If you stay ready…you don’t have to get ready!! Whether or not a recession occurs, certain personal actions will be beneficial for your future.
Job loss is the most common effect of a recession. This can occur due to a layoff, furlough, or company failure. With many people all experiencing job loss, finding a new job is difficult. For those who keep their jobs, they may experience pay cuts, reduced benefits, and no pay raises. Another major concern is the decline in value of stocks, bonds, real estate, and other assets.
To be ready to cope if an economic downturn occurs, consider these financial strategies:
- Monitor your monthly expenses. Know what it costs to live so there are no surprises. Be ready to pay items that occur only once a year.
- Cut unnecessary spending. Look back at your spending to see what you could have done without. Add up what you could have avoided to make sure you spend less than you make. Possible areas to cut include cable TV, streaming services, gym membership, online music subscriptions, and a less expensive cellphone plan.
- Start or expand your emergency fund. No matter how small, be sure to set aside funds for poor economic times. To build your fund, have an amount automatically deposited in a saving account each month.
- Budget everything. Telling your money where it will go keeps you in control.
- Avoid debt. Just like saving, paying off debt can start small.
- Be in contact with others to discuss possible late payments, reduced costs, cancel services, and other actions to cope financially.
- Maintain retirement savings. Keep contributing to your retirement fund so it will be there when you need it.
For career planning during times of recession, consider the following actions:
- Inventory your skills, especially those that relate to essential work for your current employers and other organizations.
- Expand your skills through online certifications, courses, and training programs.
- Be adaptable. Step up to take on tasks needed within your company.
- Network for freelance work. Connect with others in your industry for consulting opportunities.
- Be prepared for the unexpected. Despite taking these actions, a layoff may still occur. If that happens, expand your skills, update your resume, and connect to others through LinkedIn and community service activities.
For additional information on financial planning during a recession,
- Have students research current economic conditions to determine the status of employment and inflation.
- Have students create a podcast to encourage others to act on the suggestions in the article.
- What are the benefits of these actions during every type of economic situation?
- Describe actions a person might take to better understand potential career opportunities.
A research study that surveyed over 10,000 millionaires resulted in the following findings to help guide others to achieve a comfortable financial security:
- 79 percent of the respondents did not receive any inheritance; 80 percent were from families at or below a middle-class income level.
Conclusion:Building wealth is within your control and doesn’t depend on being born into a rich family.
- 33 percent never made more than $100,000 a year; 31 percent made around $100,000.
Conclusion: Wise spending, saving, and investing are more important than your salary level.
- 94 percent live on less than they make; 75 percent reported never having a credit card balance.
Conclusion: Stay out of debt and keep expenses below your income to build a financial foundation.
- 75 percent of those in the study indicated consistent investing over a long period of time as the reason for their financial success; 80 percent invested in their company’s 401(k) plan; none said one individual stock investment was a big factor in their financial success.
Conclusion: You don’t need to find that one stock that will make you rich. Invest consistently in broad-market index funds over a long period of time.
88 percent of those who responded graduated from college, compared to 38 percent of the general population. And over half (52%) of the millionaires in the study earned a master’s or doctoral degree, compared to 13% of the general population. Almost two-thirds (62%) graduated from public state schools, while only 8 percent went to a prestigious private school.
Most of the 10,000 millionaires studied achieved their wealth through consistent investing, avoiding credit card debt, and smart spending, along with…no lottery tickets… no inheritances…no six-figure incomes…no lucky stock picks.
Even when millionaires don’t have to worry about money anymore, they’re still careful about their spending. Over 80 percent reported using a grocery list in some format.
For additional information on building wealth, click here.
- Have students talk to others to obtain information about actions they take to achieve long-term financial security.
- Have students create an oral presentation or podcast that reports the findings of the study summarized in this article.
- What actions do you believe to be most important for building wealth?
- Describe how you might communicate to others suggested actions for improved long-term financial security.
Question: What is a Personal Finance simulation?
Answer: A Personal Finance simulation allows students to fine-tune their decisions when they encounter real-life scenarios while taking a Personal Finance course.
The authors of Personal Finance, 14e and Focus on Personal Finance, 7e have partnered with StockTrak.com to provide students with an interactive learning experience before they leave the classroom.
The simulation that accompanies the Kapoor Personal Finance texts includes two components–a personal budgeting simulation and an investing simulation.
The Budgeting Simulation
- Students assume the role of a full-time employee or part-time employee living on their own.
- Over a virtual 12-month period, students review their estimated income and expenses, create monthly budgets and savings goals, and try to build an emergency fund. Each month takes about 20 minutes to complete.
- Each month students manage their checking, savings, and credit card accounts as they deal with life’s expected and unexpected events that affect their budget.
- Within the simulation, additional personal finance tutorials are available to make sure students are learning about budgeting, banking, credit, employment, taxes, insurance, and more.
- A class ranking based on net worth, credit score, and quality of life keep the students fully engaged and professors informed of each student’s progress.
The Investing Simulation
- Students receive a virtual $25,000 in a brokerage account.
- They can research U.S. stocks, ETFs, bonds and mutual funds and create their own investment portfolio.
- All investment trades are based on real-time market prices.
- Within the simulation, interactive tutorials help students get started and provide additional information during the simulation.
- Students can monitor their performance versus their classmates. At the same time, professors can track each student’s progress.
And BEST of ALL, with the new partnership between Stock-Trak and McGraw Hill, classes using the Kapoor Personal Finance textbook get a 50% savings when students register for the simulation – only $9.99 per student instead of retail price of $19.99.
- Visit StockTrak.com/kapoor to learn more about the Personal Finance Budgeting and Investing Simulation. You can learn even more by watching a short video or accessing the Kapoor demo materials located toward the bottom of the above site.
- It’s easy to get started. All you need to do is access the above site, register your classes for Spring 2023, and indicate the dates you want your student to have access to the Personal Finance Simulation. The site will generate a unique link for you to give to your students.
Categories: Budget, Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapters, Chapter_10, Chapter_11, Chapter_12, Chapter_13, Chapter_14, Financial Planning Topics, Teaching Tools
Tags: Simulation, Teaching Tools
In case of a natural disaster or a cyber-attack, a financial emergency kit allows you to keep running your life. These documents would prepare you for the what-ifs of life. Bottom of Form
The kit starts with knowing where your vital paperwork is stored, and where are copies kept. Two suggested storage methods are: (1) a portable, fireproof, waterproof safe, and (2) digital storage with an electronic record of account numbers and sensitive information. This information can then be accessed on your phone. Also backup your data on both an external hard drive and on a cloud service.
The important documents that you should have in both a physical and digital format are:
- Insurance policies, insurance contact information; prescriptions, medical records
- Birth and marriage certificates; passports; driver’s license; Social Security cards
- Mortgage information; car registration
- Recent tax returns; employment information
- Wills and deeds; stocks, bonds and other negotiable certificates
- Bank, savings. Investment, and retirement account numbers
- Pet medical records; pet identification tags
- Recent utility bill, school registration to prove your legal place of residence
In addition to your financial documents, also plan to have these items in your emergency kit:
- Water; non-perishable food; first aid kit; multi-purpose tool
- Flashlight; battery-powered radio; extra batteries; cellphone, charger
- Medications, medical items; sanitation, personal hygiene items
- Extra cash; contact information of family and friends
- Emergency blankets; maps of the area
Consider a hand-crank flashlight and radio to be able to use and charge when there’s no power.
To connect with family and others in emergency times, text instead of calling to avoid network congestion. Use apps, social media when cell networks are overloaded. Update your voicemail message to tell your location and status.
Be prepared with these simple things that require minimal money and a small-time investment.
For additional information on financial emergency kits, click here.
- Have students identify situations in which this type of emergency kit would be appropriate.
- Have students create a visual proposal (poster or slide presentation) to communicate the elements of an emergency kit.
- What are reasons people might give for not preparing an emergency kit?
- Describe methods that might be used to store financial documents for emergency situations.
As young people get their first full-time job with a substantial paycheck, their money management activities need to be reconsidered, which include:
1. Automate your savings. For unexpected expenses and major purchases, set aside a specific percentage or amount of your income from every paycheck. These funds should be directed to one or more dedicated accounts.
2. Make use of different accounts. This money management strategy can help you plan for different savings goals and can prevent spending money planned for a specific purpose. Consider using a checking account to pay regular expenses, along with one or more savings accounts.
3. Start retirement saving. Start with 3 to 5 percent of your gross income, increasing to 15 percent as soon as you get raises and bonuses. These funds may be in a company-sponsored 401(k) or a personal IRA or Roth IRA.
4. Pay off debt. If you have college debt, create a plan to pay it off, especially credit card debt. Set a goal to become debt free in your 20s.
5. Practice wise spending. Minimize your transportation, housing, and clothing expenses.
For additional information on money tips for your first job, click here.
- Have students talk to others to obtain money management suggestions to implement when completing college and starting work.
- Have students create a personal plan for improved money management.
- Why do people start taking on more debt when starting work?
- Describe money management actions you might take as you complete college.
Limited knowledge of personal finance and weak financial literacy skills are some of the concerns expressed by college students in a survey conducted by WalletHub. Findings in this study included:
- Nearly all (93 percent) of the students surveyed expressed concern about the economy.
- After graduation, the two major worries of students are not finding a job (36 percent) and educational loan debt (30 percent).
- One-fifth of students expressed a belief that a college education is less important since the COVID-19 pandemic.
- About half (52 percent) of the students responding voiced a concern that they were not learning enough about personal finance in school.
- As a result of the pandemic, the three major financial lessons learned were: (1) having emergency savings (44 percent); (2) not going into debt (23 percent); and (3) having a steady job (22 percent).
Some suggestions to address these concerns include:
- Financial anxiety can be reduced with simple personal finance actions: track your spending, cut back on unnecessary items, shop wisely, maintain a workable budget, pay off debts, and increase the amount in your emergency fund. Most importantly, emphasize the enjoyment of your connections and relationships with family and friends rather than on material items.
- Various career paths may not require a college degree; consider online courses, certification programs, trade schools, and other educational/training options.
- Be creative in your savings efforts with: (1) saving $5 a day instead of $150 a month; (2) using “no buy” days to save money; (3) paying for your drinks (or snacks) at home by setting aside the “price” in savings; (4) visualizing a savings goal and budget categories with a photo or post-It notes as a reminder; (5) create, or locate online, a poster that displays savings and debt categories to track your progress; (6) placing your credit card in a bag or container of water and place it in the freezer to avoid impulse purchases, then defrost it under warm water when you need to pay for an emergency.
- When applying and interviewing, clearly communicate the connection between your skills and experiences with the current and future needs of the job position and company. This requires strong research of the company and industry trends but will allow a person to better connect with their prospective employer. Also, be ready to talk about research projects, team experiences, and creative problem-solving.
- Although an increased number of personal finance classes are becoming available in schools, also seek out financial literacy education through community-based workshops, church outreach programs, and neighborhood organizations.
This research was the result of a nationally representative online survey of over 250 respondents. Responses were normalized so the sample would reflect U.S. demographics.
For additional information on the student money survey, click here.
- Have students talk to others to determine if their opinions are similar to those presented in this article.
- Have students create a role-playing drama that communicates actions to avoid various personal financial difficulties and career planning mistakes.
- Which of the survey results are similar to your current attitudes and experiences?
- What additional money and career topics not covered in this survey do you believe are of current concern for students and others?
With inflation, you will not be able to avoid higher prices. However, there is one action you can take that will not be affected by inflation. As advocated by legendary investor Warren Buffet, one of the strongest protections against inflation is investing in yourself. Obtaining additional career skills and improving existing ones will keep you in demand.
These added skills, unlike a lower value of the dollar, are inflation-proof. Various career abilities will be in demand no matter what the dollar is worth. These competencies can’t be taken away from you, and this investment in yourself is not taxed.
As a business owner or investor, the advice is similar. Offer a top-level product or service that will be in demand even in times of inflation. As noted by Buffet: when inflation is high the best thing you can do is be exceptionally good at something.
For additional information on an inflation strategy, click here.
- Have students talk to others to learn about the actions they have taken in their lives to enhance and expand their career skills.
- Have students research online sources available for free and low-cost classes and certification programs to enhance a person’s career skills.
- What actions are you taking to enhance or expand your career skills?
- What are examples of exceptional products or services that might be in demand even in times of inflation?
As we approach the end of the year, consider these actions to help create the foundation for financial success in 2022:
- Review spending for the year. Comparing your actual spending with budgeted amounts will help you plan spending for the coming year. For the upcoming year, track spending with an app, spreadsheet file, Google doc, or a written record.
- Use flexible spending account funds. Be sure to spend any money in a flexible spending account on qualified medical expenses before the end of the year, or those funds might be lost. However, due to COVID-19, you may be allowed to roll over the full balance into next year. Contact your benefits department to see if you qualify.
- Donate to charity. This will not only create a tax saving, but will also help people in your community and around the world.
- Create a backup plan. Review the beneficiaries on your financial accounts. You should have a durable power of attorney to handle your financial activities if you are not able to do so. A health-care proxy (power of attorney) is someone to speak on your behalf regarding medical care when you are not able to do so. A will sets how your assets will be distributed after you die.
- Consider increased retirement contributions. With increased limits for 2022, plan to increase the amount set aside for long-term financial security while reducing current taxes.
- Conduct a life audit. Start with identifying your short-term and long-term goals with sticky notes or index cards. Then, sort your goals by category, such as personal development, work/career, financial, travel, family, community service, and health. Next, organize within a category based on time of accomplishment, which might include: now/soon, always/everyday, later this year, the next year or two, and someday. Take photos of your notes, place them in a visible location, or use an app such as OneNote as a reminder of these targets. Finally, reflect on your goals by determining why you have certain goals and what actions you need to take. Be sure to set deadlines. Also consider how your goals relate to the type of life you desire for yourself. Do your goals reflect your beliefs, values, work situation, and personal relationships?
For additional information on year-end financial planning, click here.
- Have students talk to others about recommended financial actions to take before the end of the year.
- Have students create an action plan and timeline for a specific goal.
- What attitudes, behaviors, and circumstances might restrict a person from taking certain year-end actions?
- Describe information sources and personal contacts that might be used to obtain guidance for achieving a specific goal.
Based on recent research, findings comparing the financial habits of women and men include:
- Overall, single men outspend women, which may be due to higher average earnings. Men spend more on food and transportation, while women have higher spending for clothing. Both groups have similar spending for entertainment.
- Women are wiser shoppers, buying items on sale and using coupons more often than men.
- For debt, including credit cards, student loans, auto loans, personal loans, home equity lines of credit, and mortgages, men have more debt than women.
- For both groups, the main financial goals were saving for a vacation, paying off credit card debt, and improving their credit score.
- As they near retirement, men had higher amounts in their retirement funds. However, women are more likely to participate in an employer retirement plan than men, and save a greater percentage from their paychecks.
For additional information on the money habits of women and men, go to:
- Have students create a short survey to compare the spending, saving, and investing activities of women and men.
- Have students create a visual proposal (poster or slide presentation) to suggest improved money management activities.
- What factors might affect differences between the money management activities of women and men?
- Describe actions a person might take to improve money management activities.
MoneyLion offers a low-cost financial service tool that integrates investing, banking, lending, and financial wellness. Using the brand name RoarMoney, the company also offers a virtual debit card for contactless payments and Instacash with a free overdraft service. With Money Lion’s Shake N’ Bank program, customers earn cash every time they spend $10 or more with their bank card. To determine the amount they get back, users literally shake their phones and a random amount up to $120 shows up.
To guide financial wellness, the Financial Heartbeat program of MoneyLion rates customers from 1 to 10 on these categories:
1) Save measures financial preparedness; how well a person can pay expected and unexpected expenses.
2) Spend measures purchasing in relation income available.
3) Shield determines how well you understand and organize your insurance needs and coverages.
4) Score creates a Bottom of Formcredit score to assess overall credit health based on debt usage and interest rates paid.
For additional information on FinTech and financial wellness, click here.
- Have students talk to others to learn about the features of banking and money management apps they have used.
- Have students create a visual proposal (poster or slide presentation) for an app that would help people better manage their money and improve their financial wellness.
- What features of an app or FinTech product might help people improve their financial wellness?
- Describe actions a person might take to evaluate an app or FinTech product.