Many personal finance reports are published with advice that may not provide the best guidance. In an effort to avoid buzzwords and troubling phrases, consider these suggestions:
- determine who conducted the research; a company may sponsor a study that lacks the rigor of academic or government researchers.
- be wary of research that reports feelings or predictions rather than actual behaviors and actions of respondents.
- consider the number of people in the study and how the respondents were selected.
- avoid generalizations that about a certain age group, such as Millennials, Baby Boomers, or Generation X.
Don’t revise your money management activities based on some survey or research report. If your current actions are working, then you are on the correct path.
For additional information on avoiding personal finance nonsense, click here.
- Have students conduct online research to locate a recent personal finance study to evaluate the validity of the advice offered in the report.
- Have students create a video presentation reporting both valid and nonsense personal finance advice.
- What problems could occur if a person uses inappropriate financial advice?
- In addition to the suggestions in the article, what actions might a person take to determine the validity of personal finance advice?
When considering a career change, the following financial suggestions are offered:
- have an appropriate amount of savings for unexpected expenses during the transition.
- create a budget to live frugally; cut living costs to be prepared for sudden expenses.
- reassess your investment portfolio to reduce risk exposure and possibly eliminate fees.
- seek advice from a financial advisor.
- determine how a career switch might impact your ability to save.
For additional information on financial advice when changing careers, click here.
- Have students talk to a person who recently changed jobs to obtain information about their experiences.
- Have students create a video presentation with suggested actions when planning to change careers.
- What relationship exists between a person’s career choice and money management activities?
- Describe additional financial planning actions that might be appropriate when considering a career change.
To spend less and save more, consider an “anchoring” system. One example of an anchor is the price of an item to determine if that is an appropriate amount of money to spend for the item.
Anchors prevent shoppers from being overwhelmed by the many choices, prices, and features. You can create your own anchors by:
- setting the maximum price you are willing to spend for an item.
- considering the value of an item in relation to the number of hours you have to work to pay for it.
- comparing the cost in relation to another item. If you buy coffee costing $2.50 a cup and want a sweater costing $50, view the sweater as costing 20 cups of coffee. Your “coffee” anchor will help you determine how valuable the sweater is to you.
When buying a home, you may be encouraged to look at properties outside your price range. Anchoring yourself at a price limit will avoid overspending, make you feel more in control, and encourage wiser financial decisions.
For additional information on financial anchoring, click here.
- Have students talk to several people to obtain information about how they determine the price they are willing to pay for an item.
- Have students create a video presentation that demonstrates various anchoring methods.
- How might anchoring help improve personal financial literacy and money management activities?
- Describe anchors people might used to determine the price they would be willing to pay for an item.
Most people would like to be able to go back and do some things differently related to their personal finances. A study by bankrate.com revealed that 76 percent of those surveyed have at least one financial regret. The largest concern, over half (56 percent), involved not starting to save sooner for retirement, an emergency fund, or their children’s education. Other financial regrets reported in the study include: living above one’s means; taking on too much credit card debt; and the burden of student loans.
A recommended action to address these financial regrets include breaking down large goals into smaller, easier ones can help put individuals on a path to success. A “save-first” mindset instead of “spend-first” is also suggested. In addition, consider opening an online savings account with higher returns, and set up direct deposits for regular saving.
For additional information on financial regrets, click here.
- Have students conduct online research to determine various financial regrets of people in different age categories and life situations.
- Have students conduct an interview with a person about actions that might be taken to avoid financial regrets.
- What factors might create situations that result in a financial regret?
- Describe possible financial regrets and corrective actions a person might take.
Before a person views your resume, it might be scanned by a computer to screen your qualifications.
Career experts suggest preparing your resume for three audiences: a computer screening program, a human resources specialist, and the hiring manager.
To pass the test of automatic resume scanners, consider these suggestions:
- Be sure to include your contact information, and avoid putting required information in the heading where it might be missed by the scanner.
- Avoid fancy formats and fonts. Use a professional presentation. Bullets are suggested for an organized, easy-to-read appearance.
- Emphasize keywords that reflect your competencies and experiences.
- Connect to the job description. Use the requirements and responsibilities of an employment position as a guide for presenting your background, skills, and accomplishments. Avoid a generic resume; tailor your resume to the specific position. Especially look for keywords that are repeated in the job description.
- Use clear job titles. Adapt and simplify previous job titles to fit generally-accepted labels in an industry.
- Seek guidance. Ask for assistance from career development centers, professional colleagues, friends, and others who can help you prepare a resume appropriate for scanning software.
Of special note, job applicants with military experience should match job description keywords to their military service. They should also emphasize and communicate their background so the resume scanning software will easily recognize their employment competencies.
For additional information on automatic resume scanners, click here.
- Have students create a resume for a specific job description to connect their background to the available position.
- Have students talk to a few people to obtain suggestions for improving their resumes.
- Based on selected job descriptions, name keywords that might be appropriate to use in a resume for those positions.
- List various sources that might be used to obtain resume preparation assistance.
Young people should take advantage of time, and start investing now for the long-term. When doing so, they should consider these actions:
- Make use of low-cost mutual funds, exchange-traded funds and index funds to minimize administrative costs, transaction fees and commissions.
- Take advantage of tax-deferred retirement programs, which will allow them to invest pre-tax dollars to lower their current tax bill. Employers may match retirement fund contributions.
- Don’t avoid risk by emphasizing conservative investments. Taking on more aggressive investments creates greater potential for higher, long-term returns.
- Effectively manage risk with fixed index annuities, fixed annuities, and market linked CDs. Dollar-cost averaging allows for obtaining more shares at a lower cost during market downturns.
For additional information on investing by young people, click here.
- Have students talk to others for suggested investment actions to take.
- Have students conduct online research regarding the best investments for their life situation.
- What factors might a person consider when selecting investments for their life situation?
- Describe actions people might take to increase the funds they have available for long-term savings goals.
While having an emergency fund is vital, putting this money in a low-yield checking account is not recommended. A certificate of deposit (CD) also may not be appropriate since your funds may be locked-up when the money is needed. For safe storage of your funds along with quick access and a better return, consider these alternatives:
- High-yield savings account. These financial products are offered by banks to attract new savers. These accounts have high liquidity and are covered by federal deposit insurance; although, interest earned is taxable. Most high-yield savings accounts are available through online banks. Also be aware of fees, minimum balances, or a required minimum length of investment.
- Money market fund. Usually offered by investment companies, these financial products are similar to high-yield savings accounts but do not have federal deposit insurance. However, they are protected by Securities Investor Protection Corporation (SIPC) insurance, usually covering amounts up to $1 million for investors.
- Treasury bills and bonds. These debt instruments of the U.S. Treasury have a maturity ranging from 90 days to 30 years. While considered very safe, an investor may lose money if sold before it matures.
- Ultra-short term bonds. For a higher yield with a bit more risk, consider ultra-short term bond exchange-traded funds (bond ETFs). These funds invest in corporate bonds, which are not guaranteed. However, it is possible to find funds that invest only in highly-rated bonds.
In each situation, be sure to consider the tax implications of earnings from these savings and investment products.
For additional information on emergency funds, click here.
- Have students create a list of unexpected situations that might require accessing money from a person’s emergency fund.
- Have students talk to others to determine where they keep money for emergencies.
- What factors might a person consider when selecting a savings instrument for storing money for emergencies?
- Describe actions a person might take to have more funds available for an emergency fund?
While a savings account and a checking account provide the foundation for managing finances, several other accounts should be considered. Since all most people don’t put all their financial documents in one drawer, all your money shouldn’t be in one account. The various recommended accounts include:
- Emergency savings for funds when you face financial difficulties that cannot be resolved in others ways. An amount equal to 6 to 12 months of living expenses is often recommended. Consider storing these funds in an “out of sight, out of mind” location, such as with an online bank account.
- Regular savings for short-term needs, such as home repairs, vacation, auto maintenance, or new furniture. Be sure to have a goal and plan for these funds.
- Household checking account for paying current bills. All income is deposited in this account with automatic transfers for regular bills and amounts to various savings accounts. Extra funds in this account can go to the regular savings fund.
- Spouse checking accounts to pay expenses for which each person has responsibility as well as work-related costs.
- Health savings account (HSA) for tax-free payments of medical-related expenses. HSAs are especially of value with high-deductible insurance plans.
- The extra fund involves the “fun money” leftover after all bills are paid, savings is under control, and all accounts have a balance at an appropriate level. This money is the reward for spending wisely.
If all your accounts are at the same financial institution, using the online dashboard will allow you monitor your balances. Or, if you use different banks, websites or apps such as Mint.com can be used to view your overall financial situation.
For additional information on needed bank accounts, click here.
- Have students design a personal plan for the various bank accounts they will use to to monitor their spending and saving.
- Have students talk to others about methods used to monitor spending and to maintain an appropriate level of saving.
- What are the benefits and drawbacks of the system discussed in this article?
- Describe actions to monitor spending and saving using online banking and apps.
While many savings, investment, and retirement plans are available to achieve financial goals, other actions are possible to achieve personal ambitions. Financial advisors and counselors also recommend these actions:
- Learn a new skill, which can result in time away from shopping or expanding your career and income potential.
- Invest in friendships that does not involve a major monetary requirement as many free and low-cost activities are available.
- Participate in a reading challenge at your local library or through a community organization.
- Create art by getting involved with writing, photography, drawing, or sculpture through a community-based group.
Many activities are available to invest your time and energy without spending much money.
For additional information on non-financial goals, click here.
- Have students list free and low-cost activities that can enhance personal and career development.
- Have students talk to others for additional suggestions for free and cost-cost personal and career development activities.
- What factors might a person consider when selecting an activity to enhance personal and career development?
- Describe personal development activities that could result in enhanced career and income potential.
Technology impacts every aspect of personal finance. FinTech (financial technology) involves apps, software, and other innovations for banking and financial activities, which includes PayPal, Venmo, and cryptocurrencies, such as Bitcoin. FinTech companies use online activities, mobile devices, software, apps, and cloud services to for financial transactions. Over 1.5 billion people around the world do not have access to formal banking. FinTech can provide these unbanked people with financial services through easy-to-use technology.
The main categories of FinTech for consumers are:
- Crowdfunding, such as Kickstarter and GoFundMe, which allows individuals or businesses to go directly to potential investors for funding.
- Blockchain and cryptocurrency, such as Bitcoin, with improved verification for financial transactions.
- Mobile payments through a smartphone.
- Insurance coverages provided by online start-ups.
- Robo-advising provides portfolio investment recommendations and allocations based on algorithms. For stock-trading, investors buy and sell stocks using apps such as Robinhood and Acorns.
- Budgeting apps, such as Mint and You Need a Budget (YNAB), monitor and plan spending.
For additional information on FinTech, click here.
- Have students talk to several people to obtain information about their experiences with FinTech products.
- Have students create an app prototype for a proposed FinTech product to help people make better financial decisions.
- What might financial literacy and money management activities be improved with FinTech?
- Describe concerns that might be associated with expanded used of FinTech.