What Is A Recession?

The Idea of an impending recession can be scary, but it can help to understand what it is and how to prepare.

There’s a lot going on in the world. In addition to the coronavirus pandemic, there are rumors of a looming recession. You have likely heard one of two things by now:

  • We are in a recession, or
  • We are about to go into a recession

In either case, it’s good to know precisely what a recession is, how to prepare for one, and tips on how to get through it.

Definition of Economic Recession

A Recession is a period in the business cycle when economic activities are in a general decline, typically accompanied by elevated unemployment, a fall in consumer spending, an increase in business failures, and falling stock markets. As scary as they are, recessions are a normal occurrence in the modern economy (see below image of typical business cycle). A recession follows the peak of the business cycle.

In the U.S., recessions are declared by the National Bureau of Economic Research‘s business cycle dating committee – which, despite its name, has nothing to do with Tinder.

The dating committee is a bunch of renowned economists who gather to assess how the economy is doing. They determine when recessions formally start and end.

The committee weighs several factors in its decision, but a commonly used definition of recession is when the total value of goods and services in the U.S. (called the Gross Domestic Product or GDP) is in decline for two or more quarters ( six months or more).

Are we in a recession?

Yes and no.

Yes we’re in a recession but it’s not official yet.

On one hand, because the data isn’t nailed down and the committee hasn’t officially said so, we are not in a recession yet. BUT, because the committee usually retroactively calls recessions, we are more than likely in a recession. (For context, the committee declared in December 2008 that the Great Recession had started in December 2007 – a full year later!).

We need at least 2 quarters of negative GDP to declare it a recession. The first quarter of 2020 saw a decline of 4.8%. If we see another sequential quarter decline in GDP, the committee can officially say we are in a recession.

Impacts of a recession

Recessions, while a normal part of the business cycle, can be very destructive because it causes a rise in unemployment. As unemployment rises, consumer spending falls because people don’t have money for the discretionary items. People also lose their homes because they can’t afford the mortgage payments and young people can’t get a good job after school. Investments lose their value and businesses go bankrupt.

Difference between a Recession & a Depression

A recession can become a depression if it lasts long enough. As a reminder, a recession is an economic contraction of two or more quarters. A depression will last several years.

How to Prepare for a Recession

It’s all about the long-term. Recessions since the end of WWII have lasted anywhere from six months to sixteen months, with the average lasting 11 months.

Recessions are going to happen and there’s nothing any of us can do about it. The critical take away is that we need to be prepared. Is it possilbe to recession-proof your finances? The answer is yes and here are some specific ways you can do it:

  1. Pay Off All Debt
    Debt is a problem even when the economy is booming. But, it’s an even bigger problem during recessions, when you may be facing the possibility of losing your job or experiencing a serious decline in the value of your investments.

    Whether it’s credit cards, student loans, medical bills, or any other type of financing, the more you can eliminate, the fewer payments you will have. That will make the loss of your job that much easier to deal with, especially if you’re unemployed for several months.

    If you can’t pay off all your debts, pay off or pay down as many as you can. The more you can pay, the stronger your financial position will be if your personal financial situation starts to look shaky.
  2. Increase Your Emergency Fund
    Emergencies can happen in times are good, but they tend to be more frequent in recessions. Having a well-stocked emergency fund is the best way to prepare in advance.
  3. Build Your “IA’s” – Intellectual Assets
    This is all about improving your skills and qualifications. If a recession is coming, or already here, one of the best strategies to keep yourself relevant on a career front is to improve your abilities. That might mean getting an advanced degree. But, it could also mean taking online courses or getting an important certification – anything that could help your career move forward and/or increase your earning potential.
  4. Create a Side Hustle
    Get a job that supplies additional income and provides a way to diversify your income sources. It could be an online business or driving for Uber or a food delivery service.

Tips to Survive a Recession if You Lose Your Job

  1. Get On a Budget
    If you aren’t already living on a budget, the time is NOW!
    For more on why a budget is so important and how to set one up, click here.

    Look for ways to cut..subscriptions, groceries, utilities, etc. Everything that isn’t “locked in” and cut back.
  2. Take care of the Four Walls
    When the going gets rough, focus on the things you really need to survive: Food, Utilities, Shelter, Transportation.
  3. Pause paying off debt
    When you’re just trying to make it to another day, you don’t need to pay extra on your debt. Instead, focus on piling up cash as high as you can. This will help with peace of mind until you have income again. Once life gets back to normal and everything is ok, you can pickup where you left off with your debt payoff plan.
  4. Sell Stuff
    Look for things to sell around the house and list them on on Amazon Marketplace, Poshmark, Mercari, Your Local Facebook page, Craigslist, etc. Sell so much stuff that the kids think they’re next!
  5. Look for a side hustle
    This may not be your ideal way to earn a living, but when they going gets tough, the tough get going. Get out there and do what you can to earn extra cash to survive this difficult time.
  6. Don’t lose hope
    You may be losing a paycheck, but that doesn’t mean you need to lose your hope too. Hang in there!

Summary

While recessions are “normal”, they are difficult to navigate and often devastating if unprepared for one. The best things you can do are to prepare by cutting back on your expenses, paying off debt, and building emergency savings. And, if you find yourself out of work, make sure you budget to cut back where you can. Focus on the 4 walls, sell stuff, and look for a side hustle.

Most important, don’t lose hope!

Have questions?

Please feel free to contact me either through a message via my blog or email me @ moneysmartjackson@gmail.com.

The 10 Best Personal Finance Books for 2020

April is Financial Literacy Month so I wanted to highlight some great personal finance books that are worthwhile reads and why I recommend them.

The internet is a great source for information about personal finance. If you want to know how an index funds work, which debt repayment method is most effective, or how to save money on groceries, you can find ten articles with the information you need to know.

Sometimes, nothing beats an old fashioned book when it comes to learning about a specific topic. There are a lot of books out there on how to earn, save, budget, spend money and invest. But, deciding which book to invest your time and money on can be overwhelming so I’ve a compiled a list of the books I recommend and what each is “best for”. These 10 personal finance books can help you get started on your journey into personal finance.

These are the best personal finance books for 2020:

BEST BOOKS FOR BEGINNERS:

The Richest Man in Babylon

This is a great beginner book and particularly useful for young adults (can be as young as 16) and those that need/want guidance on spending, budgeting and investing at any age. It’s regarded as a classic for personal finance advice.

The book dispenses its knowledge through a collection of parables set 8,000 years ago in ancient Babylon. The main points are: save (at least) 10% of everything you earn and don’t confuse your necessary expenses with your desires; work hard to improve your skills so you can ensure a steady income; and invest your money safely.

I like it because it’s a quick read, easy to understand, and keeps you engaged while offering sound bits of financial wisdom.

Get a Financial Life: Personal Finance in your Twenties and Thirties

This book is aimed at young adults and focuses on the basics. From doing taxes to debt repayment strategies, Beth Kopliner gives a thorough foundation for anyone wanting to establish a financial life for themselves.

Broke Millennial

Author Erin Lowry makes things easy for young adults who are overwhelmed and confused about debt and budgeting with this smart, motivating guide. Promising to show how to go from “flat-broke to financial badass,” it differs from other personal finance books by covering tricky, real-life situations involving money, from managing student loans to not being able to split the bill with friends. Among the plethora of personal finance books made for older people, Broke Millennial offers a fun, relatable take on managing money for beginners.

Rich Dad Poor Dad

If personal finance is new to you, then you might want to check out the 1997 classic, “Rich Dad, Poor Dad.” This book tells parables about personal finance while advocating for real assets and investments, including real estate.
It doesn’t tell you how to build wealth by avoiding Starbucks and fast food; but how to build successful businesses that will create passive income for you. It’s not about asking for a five percent raise at your job, it’s about creating streams of income that will work for you.

BEST BOOKS FOR INVESTING:

The Little Book of Common Sense Investing

This easy to read book shows you an alternative to actively, poorly managed, overpaid funds by introducing you to low-cost, passive index funds as a sustainable investing strategy, which gets you the retirement savings you need without the usual hassle of stock investing.

The Simple Path to Wealth

JL Collins is a huge fan of John Bogle, the founder of Vanguard and the author of the book above titled “The Little Book of Common Sense Investing”. This book is a guide to money and investing for people who realize that money is important, but would rather spend their time raising kids, advancing in their careers, pursuing other passions and making the world a better place. It’s easy to understand and filled with lots of practical advise. It’s one of my favorite financial books.

BEST BOOKS FOR INSPIRATION:

The Millionaire Next Door

To truly understand how to accumulate wealth, business professors William D. Danko and Thomas J. Stanley explore the seven common traits found among millionaires.
After years of research into the wealthy, the authors interestingly found that most of them don’t live in Beverly Hills or drive fancy cars. Instead, these people acquired most of their wealth by working hard, living frugally, and saving most of their money. Contrary to the media’s flashy depiction of millionaires, the book emphasizes how to get rich without needing a high-profile job or degree.

Your Money Or Your Life

This book encourages readers to take a step back and think about the their ultimate goals and how much money they’ll need to get there. The simple premise of the book is the question: How much money are you willing to trade your life for? Whenever you’re working, your trading your life and energy for money. What does that mean to you? Once you’re clear on the “why” behind your saving and spending, making decisions about investing and budgeting becomes much easier. 

BEST FOR DEBT MANAGEMENT:

The Total Money Makeover

When Dave Ramsey talks about money and finances, people sit up and listen. This is no get-rich-quick scheme — Ramsey’s books never are. The book provides a solid foundation for saving enough money so that the next life emergency won’t derail your finances and you can retire comfortably. Ramsey’s foundations, setup as “baby steps” has always involved paying off your debt so you can get there, and he tells you how.

Best For Building Wealth

The Automatic Millionaire

This book is straight forward. It describes how to take the hard work and willpower out of the saving equation by automating your saving and investing. It’s a classic read to learn why it’s so important to set-up a cash flow system that works and to watch out for all of the little expenses. Bach highlights the fact that changing your habits in a way that you can stick to them, and knowing what’s meaningful to you in your own life and prioritizing that, is what’s going to help you succeed.

Summary

Each of these books offers something unique to learn within the personal finance world. They’re all worthwhile but where you start would depend on where you are in your financial journey. If you’re new, I’d start with the books that are best for beginners. If you are in debt, I’d definitely read “Total Money Makeover” by Dave Ramsey. And, if you’re ready to get into investing, I would read both “The Simple Path to Wealth” by JL Collins and “The Little Book of Common Sense Investing” by the great John Bogle.

Happy Financial Literacy Month and happy reading!

~SMJ

Getting Out of Debt Using the Debt Snowball Method

Image result for pics of debt

Paying off debt can be overwhelming and it is no easy task. But doing so will help provide so much relief by eliminating that heavy burden. And, it’s a critical step towards financial peace of mind, and ultimately financial independence.

The Debt Snowball Method is a debt elimination strategy. It’s a simple, yet effective approach to getting out of debt popularized by Dave Ramsey, a renowned personal finance guru. Dave has helped thousands of people get out of debt using this method and it will help you too!

It focuses less on math and more on behavioral changes. For more on the theory of why your brain will like the debt snowball method, click here.

Why is it called the Debt Snowball?

Image result for snowball images

The process is named the “snowball” method because the payments you are sending to creditors grow larger over time, much like a rolling snowball.

Imagine making a snowman as a kid. You start with a snowball and then roll the snowball around the yard. It starts out small, but with each rotation, it adds a layer of snow, getting bigger and bigger, as it accumulates more snow. Eventually, your snowball looks more like a boulder than a snowball.

How the Debt Snowball Method works

With the debt snowball method, you pay off debt in order of smallest to largest, regardless of interest rate. You make minimum payments on everything but the smallest debt and attack that one with a vengeance. When that bill is paid, you move to the next smallest and repeat until you plow through all of your debt.

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Step 1: List all of your debts from smallest to largest. Write them down. (For an idea of how to setup your list, see below).
Step 2: Pay the minimum payment on every debt, except the smallest debt.
Step 3: Pay as much as you can towards that smallest debt until it is paid off.
Step 4: Repeat the process by paying as much as you can toward the next smallest debt until each debt is paid in full.

Related image
Example of Worksheet to list out debts and keep track of the balance and payments.

Why use this method?

You gain a psychological momentum achieving quick wins. The advantage to using the debt snowball method is that you see instant progress and will be able to pay off a debt completely in only a few months.

Personal finance is only 20% head knowledge. It’s 80% behavior!

Dave Ramsey

This approach is all about behavior modification. Be seeing results fast, you’re more likely to stick with the program and rid yourself of debt for good.

Why Does the Debt Snowball Method Work?

The debt snowball works because it’s all about behavior modification (not math).

This method is structured to help you achieve wins as quickly as possible since you’re making additional payments on your smallest debts first.

Neurotransmitters are chemicals that transmit between neurons or nerve cells. Dopamine, the “feel good” neurotransmitter, helps us focus and makes us feel happy when we meet our goals. By completing small goals rapidly, you are getting dopamine spikes more often. This makes you feel good, which, in turn, makes you want to repeat the behavior.

It also keeps you focused on your plan. Small victories matter.

Visually tracking your debt journey can also help you feel gratification because you SEE PROGRESS. So, write them down, setup your chart, and tack it to your fridge – “gamify” your debt pay-down!

Have questions? Please feel free to comment or email me. I’d love to hear from you!

Let’s develop some smart money habits together!
~SMJ

Top Financial Goals – Ideas for 2020 Goalsetting

Top 3 Financial Goals You Should Set Immediately

If you haven’t realized it yet, I’m a big fan of setting goals. I start each day writing down 5 things I am grateful for along with the goals I’ve set for myself. I write them down EVERYDAY and then creating a plan for how to achieve them.

For example, I have 10 goals that I want to achieve within the next ten years. From there, I set goals for the next year that will help me work towards the bigger goals. And, I set monthly goals to further drill it down. (You can checkout some of my monthly goals on my Instagram page: @smartmoneyjackson or facebook: @FinancialJackson.

Here is a list of my 2020 Goals:
  • Save 50% of our net (after-tax) income
  • Read 1 financial book each month
  • Exercise 4-5 days per week
  • Use less plastic
  • Reduce my carbon imprint

Not all of my 2020 goals are financial related because I want to focus on all areas of my life.

My big financial goal this year is to save 50% of our after-tax income.

My husband & I are in the financial cycle phase of life called “wealth accumulation”. See illustration below for the stages of an individual’s financial life cycle:

Image result for stages of financial life cycle

Your age and your financial life cycle will help guide you on which financial goals to set for yourself. Listed below are several ideas from which to choose from but there is a hierarchy or priority that should be placed on which goals you work on first.

Order of Priority for Road to Financial Independence

  1. Save $1,000 for your starter emergency fund.
  2. Payoff all credit card and student loan debt.
  3. Save 3-6 months of expenses in a fully funded emergency fund.
  4. Invest 15% of your household income for retirement.
  5. Save for your children’s college fund.
  6. Build wealth and give charitably.

Keep the above order in mind as you choose from the following list of financial goals.

My Top Financial Goals Idea List:

  1. Create and stick to a Budget
  2. Live below your means
  3. Cut spending
  4. Payoff all credit card and student loan debt
  5. Have an emergency fund of at least $1,000
  6. Have a fully-funded 3-6 month Emergency Fund
  7. Save and invest a minimum of 15% of your household income
  8. Plan to leave your financial house in order upon your death – aka: make a will

1. Create and stick to a budget

Creating a budget is the foundation for all financial success. I really feel like this is the most important thing you can do for your financial future. Regardless of whether you think you are too poor to budget or too wealthy to budget, you’re not. I’ve written a blog post on how to create a budget. You can access it here.

2. Live below your means

It’s a simple math equation. If you spend more than your income, there’s debt. If you spend less than your income, there are savings. Being able to live on less than you earn is a simple concept but not easy, especially if you’ve already accumulated debt. There are 2 ways to live on less than you make: cut spending (discussed next) or increase income. You can increase your income with a side hustle like driving for uber/lyft; food delivery; selling “stuff”; etc.
I prefer a combination of both. Whatever method you choose, making it a priority and committing to your plan are essential to making it a reality.

3. Cut spending

Here are some ways to cut expenses on everyday items and free up money for other goals like debt payoff, house down-payment, or wealth accumulation:
Cut back on television streaming services; raise insurance deductibles; eat out less; food prep to reduce grocery bill; go through utility bills to see where you can reduce; install LED lights; cancel gym memberships and subscriptions.

4. Payoff all credit card and student loan debt

Pay off all debt using the debt snowball method. Start by listing all of your debts, except for your mortgage. Put them in order by balance from smallest to largest. Start putting as much money towards the smallest debt while paying the minimum amount on the other debts. Once you’ve paid off the smallest debt, move onto the next smallest, applying all the funds used on the first debt plus the minimum payment you were paying. Focus on one balance at a time, but make minimum payments on the others so you don’t become delinquent.

5. Have an emergency fund of at least $1,000.

Emergencies are going to happen – whether it’s a flat tire, an unexpected medical bill, or a sudden loss of income.
None of these things are planned for, but they can happen any moment, no matter how careful you are. Start by saving $1,000 and then tackle your debt. If you are debt free, move to financial goal #6~ a 3-6 month emergency fund.
By the way, if you accomplish this goal, it will put you ahead of 57% of Americans!

6. Have a fully funded 3-6 month emergency fund.

The amount you need depends on your life cycle status. If you are single, or married with no kids and both of you are working, 3 months of expenses saved up is sufficient. If you are married and have kids and especially, if you only have one source of income, I recommend having a 6-month emergency fund.

7. Save and invest a minimum of 15% of your household income

The more the better. Payoff your debt first!

8. Make a Will

A will = being responsible to those you love. A will is simply a piece of paper that states who you want to get what when you die A will states what YOUR wishes are. For more on why a will is important and how to create a will, read my blog post here.

To Summarize:

Going through your adult life without having some concrete goals is a lot like sailing a ship without a destination. You have no idea where you are going and, what’s worse, the longer you stay lost on your finances, the harder it will be to correct your course and reach your desired destination.

Set some financial goals. I’ve provided some ideas above but feel free to create your own that are best suited for your stage of life. I would would just strongly suggest that you follow the guidelines set above and don’t go out of that order. Why? Saving while you are in debt is like swimming upstream. If you have debt, you’re being crushed by interest. Before you can start saving and take advantage of the power of compound interest, you need to stop the bleeding.

Budgeting 101 – How to Create A Budget

The thought of budgeting often brings a negative response from people. Many people are turned off by the simple term budget. Some of my friends refer to it as the “B” word. The term is associated with restrictions and a lot of hassle and headaches. Can anyone relate?

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While I realize it can have a negative connotation, I can not emphasize enough the importance of creating AND maintaining a budget.

I really feel like this is the most important thing you can do for your financial future. Regardless of whether you think you are too poor to budget or too wealthy to budget, you’re not.

Reasons why Budgeting is Important

1) Helps You Reach Your Goals

A budget is a plan that helps prioritize spending. With a budget, you can move to focus your money on the things that are most important to you. It may be getting out of debt, saving up for a home or preparing for retirement. Your budget creates a plan and lets you track it to make sure you are reaching your goals.

2) Helps you Save Money

People who do not have a budget tend to save less money than people who do. This is because when you budget, you assign your money to do certain things. It allows you to automatically put money into a savings or investment account each money (#smartmoneyhabit). A budget helps prevent debt and save money. As you save, you will begin to build wealth. Building wealth is what provides true financial freedom and peace of mind for your future.

3) Helps you Stop Worrying

Most people don’t like the restrictions that having a budget puts on them. However, you decide how much you spend in each category. So, if you want to put a large portion of your money towards leisure activities, as long as you’re saving and meeting your other needs without going into debt, you get that choice. BUT, once you setup limits, you need to stick to them.

4) Budgeting Puts You In Control

If you feel like you’re not in control of your money and you’re constantly wondering where it went and what happened to it, budgeting can put you in control. It allows you to prioritize your spending, track how you are doing, and realize when you need to stop.

Budgeting is the most essential part of financial planning and the best thing you can do for your financial future!

How To Create A Budget

A man and a woman looking at financial papers with a calculator

Step 1: Determine why you want a budget

According to surveys, only one-third of all households live by a strict budget. By deciding to budget, you’re joining a select minority — and your decision will pay off! Budgeters are almost twice as likely to report no financial worries compared to spenders, and they’re less likely to live paycheck to paycheck or struggle with finances. Sold yet?

While budgeting is always a GREAT decision, it helps to define goals before you start the process, since the real reasons you’re budgeting may impact choices you make during the process. Here are a few reasons to create a budget:

  • Finding a way to save more money
  • Reduce debt
  • Reduce overspending on problem areas (Starbucks anyone?)
  • Making sure your spending reflects your goals and values
  • Breaking the paycheck-to-paycheck cycle
  • Avoid spending money you don’t have
  • Meeting long-term financial/retirement goals

While it may seem silly to think about your motivations, psychology plays a big role in how we handle money. In fact, University of Maryland research into budgeting showed the process of creating a budget makes it more likely goals will be achieved because the process of hashing out the numbers creates an emotional investment, enhances motivation, and discourages cheating. That’s a lot of benefits right there.

Creating a budget makes it more likely goals will be achieved.

University of Maryland

Step 2: Dive into your current spending habits

Before you can create a realistic budget, you need to know how much you are currently spending. If your budget isn’t realistic, it’s nothing more than a wishlist.

I recommend looking back at your bank and credit card statements for the last 3 months to get an average of each expense category (see below for a list of expenses you might include in your budget).

This is where most people stop. I’m just going to be honest here…you just have to do the work here.. THERE ARE NO SHORTCUTS. Figuring out where your money is going must be part of the budget process.

“You just have to do the work here.. THERE ARE NO SHORTCUTS.

Financial Jackson

Write down all of your expenses in either a spreadsheet or a notebook. I’ve shown a picture of a sample budget worksheet below for visual reference. If you are struggling, here are a couple of resources I think are good, that can help you create your master budget worksheet:

  1. Dave Ramsey’s quick start budget forms click here.
  2. Spreadsheet for creating your master budget worksheet click here.
Sample Master Budget Spreadsheet:
Notice how much income is used up by student loan debt! See my write-up on the Student loan debt crisis here.

Step 3: Write Down Your Total Income

This is your total take-home (after tax) pay. Factor in income from all sources including:

  • Wage income
  • Money from side gigs
  • Alimony and/or child support
  • Business/Commission income
  • Income from investments
  • Social Security

If your income is variable, one of the best budgeting approaches is to pay yourself a salary. This means you’ll decide on a monthly “salary” to base your budget around – I recommend using a worst case scenario here. If/when extra money comes in, save it in case of a bad month later.

Step 4: Subtract Expenses from Income to Equal Zero

This is called zero-based budgeting, meaning your income minus your expenses should equal zero. When you do that, you know that every dollar you make has a place in your budget. If you are negative, look at your budget to check for errors first. If you are still over, look to see what you can cut – Hulu, Disney+, cable, dining out, etc.

Step 5: Track Your Spending

Making a budget is only the first step. You have to figure out how to live by your budget. Now that you have created a Master Budget Spreadsheet, track your spending every week. Every day if you can. It’s the only way you will know if your spending is aligning with your plan.

Here are some ways to track your spending using apps that I have researched and would recommend:

  • Mint: Mint is free. You link your credit cards, bank accounts and add your budget that you’ve created. Mint will track how well you keep to budget limits. You can choose categories of spending, set limits, specify how frequently each expense will occur, and specify whether to start each month with leftover amounts from prior month (i.e. if you have irregular income).
  • You Need a Budget (YNAB): I really like this app but it costs money to use it. YNAB costs $11.99 per month or $84 for the annual plan after a free 34 day trial. If you’re not in debt, I think this is a good choice. The free 34 day trial means you can try it out before committing to see if it works for you.
  • Everydollar: This is a new app created by Dave Ramsey. I like it for the budgeting and tracking components, which are free. But, it falls short when you want to automate your expense tracking by linking your bank and credit cards. While the budgeting and manual input of your expense tracking is free, it costs $129.99 per year to move to the “Plus” version. While I like the visuals he creates for the budget and tracking, I think it’s too expensive for the automation upgrade. So, if you’re only interested in manual tracking and don’t want to integrate your bank and credit card accounts, I think this is a good tool. If you want to automate, Mint is free.
  • Spreadsheet: If you’re not tech savvy or don’t like computer based programs, the spreadsheet I mentioned above when creating your Master Budgeting worksheet, can also be used to track your expenses.
  • Plain old notebook: no link here. If you are adverse to an app/computer tracker, you can do it manually. I once had an 80 year old client who preferred to do his tax returns, with paper forms. We always double-checked his work using our computer software, but he was always accurate, down to the penny! So, if you like it the “old-fashioned” way, go for it. But, remember to write everything down.

Balance the Budget Weekly

Once you get everything setup and begin spending money, use your spending tracker app (from one of the above options) to keep track of each purchase and bill. About once a week, review where you actually are with what you planned. Have you spent all of your dining money already and now you will be cooking each night until the end of the month? Did you sell some clothes and have extra cash to put towards a credit card or vacation? Make sure you do this religiously. Its so much easier to keep up with it then it is to catch up!

Review Budget Monthly and Setup Next Month’s Budget

Finally, it’s important to check in with your budget and make adjustments as needed. See how you did each month, where you overspent, and if you had extra left over. Then, adjust your budget according to what you’ve learned and set yourself up for success the following month.

That’s it! If it seems like a lot at first, you’re not alone. Budgeting takes practice, just like everything else in life. Do you have questions about getting a budget started or utilizing one of the spending trackers listed above, please feel free to reach out to me. I’m happy to help!

~Financial Jackson

Fetch Rewards Review 2019 – How to earn gift cards

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Earn gift cards from Amazon, Target, and more just by scanning in your grocery store receipts.

What is Fetch Rewards?

Fetch Rewards is a rebate app that pays you, via gift cards, to buy items from your favorite brands. All you have to do is scan your grocery, hardware, pet, warehouse club, convenience, drug, or liquor store receipts. You get bonus points when you buy select items and those points turn into gift cards when you’ve reached $3.00 or more in savings.

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Download the app here: App Store (iOS) or Google Play (Android) then enter the promo code PR53B before you scan your first receipt to receive 2000 bonus points.

PRO TIP: Enter the promo code PR53B before you scan your first receipt to receive a sign-up bonus of 2000 points [$2 value].

How does it work?

Once you’ve downloaded the app, sign up with your email address or through Facebook. You’ll also be prompted to select the state you live in and enter your phone number.

You earn points when you make purchases on qualifying brands and scan your receipt with the Fetch app. The number of points you earn is tied to how much the product costs. For every $.10 spent on a participating item, you will earn one point.

Make a purchase and scan your receipt.

Once you’ve made your purchases, grab you receipt and open the Fetch app. Tap “Scan” to take a picture of your receipt and tap “Submit”. It’s seriously that easy.

It will only take a few minutes for Fetch to review your receipt and then you’ll see the points in your account.

Redeem your points for gift cards.

A thousand points equals $1.00. Once you’ve earned 3,000 points, you can redeem them for gift cards. Reminder: you get two thousands points just by entering the promo code PR53B before entering your first receipt. Favorites include Target and Amazon!

PRO TIP: Treat your points like a savings account for something you’re planning – like Christmas.

Pros and Cons of Fetch Rewards

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Frequently asked Questions

After getting started, you may still have some questions along the way. There are help documents under the “Me” tab with video tutorials and answers to common questions.

Here are some of the questions I had while using Fetch Rewards and the answers I found:

  • What do I do if I didn’t get my points?: Find the submitted receipt, tap “Correct my Receipt” and follow the prompts.
  • Do my points expire?: If your account is inactive for 90 days, your points will expire.
  • Is there a time limit for submitting receipts?: Receipts must be scanned within 14 days of the checkout date.
  • Can long receipts be processed?: Yes, you can submit more than four images for a single receipt.
  • Can I submit electronic receipts?: To get credit for digital receipts, you must use the e-Receipts feature, which allows you to connect your Fetch account to an email inbox containing the digital receipts and pull them into the app to get points. As of October 2019, this is only available for iOS devices. Learn more here.

Leasing vs Buying a Vehicle

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Let’s cut to the chase – I am NOT A FAN of leasing a car. Period. Ever. I really feel like I could stop here, but I won’t. I’ll show you the math on why leasing is not a good financial decision and, as a bonus, I’m also going to give my thoughts on buying a new car vs a used car.
Don’t worry, I’ll keep the math simple and I’ll even link a video to Khan Academy’s site where they provide a detailed explanation of the exact numbers I’m going to show here. Did you know that Khan Academy provides lots of great videos on financial topics to help create better money habits? They do.. You can find their website here. I just love Khan Academy, don’t you?! But, I digress. Back to the topic..

Crunching the numbers

Refer to the spreadsheet below for the simple calculations used in this example.

Scenario 1 – Keep the car:

Let’s say you’re in the market for a new subcompact and the cost to purchase the vehicle will be $17,700. If you finance the car to purchase it, you will need to pay a deposit. Let’s assume $2,000. With a reasonable interest rate of 4.22%, monthly payments will be $465/mos for the 3 years until it’s paid off. Total cost to purchase and keep the vehicle is $18,740 (note that the difference between the purchase price of $17,700 and the $18,740 is interest you’re paying the bank).

Your other option in this scenario is to lease the car. As you can see, the monthly payments are a lot less over the 3 years but if you choose to buy the vehicle at the end of the lease term, you will pay a total of$19,924 and $1,184 MORE to own the same vehicle. I like to refer to it as the cost of lower monthly payments. Oh, and by the way, if you don’t have the cash to pay the Lease Buyout, you’ll need to finance it which means more interest and a greater difference in price that you’ll pay to lease vs. buying the car.

scenario 2 – sell/give up the car:

Refer to the spreadsheet below for the simple calculations used in this example.

I know what you’re thinking:”yeah, but Denise, I’m planning to give up the vehicle at the end of the lease. I’m sure that’ll be a better deal than buying the car, right?”
Sorry, but the math doesn’t support it. Even if you enjoy low monthly payments for 3 years while the purchaser endures high monthly payments, at the end of the lease term, you have nothing, while the purchaser actually owns the car. So, the purchaser can sell the car for the estimated sale price and still make out better by almost $1000!

For a video explanation of these calculations, please go to Khan Academy’s website here.

The bottom line on Lease vs Buying

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Leasing offers lower monthly payments and this is why they are so appealing. And, if you like to have a shiny new vehicle every few years, leasing allows you to easily upgrade to the newest model. But, financially, leasing is a bad deal for the consumer. I realize that car dealerships sell it as a great deal, but they’re out to make money. If it wasn’t a money maker for them, they wouldn’t be “selling it”.

What if you have a lease already?

If you currently lease your car, you are not in the minority here. Like I said, car dealerships hard sell leases and they are becoming more and more popular. I get that a low monthly payment and the idea of driving a shiny new car every few years is definitely appealing. It just doesn’t make sense financially.
So, if you currently lease your car, read your contract to see if you can get out of the lease early. Generally, there are stiff penalties for early lease termination. You may be better off waiting out the lease term and then choosing the lease buyout so you can purchase it.

If you have questions about crunching the numbers and whether early termination of the lease is a good idea, I’m happy to help you run the numbers.

Bottom line: I strongly discourage choosing a lease again, if you currently have one. Just buy a less expensive used car to get the lower monthly payments you need to manage your budget.

A Few Thoughts on Buying a New vs Used Vehicle

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A car’s value depreciates approximately 20% the first year of ownership. So, why buy new? Dave Ramsey, a well known and reputable financial adviser says you shouldn’t be buying a new car unless you have a $1M net worth. I’m not sure where he came up with the number, but I like it as a rule of thumb. However, I really feel like buying used, even if it’s less than a year old, is always a #smartmoneyhabit. In addition to being a smart financial decision, it’s also good for the environment because you’re reusing. Bonus.

I’ll go a step farther on the car buying to say I strongly suggest you only buy what you can truly afford. Keeping up with the Joneses is a competition you’ll never win. Don’t give in. Don’t sacrifice what you want most for what you want now. Resist the impulse and get what you need AND what you can afford. All shiny new toys lose their luster.

~Financial Jackson

Questions? Comments? Please feel free to email me. I’d love to hear from you.

Benefits of an Online Savings Account and How to Sign-up for One

If you want to save money, the simplest and most fundamental way to do so is with a savings account.

Online savings accounts can usually offer much better interest rates than the typical brick & mortar banks like Bank of America. For example, Bank of American currently offers an annual savings yield (APY) of .03% for a basic savings (that’s practically nothing!) while Synchrony Bank, an online banking option, currently offers 1.9% (as of Oct 2019). That’s a big difference and since it’s so easy to open an account, it just makes sense to have one. Click the link here to see a list of the online banks offering the highest APY.

How to Open a Bank Account Online

You should shop around for the right bank account to meet your needs. It should be FDIC insured, with NO fees. Also, check to see if it requires you to make a minimum deposit or keep a minimum balance. Avoid ones that require a minimum balance because it’s too hard to keep track of and fees can add up quickly and eliminate any higher interest that it may be offering.

Then look at the interest that the account will pay you on your deposit.

Once you pick the best one for you and your needs, it’s time to get started. 

The good news is that most online banks make opening an account as simple as possible, with easy-to-use online applications. And if needed, you can even chat with friendly professional bankers to help you through the process. Keep reading for step-by-step instructions to setup an account with Synchrony Bank. (If you choose a different bank, it will work in a similar manner).

Before you start, you may want to get together your personal information.

Note: most banks require that you and any joint applicant are U.S. citizens, or lawful permanent residents, and are at least 18 years old.

If you’re funding your new account electronically, you’ll also need the information of the account you’re using for your initial deposit.

Once you complete the application, your new account is usually set up — and earning interest — within a few days!

How to open an account with Synchrony Bank:

  • Go to www.synchronybank.com
  • click on the drop-down menu item at the top labeled ‘PRODUCTS’
  • Choose ‘High Yield Savings’ (see pic below)
  • Scroll down the page and click on button that says ‘Open Account’
  • Then click on ‘YES, OPEN A SYNCHRONY BANK ACCOUNT’
  • Complete the application. It’s that easy.

REMEMBER to have all of your information handy, including bank account information for your initial deposit, if you are funding it electronically.

Most banks have apps you can download onto your phone so you can transfer money easily; but, you can also log onto your account with any computer to transfer money as needed.

If you have any questions about setting up an online savings account, please don’t hesitate to contact me.

~Financial Jackson

Important Legal Documents Every Young Adult Should Have

Do you have children who have turned 18? If so, please keep reading to find out which legal documents every young adult should have, why they’re needed, and where/how you can get them completed.

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Health Insurance Portability and Accountability Act (HIPAA)

Because of HIPAA, healthcare providers are unable to disclose information about a patient to ANYONE, even a family member, unless explicitly authorized by a patient. You, as a parent, have no more right to obtain medical information on your legal-age son or daughter than you would to obtain information about a stranger on the street. And that’s true even if a young adult is covered under his or her parents’ health insurance, and even if the parents are paying the bill.

A medical provider can choose to disclose protected health information to the family member, even without the patient’s authorization, if, in their professional judgement, it serves the best interest of the patient. But providers often come down on the side of patient privacy, particularly if they have never met the family member.

It’s not easy to ponder, but imagine your 18-year-old child, while away at school, is severely injured in a car accident and is taken to the hospital. As soon as you find out, you call the hospital to check on your child’s condition but are told they are not authorized to provide you with any details because they do not have prior authorization permitting them to share information with you.

Sitting down with your adult child and having them sign the appropriate documents naming a parent or guardian as an authorized party to handle matters in the event of an emergency can eliminate many potential unforeseen issues.

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Important Documents:

HIPAA authorization

A signed HIPAA authorization is like a permission slip. It allows healthcare providers to disclose your health information to anyone you specify. Your adult child is naming you as an authorized party and is giving you the ability to ask and receive information from medical providers about your child’s health status, progress, and treatment. This is particularly important in the event your adult child is unconscious or incapacitated. Without a HIPAA authorization in place, the only other way to obtain information regarding your child’s health would be to have a court appoint you as his or her guardian.
Young people who want parents to be involved in a medical emergency but fear disclosure of sensitive information need not worry; HIPAA authorization doesn’t have to be all-encompassing. Young adults can stipulate not to disclose information about sex, drugs, mental health, or other details they might want to keep private.

Medical power of attorney (POA)

A Medical POA or Health Care Proxy (as it is sometimes called) communicates your wishes in case you are unable to make medical decisions. In signing a medical POA, you appoint an “agent” to make medical decisions on your behalf in case you are incapacitated and unable to make such decisions for yourself. In many states, HIPAA authorization is rolled into the standard medical POA form.

Included in a medical power of attorney should be a living will. A living will specifies your wishes with regard to interventions in life-or-death scenarios in case you are unable to do so.

It is important to note that because state laws differ, you should obtain a Medical POA that complies with the laws where your young adult will be residing. If your child is away at college, that institution my have their own specific forms, so you should check with them and be sure to sign any of their forms IN ADDITION to these documents.

For example, my children are away at college – at Rhodes College and University of Michigan. But, both of my children reside in Texas. That’s where their license is, where they are registered to vote, etc. So, I have made sure I comply with the laws of the state of Texas. In addition, I have also signed the applicable forms provided by each school. You can usually find out which forms the school uses by going to University’s health services website and/or emailing the health services department.

Durable power of attorney (POA)

As an additional step, young adults should consider appointing a durable POA, enabling a parent or other designated agent to take care of business on their behalf. If the young adult becomes incapacitated or if they are studying abroad, the durable POA would enable the agent to sign tax returns, access bank accounts, and pay bills, for example.

When discussing this form with your young adult, you should stress the significance of this legal document, because the powers granted to the person named in the durable POA are broad and provide the ability to make medical, legal and financial decisions on the young adult’s behalf. Please encourage your young adult to name someone they trust explicitly.

Where to get these forms completed

Just a reminder that these forms vary by state law so it’s important to follow the rules governed by the state your young adult is residing in. There are several ways for you to get these forms completed:

  1. If you have a lawyer who has already drawn up estate documents for you in the past, you may request them to draw up these documents for your young adults as well. Price range is $450-$500.
  2. Utilize Mamabearlegalforms.com. This website is knowledgeable, walks you through utilizing a question and answer approach; and then completes the forms for you to print and sign. Price range is $100-$150.
  3. Utilize a free option on eforms.com or legalzoom.com.

Have questions? Please email me at: moneysmartjackson@gmail.com or leave a comment. I would love to hear from you.

The Student Loan Debt Crisis

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Getting a college education is one of the American dreams, right? It will help you achieve your career goals and provide you with “financial security”.
A college education can be invaluable but first you have to fund your education and most people are doing it by taking on debt in the form of student loans.

Student loan debt in the U.S. has reached $1.6 trillion

That’s insane! The student loan crisis in this country has become way too serious to ignore.

The Disheartening Stats on the Student Loan Crisis

  • National student loan debt has WAY exceeded credit card debt – by over $1.6 trillion! (1)
  • There are currently about 44 million loan borrowers in this country. (2)
  • Students, on average, accumulate about $35,000 in student loan debt by the time they graduate. (3)
  • As of 2018, roughly 1 out of 10 people with student loans were late (or completely missed) their payments. That’s the highest 90+-day delinquency rate of all household debt – outranking auto loans, credit card debt and mortgages! (4)
  • Student loan debt has seen almost 157% growth since the Great Recession and is the fastest-growing portion of the total household debt in the U.S. (5)

As you can see, the student loan crisis has reached alarming levels. It is delaying many Americans from investing into their retirement dream and it’s killing the dream of college providing you with financial security. That’s NOT ok.

It’s time to get intentional and take control of our financial future!

How to prepare your kids to go to college without student loans:

I know this is a tough one. As a parent of twins, I want the absolute best for them and I’m sure you do too. But, have you bought into the trap of believing the absolute best means college and not just college, but the best college they can get into, regardless of whether you or they can afford it?

My husband and I began saving for our kids college education when they were babies. We chose a 529 plan and I highly recommend them ONLY IF you can afford to save for your own retirement and have extra to put away into a college savings plan for your kids.

But, the majority of families can’t afford to save extra for their kids college. If you fall into this category, please don’t think the only solution is to get “help” from student loans. Trust me, there are thousands of students who have obtained their degree without going into debt to get it. Here are a few practical steps you can take to help them get ready far in advance.

Sit down and create a budget with your child with their dream career beginning salary and subtract all the expenses they will incur.

Have fun with this. It’s not intended to depress them but to give them a realistic view of how much money they will be bringing in and how much will be going out each month. Do the budget with student loan debt and without so they can see how much “damage” student loan debt can make on their bottom line. Don’t overthink this or get lost in the weeds. Just do a rough estimate of anticipated expenses. Your child will get the idea very quickly as they see how fast the “amazing” salary goes. Click here to show them (and you) how monthly debt payments are calculated.
If you need help with creating a budget, Dave Ramsey has very helpful forms for you to utilize. You can access them here.

Talk to your child about their career goals. Not all degrees are created equal (sorry but it’s the truth).

Do they want to go to college? What do they want to do? What you study matters! A student’s major can actually have a bigger impact on lifetime earnings than simply going to college, according to Georgetown University for Education and the Workforce.

Note that the lowest-paying majors are in education, arts, and social work fields.

You may think we’re horrible parents, but we told our daughter,who at the time thought she might want to major in social work, that she would be going to a local in-state public school if that was the choice she wanted to make. We had no problems with her choice in major and actually thought it was very philanthropic and caring to choose that career path; BUT, social workers don’t make a lot of money. And, let’s face it, they’re not going to be picky on where our child got their degree from. They just want someone skilled and willing to do the job.

Find an AFFORDABLE College!

Now that you’ve sat down with your child and reviewed their goals and created a budget, it’s time to research potential schools. Public in-state schools are your best bet for affordability. If they live at home, that saves more money. I know we all dream of our kids going to an Ivy League university (me too), but I truly believe it’s more about work ethic and what you do with your degree AFTER you graduate than what the name on the piece of paper reads. When you go to a doctor, do you find them by searching on a listing of where they went to college, or from word of mouth from others on how good they are. I can tell you that I’ve never asked a doctor where they went to school before getting a checkup. Ok, maybe one time when my son had to have a heart procedure I may have glanced at the diplomas on his wall. But, the fact that he was head of the pediatric cardiology dept. was what really sold me – what did he do with his degree? He worked hard and moved his way on up to the top.

What you do with your degree matters more than the name of the college on the diploma.

Financial Jackson

Encourage your kids to work hard. Hard work pays off.

I can’t emphasize this enough. Work hard and don’t give up. You, as parents, set the example here. Enough said.

Help your kids find scholarships.

Scholarships are a key part of graduating debt-free, and there are hundreds of them available to students and lots of them aren’t academic focused. For help in this area, I encourage you to look on Anthony Oneal’s website.
In fact, he has a new book out called “Debt Free Degree“. I highly recommend it. Anthony has a passion for helping people avoid college loan debt.

But what if it’s you that has student loan debt?

So, you didn’t get this advice in time and you are now faced with student loan debt. What can you do? Dave Ramsey is a knowledgeable resource for all things financial. He started on a radio station back in 1992, sharing practical answers for life’s tough money questions. Today, his show reaches 15 million+ weekly listeners. His techniques to help people get out and stay out of debt is proven successful and I can only hope I can help him in his revolution! Click here to read how you can pay off student loans quickly.
Don’t wait!! Click here now! Get started paying off your student debt burden TODAY! Let’s go! You can do this!