Home Save Personal Finance 6 Ways to Handle Money Better than Our Parents
6 Ways to Handle Money Better than Our Parents

6 Ways to Handle Money Better than Our Parents

0
0

This is a paid post written by me on behalf of Discover Personal Loans. All opinions are my own.

Growing up, I always looked to my father for advice on life’s essentials. I leaned on him for advice on how to get my first job, where I should go to school, and how to pick my career.

I was so grateful to have a father that was willing to listen and offer his guidance whenever I needed it. And, for the most part, his advice was pretty darn good.

Unfortunately, there was one topic he wasn’t qualified to give advice on at all — the topic of money. My father filed for bankruptcy twice and basically had no investments whatsoever.

But, my dad isn’t an outlier at all. The reality is, many from his generation have struggled or still continue to struggle.

According to a recent survey from the Insured Retirement Institute (IRI), only 24 percent of baby boomers ages 51-69 were confident they had enough savings to last through retirement last year. Further, just 39 percent of those polled had even bothered to figure out their retirement needs.

If we want to end up in better shape, the time to get our money straight is now. But, what steps should we take to ensure we wind up better off than our parents? And, what should we avoid?

Here are 6 steps you could start taking today:

#1: Focus on investing as if your retirement depends on it.

Because life was so different for my parent’s generation, I believe the way they handled money and their finances was dramatically different.

My dad never invested, mostly because he didn’t have enough cash and didn’t see the point. I also think some of my parent’s generation may have eschewed investing in the stock market because it was much easier to dump their excess funds into CDs which were, at the time, earning 18 percent or more.

I don’t think that strategy can work today to earn you substantial money. CDs, or Certificates of Deposit, pay a pittance of what they used to back in the day. In my opinion, the best way to save for retirement is to invest in a diversified portfolio of stocks, bonds, and other investments. But, we can’t put these steps off for years like my parents.

To avoid not having enough cash in retirement, today’s young adults should start investing now.

A good place to start is your work-sponsored retirement plan where you may get a company match, but you can also open other accounts like a traditional or Roth IRA on your own. Remember, you can invest up to $18,000 per year in a 401(k) plan and another $5,500 across both traditional and Roth IRAs. In addition, you can also consider investing in real estate (either directly or through REITs), or with a traditional brokerage account.

The sky is the limit, but the best time to start is now.

Looking back, I’m not sure my father understood this. I have to assume he was more concerned with paying off his debt so he didn’t really think about investing.

#2: Research before you choose a financial advisor.

My parents didn’t do a lot of research before choosing a financial professional to work with. Because the internet didn’t exist yet, they asked for a recommendation from family or friends and usually went with whatever advisor came their way.

Unfortunately, I think people rarely knew what they were paying their advisor, either. Plus, from what I observed of my parents generations, many weren’t fully aware how much the fees cost on their specific investments.

These days, all that information is more readily available. You can look online to find the fees for any investment your advisor suggests, and you can check up on your advisor’s credentials using FINRA’s BrokerCheck or SEC.gov. Or, you can even manage your investments from your own online financial portfolio, and forego using an advisor.

With so much information on social media, blogs, and the internet in general, it’s easier than ever to make an informed decision about your advisor and investments.

#3: Research your borrowing options to find the best fit for your situation.

Many people in my parent’s generation were big on financing automobiles. I know my parents discovered the convenience of credit cards and “buy now, pay later” deals and in my experience leveraged them to the hilt.

My parent’s generation may have been the first to own fancy new cars and large suburban homes, but some didn’t look at other financial tools to accomplish their personal goals, leaving some, like my parents, without much savings for retirement.

If we want to do better than our parents, we need to make sure we’re using debt in a way that furthers our goals, versus borrowing without a plan.

Fortunately, it’s easy to research borrowing tools and lenders these days. The internet offers a treasure trove of information when it comes to reading reviews and finding the right loan for your needs.

There are different borrowing tools to help people accomplish different goals and purchase things they don’t usually have the savings to buy upfront. For example, a mortgage allows people to purchase a home with a down payment, and then pay off the house with a payment each month, until the owners owe no more money to the bank. Student loans allow students to go to college and pay back the loans once they have a job after college.

Credit cards allow people to borrow money and build credit, and some even provide the opportunity to earn cash back or travel rewards for every dollar spent. Personal loans can help people finance purchases they don’t have the cash for upfront, to consolidate and pay down debt, finance unexpected expenses, or achieve a personal aspiration like adoption.

Using a personal loan can be advantageous, depending on the situation and your goals, as they offer a fixed interest rate, monthly repayment amount and term, and no required collateral to secure the loan.

It’s good to know the borrowing options available to you so you can make informed financial decisions, but also use these tools accomplish your goals. Using debt should be a planned, financial decision that fits your budget and should only be used if you have a plan to pay off.

There are also so many different companies that offer financial borrowing tools, so with the right research, understanding of the product and financial planning, you can find the option that fits best with your life and finances.

For example, there are many personal lenders out there, but if you fully research, you can find a lender that will altogether help you save money and work best for your financial needs.

Discover Personal Loans is a lender that offers a variety of repayment terms and amounts to choose from, no fees (as long as you pay on-time) and 100% U.S.-based customer service agents available 24/7. They even provide the option to consolidate your bills into one monthly payment, if you find yourself in higher-interest debt and need to pay down.

#4: Keep on the lookout for employment opportunities offering greater financial and professional growth opportunities.

Our parent’s generation often worked hard for a single employer for life. They earned amazing benefits and a pension that afforded them income in their retirement years, usually after working for a company for 20-40 years. It’s great they were so dedicated to their employer, but times have changed. People are more empowered to manage their retirement savings, healthcare options and more, which allow today’s generation to keep an eye out for other opportunities until they find their perfect fit.

These days, people rarely stick with the same firm for their entire careers, mostly because it’s not always advantageous to do so. Pensions have been replaced by 401(k) plans, and individuals are taking more financial responsibility for their own healthcare.

This may make many people today feel free to explore better employment options, and to keep looking for ways to improve their lot in life. They could look for a new employer or career to increase their income, gain a better healthcare plan that works best for them, or to find projects, a company culture or new industry that’s a better fit for them.

#5: Take care of your credit score.

My parents ignored their credit altogether, mostly because there was a lot less information about how it worked. A low credit score could have hindered people like them from qualifying for certain financial tools, like loans.

These days, there’s almost no excuse to leave your credit score to chance. Not only can you get a free copy of your credit score online, but you can find information on how to improve your credit score with the click of a mouse.

If you ever want to buy a house, finance a car, or take out a personal loan to pay for unexpected expenses or achieve another financial goal, you’ll need good credit and a long history of responsible credit use. I say the best way to get started building credit is to use credit slowly and wisely. Pay all of your bills on time or early, and don’t borrow more than you can afford to pay back. If you find yourself in over your head with higher-interest bills you can’t pay off right-away, consider a debt consolidation loan to help you pay down your debt in a simpler way that could save you money.

#6: Prepare for the worst-case scenario.

If there’s one thing I know about my parents and many of their friends, it’s that they didn’t always plan ahead for the worst-case scenario. I think maybe the concept of the “emergency fund” was born out of the desperation boomers faced when they lost jobs and didn’t have a backup plan.

These days, it’s more important than ever to make sure you have a financial cushion if you lose your job, face a pay cut, or run into some other financial emergency. As a financial advisor, I suggest saving up 3-6 months of income in a special savings account designated for emergencies only. That way, you’re prepared for whatever hardship comes your way.

My wife Mandy and I learned to do this early on. We always try to plan for the unexpected emergencies in life, and we stay out of financial trouble by keeping a fully-stocked emergency fund. That way, if one of our kids has a medical emergency, our car breaks down and needs to be fixed with a high-price repair, or anything unexpected happens we’re prepared financially.

Better Than Your Parents

Whether your parents were good with money or not hardly matters. It’s how you treat your finances and your credit that can determine the financial legacy you leave behind.

If you want to be better, then do better. And if you want to build wealth, it’s smart to look at how previous generations managed their finances, and what tools and products are available today so you can reach your financial goals.

This is a paid post written by me on behalf of Discover Personal Loans. All opinions are my own.

The post 6 Ways to Handle Money Better than Our Parents appeared first on Good Financial Cents.

LEAVE YOUR COMMENT

Your email address will not be published. Required fields are marked *