How to Invest Like Mark Cuban

Mark Cuban’s advice is universal: Focus on eliminating debt, saving money, and living cheaply. Here’s more advice from the man worth $4.1 billion.Mark Cuban’s advice is universal: Focus on eliminating debt, saving money, and living cheaply. Here’s more advice from the man worth $4.1 billion.

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How to Make Better Financial Decisions

Woman learning how to make better financial decisions

A key financial decision people struggle to make is how to allocate savings for multiple financial goals. Do you save for several goals at the same time or fund them one-by-one in a series of steps? Basically, there are two ways to approach financial goal-setting:

Concurrently: Saving for two or more financial goals at the same time.

Sequentially: Saving for one financial goal at a time in a series of steps.

Each method has its pros and cons. Here’s how to decide which method is best for you.

Sequential goal-setting

Pros

You can focus intensely on one goal at a time and feel a sense of completion when each goal is achieved. It’s also simpler to set up and manage single-goal savings than plans for multiple goals. You only need to set up and manage one account.

Cons

Compound interest is not retroactive. If it takes up to a decade to get around to long-term savings goals (e.g., funding a retirement savings plan), that’s time that interest is not earned.

Concurrent goal-setting

Pros

Compound interest is not delayed on savings for goals that come later in life. The earlier money is set aside, the longer it can grow. Based on the Rule of 72, you can double a sum of money in nine years with an 8 percent average return. The earliest years of savings toward long-term goals are the most powerful ones.

Cons

Funding multiple financial goals is more complex than single-tasking. Income needs to be earmarked separately for each goal and often placed in different accounts. In addition, it will probably take longer to complete any one goal because savings is being placed in multiple locations.

Research findings

Working with Wise Bread to recruit respondents, I conducted a study of financial goal-setting decisions with four colleagues that was recently published in the Journal of Personal Finance. The target audience was young adults with 69 percent of the sample under age 45. Four key financial decisions were explored: financial goals, homeownership, retirement planning, and student loans.

Results indicated that many respondents were sequencing financial priorities, instead of funding them simultaneously, and delaying homeownership and retirement savings. Three-word phrases like “once I have…,", “after I [action],” and “as soon as…,” were noted frequently, indicating a hesitancy to fund certain financial goals until achieving others.

The top three financial goals reported by 1,538 respondents were saving for something, buying something, and reducing debt. About a third (32 percent) of the sample had outstanding student loan balances at the time of data collection and student loan debt had a major impact on respondents’ financial decisions. About three-quarters of the sample said loan debt affected both housing choices and retirement savings.

Actionable steps

Based on the findings from the study mentioned above, here are five ways to make better financial decisions.

1. Consider concurrent financial planning

Rethink the practice of completing financial goals one at a time. Concurrent goal-setting will maximize the awesome power of compound interest and prevent the frequently-reported survey result of having the completion date for one goal determine the start date to save for others.

2. Increase positive financial actions

Do more of anything positive that you’re already doing to better your personal finances. For example, if you’re saving 3 percent of your income in a SEP-IRA (if self-employed) or 401(k) or 403(b) employer retirement savings plan, decide to increase savings to 4 percent or 5 percent.

3. Decrease negative financial habits

Decide to stop (or at least reduce) costly actions that are counterproductive to building financial security. Everyone has their own culprits. Key criteria for consideration are potential cost savings, health impacts, and personal enjoyment.

4. Save something for retirement

Almost 40 percent of the respondents were saving nothing for retirement, which is sobering. The actions that people take (or do not take) today affect their future selves. Any savings is better than no savings and even modest amounts like $100 a month add up over time.

5. Run some financial calculations

Use an online calculator to set financial goals and make plans to achieve them. Planning increases people’s sense of control over their finances and motivation to save. Useful tools are available from FINRA and Practical Money Skills.

What’s the best way to save money for financial goals? It depends. In the end, the most important thing is that you’re taking positive action. Weigh the pros and cons of concurrent and sequential goal-setting strategies and personal preferences, and follow a regular savings strategy that works for you. Every small step matters!

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How to Make Tough Decisions as a Couple

Marnie and Tom live in a nice suburb in the Midwest with their two young children. Marnie’s mother, Elaine, lives about an hour away.

When the kids were babies, Marnie's mother used to drive to Marnie and Tom's every day to see her grandkids and help out. But lately, Marnie's mother's health has been declining, so she can’t drive over anymore.

One day Marnie gets an idea: What if she and Tom sell their house and move closer to her mother? Then the kids would be able to see their grandmother more often. Plus, Marnie would be able to keep a closer eye on her mother in case her health gets worse. Seems like a perfect solution.

There’s only one problem—Tom doesn’t want to move. Tom likes the neighborhood they’re in. He thinks he and Marnie paid too much for their house, but other than that he’s very comfortable.

Tom says no.

Tough decisions and zero-sum situations

Faced with big decisions like this, a couple will ordinarily try to compromise. But in this case, there’s really no half-way. Economists call this kind of thing a zero-sum situation. Someone’s going to win, and someone’s going to lose.

For over thirty years, I’ve watched couples struggle with zero-sum problems. Some more successfully, and some less so.

Some classic zero-sum problems for couples involve whether or not to move—often for one partner’s career—and whether or not to have another child. But there are lots of others.    

For thirty years, I’ve watched couples struggle with zero-sum problems. Some more successfully, and some less so. Today, we’re going to talk about what works, and what doesn’t, when you’re faced with one of these situations.

Three ways not to make tough decisions as a couple

 First, let’s talk first about what doesn’t work. There are three main approaches that don’t work. Unfortunately, most couples try all three:

Mistake #1 – Trying to convince your partner they'll be better off

The first mistake is to try to convince your partner that they’ll be much happier if they do things your way. In Marnie’s case, this might involve demonstrating to Tom all the wonderful things about the neighborhood she'd like to move to. Wouldn't Tom be better off there? 

No one likes to be told they’ll be happier if they just do things your way.

 Here’s the problem: No one likes to be told they’ll be happier if they just do things your way. It's better to assume each person has good reasons for feeling the way they do. And that those reasons aren’t likely to change. In couples therapy, we call this "staying in your own lane."

Mistake #2 – Suggesting there's something wrong with your parnter for disagreeing

The second thing that doesn’t work is to suggest there’s something wrong with your partner. Otherwise, they'd see it your way. If only they were less anxious, less obsessive-compulsive, less oppositional, less stuck in their ways, or less damaged by unresolved childhood trauma. Then they’d surely agree with you!

A lot of people get sent to my office for therapy by their spouses for just this reason. Believe me when I tell you, it doesn’t work.

A lot of people get sent to my office for therapy by their spouses for just this reason. Believe me when I tell you, it doesn’t work. It usually just leads to a lot of bad feeling.

Mistake #3 – Appealing to your partner's love

The third thing that doesn’t work is to appeal to your partner’s love and insist that if they really love you as much as they say they do, they’ll give you what you want. Almost every couple tries this.

Marnie is no exception.

“Tom,” she says, one night as they're getting ready for bed, “Don’t you see how I can’t sleep at night worrying about my mother? I can't stop thinking about how she’s missing out on so much of our kids’ lives. Can’t you see what this is doing to me? Don’t you love me?”

 “The answer’s still no,” says Tom. “And it has nothing to do with whether I love you or not.”

I'd be inclined to agree. Just because you love someone, that doesn't mean you're responsible for giving them everything they want. 

A better way to make tough decisions as a couple

The good news is there’s a much better method. There are three steps involved.

Step One:  Let’s make a deal

In business, this would be a no-brainer, right?  You’d never ask someone to give you something you want for free. Instead, you’d find out what their price is.  

In marriage, it’s the same thing. The main question is: What’s going to motivate the other person to do a deal?

Let’s see what happens when Marnie tries this approach.

One night in bed, just before they turn off the lights, Marnie turns over to face Tom.

“Tom, what can I give you to make you agree to move?” she asks.

Tom is silent.

“A promise to never complain ever again about you watching TV?”

Tom smiles. “It’s going to cost a lot more than that,” he says.

Marnie thinks some more. “How about if I agree to spend every Thanksgiving and Christmas with your family?”

Tom shakes his head. But now Marnie has the idea. She’s not asking for favors anymore. She just wants to do this deal.         

“I'll do all the cooking and cleanup three times a week,” she says. "And we spend Thanksgiving and Christmas with your family."  

Tom raises an eyebrow. Now he knows she's serious. "Let me think about it,” he says, and turns off the light.

Time for Step Two.

Step Two:  The $64,000 Question

The following night, Tom is sitting at his laptop paying bills. Suddenly it hits him. “Marnie,” he says, “I think I see a way to do this. If we’re going to move, let’s get a smaller house and start saving money again. What do you think?”    Marnie’s actually been hoping for a bigger house. It’s painful to hear that this is what Tom wants. But hey, now he’s named his price. That means he’s in the game.

To me, this looks promising. Marnie gets something she wants very much. And she pays for it, fair and square. Same thing on Tom’s side.

Marnie thinks for a minute.  

“Let’s see what we can find,” she says.

Step Three: The Price is Right

Now comes the fun part.

The following Sunday, Marnie and Tom drop the kids off with her mother and start house-hunting in earnest. After a few weekends, they find a house they both like well enough. It breaks Marnie’s heart to be downsizing, but it was the only way to make things work. And it helps that once they find a place Tom likes, Marnie gets him to agree to new cabinets and closets.

Decision making builds strong relationships

 A good deal will have both of your dreams in it. That’s important, because it means you’re both fully in. You never know how a move like this is going to work out. If it goes well, you both share the satisfaction. If not, you share the blame.

A good deal will have both of your dreams in it.

One sign of a good deal is that in the end, neither of you got everything you wanted. The final result didn’t look exactly like what either of you originally had in mind.

But hey, isn’t that the case with anything creative? Eventually you have to face reality. And in a couple’s relationship, reality often takes the form of the person next to you in bed.

Sometimes life brings you to a fork in the road, where no compromise is possible. When that happens, assume you’ll need to do some serious deal-making—as if your relationship depended on it. Which in fact, it will.

Eventually, you have to face reality. And in a couple’s relationship, reality often takes the form of the person next to you in bed.

As Yogi Berra famously said, “When you come to a fork in the road, take it!”

In the long run, how you settle the issue may matter more than which fork you take.

Money Market Vs Savings: What’s The Difference?

Money market accounts and savings accounts have a lot of similarities than you may think. Among other things, both allow you to achieve your saving goals risk-free or very low risk. However, the choice between money market vs savings accounts often boils down to interest rates and fees. So, before you decide on which account …

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16 Small Steps You Can Take Now to Improve Your Finances

Pretty brunette with moneybox in hands

You have all kinds of financial goals you want to achieve, but where should you begin? There are so many different aspects of money management that it can be difficult to find a starting point when trying to achieve financial success. If you’re feeling lost and overwhelmed, take a deep breath. Progress can be made in tiny, manageable steps. Here’s are 16 small things you can do right now to improve your overall financial health. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)

1. Create a household budget

The biggest step toward effective money management is making a household budget. You first need to figure out exactly how much money comes in each month. Once you have that number, organize your budget in order of financial priorities: essential living expenses, contributions to retirement savings, repaying debt, and any entertainment or lifestyle costs. Having a clear picture of exactly how much is coming in and going out every month is key to reaching your financial goals.

2. Calculate your net worth

Simply put, your net worth is the total of your assets minus your debts and liabilities. You’re left with a positive or negative number. If the number is positive, you’re on the up and up. If the number is negative — which is especially common for young people just starting out — you’ll need to keep chipping away at debt.

Remember that certain assets, like your home, count on both sides of the ledger. While you may have mortgage debt, it is secured by the resale value of your home. (See also: 10 Ways to Increase Your Net Worth This Year)

3. Review your credit reports

Your credit history determines your creditworthiness, including the interest rates you pay on loans and credit cards. It can also affect your employment opportunities and living options. Every 12 months, you can check your credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) for free at annualcreditreport.com. It may also be a good idea to request one report from one bureau every four months, so you can keep an eye on your credit throughout the year without paying for it.

Regularly checking your credit report will help you stay on top of every account in your name and can alert you to fraudulent activity.

4. Check your credit score

Your FICO score can range from 300-850. The higher the score, the better. Keep in mind that two of the most important factors that go into making up your credit score are your payment history, specifically negative information, and how much debt you’re carrying: the type of debts, and how much available credit you have at any given time. (See also: How to Boost Your Credit Score in Just 30 Days)

5. Set a monthly savings amount

Transferring a set amount of money to a savings account at the same time you pay your other monthly bills helps ensure that you’re regularly and intentionally saving money for the future. Waiting to see if you have any money left over after paying for all your other discretionary lifestyle expenses can lead to uneven amounts or no savings at all.

6. Make minimum payments on all debts

The first step to maintaining a good credit standing is to avoid making late payments. Build your minimum debt reduction payments into your budget. Then, look for any extra money you can put toward paying down debt principal. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

7. Increase your retirement saving rate by 1 percent

Your retirement savings and saving rate are the most important determinants of your overall financial success. Strive to save 15 percent of your income for most of your career for retirement, and that includes any employer match you may receive. If you’re not saving that amount yet, plan ahead for ways you can reach that goal. For example, increase your saving rate every time you get a bonus or raise.

8. Open an IRA

An IRA is an easy and accessible retirement savings vehicle that anyone with earned income can access (although you can’t contribute to a traditional IRA past age 70½). Unlike an employer-sponsored account, like a 401(k), an IRA gives you access to unlimited investment choices and is not attached to any particular employer. (See also: Stop Believing These 5 Myths About IRAs)

9. Update your account beneficiaries

Certain assets, like retirement accounts and insurance policies, have their own beneficiary designations and will be distributed based on who you have listed on those documents — not necessarily according to your estate planning documents. Review these every year and whenever you have a major life event, like a marriage.

10. Review your employer benefits

The monetary value of your employment includes your salary in addition to any other employer-provided benefits. Consider these extras part of your wealth-building tools and review them on a yearly basis. For example, a Flexible Spending Arrangement (FSA) can help pay for current health care expenses through your employer and a Health Savings Account (HSA) can help you pay for medical expenses now and in retirement. (See also: 8 Myths About Health Savings Accounts — Debunked!)

11. Review your W-4

The W-4 form you filled out when you first started your job dictates how much your employer withholds for taxes — and you can make changes to it. If you get a refund at tax time, adjusting your tax withholdings can be an easy way to increase your take-home pay. Also, remember to review this form when you have a major life event, like a marriage or after the birth of a child. (See also: Are You Withholding the Right Amount of Taxes from Your Paycheck?)

12. Ponder your need for life insurance

In general, if someone is dependent upon your income, then you may need a life insurance policy. When determining how much insurance you need, consider protecting assets and paying off all outstanding debts, as well as retirement and college costs. (See also: 15 Surprising Insurance Policies You Might Need)

13. Check your FDIC insurance coverage

First, make sure that the banking institutions you use are FDIC insured. For credit unions, you’ll want to confirm it’s a National Credit Union Administration (NCUA) federally-covered institution. Federal deposit insurance protects up to $250,000 of your deposits for each type of bank account you have. To determine your account coverage at a single bank or various banks, visit FDIC.gov.

14. Check your Social Security statements

Set up an online account at SSA.gov to confirm your work and income history and to get an idea of what types of benefits, if any, you’re entitled to — including retirement and disability.

15. Set one financial goal to achieve it by the end of the year

An important part of financial success is recognizing where you need to focus your energy in terms of certain financial goals, like having a fully funded emergency account, for example.

If you’re overwhelmed by trying to simultaneously work on reaching all of your goals, pick one that you can focus on and achieve it by the end of the year. Examples include paying off a credit card, contributing to an IRA, or saving $500.

16. Take a one-month spending break

Unfortunately, you can never take a break from paying your bills, but you do have complete control over how you spend your discretionary income. And that may be the only way to make some progress toward some of your savings goals. Try trimming some of your lifestyle expenses for just one month to cushion your checking or savings account. You could start by bringing your own lunch to work every day or meal-planning for the week to keep your grocery bill lower and forgo eating out. (See also: How a Simple "Do Not Buy" List Keeps Money in Your Pocket)

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With the new year here, it’s time to take control of your financial goals. From creating a household budget, to calculating your net worth, or setting a monthly savings amount, we’ve got 16 small steps you can take to improve your finances. | #personalfinance #moneymatters #budgeting


Mint Money Audit: Managing Money When You Make Enough

Anna’s email requesting help with her finances began with a unique confession. “Farnoosh, my money problem garners little sympathy,” the 32-year-old wrote. “My issue is that I make too much of it.” Now, THIS is interesting, I thought. I immediately…

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Accredited Asset Management Specialist (AAMS)

New financial advisors need something to help them stand out. Consequently, the AAMS does just that. Designed for newcomers to the financial advice business, the AAMS trains advisors to identify investment opportunities as well as help clients with other financial … Continue reading →

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