from each paycheck equal to the amount of your raise. This will allow you to put aside money for major financial goals and long-term financial security.
- Keep housing costs low. Instead of upgrading, maintain and improve your current home. Housing is a major cause of lifestyle creep when a more expensive home results in higher property taxes, maintenance costs, insurance, association fees and other expenses.
- Remember and review often your financial goals.Do not take your focus off long-term money goals. Short-term desires and impulsive spending can easily undermine your financial future. Create a way to remind yourself of those goals each day.
For additional information on lifestyle inflation, go to:
- Have students ask another person of what actions might be taken when a salary increase is received.
- Have students create a video contrasting wise and unwise actions when receiving a salary increase.
- What factors influence “lifestyle inflation” in our society?
- In addition to the suggestions in the article, what actions might be taken to avoid lifestyle creep?
What are some signs that a romance scam could be taking place?
- a new love living far away requests money or use of your credit card number
- being asked to sign a document giving a new romantic interest control of your finances
- a new sweetheart wants you to open a joint bank account with them
While romance scammers usually focus on single, older people, anyone seeking a new relationship is a possible target. These scams can happen in person, but more often through social media, dating websites, smartphone apps. These scams happen when a new love pretends to be interested in you as a way to get your money. In fact, they may not even be who they say they are.
Beware of Cupid’s arrow striking your wallet instead of your heart! To protect you, friends, and family from romance and other scams, consider these actions:
- Avoid giving a new friend access to credit cards, bank accounts, or other financial assets.
- Report crimes or financial exploitation to local law enforcement agencies or to Adult Protective Services (APS); information available at gov.
- Contact your state attorney general and the Federal Trade Commission to report cases of financial abuse.
For additional information on romance scams, click here.
- Have students create and present possible scam situations to create awareness among various potential victims.
- Have students create a visual presentation (using computer software or a poster) to communicate actions to avoid scams.
- What are common warning signs that may indicate that a possible scam is taking place?
- Describe actions that might be taken to avoid various scams and frauds.
Whether you start at the beginning of the year or you start today, some actions to keep your financial plans on track include:
- Set a money objective. Simplify your approach for financial goals by selecting a word or short phrase to give your direction. This theme might be “future needs” (for retirement planning), “spend mindfully” (for controlling spending), or “kid’s college.”
- Use automation. Using automatic transfers will allow you to save for a house down payment, an emergency fund, a vacation, or retirement.
- Challenge yourself. Cut unnecessary expenses to allow you to have money left over each month for financial goals.
- Change your environment. Modifying your financial habits can occur with visible reminders, such as photos, sticky notes, or note cards placed on your credit card, desk, bathroom mirror, refrigerator, car dashboard, or computer screen. Also consider keeping a financial diary or journal.
- Obtain needed support. Instead of going it alone, work with a friend, roommate, spouse, or group to achieve your money objective and stay accountable.
For additional information on becoming financially disciplined, click on the following links:
Financially disciplined #1
Financially disciplined #2
- Have students talk to others to obtain ideas for achieving financial goals.
- Have students create visuals that might be used to remind them about financial goals and actions.
- What are the main reasons people who not achieve financial goals?
- Describe methods that might be used to help you and others achieve financial goals.
“Sometimes the hardest thing about saving money is just getting started.”
This Bank of America article provides a step-by-step guide for simple ways to save money–money that can then be used to pursue your financial goals. To learn more, check out the 8 steps below.
- Record your expenses. Ideally, you can account for every penny you spend for the big items like mortgages, credit cards, and even small items like a coffee and snacks.
- Make a budget. Once you know how you spend, you can compare your income to your expenses and make changes, if necessary.
- Plan on saving money. Your budget should contain a savings category. Ideally, savings should account for 10 to 15 percent of your income.
- Choose something to save for. One of the best ways to save money is to set a goal. Possible goals include saving for a vacation, the down payment for a house, retirement, or anything important to you.
- Decide on your priorities. Prioritizing goals can give you a clear idea of what is most important and helps to remind you why you are saving money.
- Pick the right tools. There are many saving options and the choice often depends on the amount of time before you need the money. Often, money for short-term goals is placed in savings accounts. Money for long-term goals may involve stocks, bonds, or mutual funds.
- Make saving automatic. Banks offer automated transfers between checking and savings accounts. Automated transfers are great because you don’t have to make a decision to save or invest; it just happens.
- Watch your savings grow. Checking your progress every month helps you stick to your personal savings plan.
For more information, click here.
You may want to use the information in this blog post and the original article to
- Discuss the relationship between income, expenses, and establishing a systematic savings program.
- Help students understand how saving small amounts over time can help obtain goals that can change their lives.
- At the end of the month, many people wonder where their money went! Why is it important to determine how you spend your money?
- How can a budget help you find the money needed to establish a savings program built on the goals you want to achieve?
The Personal Financial Satisfaction Index (PFSi), reported by the AICPA (American Institute of Certified Public Accountants) is at an all-time high. This quarterly economic indicator measures the financial situation of average Americans. PFSI is the difference between (1) the Personal Financial Pleasure Index, measuring the growth of assets and opportunities, and (2) the Personal Financial Pain Index, which is based on lost assets and opportunities. The most recent report had a Pleasure Index 68.1 in contrast to a Pain Index of 42.1, resulting in a positive reading of 25.9, the highest since 1994.
While the stock market is high, unemployment is declining, and inflation is low, remember the economy is cyclical. Be sure to consider and plan for your long-term goals. Stay aware and position your financial plan appropriately to safeguard finances when the economy is in a downturn. Also, analyze your cash flow to an attempt to increase savings, including an appropriate emergency fund.
For additional information on financial satisfaction, click here.
- Have students create an action plan for situations that might be encountered in times of economic difficulty.
- Have students create a team presentation with suggestions to take when faced with economic difficulties.
- What are examples of opportunities that create increased personal financial satisfaction?
- Describe actions a person might take when faced with economic difficulties.
Youngsters learn money management attitudes and behaviors by watching family members and others. To help guide their financial literacy development, involve children in the shopping process using these steps:
- Have children help in the creation of the shopping list. Sit down together with paper or an app to list what you need. Talk through your list with your kids noting items that are low on in the household as well as things bought regularly. Have children check cabinets and refrigerator to determine things they use.
- While making your list, talk about a budget. Explain the need to keep track of how much is spent on groceries so there is enough money for household expenses. Make clear that a grocery list helps make sure you don’t overspend.
- Talk while shopping to explain brands you prefer and how sale prices or coupons might affect purchases. Also communicate why you choose certain stores for your shopping. As you select items explain why you’re buying that one instead of a similar item. Older children can be asked to comparison shop among different brands.
- While shopping, refer back to your budget. This will help you decide to buy an item now or wait until a later time.
- Provide explanations of buying choices. To avoid surprises, estimate your total before going to the cash register. Also explain different payment methods, such as a debit card, which subtracts money from your bank account right away.
Discussion of various decision-making elements will help kids learn shopping and money management skills they will need. Thinking out loud can clarify what you’re doing and why when in the store, paying bills, or shopping online.
For additional information on teaching money skills to children, go to:
Grocery Shopping Tips
Money skills, by age.
- Have students visit stores and explain to friends why they buy certain items and brands.
- Have students create a visual presentation (using computer software or a poster) to communicate learning experiences for teaching wise buying to others.
- What experiences did you have growing up that helped you learn financial literacy and wise money management skills?
- Describe other methods that might be used to teach shopping and money management skills to young people and others who might lack these abilities.
Can you imagine getting paid each day that you work? That’s the idea behind Instant Financial’s app, which puts cash in the hands of workers on the same day they work. This program attempts to reduce absenteeism and employee turnover for restaurant chains.
At the end of each workday, employees may take 50 per cent of their pay for that day and transfer it to an instant account; the other half is paid at the end of the regular pay period. Funds in the Instant account may be accessed with a debit card or transferred to a bank account.
The app can reduce the use of payday loans, with exorbitant borrowing rates, as workers have access to funds between pay periods. Instant Financial makes money from fees charged employers and merchants when debit cards are used; although employees may pay ATM fees.
A major concern of the app is that it might discourage long-term financial planning. Poor budgeting habits could result in increased use of debt due to a lack of funds at the end of the month. Employees who use the app are encouraged to practice wise money management, including creating and building an emergency fund and other savings.
For additional information on instant pay, click here.
- Have students talk with others about the benefits and drawbacks of an instant account.
- Have students describe two situations: (1) a person who used the instant account wisely, and (2) someone who mismanaged their money as a result of using the instant account.
- What factors might be considered when deciding whether or not to use an instant account?
- Describe how an instant account might result in improved money management and in weakened money management activities.
CPAs and financial advisers point out five “silent killers” that create barriers for the successful implementation of estate, retirement, and investment plans. These common mistakes are:
1. Unrealistic Expectations. A valid financial plan must be based on practical assumptions, such as an appropriate forecast of rate of return, inflation, and future cash flow needs
2. Emotional Decision Making. Feelings and personal sentiment must be identified and minimized when setting goals and planning financial projections.
3. Inflexibility. A useful financial plan must take into account unexpected events. Creation of an emergency fund and contingency plan is vital.
4. Inaction. Without a plan for action, the perfect financial plan is worthless. Common results of inaction can be not having appropriate of property and casualty insurance coverage, financial hardship of dependents due to inadequate life and disability coverage, failing to address how assets are to be distributed in an estate plan, and overlooking a tax strategy.
5. Unclear Values and Priorities. Being on the wrong path will result in an undesired financial destination. Reflection of areas of importance and priorities is fundamental for implementing a financial plan and achieving financial goals.
For additional information on financial planning silent killers, click here.
- Have students talk with others about barriers they have encountered in their financial decision making.
- Have students create situations that reflect each of the five situations. Ask them to suggest actions to overcome these difficulties.
- Explain which of these financial planning barriers you believe is the most dangerous.
- What are possible actions a person might take to avoid these financial planning barriers?
Based on an online survey of personal finance knowledge, 40 percent of Americans earn a grade of C or worse. Financially literate people possess a fundamental understanding of money management activities, and are able to apply them for their financial well being.
The Wallet Literacy survey is available to assess your financial literacy. This test covers a wide range of topics, including credit scores, paycheck deductions, emergency funds, car insurance, home buying, inflation, and investment risk. Respondents are encouraged to use a calculator and other resources when taking the survey.
For additional information on the financial literacy survey, click here.
- Have students take the financial literacy survey to determine the areas where additional learning is needed.
- Have students encourage others to take the survey, and then have students talk with them about their results.
- What items on the survey are topic areas for which most people need additional learning?
- How might people be encouraged to learning more about various personal finance topics?
Many people in our society are not able to save. They are barely able to cover their monthly expenses. However, there are some actions that can help you get on a path to saving.
In the first month, open an online bank account and deposit a minimum amount, such as $5. This is a very important first step. In month two, save $15 (or more) in your online savings account. One way to do this is with Paribus, an online tool that searches various retailers to determine if you are owed money for past purchases as a result of a price drop.
Your goal for month three is to work toward savings $100. This could be accomplished by signing up with market research companies to participate in providing opinions. Or, you could try selling old items online. By consistently using various ideas for earning extra money, you should be able to save $100 a month.
For additional information on starting a savings program, click here.
- Have students to talk various people to determine actions they take to reduce spending or earn extra money.
- Have students create a summary presentation describing actions that might be taken to increase a person’s savings.
- Describe attitudes and behaviors that might result in people not being able to save for the future.
- What are actions you have taken to reduce spending and to earn extra money for savings?