Don’t Eat the Marshmallow! 4 Tips for Financial Self-Control


The “Marshmallow Theory,” based on a landmark Stanford University experiment, has been used countless times to demonstrate the power of self-control in your financial and personal life.

The experiment followed children who were left alone with a marshmallow and told that if they didn’t eat it they would get a second one 15 minutes later. Some of the kids waited the full 15 minutes, some ate the marshmallow immediately, and others waited for a short period of time before eating it.

Years later, researchers tracked down the children and found that those with the willpower to wait to eat the marshmallow — 1 in 3 of the test subjects — grew up to become more successful adults than those who ate the marshmallow immediately.

Temptation Never Goes Away

Joachim de Posada, an author, motivational speaker, and adjunct professor at the University of Miami, has gotten a lot of mileage out of the marshmallow experiment. He’s written three books based on the theory.

His latest — “Keep Your Eye on the Marshmallow” — teaches readers how to take responsibility for their own financial, career and personal success by keeping their attention focused on long-term goals rather than instant rewards.

“One of the lessons we can learn from the marshmallow experiment is that among the 1 out of 3 kids that didn’t eat the marshmallow, some already had willpower and some understood they needed to use different techniques to avoid eating it,” says de Posada. “Leadership, like willpower, can be inherited, but it can also be learned through emotional intelligence.”

While the children in the Stanford experiment resisted eating the marshmallow by turning their backs on it or distracting themselves by drawing on the walls, de Posada suggests that adults can use similar techniques (defacing property notwithstanding) to avoid the allure of instant gratification.

4 Ways to Artificially Boost Your Willpower

If you lack financial willpower (e.g., the wherewithal to save your paycheck instead of spending it right away), de Posada recommends the following workarounds to help you delay gratification:

1. Choose an accomplice. Let’s say you have a goal of saving 10 percent of your paycheck until you have enough to cover six months of living expenses to stash into an emergency fund. If you can’t do this on your own, de Posada suggests you identify someone whose willpower is stronger than yours either to keep your money for you or be the person to whom you are accountable.

“If you trust them, send them the money and tell them they can’t give it back until you’ve reached a certain goal,” says de Posada. “Or have your mother or your brother or a close friend call you every 15 days and ask you how much you saved or what you spent your money on during the previous two weeks.”

2. Have your boss hide away part of your paycheck. If you work for a larger company, de Posada says you should have at least 10 percent of your income transferred into a 401(k) or other financial instrument before you ever see it. Just like the kids who looked away from the marshmallow, your money will be out of sight and out of reach.

The Investment & Retirement Center located at First Financial can assist members with saving, investing, and planning for retirement. Set up an appointment with the Financial Advisor by calling 732.312.1500 or stop into any branch and ask a representative to schedule an appointment for you.*

3. Use a money planner. “You schedule your time with your iPad or your calendar, so schedule your money in the same way,” says de Posada. “Give yourself orders that you need to follow in your planner, such as saving a specific amount each week.”

Committing these money appointments to your calendar makes them more concrete, as opposed to vague, far-off goals.

De Posada suggests establishing your financial priorities as you would other activities, with the “A” level urgent actions that must be done today, such as paying a bill on the due date; “B” level tasks that are important but can be accomplished by a future deadline, such as reducing your debt by a particular amount; and “C” level long-term goals such as funding your retirement. He recommends checking your money planner weekly rather than daily.

4. Take action now for future rewards. Overcoming a bit of discomfort in the short term often accompanies actions that pay off in the long term. Investing in the stock market requires weathering the inevitable short-term gyrations and reminding yourself that over the long term the market has steadily risen.

“You need to understand who you are and your appetite for risk, but be aware that when you’re younger you can be more aggressive in your investments,” says de Posada.

De Posada says the most important part of the marshmallow theory is to understand how you would react to the experiment.

“If you know intrinsically that you’re a marshmallow eater, then find a technique to overcome that character trait,” he says. “Recruit someone to help you or put systems in place that will force you to wait for that second marshmallow.”

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*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 Credit Union.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. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.

4 Easy Steps to Raising Money-Smart Kids

kids-and-money2Human beings may be destined to do everything the hard way. Consider teaching kids about money – parents can do this quite simply, following a few guidelines. Parents are hands-down the most influential force in any child’s life, and studies show that this extends to money management. Yet, the money talk still doesn’t happen in many U.S. households.

Meanwhile, we have a global movement to bring financial education into the classroom. Too many kids go to college or get their first job without a basic understanding of budgets, debt, and saving.

Jonathan Clements is one parent who has made a big effort at raising financially literate children. A former personal finance columnist at the Wall Street Journal, Clements is now the director of financial education at Citi Personal Wealth Management. He started family money lessons at age 5 with his children, who are now twenty-somethings with enviable money management skills.

Clements believes there are four simple guidelines to raising money-smart kids:

  1. Make them feel like the money they spend is theirs. One way to do this is pay an allowance, explain what the money is for and never give in when they ask for more. “The first rule of parenting,” Clements says, “is to never negotiate.” With young children, play the soda game. When you eat out, offer $1 if they drink water instead of a soft drink. It’s shocking how often they take the $1. Pay allowance to a bank account so that they must make a withdrawal before they can spend.
  2. Tell family stories that illustrate money values. Clements’ own grandfather inherited and squandered a small fortune. He says he grew up hearing the story over and over from his parents; it ingrained in him and his siblings the lesson that money spent is not easily replaced. Share stories about your humble roots or how you struggled when starting your career. That way your kids will understand they must work to earn their lifestyle.
  3. Lead by example. Even if you are not a financial whiz (and who is?), you can set a good example by paying your bills on time and staying out of debt troubles. “If your kids know you’re up to your eyeballs in credit-card debt, they aren’t going to pay much attention to any wise words you might have about managing money,” Clements says. “Your kids are more likely to do as you do, not as you say.”
  4. Manage expectations. In their teens, Clements’ kids clearly heard what Dad would and would not pay for as the kids reached adulthood—how much he would pay toward college, what kind of support they could expect after college, and how much he would pay toward a wedding. This gave them a realistic sense of what was coming and there were “no bruised feelings” later. 

And there you have it. The hardest part may be consistency with your message and, for some, staying out of money trouble themselves. That’s all the more reason to commit to a plan like this, which will benefit you too!

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What’s Your Number? 5 Financial Figures You Need to Know

When we talk about personal finance, a lot of terms often get tossed around: APRs, credit scores, mortgage principles … you get the idea. It’s easy to get lost in all of these numbers, so we’re here to break it down for you. These five may be the most important – they’re the difference between a healthy bank account and debt collectors knocking at your door. Expenses.

1. Your credit score. This may be the most important number ever attached to your name. Your credit score decides your approval for a mortgage or auto loan; it also plays a role in what credit card offers you qualify for. It influences your rates on loans too, and much more. Moreover, many employers evaluate an applicant’s score during the hiring process.

To build a high score, you have to be a responsible borrower. That job is a little more complex than it might sound, so we’ll start at the beginning: Pay your credit card bills on time and in full.

Once you’ve got that down, another way to boost your credit score is to take out different types of loans to show you’re creditworthy.

That said, don’t take out all those loans at the same time, as each results in a hard inquiry, which takes a slight hit on your credit score. Your length of credit history has an impact on your score, and too many accounts opened at the same time may not look too good.

2. Your tax rate. When you file your taxes, you’ll find yourself in one of six brackets. Don’t assume, though, that if you fall into the 15 percent bracket, you pay a flat 15 percent to the federal government every year — you’ll pay less. That’s because the 15 percent bracket isn’t your effective rate (the final amount you end up paying); it’s your marginal tax rate, which says how much your last dollar is taxed.

Here’s why this is important: If your employer withholds significantly more than you owe to the federal government, you might ask them to withhold a little less. That way, rather than get the extra cash back as a federal tax return in springtime, you can deposit the money into a savings account or save it for retirement by depositing it into an Individual Retirement Account (IRA).

3. Your personal savings rate. In America, saving a large portion of your earnings may be a thing of the past. The personal saving rate — how much of your disposable income is socked away rather than spent — is at just about 4.6 percent.

While this is much improved, it still represents a major decline from decades past, when Americans overall saved more than 10 percent of their income. According to the Federal Reserve, just 52 percent of Americans spent less than they earned.

If you’re looking to save, check out your local credit union like First Financial! We offer a great variety of options in savings accounts and savings certificates.

4. Your student loan debt. Americans hold more debt in student loans than in credit cards, to the tune of $1 trillion. Although rates on most federal and private loans are less than those for credit cards, the sheer amount of debt — sometimes as much as $100,000 or more — can make it difficult to afford even the minimum payments. Be sure to know your future obligations when taking out student loans, and take advantage of any beneficial repayment programs offered by your lenders.

You need to get a handle on your student debt, as it will affect the loans you take out in the future. The way you treat your student debt, and really any debt, has a bearing on your credit score, which in turn has a bearing on your future rates — or if you’ll be approved for a loan at all.

business finance5. Your net worth. It sounds daunting to try to put a dollar value to your name, but knowing this value will help you set smarter goals and create a sound financial plan. To calculate your net worth, you need to make a list of everything you own, everything you owe, and then subtract to find out the difference.

First, add up your assets, then your liabilities (or your total debts). Your rough net assets equation should be as follows:

Net worth = (cash + properties + investments) – (credit card debt + loans + outstanding payments of any other kind).

If you’re in the positive, ask yourself: “Am I allocating my resources as best I can to my short, medium, and long-term goals?” If all of your money is sitting in a low-yield savings account, consider investing a portion of it to diversify your portfolio. The Investment & Retirement Center located at First Financial, can help you do just that.*

If you’re in the negative, don’t stress – but rather develop a plan. The most important step you can take is to begin paying off your debt as soon as possible, starting with the loans that have the highest rates. Once you know where you stand overall, you can budget better for future expenses, such as preparing to buy a car or saving for retirement.

*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. Nondeposit 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.

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The Top 10 Things You Need to Know When Buying a Home

These ten useful tips are crucial to know when looking to purchase a home.  Be sure to read on before you make the purchase! Man, Woman, My House, Couple, Front Door, Happy, Door, Entrance, 1. Don’t buy if you can’t stay put.

If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you’ll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. Get started today by using some of our financial calculators, which will tell you how much home you can afford.

4. If you can’t put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low rate mortgages that require a small down payment.  In fact, First Financial is one of them! Check out our Mortgage resources, and then stop into any branch or give the Loan Department a call at 866.750.0100, Option 4.*

5. Buy in a district with good schools.

In most areas, this advice applies even if you don’t have school-age children. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

house for sale sign

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points — a portion of what you pay at closing — in exchange for a lower rate. If you stay in the house for a long time — say three to five years or more — it’s usually a better deal to take the points. The lower rate will save you more in the long run.

?????????????????????????8. Before house hunting, get pre-approved.

Getting pre-approved will save you the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt, and credit history.

9. Do your homework before bidding.

Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that’s about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

If you have any questions about the home buying process, feel free to ask us!  We know it can be an intimidating process at times, and we’re here for you.  To apply for a 10, 15, or 30 year First Financial Mortgage – click here.*  You might also want to subscribe to our Mortgage rate text message service, by texting “firstrate” to 69302.  When our Mortgage rates change, you’ll be the first to know***

A 10 year mortgage of $100,000 at 3.126% APR* would have a monthly payment amount** of $965.61.

A 15 year mortgage of $100,000 at 3.651% APR* would have a monthly payment amount** of $708.76.

A 30 year mortgage of $100,000 at 4.541% APR* would have a monthly payment amount** of $499.29.

* A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.  Subject to credit approval. See Credit Union for details.

**Payment examples do not include taxes or insurance. Financing up to 70% value of property.

***Standard text messaging and data rates may apply.

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