financial advisor pro tips, understanding your personal finance and money management fundamentals

Transcript

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the world of financial advice is a vast and complex one and it could be hard to
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know where to start when you decide you want some help for as long as there’s
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been money there’s been people who charge a fee to hold it or manage it for
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you or tell you how to budget it if you have a complicated financial life with
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property children different assets perhaps a business maybe some debt and a
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complicated budget an advisor may be just the thing you need to bring order
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to your investments first thing consider your goals what problems are you looking
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to solve is it to save you time across a variety of financial issues is it to
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grow your nest egg is it to help you budget and save your goals we’ll narrow
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down the different type of advisors that are right for you
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you should also keep in mind that there’s a difference between an
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investment advisor and a financial planner & investment advisor is focused
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on growing your assets while a financial planner is focused on the spectrum of
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your financial life from insurance to trusts to budgets if it’s the latter you
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want look for someone with a high certification level such as a CFP which
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is a certified financial planner in the u.s. one extremely important thing for
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anyone who presents themselves to you as an advisor is to ask what credentials
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they have the main thing to find out is if they’re bound to you by a fiduciary
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duty that means they must act in your best interest versus theirs you know
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those people who try to get you to buy higher interest CDs when you go into the
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bank they have no fiduciary duty to you their goal is to get your money out of
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your savings account and have it committed to the bank for a fixed term
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the question are you a fiduciary very quickly separates the advisors from the
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salespeople in the u.s. CFPs and registered investment advisors are
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bound by a fiduciary standard stockbrokers are not measuring progress
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against your goals when working with an advisor is simple make sure they
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outperform the market by at least the value of their fee every year not as an
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average for example if your advisor is charging you 2% and the market which is
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measured by the SP index is up 8% then you can reasonably expect that your
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advisor should make you 10% growth that year
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or if the market is down you want your advisor to protect you from the downturn
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by at least the value of their fee so let’s say the market is down by 5% you
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want your loss to be no more than 3% this is why the most important question
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to ask an advisor is how has my portfolio performed net of fees in
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comparison to the market sometimes people are uncomfortable asking
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questions like these we may feel intimidated by the advisors role as an
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expert especially if this is an area of our lives that we’re not confident but
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any reputable advisor should be able to answer this question professionally but
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we’re of those who respond with a lot of jargon or technical language it’s a
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tactic to distract you and make you feel disempowered trust your gut if you feel
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like your advisor isn’t giving you the straight story or is talking to one
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partner and ignoring the other you probably want to take your money
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elsewhere one last thing what if you don’t have
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money to invest right now and just need help with budgets insurance and debt
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reduction for example financial planners can be very helpful here in setting you
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up with the plan shop around for fee only advisers and make sure you’re
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comfortable asking questions of them the important thing to remember is that when
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you’re clear about what you need to do to move your financial life forward you
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can then choose how to do so whether that involves a financial adviser or not
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you
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there is so much confusion and emotion around money for so many people but
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learning about investing or how to grow your money can seem very overwhelming so
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where do you start confidently asking questions about money
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is step one towards financial empowerment and investing don’t be
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afraid to channel your inner five-year-old the simplest questions can
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often be the hardest repeat why what how how much until you really understand
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what’s being discussed and if the person you’re working with is not helping you
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understand that it’s time to work with the new person once you’re on the road
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to understanding how to start investing the focus needs to turn to you you may
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want to invest but should you understanding your financial position
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and risk profile will help you determine how to get started if you’re very
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risk-averse starting with lower risk assets like bonds or CDs could help
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build your confidence or if you’re looking to build your knowledge about
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how investing works sometimes buying stocks or funds in things you already
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know and care about can help to contextualize investing there’s three
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ways to get yourself set up you can work with an advisor who will invest on your
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behalf you can set up a trading account and do it yourself
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or you can work with the hybrid solution so open an account fund the account and
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go I’m a big believer in investing what you know and learn as you go
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investing is a lifelong journey and the earlier you start the better even if
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it’s with virtual dollars virtually buying and selling stocks and funds is a
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great way to build your money muscles what your balances go up and down
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because they do go up and down and history has shown that you’re better off
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in the market than not in the market and then when you’re comfortable go in maybe
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start with a smaller portion of what you are invest just to get a feel for it if
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someone is investing on your behalf make sure they’re following a strategy that
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you’re comfortable with ask lots of questions and don’t ever assume that
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that money that you work so hard to earn is doing just fine without your
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attention last remember the great opportunities exist in downturns if you
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can buy when everyone else is panicking ask this question of the experts you
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come across if prices went down significantly what would you do get
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familiar with how investing works and be ready for when
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the new york stock exchange goes on sale like many things in life the simplest
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things are often the best asking simple questions can yield powerful learning
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opportunities ideas and ensure accountability so take a deep breath and
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us
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so you want to get better with money but you don’t have money right now to invest
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there’s a great way to get you started with no risk to you and no money down
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and that’s by building a virtual portfolio a virtual portfolio or
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sometimes called a practice portfolio is a collection of investments that you can
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buy and sell and watch over time the big difference is that you don’t use real
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money so why would you do this a few reasons first virtual portfolios are a
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great way to try investing without actually investing it’s a super easy way
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to learn second I truly believe this such a thing as money muscles like
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regular muscles the more you work them the stronger they get third and most
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importantly the best time to learn about investing is before you put your money
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in virtual portfolios are risk free it’s easier to set up a virtual portfolio
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online at places like investopedia or see if your online bank has that
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capability once you’ve got yourself set up then the important part begins the
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market goes up and down all day every day so there’s no point crying or
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celebrating in the short term the goal of your weekly check-in is first to
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track how you’re doing and second to gauge your reaction to how you’re doing
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do you get super anxious if your portfolio has gone down 2% are you
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already mentally spending your gains when your portfolio is up 10% over time
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you’ll learn to manage the ups and downs and learn how to take the emotion out of
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investment decisions the single biggest thing to learn is that you don’t panic
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when things are down and don’t jump on bandwagons after things have gone up but
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if you do feel terrible when your portfolio is down you should think about
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moving away from stocks and look at more conservative investments like bonds your
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investment strategy should reflect your risk tolerance also a giant benefit to
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virtual portfolios is that when you’re ready to invest you’ll have already
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built a wish list of exchange-traded funds and stocks that you believe in
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finally I recommend you bring friends or family members along for the ride
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learning is always more funding groups and maybe you can encourage each other
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to spend lists save some money and get going for real
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you how do I make the most of my fixed
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income while this is a common question from retirees there’s some great lessons
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for everyone now fixed income can mean many things from payments from an
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annuity to living on Social Security or a pension the key is that every month
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you have a finite level of income here’s three ways to optimize your fixed income
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life it goes without saying that you need a budget and that your expenses
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should be less than your income not breakeven you should not spend every
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dime that you get this may mean some adjustments to the way you live and
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change is never easy but on a fixed income with the assumptions that things
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get easier over time the sooner you make the necessary adjustments the better
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life is full of surprises good and bad so include a buffer each month and if
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you don’t have any surprises great put that money aside as savings and put it
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to work which leads to the second point contrary to popular opinion that
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retirees especially should be risk of us if you have money that you’ve put aside
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you can still put it to work and earn money on it now I’m not suggesting risky
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or speculative investments but you can now put smaller amounts into lower risk
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balanced portfolios that could earn you more than what a savings account can but
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remember all investing involves risk so only put in what you can afford to
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potentially lose also regardless of how you earn your living or currently get
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your fixed income there’s ways to make more money for ideas look at the next
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generation of workers we’re having a side hustle or multiple sources of
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income is increasingly becoming the norm start with a sharing economy what do you
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have that you can rent a car that sits in your garage 99% of the time put it to
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work and maybe you have a home with the room to spare or access to a vacation
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property check out air B&B remember that there’s always work to be done from
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proofreading to serving coffees to teaching it probably won’t make you rich
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to do side hustles like these but there’s an upside the time that you
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spend working and earning money isn’t time you spend spending your money
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lastly a warning with all the advances
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in technology there’s increasingly creative
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ways of getting scammed be suspicious of anyone offering easy money or demanding
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upfront payments for future income if you’re younger and work in a profession
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with the pension or you have an annuity that will pay you a set amount for the
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rest of your life start planning now for ways that you can maximize or subsidize
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your income and keep your cost of living in check I’ll leave you with this
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thought living on a fixed income doesn’t have to be an exercise in restriction
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and deprivation but it should be your starting point from which to build on
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focusing on your paycheck is great and making sure you get paid a fair wage for
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your work is super important but if you’re trying to maximize your earning
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potential it’s always good to look further than your paycheck there’s three
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main areas where you can look your skills the things you own and your
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liquid assets first your knowledge and experience is always worth something but
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as a person with finite hours in the day it’s hard to exponentially grow income
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based on your job but don’t let that stop you from exploring side hustles
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from teaching to participating in focus groups to making things to sell on Etsy
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doing something with your time that can convert to cash is a great way to create
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multiple income streams next look at the things you own especially the things of
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value that can be turned into cash and with the advent of the sharing economy
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it’s much easier to unlock the potential of any asset look at listing your car or
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lawnmower or even your house on sharing sites look for platforms like peer buyer
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that are available in your area and don’t forget if you’re willing to put in
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the time there’s always a market for selling your secondhand goods and
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clothes the third way to generate a different income stream is to put the
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money you have to work through investing this is a side hustle that you can do
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while you’re working hard at your other job or jobs growing your money in real
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estate your investment portfolio or businesses should be a part of
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everyone’s money mindset regardless of how much money you have right now you
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work hard for your money make it work hard for you in the US and in many
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countries investment income is taxed at a much lower percentage than salary
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which is why the one percent aka the rich probably pay a lower tax rate than
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you so investing can be a second income stream if that’s your goal but the key
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thought is that longer-term multiple income streams buy you options in life
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investing your time attention and money in more avenues than just your primary
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career is a great way to ensure that your net worth can grow
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you
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the thing about loans is this if you need to borrow money you generally will
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find a way obtaining a loan can be easy but paying
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it back is not borrowing money has become the default way to pay for the
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big things in life like education and housing but for many people it’s also
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the default way to pay for things that they can’t afford right now and buying
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things that way means that they will cost you more in the future
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sometimes a lot more let’s consider the many types of loans they include student
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loans mortgages car loans home equity loans credit cards yes they are
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considered loans cash advances and payday loans the most important thing to
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know is that interest rates and terms matter enormous Li and they vary a great
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deal depending on the loan let’s talk about this in terms of good and
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not-so-good debt let’s start with good debt good debt is debt that is
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manageable predictable and buys you something of value that means interest
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rates are low terms along and rates don’t fluctuate drastically the most
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obvious example is mortgages low interest student loans can also fall
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into the good debt category especially when the rates are fixed for the term of
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the loan in the US and other countries there’s programs that type payments to
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your income level thereby keeping the loans manageable not so good debt
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Alone’s that you cannot predict how much they’re going to cost you in the future
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or take a considerable percentage of your income or have high interest many
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variable loans fall into this realm some mortgages private student loans and
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personal loans are often variable because they’re not secured against an
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asset whose future value is predictable these loans are higher risk to the
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lender hence the higher interest rate and
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higher risk to you if you can’t plan your budget accurately let’s say you
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have a $10,000 personal loan with a 5-year term if the interest rate goes
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from 5% to 7% you’ll have to find an extra $600 for interest payments so it’s
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in your best interest to pay down as much as you can when rates are low if
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you have multiple sources of debt car loans credit card debt personal loans
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it’s worth seeing if you can consolidate into a single loan which has a more
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predictable payment term consolidating your debt only works if you’re committed
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to not going back into debt so hide those credit cards and be careful where
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you consolidate your debt the first thing not to do is to go to predatory
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lenders like payday loan providers solving a temporary problem through a
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payday loan becomes a rolling process of taking on more debt to pay for all debt
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online lending options like so far for student loans and Lending Club for
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access to crowd source capital also make it easy to get a loan but if you’re
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consolidating federal student loans you’ll lose the benefit that comes with
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them so do the math on what that will really cost you also don’t overlook your
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bank as a source for consolidation they’re more interested in keeping you
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as a customer than seeing you’d go to a competitor so they can usually work
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something out so let’s do a quick dive into interest rates the key thing to
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look for is APR specifically how much does the interest rate being offered to
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you deviate from APR if the cost of money is 1% from the central bank as it
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is now and the lender is asking for more than six or seven percent that means
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they’re making quite a profit on your loan so look for better alternatives the
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last and most important thing is that loaning money in any form means that
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you’re taking on an obligation in the future to pay it back you must
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understand the agreement and the implications especially if the loan is
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secured to any of your assets do the math on your repayment terms and
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understand the consequences of what happens if you miss a payment and if you
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ever feel pressured to sign something that you don’t understand do not sign it
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ask questions seek advice and do the math until you fully understand what
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you’re signing your future self will thank you
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paying fees is a part of life there are convenience fees fuel
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surcharges extra baggage fees account maintenance fees ATM fees fees and
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surcharges are everywhere and avoiding them can be something of a competitive
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spot one of the biggest offenders in this
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annoying fee game are financial institutions
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their fees are not only high but they also target those least able to pay them
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first of all you should know that banks make a ton of money off fees overdraft
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fees alone generate 27 billion in revenues for banks and it isn’t getting
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any better free checking accounts have dropped from 76% of all accounts in 2009
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to 37% today and fees themselves have risen 21% over the past five years by
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calling something a fee instead of a loan lenders can avoid regulators and
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charge whatever they want for example if you buy a $20 lunch but don’t have the
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funds in your account to pay for it your bank can lend you the money to pay for
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the lunch for that loan you’ll get charged a twenty seven dollar overdraft
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fee for the sake of argument instead of calling a fee let’s call this a loan
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which really it is your twenty seven dollar fee would be equal to a loan with
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a three thousand five hundred and twenty percent interest rate payday lenders are
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the champions of this fee game they’ve been restricted from charging exorbitant
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interest rates so now they play with fees and if you convert their fees into
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interest rates many payday loans bear interests of over a hundred percent
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another fun game that banks play is to reorder transactions to maximize
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overdraft fees some banks will process transactions from largest to smallest so
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if the big purchase puts you into debt the smaller transactions will each
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trigger an overdraft fee even if you think you’ve done the right thing and
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waited to make the big purchase until the last minute the reordering can cause
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a cascade of fees that can be shocking it’s in everyone’s best interest to
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minimize fees so here’s a few ideas how to help number one never set foot in a
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payday lender and if you have pay off the loan and never go back Bank fees may
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be heavy but payday lenders are terrible overdraft protection may
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sound like a great idea but the fees you pay can be astronomical many banks
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automatically opt you into the programs you can opt out facing the embarrassment
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of a rejected payment is often better than being charged overdraft fees it can
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also help to find out your bank’s fee policy if you can make sure you keep a
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buffer of cash in your checking account while debit cards are grade they’re the
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main reason people get dinged with overdraft fees if you’re running out of
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funds in your checking account consider using your credit card for a few days
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until your paycheck clears if you have room on your credit card interest on a
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few extra charges will almost always be lower than overdraft fees if you need
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overdraft protection consider an overdraft transfer it’s a form of
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overdraft but uses one of your secondary accounts to fund your overdraft the fees
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are still high but lower than a standard overdraft to avoid other account fees
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try to find a no fee checking account they still exist but they are harder to
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find they all have limits on what you can do but try to find one that has no
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account balance minimums in the u.s. new players like Bank mobile work well for
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fee free banking and use cash remember cash try this for a month take out what
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you need at the start of each week and only spend that amount you’ll never
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overspend because you only have what you have and you’ll limit transaction fees
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and ATM fees because you only need to go to the bank four times a month and no
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overdraft or insufficient fun fees it’s not easy to avoid fees but it is
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possible and there’s increased pressure on banks and lenders to at least be
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clear about the fees that they charge and remember the more you save on fees
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the more money you have to pay down debts or invest
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let’s just all assume that at some point in your life you’ll receive some money
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that you didn’t earn in your day-to-day job it could be an inheritance a bonus a
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legal settlement or if the odds are truly in your favor a lottery win which
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just so you know you’re just as likely to be struck by lightning as when big in
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a lottery still it happens so here’s three things that you need to do when a
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windfall comes your way first check if the money is taxable and if you will owe
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tax on it take that amount and don’t touch it until your tax bill comes an
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unexpected tax bill can be a nightmare then consider this question how can this
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money improve my long-term financial situation for the 50% of American
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households that are carrying credit card debt the number one best thing to do is
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pay it off the interest rate you pay on credit card debt is higher than what you
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can earn on most investments so don’t even think of trying to make money off
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the investment to pay off your debt if there’s still money left over after high
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interest debt is paid off great now you can make a plan for that money a tool
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called the reverse budget can really help when managing a windfall or any
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other lump sum basically the rule is before you spend the first penny figure
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out where every cent will go park the money temporarily in savings account so
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you’re not tempted to fritter it away then step back and do a self-assessment
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to figure out where the money should go you can do it in a storytelling format
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like I just received $5,000 that I don’t have to pay tax on I’ve stopped
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tinkering you dead but I still have a balance of $2,000 on my credit card my
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goals are to get out of debt establish a financial cushion for emergencies and
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invest for the future I’m going to allocate $2,000 towards the dead $1,000
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towards my cushion and contribute $2,000 to my IRA of course you can change those
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numbers but the idea is you figure out a plan for your whole amount before you
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spend anything so you can end the story with some sort of result I’m moving
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forward debt-free I’ve protected my financial stability by establishing a
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cushion and I’m making progress towards my future goals make sure that plan is
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one from which your future self also gets to benefit
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that means investing versus just saving the money the more you invest now the
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more your future self will be able to cash out later I’d recommend at least
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50% of the money after tax and debt reduction to be put aside for investing
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if it makes you more comfortable get professional help someone who you
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pay a flat fee for an unbiased opinion then and only then do you start thinking
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about spending the money on yourself or helping out family or friends or giving
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to charity here’s a thought that flies in the face of most people’s
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understanding of their money you don’t save what’s left over from spending you
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spend what’s left over from saving and when you receive a windfall this is sage
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advice indeed
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if you don’t know where you are how can you determine where you’re going it’s a
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thought that applies brilliantly to your financial life whether you like it or
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not there’s a lot of data out in the world about you and your financial life
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banks credit agencies companies even your trustee ups know more about you
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than what you might think it’s important for you to know what they know for a few
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reasons specifically accuracy privacy and
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planning the first thing to focus on with your financial data is accuracy
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make sure you check your credit rating at least once per year check accuracy of
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all the data and also look at the data being measured you’ll find that credit
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agencies measure how much of your credit you actually use what your high balance
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is how many different types of credit you have and how often you miss payments
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poor ratings in any of these measures will lower your credit score now privacy
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be very careful when you sign up for account aggregation services to
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understand where your data goes remember when you get a product or service for
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free what’s really being sold is your data bottom line with privacy understand
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where your data is going last make a plan
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there’s amazing tools available for budgeting investing and broader
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financial planning what used to take a lot of research and paper shuffling to
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get a picture of where you are can now be done through tools like level spendy
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and you need a budget another business concept to borrow is KPIs key
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performance indicators what are your financial KPIs I recommend
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building a set that makes sense of your progress against your goals
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it could be saving a set percentage of your income setting a monthly debt
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reduction plan or deciding on a monthly transfer to an investment account what
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you want to have at the end of this is a snapshot of what you own and what you
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owe plus a personal or household view of your cash flow now none of this may seem
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particularly pleasant and there’s no perfect time to get your financial data
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in order overcome that obstacle by setting yourself a time on your calendar
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to do it and schedule something that you love doing right afterwards remember
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once the facts are in front of you it doesn’t matter if it’s an excel sheet a
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mint calm account or a plain old pen and paper keep coming back to those numbers
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and track them over time you work so hard to
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living doesn’t it make sense to spend a little more time on tracking exactly
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what’s going on with your money
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you
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it’s been said that the most dangerous concept when it comes to the economy is
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this time it’s different history has shown that the economies of the world
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move in cycles it’s easy to slip into that mindset because economic cycles
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feel abstract and they talked about so much that economic news just becomes
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more noise to tuner but when you can see where you are in the context of the
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economy you can do two things you can adjust your behavior and you can take
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advantage of opportunities here’s how start by making key economic ideas
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personal you may think that interest rates currency values and unemployment
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don’t have much to do with you but they can influence your life more than you
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know the first thing to understand is that economies expand and contract
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expansion means the economy is growing and there’s more money flowing through
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businesses and individuals in times of expansion there’s often new developments
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within the public sector like governments building your airports or
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upgrading roads in times of contraction there’s less money if there’s three
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successive quarters of negative growth this is called a recession and if a
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recession lasts six quarters it’s a depression during a recession company’s
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share price will often go down and stay down as long as sentiment about the
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economy as negative savvy investors wait for down cycles and buy low so at the
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time of this recording the US unemployment rate is five point five
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percent interest rates are near zero and the u.s. dollar is very strong so what
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do you do with that information first unemployment when unemployment
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numbers are high say above five percent that means there’s a lot of people
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looking for work who could potentially replace you at lower cost businesses
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have fewer incentives to grant pay raises when there’s available labor in
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the marker conversely when unemployment slow you can push a little harder for
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more money or benefits because it’s harder to replace you if you leave
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and what about interest rates if the government raises interest rates that
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means two things you’ll be paid more interest for deposits that you have in
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the banks which is a good thing you’ll also pay more on the debt that you owe
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such as variable mortgages or credit card which is absolutely not a good
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thing when rates are increasing do all you can to pay down debt at the
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lower rate currency values have an impact too when the US dollar is trading
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at 79 cents to the Canadian dollar it means that the hotel room you stayed in
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a year ago when one Canadian dollar equal the US dollar that room is now 20%
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cheaper and that’s why it’s called economic cycles everything is related
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buying a cheaper hotel room seems great but it means that whatever the u.s. is
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producing for export has become more expensive for people in other countries
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to buy so that can push down production which can increase unemployment now
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there’s brilliant people all over the world who spend their lives doing
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economic analysis and predictions but guess what
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with all the tools in the world even they must admit this no such thing as
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future facts no one knows what’s going to happen to the economy so the best
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thing to do is to have an understanding of where you are now and to plan for
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your future self to be well taken care of that means adjusting your behavior
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and lowering costs in advance of economic contractions plus increasing
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your savings should you experience job loss but it’s not all doom and gloom
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history has shown that there will always be good years and bad years and at least
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knowing that can help you make bigger decisions like buy versus rent when to
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increase investments or sell-off and perhaps the most fun decision if you
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have a vacation budget in what country will your money go the farthest
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there’s no question that the economies of the world are changing at an
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extremely fast rate a century ago when the Industrial Revolution made
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manufacturing the cornerstone of the economy products and services became
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available from mass market and the prosperity of the world grew
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exponentially since then much of the world has consumption based economy’s
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growth was assured by constantly increasing levels of purchases since the
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post-war boom of the 1950s until now individuals and family consumption has
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been the source of growth expanding populations needed places to live
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appliances food clothing and technology but recently something has changed the
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ownership culture has shifted a little whereby people are rejecting the notion
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that you need to own all your own stuff and if you do own stuff you can put it
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to work by renting it out to others this is the core idea of the sharing economy
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in the u.s. right now every second household is struggling with credit card
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debt so the widespread adoption of buy less and share more is a good thing
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let’s look at a few ways that you can benefit from this change one of the most
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high-profile changes for urban dwellers especially is the idea of car sharing
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when you add up the cost of a car itself what a cost of pocket services register
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it and insurance cheapest car maybe costing you thousands of dollars every
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year looking to services like Zipcar to see whether you can rent one on demand
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instead and if you do need to have one or more cars in your life is there a way
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to put them to work to generate more income services like uber and lyft allow
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for you to sign up to become a driver and work as much or as little as you
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like or looking to Touro where you can allow people to rent your car when
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you’re not using it think of other big-ticket appliances in your life that
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you need but don’t use all the time lawn mowers leaf or snow blowers or bikes
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look for local versions of zilog calm where you can list your stuff your
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availability and your price to rent and your biggest ticket expensable
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your home a B&B has revolutionized travel and is allowed for people
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everywhere to generate extra ink by renting out some or all of their
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homes the world of Finance has also been impacted you can now participate in the
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cycle of borrowing and lending the way that banks have done for years by
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depositing money with Lending Club or prosper and then earning interest as
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other people borrow your money of course there are ideas that have been around a
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long time that are essentially sharing economy carpooling babysitting clubs
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shot my closet clothing swaps even potluck dinners anything where a cost
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can be shared by a group of people this has taken on yourself here’s an idea why
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not set a goal today to get extra money in your pocket by reducing some of your
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own expenses or generating some income or both
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if you haven’t heard of the frugal movement you’re not alone but it’s very
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real and is growing fast being frugal isn’t just about making ends meet when
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you’re short on cash it’s more about being able to buy options later in life
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versus spending all you earn now the frugal movement has some great lessons
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for all of us let’s explore four of them first buy
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less stuff the advertisers of the world all have one goal make you buy and then
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rebuy their product over their competitors the big question for you is
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do you need to buy it at all the sharing economy eBay and plain old going without
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are all alternatives and if you think you’re already economical with how you
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spend your cash here’s a great way to commit to the buy less stuff mantra
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think of all the holidays in the course of the year and make a concerted effort
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to celebrate without buying all the stuff that goes with them second live
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with a smaller footprint we fall in love with neighborhoods and homes often
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without doing the math on the financial commitment they’ll take before moving
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compare the short and long term cost differentials between options first the
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total cost of buying versus renting and then the ongoing cost of furnishing
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heating cooling ensuring and maintaining different homes spoiler alert
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smaller is better and after decades of building bigger and bigger homes the
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trend is now reversing to downsizing new developments so they aren’t so expensive
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to run the most extreme example of downsizing is the tiny house movement I
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recommend doing a search to see how whole families are living happily in
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homes the size of the average American kitchen their creativity and commitment
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is quite amazing now if you’re not up for buying less stuff or downsizing the
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least you can do is recycle everything the frugal movement is all about buying
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less but better stuff nobody needs a wardrobe makeover or new stuff every
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season take pride in making things last or exchanging them with family and
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friends for the things that you need keeping up with the Joneses is a fallacy
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it’s extremely difficult to truly know another person’s financial situation but
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it’s a strong possibility it’s not the same as yours no matter how much you
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think you have in common take pride in living below your means
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and understand that for every new car that appears in your neighbor’s driveway
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it’s more than likely that’s an extra bill that they’re taking on to spending
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money to try to be like someone else is a dangerous slippery slope you have to
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accept that everyone in the world has either more or less money than you and
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we have to get comfortable making choices that are in line with our
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financial circumstances and values remember you don’t have to live in a
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tiny house or weave your own shoes but learning from this movement will
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help both your wallet and the environment and best of all every dollar
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that you don’t send out into the world today is available to you to invest so
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your future self will have more money and more options tomorrow
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you
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so it’s coming up on tax time do you have a feeling of dread when I say that
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or did you think great I’m all set I can skip this video taxes do bring up all
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sorts of emotions but regardless of the feelings that tax-time invokes you will
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most likely be paying taxes here so let’s see how we can minimize the stress
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and maximize your return if you’re lucky enough to have a salary your employer
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has most likely had tax taken out of each paycheck via the pay-as-you-earn
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system depending on the with holdings you signed up for when you took the job
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you will have either overpaid in which case you’ll get a tax refund or
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underpaid in which case you’ll owe additional tax either way you’re better
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off than independent contractors and small business owners who need to keep
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track of taxes they owe in the course of a year and put money aside to pay them
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in order to feel less stressed about tax be aware of expenses you can deduct all
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year round not just prior to tax time to make things easier have a folder for
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things that you think might be deductible business and school expenses
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charitable donations or child care and medical expenses keep it in sight and
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organized so it’s not a source of stress rather it should give you a sense of
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being in control in the u.s. if you made less than 62 thousand dollars last year
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you can file directly with the IRS for free they even have some state forms
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that you can also file for free go to irs.gov and look for the Free File link
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also research the different online services like TurboTax and H&R Block
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these programs have developed a lot in the past few years if you’re claiming
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itemized deductions these services are a great alternative to the higher price of
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accountants if you live in the US make sure to check if you’re eligible for the
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Earned Income Tax Credit this is one of the only tax programs that is a refunded
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credit it’s free cash and 25 percent of people eligible for it
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don’t Clemen the IRS has an e ITC tool to check if you’re eligible then do one
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more thing if you think that you may owe taxes here make sure to set up a goal
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within your savings account or a new account completely and create a direct
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deposit on a month basis to cover any surprise tax bills
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here’s the great thing about that should you be hit by a bill it won’t eat into
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your savings or worse put you deeper into debt but in the u.s. the odds are
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in your favor 8 out of 10 American taxpayers get a tax refund so if you do
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get a refund make sure you don’t spend it right away
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think about prioritizing these two things paying down debt or increasing
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your investments these aren’t as much fun as a new TV but both of these
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options will pay off more in the long run lastly a word about fraud these last
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few years have seen an increase in fraudulent tax returns with people going
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to file their taxes to find that they’ve already been filed and their returns
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have been cashed by someone other than themselves try to file earlier to reduce
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the chances of this happening doing these things can help you focus on
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what’s really important making sure that you’re taking advantage of all the
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deductions that you can and more importantly making sure you’re focusing
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where it really counts on earning as much money as you possibly can
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you
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for most people under 50 the concept of retirement can be difficult to imagine
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let alone plan for how do you plan for something that seems so far away and how
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do you navigate the minefield of acronyms and regulations and service
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providers if you’re lucky enough to live in a country where you’re provided a
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pension or a defined benefit for your life beyond employment congratulations
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but that doesn’t mean you don’t need to think about what the third phase of your
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life will look like for many people all over the world their comfort level in
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retirement is determined by a simple factor prioritizing your future self
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over your current self but think of yourself at the age of 71
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can you imagine what you’re going to be doing on a Tuesday morning when you
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serve anyone it’s not easy right here’s four building blocks to make sure the 71
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year old you will rock your retirement number one take advantage of any free
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money offered to you usually in the way of a company match for your
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contributions in the u.s. this is your 401k you should contribute enough to get
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the maximum company match if your company doesn’t contribute a 401k loses
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some of its benefit it’ll still lower your taxable income but you won’t get
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the long term benefit from your company’s extra cash also look at
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setting up a separate long-term taxed advantaged account in the US this is an
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IRA which is an individual retirement account try to deposit the maximum
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allowed each year these accounts will allow you to grow your money tax-free or
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deferred until you retire also make sure the funds are invested and not sitting
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in cash the easiest way to do this is to buy a super low-cost ETF which is an
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exchange-traded fund or an index fund that tracks the overall market in the US
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these two funds are the best known lowest cost examples your retirement
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accounts are for your future self there are often huge penalties if you want to
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withdraw money early 25% of Americans take money up before retirement and they
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hit with huge taxes and fines so make sure the money you put into retirement
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accounts can be left there until retirement and depending on when you
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start contributing and how much you put in it still may not be enough that’s
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where it’s important to can your assets across your life tracking
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your worth over time and prioritizing ongoing investments many people rely on
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their homes to be a core asset when they retire but homes aren’t liquid meaning
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you can’t get cash out of them quickly and many people want to remain in their
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homes and you need to live somewhere right so don’t rely on your house as
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your retirement plan lastly the biggest impact on your
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long-term financial health isn’t how much you earn but how much you spend
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it’s an annoyingly simple formula spend less than you earn and prioritize saving
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and investing think about the relationship between your short-term
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wants versus your long-term needs that is rethinking retirement and it’s much
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easier than trying to imagine the seven-year old you as much as human
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nature conditions us to live in the present and make ourselves happy the
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more you can prioritize your future self the better
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you