Financial Plan – Silent Killers

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.

Teaching Suggestions

  • 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.

Discussion Questions 

  1. Explain which of these financial planning barriers you believe is the most dangerous.
  2. What are possible actions a person might take to avoid these financial planning barriers?

Financial Literacy Survey

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.

Teaching Suggestions

  • 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.

Discussion Questions 

  1. What items on the survey are topic areas for which most people need additional learning?
  2. How might people be encouraged to learning more about various personal finance topics?

Monthly Actions to Save $1,000

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.

Teaching Suggestions

  • 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.

Discussion Questions 

  1. Describe attitudes and behaviors that might result in people not being able to save for the future.
  2. What are actions you have taken to reduce spending and to earn extra money for savings?

Smart Money Moves for January

With a new year, many people hope to get a fresh start with changes in their financial planning activities. To do so, the following actions are suggested:

  • Maintain or increase the amount of money in your emergency fund.
  • Pay off high-interest credit cards and other expensive loan accounts.
  • Set goals that will contribute to long-term financial security.
  • Review your cash flow (spending and income) from the previous year in an effort to increase saving by avoiding unnecessary payments.
  • Merge various banking, investment, and retirement accounts into one low-cost account.
  • Determine if changes are needed in your estate plan.
  • Increase your retirement account contributions.
  • Revise your tax withholding, as needed

For additional information on January money moves, click here.

 

Teaching Suggestions

  • Have students talk to various people about which actions they believe to be most valuable for long-term financial security.
  • Have students create a brief presentation describing the value of one of these suggested money actions.

Discussion Questions 

  1. Describe the January money actions that you consider to be most valuable for long-term financial security.
  1. What are some other money moves that you would recommend?

Learning How Money Works

 Many people grow up without learning how money works, which usually results in difficulties.  Studies reveal that less than one-fourth of millennials have basic financial knowledge.

A vital starting point in the learning process is admitting that you don’t know.  For example, most people do not know that credit scores show if a person has paid his or her bills on time and how much has been borrowed.  Most people are not aware that credit reports often contain incorrect information, or how to check for errors.

Credit card rewards may seem like a good deal but only is you pay your bill on time every month.  If you don’t, late fees and interest charges can more than outweigh any reward point benefits.

These are just two areas on which many young people, as well as others, lack a basic understanding. However, a wide variety of sources are available to add to your knowledge.

For additional information on learning how money works, click here.

Teaching Suggestions

  • Have students conduct research to determine the financial knowledge among various age groups.
  • Have students create a video presentation with suggestions for improving financial knowledge.

Discussion Questions 

  1. Why are people often not informed on basic money topics?
  2. What are the most common topics that on which many people lack basic financial knowledge?

Financial Fears

According to the Northwestern Mutual Planning and Progress Study on financial well-being, Americans have several worries.  Based on interviews with 2,646 adults, 85 percent of respondents reported financial anxiety in some form.  Approximately two-thirds of those surveyed indicated that financial anxiety negatively affected their health.  In addition, 36 percent of those responding had increasing levels of financial anxiety over the past three years.

In the study, the greatest financial fears were:

  1. Having an unplanned emergency
  2. Having unplanned medical expenses
  3. Having insufficient savings for retirement
  4. Outliving retirement savings
  5. Becoming a financial burden
  6. Not able to afford healthcare
  7. Loss of a job
  8. Identity theft
  9. Extended unemployment
  10. Death/loss of primary wage earner
  11. Having poor credit
  12. Having to file bankruptcy
  13. Being a victim of a financial scam

To address these concerns, the study recommends the following actions:

  • build an emergency fund for unplanned expenses
  • invest properly for retirement and long-term financial security
  • review your finances regularly to revise goals and savings activities

These actions can help to reduce the financial anxiety reported by a large portion of Americans.

For additional information on financial anxiety, go to:

Link #1

Link #2

 

Pokémon Go Can Cost You

Pokémon Go has resulted in a loss of money and other concerns.  In this popular game, users interact virtually with Pokémon characters placed in real world settings. The app is free to download, however there are in-app purchasing opportunities. Players are encouraged to pay for hints and tips for a competitive advantage.

In addition to financial losses, the Pokémon Go app has been used to lure robbery victims.  Other players have been robbed of their phones.  Police departments caution players to be aware of their surroundings.

Be warned that “free isn’t the same as no cost.”  Users may pay in the form of data use, legal confrontations, injuries, and reduced work productivity.  Higher insurance costs can also occur when playing the game while driving, which might result in an auto accident. Social concerns include disturbing church services and other occasions with players capturing creatures during the events.

For additional information on the cost of Pokémon Goclick here.

Teaching Suggestions

  • Have students suggest ways that an app game might be used for improved learning or assisting others in need.
  • Have students describe safety precautions when playing Pokémon Go.

Discussion Questions 

  1. Why are people attracted to the game, often with a personal or financial cost?
  2. What actions might be taken to avoid the financial and personal dangers of the game?

Finances for Newlyweds

An estimated one-third of recently married couples are surprised by the financial situation of their spouse.  A similar number (36 percent) are not aware of their partner’s spending habits.  Based on a study by Experian Plc, only 40 percent knew the credit score of their partner.

Men more often hid money from spouses.  About 20 percent of men had secret bank accounts about which their partners didn’t know; compared to 12 percent of women. Regarding the maximum amount that they would spend before consulting with their spouse, men replied $1,259; women said $383.   Hidden financial information can have a significant adverse effect on the relationship of a newly married couple.

For additional information on newlywed finances, click here.

For additional information on the survey results, click here.

Teaching Suggestions

  • Have students survey newly-married people about their disclosure of financial information to their spouse.
  • Have students create a list of problems that might arise between newly-married people who do not inform their spouse about their personal financial information.

Discussion Questions 

  1. What financial information would be most important for newly-married people to disclose to their spouses?
  2. How could a lack of disclosure of financial information to a spouse create relationship difficulties?

Ways to Reduce Environmental Impact and Save Money

To save money and help improve the environment, 20SomethingFinance.com suggests that you:

  • grow your own food and buy from local sources.
  • replace meat in meals with beans and vegetables.
  • bring your own containers to buy bulk items.
  • use refillable drink bottles.
  • ride a bike instead of driving.
  • use a low-flow showerhead.
  • sell items not being used; buy used items instead of new.

For additional information on saving the environment and money, click here.

Teaching Suggestions

  • Have students ask people to describe environmental-saving actions commonly used.
  • Have students create a promotional plan to create awareness of money-saving actions that are also environmental friendly.

Discussion Questions 

  1. What are benefits and drawbacks of environmental-saving actions?
  2. What factors might be considered when taking actions that save money and improve the environment?

Tips and tricks for Impulse purchases

You are in line at your local grocery store and all the snacks, candy, and cheap gadgets are beckoning to be picked up and added to your shopping bag.  You are shopping on-line and you only need to spend $8 more to get free shipping.  How do you avoid falling prey to impulse buying?  How are marketers reducing friction to get you to buy more stuff?  As a consumer, factoring in additional transaction costs will help you avoid making impulse purchases.

The following article provides way to help you avoid adding impulse purchases, such as:

  1. Carrying cash.
  2. Making it a struggle to get out your credit card.
  3. No more one-click purchasing.
  4. No more e-tailer memberships.
  5. Having an accountability buddy.

 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of carefully watching your spending.
  • Have the students record all purchases for one week and see how much money is spent by the class in total on impulse purchases.
  • Stress the importance of having a budget and sticking to it.

Discussion Questions

  1.  Ask students to recall a time when they were able to resist the urge to make impulse purchases. What were some techniques that they used?
  2. Poll students about e-tailer memberships, such as Amazon. Why did they choose to acquire the membership?  Free shipping? On-demand viewing options.