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Family Financial Flexing | Paradigm Money
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Family Financial Flexing: How to Make Your Household Income Stretch

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Growing up, anytime I inquired about the family finances my mom would utter four words—none of your business! I had no choice but to accept this. However, as the resident financial fanatic it would have been good to understand the family finances in and out. This could have saved us money as a family in the long run because I didn’t know where we stood financially and my only job was to figure out how I could convince my mom to spend money on me; having no regard for any other household financial priorities. Now as a parent, I understand the importance of everyone’s input in family matters; not just the adults.

Ken Blanchard once said, “None of us is as smart as all of us,” and while managing a family may require some hierarchy to avoid chaos, running your family like a team may prove to be beneficial. Everybody’s input matters and the more information that can be shared, the better the chance you have of running a successful household. Teamwork makes the dream work and the following four tips will help you run your household finances more effectively in order to make your household income stretch.

Make Sure Everyone is Aware of the Numbers

One of my old managers use to always say, “Inspect what you expect,” meaning that if you want to get a certain outcome, you must make sure that you are checking in and doing what you need to do in order to get that outcome. With that said, if your goal is to run a lean household, it is important that everyone in the household is aware of the numbers. Many times, when it comes to paying bills, going over expenses and analyzing income, this is usually reserved for the heads of the household/bread winners. However, those involved in spending the money should understand all facets of the family budget as well. Doing this allows everyone in the home to understand what is coming in, what is going out, and what adjustments need to be made in order to reach the family financial goals.

Create Goals as a Family

Speaking of family financial goals, it is important that those goals are created together as a family. Doing so gives everyone a sense of responsibility to keep the goals intact. So next time instead of telling your child “no I don’t have it” you can say, “no we don’t have it because this money is allocated for xyz.” This may be a challenge at first because I’m sure your kids don’t care much about your electricity bill or how much the cable costs, but as you include them on things like family vacations, trips, and other things that will benefit them more directly they will likely start to be able to draw the parallel and understand why certain financial decisions have to be made. Not only is this a great money management lesson for them, but it also removes the temptation of them asking for extra since they’ll know what is available and what is not.

Begin to Plug Money Leaks as a Family

Whenever times get tough financially, there are three options 1) cut back on expenses, 2) make more money or 3) do both. If you are trying to stretch your household income, then you don’t have to wait until times get tough to exercise one of those options. Being proactive will help make sure that financial storms don’t happen unexpectedly and assures that when the storms do happen the family is well equipped to weather them. Sure, parents can take the lead and begin slashing expenses, but when it’s done as a family it allows everyone to feel included and responsible for the maintenance of good family financial planning. As you plug the money leaks, make sure that a financial freedom fund is being built as well. Show the family the importance of having 6-8 months of expenses in a free high-yield savings account.

Distribute Household Money Wisely

Now that the family is aware of the numbers, knows what the family financial goals are, and has played a role in plugging the money leaks and creating a financial freedom fund, it is time to allocate the household funds wisely. Let everyone play a role in knowing where money is going and why. This has a long-term learning effect on the family, helps keep the family budget intact and avoids anyone trying to stray in a different direction.

Congratulations! You are well on your way to financial family flexing and stretching your household income. Staying focused and having the perseverance to see this plan through will give you and your family the best chance to be successful. Additionally, utilizing free tools and resources, like the S.M.A.R.T. Financial Goals Worksheet, Budget Worksheet, and Daily Spending Journal we offer in our Best You Yet Experience, will help you tremendously on your journey to fantastic family finances.

And don’t forget—a family that pays together, saves together!

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

Digm Piece (Op-Ed)

5 Hidden Risks in Retirement That Could Affect Your Financial Security

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Being well-prepared for retirement is wonderful, but there is no fail-safe plan. Things can unravel due to many inherent post-retirement risks. Understanding those risks that lie ahead and how they can harm financial security is key to making critical adjustments in a retirement plan. Sometimes without those changes, the impact of unfavorable and unpredictable events can be far more severe.

“Once you have a retirement plan in place, it’s not set in stone,” says Clayton Alexander (www.retireteton.com), an investment adviser and founder of Teton Wealth Group. “Things change. You may add or lose family members, your retirement goals may change, the economic environment may create new considerations, and financial innovations may present new strategies. Once per year is a minimum in terms of making sure your retirement plans (and beneficiaries) are constantly up-to-date.”

Alexander says retirees and those making retirement plans should be aware of these five risks:  

  • Longevity. Running out of money before they die is one of the primary concerns of most retirees. This worry is heightened by the fact that the average life expectancy has increased. “A pension or an annuity can lessen the risk, but carefully investigate any company where you’d place an annuity and be cautious of fees and interest rates,” Alexander says. “It’s best to tailor your plan to run to life expectancy plus five years.”
  • Loss of income. “Make sure both you and your spouse are protected from the unexpected,” Alexander says. “Consider the financial impact of the loss of one spouse. Remember that your surviving spouse will only get the highest of your two Social Security checks. A spouse’s death can bring additional financial burdens, including lingering medical bills and debts. Life insurance and estate planning are important vehicles to protect survivors.”
  • Health care costs. Longer life expectancy could lead to high costs in a long-term care facility. “It’s estimated that approximately 50% of people over 65 will need long-term care,” Alexander says. “Do not overspend on policies that may be subject to drastic premium increases. And surprising to some, Medicare is not free — your premiums for coverage are usually deducted from your Social Security check. Medicare doesn’t cover dental, hearing or vision, is subject to deductibles, and doesn’t cover long-term care. Long-term care insurance is advisable.”
  • Negative return risk. “A 50% gain does not allow a portfolio to recover from a 50% loss,” Alexander says. “In fact, a 100% gain is required to restore a 50% loss. The ‘buy and hold’ strategy that works when you are young — where you wait for the markets to come back up after a downturn — does not apply in retirement as we saw in 2008, when many people’s retirements were wiped out. Common stocks have substantially out-performed other investments over time and thus are usually recommended for retirees as part of a balanced asset allocation strategy, but the rate of return you earn can be significantly lower than the long-term trends.”
  • Inflation risk. “You should plan on prices for food, goods and services getting higher during retirement, reducing your buying power incrementally as you are living on a fixed income,” Alexander says. “Your retirement plan has to factor that in. Ways retirees can curb the effects of inflation include annuity products with a cost-of-living adjustment feature and investing in equities, a home, and other assets.”

“Understanding what the potential post-retirement risks are and considering them in the retirement planning stage,” Alexander says, “can help to ensure that they are mitigated and properly managed.”  

About Clayton Alexander Clayton Alexander (www.retireteton.com) is an investment adviser and founder of Teton Wealth Group. A graduate of Dixie State University with a B.A. in administration, Alexander also worked at Northwestern Mutual and Goldman Sachs. He is licensed for life and health insurance in the state of Utah and has passed the Series 65 securities exam. Alexander focuses on building holistic retirement plans, and with the launch of Teton Wealth he developed the four-step Ascent Plan – a system to help clients gain clarity and perspective on creating a financial plan for safe, secure and tax-efficient retirement income and estate transition.  

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Digm Piece (Op-Ed)

Are Americans Undervaluing Paid Time off + Quick Trip Tips

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It’s August, which for many Europeans means taking almost the entire month off. So why is it difficult for Americans to take even the little vacation time they receive? A recent piece in The Economist states workers in the U.S. are doing it all wrong by going on short holidays, which can add even more stress or taking none. Instead, it’s essential for employees to recharge their batteries. It’s also beneficial for companies to have a consistent holiday month during which junior employees can head to the beach, and managers can take stock of things, says the report.

While many Americans may not receive paid time off, especially those that only work part-time, even those who receive it generally don’t take all of it. What we don’t realize is that not taking a vacation is like giving money back to your employer, especially with companies that have a use it or lose it policy. Which should encourage employees to use their time but unfortunately it does not. According to recent polls conducted by Bankrate, nearly 2600 US adults say they plan to take a quarter of their vacation days while 4% are not planning to take any vacation time at all.

Time off is a valuable perk, to the tune of millions of dollars! Just to bring the point home in 2017 Americans gave up 212 million days off that amounts to $62.2 billion in lost benefits! So, take your vacations and follow the tips below to not break the bank while taking time off:

  1. Take a Staycation – Stay local and vacation somewhere that is less than a day drive away, this helps save gas, mileage, and spending on lodging. Look for local attractions, vineyards, interesting museums and landmarks or even travel to your closest big city and be a tourist for a day. You would be amazed at how much you can discover and learn by staying local and all on the cheap! It’s a bonus if you have friends in the town your visiting they can serve as a tour guide and let you stay over for free if they have the room.
  2. Book Flights Off-Season – July 4th, Memorial Day and Labor Day seem like a great time to go on vacation; unfortunately, everyone is planning to take time off during those busy weekends, and ticket prices are through the roof because of it. Book flights after major holidays and during the week you will generally find that they are cheaper than weekend flights.
  3. Take a Road Trip – Road trips are fun and cheaper than taking a plane, especially if you must rent a car when you get to your destination anyway. Plan cool stops along the way and finds interesting places to eat that way you can make the journey part of the vacation.
  4. Plan to Eat In – Food adds up on vacation so pack food and making one or two meals in your hotel can keep you under budget.
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Top Ten Freshman Money Myths

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Starting college is one of the most important and exciting times of your life. Now that you’re all “checked-in,” enjoy your college experience without worrying about where your next meal will come from by chasing away these common freshman money myths. (more…)

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