Graduation is the theme all around my neighborhood. It is a time of excitement and big dreams. Unfortunately in most cases, personal financial sense is not a taught at college. Once out of college, going from living broke to a big paycheck every month can easily encourage lifestyle inflation and a downward spiral of bad financial habits. Hence, it is essential to establish a good personal finance foundation to avoid getting trapped in a lifetime of debt. Here is a checklist I would hand over to a new graduate to make sure they start on the right path.
- Learn to network efficiently: Invest time in networking. Learn about your colleagues. Find a mentor and build relationships at every level, both above and below yours.
- Start a case study file: By “case study file,” I mean make a list of all your accomplishments rather than a list of projects you worked on. For example: Cut 20 percent of production costs while maintaining the same product quality. Include information on which project and what you did to achieve that. This will be of great use in many situations like an annual review, a salary negotiation or a new job search. In addition, keep your resume updated at all times.
- Promote your personal brand: As a job candidate, 86 percent of potential employers will look at your social profiles, so spend some time cleaning up all your social media profiles.
- Create a budget: You might feel like you are flush with cash going from a student’s pay to a full-time-job’s pay. Create a budget even before you get your first paycheck. Continue as much as possible to live like a student and set money aside for your future goals.
- Pay yourself first: The first bill you should pay each month should be to you. Before you pay for your groceries, before you pay your mortgage, before you do anything else, put money aside in your savings. Most people will wait to pay all the bills and save the money left over. It is fine in theory, but the problem is there is almost never anything left over. If you pay yourself first, even if it seems impossible initially, you will learn to live with what is left over. This way you will always spend less than you earn.
- Borrow a book or two on finances: Knowledge is power. Arm yourself with as much personal finance knowledge as possible. I recommend “I Will Teach You to be Rich” by Ramit Sethi, if you are just starting out.
- Start an emergency fund: Establish a rainy day fund as soon as possible. Start with $1,000 to cover small emergencies, then move on to saving ‘X’ number of months’ expenses to make sure a sudden job loss or illness won’t put you in debt.
- Think five and ten years ahead: Right now your 20-year-old self might say that you are never going to get married or you will always be renting. But in five or ten years, it is very likely you would have changed your mind completely. Do yourself a favor and start saving for standard goals anyway — a wedding, down payment for a house, or your dream vacation. If you don’t end up spending money on a wedding, you can always reallocate it to another goal.
- Get started today: Time is the most powerful ally when it comes to investing. Many people keep waiting to learn everything about investing to start. Don’t get stuck on debate minutiae. Get started with some basic, low expense, index funds — total stock market or life-cycle funds. As you learn more about investing, you can adjust them accordingly.
- Don’t pass up free money: If your company offers a 401(k) plan, especially with matching funds, take full advantage of it. Sign up to contribute the maximum. That way you will never see the money in your wallet, you won’t miss the money, and you won’t be tempted to spend it.
- Manage your debt: If you have student loans or credit card debt, pay them off aggressively, starting with the highest interest rate loan.
- Avoid consumer debt: I do not believe credit cards are evil, but they are not for everyone. Understand the pros and cons of credit cards. Do not buy things you cannot afford. If you want something, save for it.
- Build your credit: Unless you are determined to pay everything in cash, you need decent credit to get a good interest rate on your loan, whether a car loan or a mortgage. Even if you are in the cash camp, it is still a good idea to maintain a great credit score as it is now used by utility and insurance companies to give you preferred rates.
- Insure adequately: When you are in your 20s, you might feel invincible and be tempted to skip health insurance to save money. Don’t! Accidents happen, and so do sudden illnesses. If your company offers health insurance, that is most likely the cheapest option. If you are under 26, you can also check the cost of insurance as a dependent on your parents’ plan. If you are single with no dependents, you probably don’t need life insurance, unless you have a loan that someone else co-signed for, if that is the case, insure yourself at least to cover that loan amount.
Nobody cares more about your money than you do. By setting up a good financial foundation, you are setting yourself up for success.
If you can go back and talk to your newly graduated self, what advice would you give yourself?
This post comes from Dawn Jamison at our partner site Zing!
One of the most exciting things about being a new parent is learning about all of the wonderful toys and technologies that exist for kids! The apps and websites my friends have told me about have truly been lifesavers. I don’t know what I would do without having these great resources at my fingertips. Whether I’ve had questions about my daughter’s development or questions about my sick baby, these have come in handy.
Here are four web sites well worth saving to your favorites list.
This site is popular among expectant moms because it tracks the development of their fetus and also tells moms how to take care of themselves during pregnancy. The site boasts trusted advice from pediatricians and experts around the world on all things babies. It provides feedback from an online community of moms and parents. The instructional video clips are very helpful too!
This website is intended to help parents raise healthy children and influence manufacturers to produce safer products for families. HealthyChild.org gives parents answers about children of any age. The site features all things pertaining to kids and parenting, including information about your child’s growth, news stories, blogs and consumer information.
This website is run by Public Broadcasting Service and focuses on providing quality child development through programming, videos and activities. This site also provides free interactive learning games for kids and fitness and food advice for parents. Your children can watch cartoons and listen to songs while learning basics like numbers, letters, colors and shapes.
If you’re the type of person who relies on feedback from reviews, you’ll love WeeSpring.com. This review site provides parent reviews on everything from products, toys and furniture to foods and more. It is a great resource for new parents who don’t know where to go for advice on baby products. It’s also helpful for people who aren’t parents and need to purchase gifts for kids. It even has a section called “Diaper Bag Essentials” for newbies.
You know how people say, “there’s an app for that” about everything? Well, I’m starting to think it’s true! Here are four phone apps that are must-haves for parents.
This app helps parents find kid-friendly fun and activities when away from home. The Mom Maps directory has more than 19,000 locations in 18 metro areas. These include parks, playgrounds, restaurants, museums, indoor play areas and more. The directory is powered by a large community of mom-mappers and well-traveled parents.
This awesome app lets you track and review your caregiver’s actions throughout the day. You can see your baby’s feeding schedules, diaper changings, sleep times and even pictures taken by your caregiver. It also is an easy way to keep track of your child’s growing milestones such as a first tooth or first steps. This app also has a cool calendar feature to sync your schedule and baby-related appointments.
This app is designed to save users money because they can see trending deals, limited-time offers and find coupons for items of interest. This app isn’t tailored to parents, but it’s a valuable tool when it comes to buying pricey items like formula, diapers and wipes. The app sends you deal alerts and reminders so you don’t miss out!
Baby Monitor Apps
As I geared up to spend about $150 on a baby monitor system, I learned about these cool baby monitor apps. They allow you to turn your phone or computer into an alarm and detect noise around your sleeping baby. There are various versions of baby monitor apps such as CloudBaby Monitor by iTunes, Dormi for Android phones and CodeGoo by iPhone.
If you have other valuable websites or mobile apps to share, post a comment below. I’m sure other parents will appreciate you for sharing your resources!
More stories from Zing:
Do you think it’s a good idea to get away from fossil fuels for our energy needs? If so, you’d be one of millions. Fact is, we are totally dependent on energy for our daily lives, especially electricity. (You can’t read this post without electric power, for example.)
Where Does Power Come From?
Most electricity, by far, is generated with fossil fuels: coal, oil and natural gas. However, this is unsustainable in the long run, as we all know by now. In recent times, new methods of generating electricity have been taking root with processes that rely on sources which:
- do not pollute
- do not contribute to climate change
- do not deplete a finite resource
- are not destructive (in terms of damaging the Earth), and
- are sustainable over the long term.
Three new processes of generating sustainable electricity have been attracting more attention in the past decade (hydro-electricity presently is the oldest and the largest renewable energy source):
- Wind turbines
- Photovoltaic (solar cells)
- Solar thermal
(The difference between photovoltaic and thermal is that the former turns the rays of the sun directly into electricity which can be used for anything, while solar thermal is limited to heating water or air.)
Wind energy output has tripled since 2008, according to the American Wind Energy Association, although it’s from an admittedly small base. In 2013, wind energy made up 4 percent of all U.S. electricity generation, but a full 30 percent of all new generating capacity.
In comparison, solar is still small potatoes, as this chart depicting data from the government’s Energy Information Administration shows:
Renewable Energy – Wind vs. Solar (quadrillion of BTUs)
Although wind energy output tripled since 2008, photovoltaic (PV) solar energy generation is growing much faster at the moment because its costs are dropping at the rate of about 15 percent per year.
Speaking of cost, clean energy costs much more than old energy, and that’s one of the biggest impediments to widespread adoption of alternative energy generation these days. Hydro-electric power is the cheapest sustainable energy source, but environmentalists have pretty much put the kibosh on the construction of new dams. In addition, wind and solar remain much more expensive alternatives to traditional fuels.
Cost isn’t the only deterrent
Then there is the issue of storage. Electricity is generated as it is needed, and what’s not used is wasted. That means your utility has to anticipate when you will turn your computer on so the power is there for you. (And yes, they actually do track that. Interestingly, they’ve noticed that tablets and smartphones have reduced legacy computer current usage.) The point is that any extra power they generate is lost forever. Over the years, utilities have become good at load management, relying on stable, low-cost, fossil-fueled power plants. They have “base load” generators which run round the clock, plus additional generators which come on when more electricity is needed and are shut down when demand subsides. These new renewable energy sources present a problem, however: You may not need the power they generate the moment the wind is blowing. The situation is reversed when a cloud passes over a solar installation, reducing the amount of energy generated and available at the very moment you need it.
Energy storage is the next biggest problem (after cost) for wind and solar power. That’s why Abengoa’s new Solana thermal solar power plant is significant — it comes with energy storage built in, which allows it to generate power for six hours after sunset. Time will tell if the benefit of storage will outweigh the cost involved and if this becomes the future for clean energy generation.
How does this impact you?
1. Expect to pay more: Clean energy costs more than “dirty” energy, and those costs will be passed on to consumers as clean energy supplants traditional power sources.
2. Expect complications: The lack of storage, and the variability of the new sources of energy, will expose you to more power shortages when the weather conspires to deliver “whammies” every few years. As the nation transitions to cleaner power, your need to prepare for power outages will increase.
3. Become self-sufficient: As the cost of household electricity continues to rise and the price of solar energy continues to drop, it makes more and more sense to consider adding solar (thermal or PV) capacity to your house. Geothermal energy and even residential wind turbines are other options to consider. Whichever technology you choose, this investment will show returns which increase every year.
The biggest downside to adding clean energy to your home is, of course, the initial investment. The numbers range from below $10,000 to over $100,000, and depend on a whole host of variables such as the amount of power you want to generate, how you want to store your energy, whether you want to maintain a connection with the power grid, and so forth. I was intrigued to observe that the number $30,000 seems to pop up more than any other … for just about any clean energy option.
That’s obviously more than your daily Happy Meal at McDonald’s. In order to encourage homeowners to make this investment, the government has offered various incentives, and can probably be expected to offer more in the future. That obviously reduces the up-front cost. How quickly you earn that investment back depends on your current energy usage and your passion for a clean earth. Worst case, though, you can probably expect to get the cost back when you sell your home.
If you live in communal housing (condos or tracts with strict homeowners association rules) your ability to make the world a cleaner place may be limited. However, as electricity costs continue to escalate, we can probably expect to see new construction projects that include some form of clean energy, which is actually more cost-efficient on a per-unit basis when installed in clusters, and may significantly increase the marketability of those units.
Bottom line: In 20 years’ time, you can expect to see the “cleanness” of electricity generated in America rising significantly and, with that, its cost. That rising cost should make any investment in clean energy sources for your home energy well worth it.
One can’t give financial advice for very long without realizing that most of it is not earth-shattering insight. It usually comes down to common sense. So then the challenge becomes one of analyzing why people don’t apply common sense to their finances more often.
Temptation is a big reason, of course. One person goes over a credit limit because she is absolutely convinced she deserved a fancy vacation. Another cannot save any money because he feels he has to buy a new car every nine months. Those situations are tough to deal with because, when you confront people who do this kind of thing with reason why it is a problem, they will start out agreeing with you but then immediately segue into a long rationalization of why they only did it because the circumstances were exceptional.
Believe it or not, though, temptation is not the most common reason people fail to make the right money moves. I find that it more often comes down to time. People are aware of what they should do, but they just don’t quite get around to it.
From a management standpoint, saving time by not addressing important tasks is a false economy. A little investment in time can lead to an ongoing payoff without any further effort. In other words, rather than costing time, attention to these tasks would actually leverage the use of your time in the long run.
In this sense, managing money is much the same as managing a business. A little investment of time in the right spots can produce an ongoing return without much further effort. These are the type of money tasks you need to make time for.
5 money tasks you need to make time for
Here are five money tasks that could have an ongoing return once you take care of them:
- Creating a formal budget process. Notice that I said “budget process” rather than budget. Yes, ideally everyone should formulate a detailed plan of expenditures and income at some point, especially early in their careers when income is most likely to be tight. Going into that kind of detail is the best way to get a good sense of where your money goes; but realistically, not everybody is likely to set out a fully detailed budget. So, you at least need a process that will limit your expenditures — such as a fixed allowance, and rules about how you use credit. Setting strict, big-picture limits tends to force the details to take care of themselves.
- Set a refinancing target. People occasionally look at mortgage refinancing if they happen to notice that mortgage rates are low. That is way too random because mortgage rates can move up and down quickly, and the potential reward here can pay off for many years. Look at refinancing not from the standpoint of where rates are, but from the standpoint of where rates would need to be for it to be worthwhile. Once you have set that target, it would only take an occasional glance at mortgage rates to see if they are moving within range of that target.
- Update your insurance. Insurance tends to sit quietly in a drawer while your life is changing dramatically. Your driving record, your financial resources, the value of the possessions in your house, and the needs of your spouse and children may all be very different from when you last bought auto, life, and homeowners insurance. Check to make sure your insurance is adequate, and shop around to see if you are getting the best rates for your current needs.
- Shop your credit card business. This is one of those slippery things where what you bought may be very different from what you are getting today. Your credit history may have changed, your credit card company may have changed its rate policies, and the competitive landscape of the credit card industry is changing all the time. In short, what was once a good deal may not be so attractive any more. If you regularly carry a balance on your credit card, you should shop for the lowest rate you can find. If you do not carry a balance, you should shop for the most generous rewards package on a no-fee card, since this is essentially a free benefit if you are not incurring interest charges.
- Shop your banking business. Fees on checking accounts and rates on savings accounts are changing all the time. You won’t know how competitive your bank is unless you check periodically — at least once a year, or whenever you are notified of a rate increase.
We all draw the line somewhere. We choose not to pursue every money-saving opportunity if we perceive our time as being worth more than the potential savings. However, for those opportunities which represent ongoing savings, a little investment of time can have an out-sized reward.
This post comes from Jenny Paxton at our partner site LearnVest.
Apprenticeships—formal programs that consist of on-the-job, paid training, mentorship and related classroom education—may be the solution to the pressing skills gap between employers’ needs and job seekers’ training.
Yet despite the obvious benefits, the number of these programs dropped 40% between 2003 and 2013, according to the U.S. Labor Department. So what gives?
One reason could be that apprenticeships are linked with unions and a blue-collar image: Two-thirds of programs in the U.S. are in construction industry (though programs are now offered in other professions, like certified nursing assistants and IT administrators).
To encourage more apprenticeships, President Obama announced earlier this month the availability of $100 million in grants devoted to apprenticeship programs in high-growth industries.
“Apprenticeships are a way to link more Americans to jobs in some of our in-demand fields, like IT and health care. They let you earn while you learn,” Obama said at a community college in Pennsylvania.
South Carolina, Wisconsin and Michigan are a few states that have taken advantage of more innovative apprenticeship programs. As an added benefit to employers, some states offer tax credits for each apprentice on payroll.
While companies might fear apprentices will leave for higher-paying jobs at the program’s conclusion, advocates have found apprenticeships in fact help with retention rates. The programs are an investment in the employee, which is often reciprocated with loyalty to the company. Some employers also avoid this problem with non-compete agreements upfront.
But another discouragement to apprenticeships is the idea that young people should stay in school rather than pursue a “tracked” program. On the other hand, supporters of the programs say these opportunities offer more intensive hands-on experience than college degrees or internships do.
Business owners skeptical of the programs can look to South Carolina’s encouraging results, where the number of companies offering apprenticeships has increased to 647 from just 90 in 2007.
More stories from LearnVest:
Even if you’re not a news junkie like me, I’d be willing to bet that you’ve seen or heard one news item ad infinitum over the past several years. That nugget is the story about Americans’ retirement readiness, or lack thereof. We are endlessly informed by the media that we’re not ready to retire — and that we won’t be ready unless we start banking lots more dough.
Years ago, there wouldn’t have been a need for newspapers and magazines and broadcasters to hammer this mantra into our heads. That’s because the rules were different then. You were hired by an employer, you worked there your whole work life, you earned your pension and retired. You then lived off your pension and Social Security. A few years later, you drifted off to the Happy Hunting Grounds, leaving whatever was left of your nest egg to your children and grandkids.
Since then, we’ve had an almost perfect storm of happenings that have led us to this point of non-retirement readiness. First, pensions began to be phased out by employers in the 1980s and ’90s, being replaced by defined contribution plans — such as 401ks — that today dominate the retirement savings landscape.
Many have wrongly underestimated the significance of this development, one keen observer told me recently. What that shift from defined benefit to defined contribution plans essentially accomplished was to take decision-making out of the capable hands of financial experts heading employer pension plans and put it in the butter fingers of average Americans without a personal finance clue.
At the same time, advancements in medical science were adding years to the length of the average life span. That meant you no longer bought the farm a few years after traditional retirement age, but two to four decades afterward. And like icing on a catastrophic cake, now there is the danger that Social Security and Medicare benefits will be pared back, leaving oldsters even more exposed.
In short, once upon a time, financial experts with years or even decades of experience made determinations about the funding of retirements that were short in duration and buttressed by Social Security checks. And today, Joe and Jane Sixpack — whose first and foremost priority in life is watching each and every episode of “Dancing with the Stars” — make the decisions about funding their retirements, which are long in duration and may not be so ably assisted by Social Security payments.
And the media world’s talking heads label it “news” that we’re not prepared?
Take what’s coming
If you are among the legions who are behind in funding your retirement, you’ll need to maximize every single opportunity to save. Your employer may not be doling out pensions. But that doesn’t mean you shouldn’t closely scrutinize each offering the boss does provide to help you bank crucial retirement bucks.
The very first place to focus is upon your own employer’s 401k plan. According to research by Lincolnshire, Illinois-based Aon Hewitt, the talent, retirement and health solutions business of Aon PLC, 82 percent of Americans in their 50s are indeed participating in their 401k plans. That means 18 percent — almost one in five — are not participating, possibly because they believe they will be flattened by Elvis’s UFO on the day they retire.
Next, if at all possible, ensure you are saving at a level that will qualify you for your employer’s match, which generally kicks in at three percent.
Aon Hewitt reports that 80 percent of people participating in their employers’ 401k plans are saving at rates enabling them to garner full matches from employers.
So again, something like one in every five is leaving free money on the table. The employer match is like a fountain of gratis greenbacks showering toward your retirement piggy bank. If it is at all possible for you to do so, make sure your hands are cupped to gather them in.
If you’re 50 or older, you can save at a higher rate than those under 50, thanks to what’s called “catch-up contributions” that allow you to funnel an extra $5,500 a year into your employer’s 401k plan.
In essence, there’s a maximum dollar amount that can be saved. For those under 50, it’s $17,500; for those above that threshold, it’s $23,000. The chance to save more per year in a tax-privileged plan could mean a much larger stash of retirement savings for you to whittle away playing golf and sailing your sailboat.
Grab other offerings
Once you have begun funding your 401k to the maximum level of your ability, look around for other cash grabs your employer may make available. Let’s say you don’t want to fully retire in your 60s or 70s but want to transition into the kind of “encore career” for which you’ve always yearned.
Many employers offer partial or full tuition reimbursement. Plan your late-stage training well enough, and you could conceivably go back to school, use the employer-tuition reimbursement to fund your training, and still be able to work a mandated one or two years for your employer after finishing your training.
Also take a look at any corporate discounts that might be available. According to retirement funding experts, this is one place average Americans too often leave cash on the table. That’s cash that could finance your retirement lifestyle.
In conclusion, you may not be able to do anything about the yammering media refrain about lack of retirement readiness. But you can do something about the free retirement goodies your employer offers as a benefit of employment. You’ve given your bosses a lot. Let them give you something for a change.
It’s been exactly one year since my husband and I purchased our first home. As one might expect, we’ve learned a number of valuable lessons this past year. There are plenty of articles full of useful tips for first-time home buyers. I am not going to repeat them. Instead, I will list the lessons I personally learned that I didn’t find covered anywhere else.
- Think long-term and think re-sale: Are you planning to have kids? Will you be taking care of elderly relatives? You might be planning to live in your first home for only a few years. In that case, who is your target audience when it comes time to sell the house? If you buy a house in a very bad school district or a house on a very busy street, when you are ready to sell the house, most families with children will be out of your list of potential buyers.
- Make a list of items to check: Home-buying is an emotional process. Ideally, you should set aside all your emotions when evaluating a house. Practically, that is impossible. Instead, make a checklist of your must-haves, nice-to-haves and other essentials. Then print copies of this checklist. Every time you visit a house, take the checklist along with you; take photographs so you can cross each item off your list. If you fall in love with the house and your checklist shows that the house has none of your must-haves, it will at least make you pause and think.
- Look at ALL the expenses when you are budgeting for the house: When budgeting for the house, don’t stop with principal, interest, taxes and insurance; add in utilities, cost of commuting and upgrades. Call the utility companies that service the house you are considering and ask for an estimate of what the cost will be, whether there are any budget plans available, etc. Will the gas budget for your car go up if you are moving further away from the places you frequently visit? Budget all of these expenses and see if you can still afford the house.
- Ask for the homeowners association contract before you make a decision: Our long term plan is to rent out the house, if and when we move away. With this in mind, once we identified the neighborhood we found most desirable, I asked for a copy of the HOA contract after going to an open house in the area. It turned out that none of the houses in that neighborhood could be rented out. If you are buying a house that is part of an HOA, it is absolutely essential to read the HOA contract before you do anything else.
- Research grants and other sources of funding: When I was researching our mortgage options, I came across so many grants and funding sources I have never heard of before. I always thought the income limit for qualifying for these types of funding would be very low, but I was pleasantly surprised by the generous income limit on many of the options. There are many different options based on profession (grants for teachers, farmers, etc.) as well as the area of the potential house (whether it’s in a rural area, high-poverty area, etc.) Research all the grants and funding options you are eligible for before you automatically decide you won’t qualify for anything.
- Be sure to read your contract before you sign it: A house is probably the largest purchase you will ever make in your life, so make sure you understand the terms of your contract. If you don’t understand any of the terms, ask your mortgage broker and your real estate agent. If they won’t explain the terms clearly to you, fire them; there are enough people who will be more than happy to help you and work for your business.
- Learn about the neighborhood demographics: If you are buying a house in a neighborhood full of renters, it only takes a few bad renters or bad landlords to drive the neighborhood down fast. If the neighborhood is full of single people, will you be happy there if you have very young kids?
- If you like the view, buy it: Buy the view, not the house. A set of people in our neighborhood are at war with the county for approving a new development next to ours. The reason? There was a wetland and a nice wooded area with a view of snow-peaked mountains from their homes. They bought their homes for that view. Now, within a year of moving in, their view is gone. Unless you own the land between your house and the view, don’t buy a house for the view.
- Look beyond the staging: I read about staging while I was researching buying a home, but I never expected the amount of staging a house goes through. The psychology does work; staged houses look far better than houses that are still being occupied. One house we went to had nightstands with lamps on it next to the bed that really increased the appeal of the room. In reality, though, there were no plug points anywhere near the lights. So practically that setup would not have been possible without remodeling. When you are considering a house, mentally try to remove the staging. Pay more attention to the layout of the house and the structure itself. Ugly wallpaper and paint can be easily fixed later.
- 10. All the old advice about buying your first home is true. Some examples — have an emergency fund, save for a down payment of 20 percent, get your credit into a better shape and don’t buy more than you can afford. If you need a refresher, here are some good articles: Roadmap for a Successful Relocation, Should You Buy a Home Now?, 11 Tips for First-Time Homebuyers, Renting vs. Buying: The Realities of Home-Ownership, Pay Off Mortgage Early or Invest?
Do you have any tips to offer first-time homebuyers? Are there any specific things to consider in the current housing market?
This post comes from Anna Williams at our partner site LearnVest.
When it comes to work perks, flexibility is one of our favorite nice-to-haves—whether that means occasionally telecommuting from home, working variable hours or being part of a job share. In fact, a 2013 LearnVest study found that more than half of us would prefer a flexible schedule.
But are employers actually meeting this growing request?
Yes and no, according to new research from the Families and Work Institute. On the one hand, employers are increasingly allowing workers more daily flexibility—think perks like occasionally working from home (67% of companies offer this, up from half in 2008). Companies are also more willing to let workers attend to personal needs during the day, like picking up a sick child from school or spending the morning waiting for the cable guy.
But when it comes to more innovative, long-term flex options, employers are drawing a harder line. Perks like sabbaticals, job shares, or the option to go part time are becoming increasingly rare, the study finds. For example, just 18% of companies today are open to job shares, while almost 30% of firms were in 2008.
What’s behind the switch? It’s likely an effect of the smaller staffs left in the wake of the recession. “[Companies] may be more reluctant to offer long leaves because they don’t have the financial margin to cover that,” Ken Matos, senior director of research at the Families and Work Institute, told the Wall Street Journal. “And they may be using day-to-day flexibility to compensate for the extra work people are doing when you have a smaller staff.”
More stories from LearnVest:
Is the American dream dead? A majority of people say it is, according to the recently announced CNN Money survey, as well as several others done at academic institutions like Xavier and Youngstown universities and other private organizations. Although the samples, questions and methodologies differ from survey to survey, the results all seem to indicate that the American dream (however people define it) is dying.
The term “American dream” was coined in the Great Depression the first time a major economic meltdown happened in full view of the entire nation through mass media, like radio and national print. It is a bit ironic that author James Adams penned this in 1931, the depth of the Great Depression: “The American Dream of a better, richer and happier life for all our citizens of every rank … is the greatest contribution we have as yet made to the thought and welfare of the world.”
You could make the case that the American dream has turned out to be America’s greatest export to the world. Entire societies, from Japan and China to Russia and Dubai, have undergone significant changes, all shifting toward the American dream, however they translate it into their version.
What Is The American Dream?
Ask ten people and you’re bound to get eleven answers. It’s one notion about which everyone seems to have a vague idea but few actually articulate down to a short list. A number of surveys consider the following components when they discuss the American dream:
- Owning your own home
- Getting married
- Having kids
- Getting a degree
- Retiring at 65
Other studies reveal more nebulous definitions, with terms like:
- A good life for my family
- Financial security
- Pursuit of happiness
Homeownership, the number one item in the Learnvest/Chase study, was ranked number one by only 7 percent in the Xavier study, illustrating the wide disparity in how people articulate the elusive dream.
When you sift through the noise, though, the essence of the American dream boils down to a system of hopes, aspirations and beliefs: If you do the right thing and work hard, you believe that you will get ahead, that you will one day accomplish the things to which you aspire, and that each generation will have a better life than the previous one.
However, that system of hopes and beliefs is crumbling as this economic recovery has not benefited the majority. We are now seeing a generation which believes it will not match their parents’ standard of living.
That is profound because it is the first time in this nation’s history that has ever happened.
What Does It Look Like?
- More kids are staying at home with one or both parents.
- It is harder to find jobs that pay more than minimum wage and involve a full 40-hour week.
- Job rewards are falling behind: pension, health, job security, job satisfaction/pressure.
- Job security is dead: Fewer people believe that dong the right thing and working hard will work.
- Education is costing more and guaranteeing less.
- Student debt is now the largest category of debt after home mortgages.
- Trust in leadership (both public and private) is at an all-time low.
Hard statistics bear this out. The labor force participation rate for those under 25 has been declining for a while and shows no sign of turning around. Conversely, the participation rate for those over 55 is rising, at a time when their forebears checked out of the workforce and retired.
If you had to pick a notion which captures the quintessence of the American dream, it’s probably retiring in a paid-off home. Some stereotype that as old fogies playing golf in plaid pants all day, while Missy plays endless rounds of bridge with the blue-rinse set in the senior center. Today’s generation may deride the image, but increasingly they realize they may never attain what their parents could take for granted — a lifetime of diligent work yielding financial freedom to do whatever you want to do.
If you look further, you can see other, more subtle, signs. Walmart has displaced Sears as America’s retailer of choice, showing how consumers have spurned “good quality at a fair price” for “everyday low prices” regardless of quality.
What Can You Do?
The reasons this generation expects to do worse than its parents are many, and, for most of us, don’t matter as much as figuring out what we can do in the face of our declining prospects.
1. Reset your expectations
All unhappiness, my wife tells me, comes from unmet expectations. Most Americans started life expecting they’ll end up with a better life than their parents. When, after some years, it starts to look like that’s not going to happen, they get frustrated and impatient. Immigrants, on the other hand, who grew up with an entirely different set of expectations, arrive in the States with wide eyes and beaming smiles. To them, America is still the land of opportunity. It’s not surprising to see that almost all of the surveys note that the American dream is still alive to a much greater degree in immigrant households.
The difference? Expectations. Immigrants seem to have lower expectations. By simply lowering your expectations of material comfort, career advancement and peer group acceptance, you remove a lot of the pressure you put on yourself. In essence, you reset your life compass to a slightly lower north. Just changing what you regard as your version of the American dream will increase your happiness.
And isn’t happiness, at the end of the day, what the American dream is all about?
2. Reset spending
It’s simple math, really: Spend less than you earn. No need to beat that dead horse.
It does get complicated, though, when you have to commit to expenses into an unknown future, like on a home lease or mortgage. We’d all like to be able to buy a home for cash, but the reality is most of us can’t do that these days. Instead, we have to make spending commitments which count on a future income.
The solution to that problem is obviously to keep those commitments to a minimum and to sacrifice to amass an emergency fund that can see you through any periods when you won’t be able to keep those commitments from income.
3. Understand that debt is more dangerous than ever before
I suspect many people nod their heads in agreement to that headline — and then incur debt anyway because they feel they can justify it. That feeling of justification is often rooted, directly or not, in the American dream.
However you look at it, debt is nothing but impatience expressed in dollars. And those with aspirations for better things take on debt when they can’t afford them.
The key to finding your way in a “dreamless America” is not falling into the trap of thinking that “things will get better in the future, at which time I can pay off this debt.” Is this hard? Painful? Unfair? Frustrating? It’s all of the above and more, but it’s still the prudent new reality. As Marty Schottenheimer always says when asked how he feels about not winning a Super Bowl: “It is what it is.”
Much better to assume things will never get better than to assume they will and live an unhappy life.
4. Be content with what you can afford
Kiss the Joneses good-bye and don’t try to keep up with anybody. I’m an immigrant, and unabashedly a believer in the American dream. But I’m not stupid enough (any more) to sacrifice my journey for a destination which often ends up being a let-down. Are there things I’d like but don’t have, places I’d like to see which I haven’t? You betcha. But I’ve learned, as someone once said, to be content with what I do have (and did see).
This recommendation is not a financial one; it’s one of identity and emotion.
Happiness is what the American dream is all about. I grew up in Africa, where I saw contentment in a hut of less than 400 square feet, no plumbing, no phone and no electricity. The people had no degree, no job, no pension — just family and enough food to get by. When you look at those wide smiles, you can’t help but realize you don’t need “stuff” to be happy. We’re privileged that what we might call a low standard of living in America is the lap of luxury to the majority of people in the world today.
No matter how distant your dream is, you can be content. By scaling back your expenses and expectations — and, above all, avoiding debt — you can stay content until the day you die.
What do you see as the American dream? Do you think you will reach it?
In a sense, personal finance is a battle of conservation. People manage their resources in the hopes they won’t run out of the essentials — only what people find essential can differ. This centers around the fear of losing money or some other aspect of your financial life, and overcoming that fear should involve some element of minimizing the reality of it happening.
Offensive vs. defensive finance
Fundamentally, some people approach finance on the offensive, while others are on the defensive. People on the offensive are driven by acquiring more, or advancing their careers and social standing. People on the defensive care more about keeping what they already have than acquiring more. Both an offensive and a defensive mentality towards finance can come from a fear of loss — but what you fear losing determines whether your approach is offensive or defensive.
What do you fear losing?
These common fears of loss may determine how you approach your finances:
- Time. People who frequently say “life’s too short” are likely to be more defensive than offensive financially. Rather than being driven by career advancement or amassing wealth, these people’s priorities are to save time for themselves, and they won’t hesitate to spend money on a vacation or other experience that they feel will enhance their appreciation of life.
- Money. These are people who are concerned about career setbacks, financial losses, rising prices, or anything else that might cause them to run out of money. Often, these are people who have had to claw their way up from a difficult financial situation and never want to have to do it again, making them very defensive financially.
- New things. It is easy to see this simply as greed, but if you look closely, acquisitive people are driven by a fear of loss in a way — they would miss the constant thrill of having new things, so they are always on the offensive financially, looking to make and spend more money.
- Prestige. Acquisition is sometimes not about the things themselves, but about social standing. Fear of losing that standing makes people aggressive financially, as they seek to get further ahead of their peers.
To a large extent, concerns with time, buying things, or prestige require a philosophical solution — you need to find a way to stop these concerns from becoming obsessions. People can be obsessed about running out of money too, but this is also a very real concern. So, conquering the fear of running out of money requires both a philosophical and financial approach.
Conservation, not compulsion
For people whose fear is someday running out of money, the trick is to conserve your resources without becoming compulsive about it. Here are some approaches that might help:
- Shoot for conservative targets. This means low return assumptions, but a high longevity assumption. This will force your savings targets higher, but reduce your risk of unpleasant surprises later in your retirement savings.
- Give yourself an allowance. Being careful financially is great, but you should not compulsively save every possible dime. Give yourself a set allowance that you are allowed to spend. This will allow you to enjoy your money, but also the discipline of keeping discretionary spending within a known limit should also make you feel more secure.
- Keep your financial plan current. This is advisable anyway, because so much can change over the years, but in the context of overcoming the fear of running out of money, updating things regularly (such as once a year) will help you feel confident that things are on track.
- Have a what-if plan. Setbacks such as market corrections or a job loss are part of financial life. The problem is, when they occur the emotional distress involved makes it difficult to think rationally. Try building some what-ifs into your financial planning — some negative scenarios to make you think through how you would cope with them. This will help you think through the possibilities more calmly because, to some extent, the more you plan for setbacks, the less you have to worry about them.
- Give something away. This is definitely more philosophical than practical, but sometimes the philosophical side of things is a necessary part of getting comfortable with your financial situation. If you have a fear of running out of money, it can dominate your thinking to the extent that however much you earn and save is never enough. Most likely, though, you can give some money to people less fortunate than yourself without jeopardizing your financial future. This will demonstrate that letting go of some of your money is not the end of the world, but it will make that point without the guilt involved in splurging on yourself.
Personal finances are exactly that — they are personal, which means there is an emotional as well as a practical component to them. For this reason, both the reality of your financial situation and your perception of it are vitally important.
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