Money Mindset | Financial Education
The Road to Financial Wellness
Founder, Jason Vitug’s story of “Make more money. Spend more money. Work more hours.” But it’s not the size of the paycheck that matters but how it’s managed.
We all go through financial rough waters because we’re unaware of the decisions we’ve made. The first step is acknowleding our relationship with money and being okay with the not so positive parts. Jason was living his dreams and realized that retirement isn’t an age in the distant future. Retirement is a lifestyle that can be lived sooner rather than later.
In one of his stops during his backpacking trip, Jason realized the power of perspective that people can see the same thing differently. Our perspectives may not be reality but it is our truth. Knowing that it is our perspectives we have the power to change it.
We all see things differently but it’s our perspective that matters.
Don’t like it? Change it.
Change of Mindset
“The secret to financial wellness is lifestyle awareness, financial planning and taking action.”
The plan is to provoke discussion and interest in the subject of personal finance. The goal is to incite action in furthering your education and knowledge. The hope is to build the foundation for you to achieve prosperity.
Prosperity is the successful and thriving living condition with respect to finances.
Why Financial Education?
• We learn the area of a triangle but not the value of the dollar.
• We can calculate the circumference of a circle but not compounding interest.
• Money is a taboo subject but we learn our financial habits through family and social interactions.
•Tremendous amount of information; confusion
• Don’t be fooled. Money impacts your life!
What we hear about money? American consumers owe:
– $854.2 billion in credit card debt
– $8.15 trillion in mortgages
– $1.12 trillion in student loans
• Consumers paid $32 billion in overdraft fees
• 70 million Americans are “underbanked”
• Financial relationships, credit reports and credit scores impact your well being.
Education empowers you to make better informed financial decisions.
Road to Financial Wellness
• Imagine a cross country road trip without a plan and the tools to reach the destination.
• Your destination to financial wellbeing requires planning and you can choose to get there sooner.
• Have a life plan not just a financial plan.
– Financial goals without an understanding of how it contributes to your desired lifestyle prevent you from achieving your life plan.
A lifestyle is the way in which you live.
Financial goals are targets that revolve around money.
• Envision the life you want to live.
– Ask yourself, “What brings happiness into my life?”
– Ask yourself, “If I had no debt or financial obligations, how would I spend my time?”
• Beware of Lifestyle Inflation
– spend more when you have more to spend.
– When you earn more the cost of your lifestyle choices increases accordingly limiting your ability to build wealth.
• Keeping up with the joneses.
– Purchases are made to keep up appearances.
• Lifestyle choices are sticky. Income fluctuates.
Wealth is not measured by how much you spend but how much you’ve saved.
• Influenced by the Culture of Debt.
• Taught a spending habit.
• Consumerism has taught us quantity of stuff not quality. Disposability not usability.
• Savings is postponed for instant gratification.
• Purchase things over experiences.
If you won a million dollars, what would you do?
Mindset – Mind the Gap
• What’s your relationship with money?
– Do we control it or control us?
– Do we value life by how much we spend?
• Money is personal.
– It’s not just numbers.
• Spending Habits
– Mindless spending can prevent you from spending on needs and wants.
– The longing of a purchase is more impactful than the ownership.
– Place more value on things we can’t afford.
• Savings Habits
– Waiting to have more income to save.
• Retirement isn’t an age.
– Choose the time period to live your dream lifestyle.
Was the first thought about paying for stuff?
Mindset – Happiness
• Money does buy happiness.
– Ensures we don’t worry about basics to sustain life.
• Materialism does not buy happiness.
– Wealthiest don’t want it all.
• Fear: More money more problems.
– Lottery winners lose winnings.
• Buying things or experiences are the same.
– It’s the value you place on them.
• Personal satisfaction can’t ever be purchased.
• Money is a tool not the answer.
– Used wisely can help you continuously achieve.
• Money does not give you purpose in life.
– Makes it easier to achieve a purpose.
Cutting expenses is more powerful than increasing income.
• Income comes and goes.
• It’s not how much more you can make. It’s the relation to how much you spend.
• You can live paycheck-to-paycheck with a six figure salary.
• It’s not just the paycheck. It’s the benefits too!
• Diversify income sources.
Do I have cash to make the purchase now or am I willing to work more hours in the future to pay for it?
• Savings is necessary to get capital needed to make wealth.
• Prioritize Savings – Pay yourself first.
• Find ways to reduce spending and save more.
• Have a Purposeful Savings Strategy
– Emergency Fund: 6 months of expenses in liquid account for use in event of loss of employment or underemployment.
– Short Term (within a year): Vacation, Holidays, Taxes
– Midterm Goals: Home and auto purchase, college expenses, growing family.
– Long Term and Retirement
• Benefits of an early start
• Compound Interest
• 401(k) match
• Roth IRA
Do you want to be the Starbucks loving apartment renter or the Folgers Crystal’s homeowner?
• What we need is actually much less than “what we think” we want.
• Loyalty to brands and stores.
• Impulse buys and retail therapy.
• Present bias putting immediate gratification over future needs.
• Awareness of how money is spent to improve quality of life.
• Knowing purchases made today can impact ability to retire early.
• Questioning purchases.
– Do I need it?
– Do I need it now?
– What will happen if I don’t have it?
A bargain isn’t a bargain if you actually don’t need it.
Don’t spend more than what you make.
Love it. Need it. Like it. Want it.
Mindset on Financing
• Purchase on credit only when buying long lasting assets with short lasting financing.
• Don’t finance items for longer than their usable life.
• The importance of credit and impact to lifestyle.
• Necessity of loans as an investment (education, home, car).
• Just because you’re approved doesn’t mean you can afford it.
• Ask yourself, “How does the loan or line of credit improve your life long term?”
Just because you’ve been approved for credit doesn’t mean you can afford it.
Reality of Debt
• Debt is a ball and chain that prevents you from living your dream lifestyle.
• Borrowed money keeps you bound.
• Avoid debt collectors, bankruptcy and financial stress by avoiding debt.
•In debt? Prioritize debt repayment.
Debt is reserving your future time to work rather than fun.
Retirement as a Lifestyle
• Through planning and sound financial management retirement can be achieved sooner.
• The amount needed to retire differs from one person to another.
•Power of Time. Start saving and investing early for retirement sooner.
• Know your life plan, preferred lifestyle and financial goals.
• Understand and use retirement savings vehicles:
– 401(k) and other Defined Contribution Plans
– Individual Retirement Accounts (IRA)
– Investments and Brokerage Accounts
– Company Stock Options
– Social Security
At age 23, you made $40,000/year and by 30 years old you’ve saved $40,000 into your 401(k).
If you decided not to contribute another dime till retirement and realizing an 8% return, your $40,000 would be over $600,000.
Financial Wellness FACTS Process
• Financial Awareness
– Be mindful of your life plan, financial situation and your money habits.
– Ask questions and understand. Change mindset and perspectives as needed.
• Creating a plan
– Have a life plan, set financial goals and budget for everything.
– Change is certain and plan a response.
• Taking control
– Prioritize savings and diversify income.
– Pay down debt, control spending and decrease expenses.
– Automate and use financial tools.
• Seeking knowledge
– Invest in yourself through education and skills attainment.
Achieving Financial Freedom
• Ignorance isn’t bliss. Financial independence begins with financial knowledge.
– The more you know about personal finance the more control over your financial future.
• Change is inevitable. Have a plan, avoid lifestyle inflation but be flexible and prioritize saving.
• Retirement can be a lifestyle not an age. The magic number for retirement varies greatly for each person.
• Increase wealth. Lower expenses, curb spending, save on purchases, diversify and supplement income.
You Only Live Once
• YOLO is knowing the value of your time to create experiences and memories.
– Spend what you make only leads you to “living at the workplace” more often than you need.
– If you only live once, why not spend it doing the things you want to do all the time rather than just the weekends?
• YOLO is using knowledge, resources and time to achieve desired lifestyle in this lifetime.
– You can spend your days/nights working to pay for a lifestyle you can’t afford.
• The more you know about personal finance the more control you have over your future.
• Don’t wait in the unknown.
• Begin to live in the know(ledge).
• Know your actual take home pay
• Know your credit history and credit score
• Know the power of time
• Know how much money you truly owe
• Know the interest rates, terms, fee structures
• Know the fine print on your credit cards and loans
• Know your financial statements
• Know the total cost of borrowing
• Know the resources and tools available
Your Knowledge – Invest in learning more.
Budgeting – Helps achieve financial goals and life plan.
Banking Relationships – Not all created equally choose the right program.
Free Resources – Take advantage of all available resources from colleges, non-profits and government sources.
1. Envision the life you want to live without money or things.
2. Analyze and accept your true financial standing (income and expenses, savings and debt) and set goals.
3. Ask questions and research to increase your financial knowledge any which way you can.
4. Ask yourself what can you do today/in 3 months/this year?
5. Practice financial awareness and stay proactive.