How Much Does it Take to Be Rich?

The results of a recent YouGov survey show that most Americans think you need to make $100,000 per year to be considered “rich.” Assuming you weren’t one of the people interviewed for that survey, does $100,000 a year sound like wealth to you? What if someone makes less than six figures per year? Can they still be considered wealthy? How can someone with a goal of getting rich know when they’ve finally arrived?

What does “rich” even mean? Here’s the challenging thing about defining what it means to be rich or wealthy—it’s all relative. In a recent article for CNBC, reporter Kathleen Elkins shared that, according to a recent Global Wealth Report, “If you have just $4,210 to your name, you’re better off than half of the people around the globe.” That report went on to show that anyone with a net worth of $93,170 or more ranks in the world’s wealthiest 10 percent. How about that? It turns out wealth has little to do with your income after all.

Yes, earning a lot of money can help you build wealth, but there’s more to it than that. We’ve all heard stories of individuals who made massive amounts of money yet wound up broke and bankrupt. At the same time, there are many examples of ordinary people who earned average salaries and somehow managed to retire with extraordinary wealth and financial stability. When you analyze their stories, you find that those who were successful focused less on their income and more on their net worth. If you want to “get rich,” you’ll need to make your money work for you instead of the other way around.

Net worth is the key to lasting wealth. Maybe net worth is a new concept for you, maybe it’s not. Either way, let’s define the term for the sake of clarity. Credit Suisse, the research institute that compiled the Global Wealth Report mentioned above, defines net worth as “the value of financial assets plus real assets (principally housing) owned by households, minus their debt.” Simply put, your net worth is the difference between what you own and what you owe. By this definition, it’s easy to see why income is only part of the wealth equation. You might earn $250,000 per year, but if your debt and payments outweigh your income and assets, you’re just broke at a higher level.

Do you want to get rich? Start with these simple steps.

Follow a budget. Whether you make minimum wage or a CEO’s salary, it’s essential to have a plan for how you’ll spend your money. Some experts recommend zero-based budgeting, which means you’ll designate where every single dollar will go during the month, starting with your basic needs (housing, food, utilities) and financial obligations (credit card payments, loan installments) and placing any remaining funds into savings. Others recommend a broader 50/20/30 guideline, which dedicates 50% of your income to needs, 20% to savings, and 30% to wants. These are only two out of many budgeting approaches. There are pros and cons to each, so take your time and find the right fit for your financial situation. Remember, the best budget for you is the budget you actually follow.

Minimize your debt. To create a substantial net worth, it just makes sense to limit your debt. If you’re starting out on your own and haven’t racked up mountains of debt, do your best to keep it that way. If you’ve made some poor financial decisions that left you saddled with considerable debt—especially high-interest consumer loans and credit card balances, create a plan for paying off that debt as quickly as possible. If you need help formulating a plan, you can find a variety of resources online – including this First Scoop blog. You can also contact your local credit union to see if they offer debt counseling services. If you live, work, worship, volunteer or attend school in Monmouth or Ocean Counties in NJ – you can make an appointment at your nearest branch to go over your financial situation and come up with a debt management plan that works for you. Once your money is no longer going to pay off debt, you’ll be able to take significant strides toward building wealth.

Invest in assets. Speaking of strides toward building wealth, investing in appreciable assets can help build your net worth. The most common assets are real estate, stocks, and bonds. While real estate varies by location and depends on fluctuating market conditions, it is historically a safe investment that typically increases over time. Buying individual stocks is another way to grow your money, but this kind of investing can often be a high risk, high reward proposition. If you’re looking for stable growth over time, investment products like 401(k) accounts and mutual funds offer stability through diversification. Since there are so many investment options available, it’s always a good idea to consult a qualified financial advisor before committing your hard-earned money. Be sure to contact First Financial’s Investment and Retirement Center to learn more and get started today.*

So, how much does it take to be rich? That answer is going to be different for everyone. Your situation is unique, which means your road to riches will be as well. Fortunately, you don’t have to plan your route alone as a First Financial member. Our dedicated staff is ready to help you find your starting point, establish your monetary goals, and select the best products and services to accomplish your financial dreams.

*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

 

3 Things You Should Do With Extra Money ASAP

According to a recent report by CareerBuilder, 78% of Americans who work full-time live paycheck to paycheck. Thinking about the long term is hard, especially when it comes to finances, but life does get easier the earlier you start laying the foundation for good financial habits. Whether you have $100 or $1000 to spare every month, investing extra funds wisely can have a significant impact on your financial future.

1. Pay Off Your Debt

First and foremost, consider putting part or all of your extra income every month toward paying off your debt. Being in any kind of debt can definitely loom heavily over your life and finances. Instead of spending any extra cash, it’s smart to chip away at that mountain to become debt-free. You should start with your highest interest debt first and work your way down, though some people find more motivation to tackle their debt by focusing on paying the smaller debts first.

2. Put it in Your Emergency Fund

Having an emergency fund is not just a smart idea, it’s a necessity. Life is unexpected and you never know what can happen. Having an emergency fund can help you in life’s hardest situations, such as a car accident or the loss of a job. Begin putting money toward an emergency fund, any little bit helps. It’s ideal to have six months of expenses saved up just in case.

3. Invest in Your Retirement

After you’ve paid off your debt and put money in your emergency fund, it’s now time to think about the future – which means retirement. While it’s still years or maybe decades away, saving for retirement as early as possible means you reap more rewards later. And that can start with a 401k. Surprisingly, many full-time workers are unaware that their employers may match up to a percentage of your contribution to the company’s 401k plan. Find out what your company’s policy is and get started with contributing to your retirement as soon as possible.

A Roth IRA is another popular retirement savings account that allows your money to grow tax-free. When you’re ready to withdraw at retirement, you do not pay taxes on these funds. If you’re under the age of 50, the most you can contribute to a Roth IRA is $5,500 yearly. This basically means that those who have earned income, can put in just over $458 monthly to reap the most benefits in their retirement future.

If you have extra income at the end of every month, start with these three steps. It will set up a healthy financial foundation for you and your family. Going forward if you still have money leftover after that, you might want to start looking into investments or perhaps spending a bit on yourself.

Need help with retirement planning? To set up a complimentary consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings goals, email Mary.Laferriere@cunamutual.com or stop in to see us!*

*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Article Source: Connie Mei for moneyning.com

 

Can You Afford a Pet?

Before envisioning long walks and fur-baby snuggles, make sure you are financially prepared for what’s ahead. The ASPCA estimates the first year costs of owning a pet is at least $1,000 – and that’s not factoring in unexpected emergencies.

Here is the breakdown of the average annual costs for a medium dog (not including the adoption fee which can range from $45-$300).

One-time costs

Spaying/Neuter: $200
Initial Medical Exam: $70
Collar and leash: $30-$45
Crate: $95+
Travel Crate: $60+
Training: $110

Recurring costs

Food: $319
Annual Exams: $235
Toys/Treats: $55+
License: $15
Grooming: $264+
Pet Insurance: $225

First Year Average TOTAL: $1,723

If you have a large dog, that average total jumps to $2,008. Cats are a bit friendlier on your wallet at $1,174.

Here are a few tips to help keep costs down:

Schedule regular check-ups.
Don’t be afraid to shop around for the right vet and compare preventative care fees. Ask family or friends who have pets who they go to and if they are happy with the veterinary services.

Brush your pet’s teeth.
Just don’t use toothpaste made for people, since the fluoride may irritate your pet’s stomach. But good dental health is important for pets – believe it or not, dental disease can lead to heart and kidney problems.

Groom your pet at home.
Some grooming salons offer a fully stocked self-service room complete with a tub, blow dryer, apron, and gloves at a fraction of the cost. Bonus? You take your fresh smelling dog home without doing any post-bath clean-up. Also invest in a good brush. Setting aside daily brushing time is good for your pet and will reduce the amount of hair floating around your home.

Article Source: Myriam DiGiovanni for Financialfeed.com

More Bad Money Habits You Need to Let Go Of

Habits happen. When it comes to money, it’s a good idea to recognize the bad ones and kick them to the curb as soon as possible. Here are a few less-than-stellar money habits that you need to let go of right away.

Not setting goals: If you don’t have savings goals, you’ll never have the savings you need. You should be packing away money for retirement and at least have an emergency fund for those unexpected bills. If you don’t know how much you need to retire, checkout a retirement calculator like this one.

Picking up every check: It’s great to buy dinner sometimes, especially when you’re out with friends and family, but don’t feel you have to pay the check every time. Even if the bill is only $40-50 bucks, if it’s a regular thing, it can really add up. Having separate checks is the best plan, and feel free to pick up the check every now and again.

I’ll have what he or she is having: If you see your friend pick up a new 60” flat screen, it can make you very envious. Remember just because your friend has some new, cool toys doesn’t mean they haven’t put themselves in debt to get it.

Paying ATM fees: When you are going somewhere and you need cash, make sure you plan ahead. You may feel like stopping at a random ATM is no big deal, but those little service fees will rob you blind over time. If you’re going somewhere that doesn’t take plastic, plan to stop at your local branch and use the free ATM that’s provided for you.

Article Source: John Pettit for CUInsight.com

Unexpected Life Events That Could Ruin Your Finances

Although it’s impossible to predict what will happen in life, there are certain actions you can take to better prepare yourself for what may come your way. Instead of worrying about things you often can’t control, consider these potential life events and what you can do now to avoid ruining your finances in the future.

Becoming a caregiver.

It’s difficult to think about our parents growing older and the possibility of becoming a caregiver to a loved one. If you’re not careful and prepared, taking on this responsibility can significantly impact your finances. The best thing you can do to prepare your family is to fully understand your loved one’s financial situation. Have they invested in long-term care? Are their finances in order and have they sought the advice of a financial planner? Try not to let any new expenses you may incur while helping out cause you unnecessary financial stress.

Getting a divorce.

No one expects to get divorced when they’re reciting their marriage vows in front of family and friends. The fact is, sometimes things don’t work out and you and your spouse may be better apart than together. The smart thing to do if you’re faced with this situation is to get informed now. Don’t let your soon-to-be ex control your finances. Don’t be afraid to get the help you need so you’re financially independent and stable. Experts also suggest that immediately after going through the divorce, wait before you make another serious decision. Let the dust settle, make sure your assets are in order and take things slowly. Rash decisions can cost you, so take your time during the transition.

Weathering a natural disaster.

We all know that Mother Nature has a mind of her own. But, there are a few things you can do to prepare your financial state in case of a weather disaster. First, start an emergency fund now. Saving a small amount initially is a wise plan, but ideally you’ll want to have around four to five months’ worth of living expenses on hand. Secondly, keep your financial documents organized and secure so if disaster strikes, you can easily access the information needed. Third, get up to speed on your insurance policies. Most homeowners insurance plans do not include flood damage – so in the off chance you live in an area prone to high flood waters, get coverage now as flood insurance usually cannot be purchased after the disaster strikes.

Article Source: Wendy Bignon for CUInsight.com

4 Money Skills You Should’ve Had Yesterday

Everyone’s life is different and we all learn life skills in a different order, at a different age, and at a different place. No matter where you’re at, here are 4 money skills you should have.

Negotiating purchases: When you were shopping for your first new car you probably didn’t have a clue about how much you should spend or how much the car was really worth. It’s time to do your homework. Negotiation is a battle and you need to show up to the dealership prepared with knowledge as your ammo. Don’t just accept the price of the first car you like. Make a counter-offer that’s reasonable and don’t be afraid to say no and walk away. Stick to your gameplan and you’ll end up with a good deal.

Here’s how to buy a car in 5 easy steps!

Budgeting your paycheck: Your first job put more money in your pocket than you’d ever made in your life and you probably spent like crazy. Now that you’re older, you need to be seriously thinking about your spending habits and saving for retirement. If you haven’t used a budget before, find one and stick to it. If you’ve been living paycheck to paycheck, it’s time to stop.

Check out our budgeting guide for some helpful hints on creating a budget.

Maximizing your credit score: When you’re young, you don’t care about your credit score. But it’s never too early to start paying attention to it. Anything you purchase that requires making payments will be affected by your credit score. The higher your score, the better your interest rate, which will save you a lot of money over the life of the loan.

Using your credit cards: Credit cards are a valuable tool when used correctly. When used irresponsibly, they can turn on you in a heartbeat. When you get that first credit card, use it periodically to build credit. DON’T overspend. If you want to use your credit card more often, make sure you pay it off every month. EVERY SINGLE MONTH. Don’t miss payments and don’t leave a balance. If you stick to those rules, you’ll be in good shape.

Article Source: John Pettit for CUInsight.com