Millennials love their Starbucks. But if you love your money, you probably shouldn’t. At least not according to one financial expert.
“I wouldn’t buy a cup of coffee anywhere, ever — and I can afford it — because I would not insult myself by wasting money that way,” Suze Orman told CNBC Make It.
Because premium coffee is a “want” vs. “need,” that same capital could be put to work.
Let’s say you spend around $100 on coffee each month. If you were to put that $100 into a Roth IRA instead, after 40 years the money would have grown to around $1 million with a 12% rate of return. Even with a 7% rate of return, you’d still have around $250,000.
“You need to think about it as: You are peeing $1 million down the drain as you are drinking that coffee,” Orman says. “Do you really want to do that? No.”
Shark Tank’s Kevin O’Leary agrees.
“Do I pay $2.50 for a coffee? Never, never, never do I do that,” he said. “That is such a waste of money for something that costs 20 cents. I never buy a frape-latte-blah-blah-blah-woof-woof-woof for $2.50.”
Interestingly enough, a new wave of investment apps actually help you save when making these purchases, making the Millennial buying pattern work to your advantage.
Say you buy a $2.50 coffee, Acorns will round up the number to $3 and deposit the rest into your savings.
In Africa, WealthLAB co-creator Odunayo Eweniyi’s savings app PiggyVest—which operates similarly to Acorns—has amassed 250,000 Millennial investors, all making 10% on savings.
Echoing this trend, financial influencer and best-selling author of “I Will Teach You To Be Rich” Ramit Sethi makes the point that spending on coffee is fine — as long as saving is automated.
10 Ways To Avoid Financial Stress
If financial difficulties are keeping you awake at night, take action and tackle your problems head on otherwise they are likely to get worse. The ability to pay for rent, mortgages, bills, and food are fundamental to our quality of life.
It is important to plan for future financial hardship by making saving a goal and budgeting carefully. It’s impossible to predict what will happen in the future, so to cushion any financial hardship, it’s worth putting a little money aside each month.
Developing a savings plan now will enable you to get on with living your life stress-free!
Reduce monthly bills
List all your current outgoings and look to see if you can make any savings. Often it’s tempting to keep the same standing order from the same insurance company for year upon year. You are likely to be paying too much for your premiums and it’s worth shopping around and switching.
Look at the amount of interest you are paying on loans, mortgages and credit cards, you could be able to secure a better deal. One thing to remember is to check your credit score if it is poor lenders won’t give you the best interest rate.
It is possible to repair your credit score by using the expertise of a credit repair company.
Utility bills can be reduced by switching utility providers. Use an online comparison site to secure the best deal. Switching is easy as most of the work is completed for you by your new supplier.
To budget carefully you need to be in control of your spending and to be in control you need to be aware of your income and outgoings. List every necessary outgoing that must be met on a monthly basis and you will be left with an amount which will have been spent on miscellaneous items such as eating out.
You can then design a budget plan so that you can put a certain amount into a savings account. You will probably be surprised at how much your morning coffee costs when added up over the month.
Cut it down to once or twice a week and you will make significant savings.
Make savings work to your advantage
Savings (if you have them!) can work to your financial advantage. Ensure you choose the best financial products that give the maximum return on your savings. Financial products change rapidly to factor in a financial audit of your savings every couple of years to check savings are in the best account.
You could also consider investing your savings property or financial shares. This has the potential to be lucrative but is not without risk. Consider hiring a professional and independent financial advisor for advice.
Ideally, you should set apart some of your salaries each month in order to build up an emergency fund. Life can be unpredictable and without savings to fall back on, your car breaking down or your roof leaking could plunge you into more debt as you borrow to rectify the situation.
Savings will cushion the blow of any financial hardship.
Stop Paying Extra Bank or Late Fees
Late fees are not helping you. They add up over time – fees can even accrue fees!
If you are the kind of person who always forgets to pay their bills on time, you can get around this by automating your finances so that the money automatically goes out of your account.
You should also avoid making any extra charges on your credit card unless you are sure that you are able to pay it off in full at the end of the month.
Don’t Pay Full Price!
Paying full price is a really common financial mistake that a ton of people make.
In today’s world, you can find a sale on just about any item. If you see something you need at the store, take a few moments to shop for it online and you’ll probably be able to save 10-20%
Not only does this method stop you from overpaying, it also gives you a moment to think and decide whether or not what you were thinking of buying is actually a worthwhile investment.
Create a Financial Defense Plan
All of us need to not only earn our living and grow our finances if we’re to live a comfortable and happy life, but we must also defend them.
That means ensuring you stay rational, sensible and forward-thinking in all matters related to your financial health.
There are a few considerations you can take care of in order to make this so, and generate a cognitive and systemic financial defense to keep your money yours, and flowing in the direction you most want.
Here are the keys to defending your financial interests
Know Good Lawyers
The most important thing is to have good counsel and good advice. So, hire the best attorneys that you can afford. From real estate to contracts to brand protection, you need someone behind you making sure you aren’t making any major missteps.
The world practically runs in the courtroom now, unfortunately. So, with good attorneys on your side, it will keep you out of the courtroom and focused on running your business.
Have A Contingency Plan
It’s always best to have a fail-safe.
This might mean never tying up all your investments in one basket. It might mean diversifying your investments .
Or, it could mean allowing only one or two financial handlers to have any kind of insight into your money matters in the first place.
The key is to be able to have a solid plan but also be able to pivot to something else should the first plan fail.
With the willingness to keep a backup plan, or a mode of operation to take when something fails or doesn’t go the way you expect, you at least won’t lose anything.
Keeping a solid contingency is also reliant on keeping solid discipline with your financial means – without this none of your decisions are likely to land effectively.
Pore Over Contracts
Whenever signing a contract, or forging a new one, you need to know exactly what terms are referring to.
You also need to read between the lines, and consider what situations a certain stipulation could affect in the future. Remember, even vaguely written terms in a contract do not fall there unexpectedly.
They are either there to make or defend a certain form of income, or persuade and dissuade a certain type of behavior. Every word counts.
Remember the first recommendation? Well, here’s where they come in. But, it’s important to know how to read and interpret the contracts yourself as well.
Study contract terminology and simply dedicate the time to observe and understand.
Look For Weak Spots
What are the weak spots in your defense system?
Could it be family members having access to your accounts? Do you think it could it be emotional family members asking for financial help, when this is not genuine?
Or perhaps it could it be the services you bank with.
Don’t forget about the way you log in to your accounts and store passwords.
To prevent your finances from being breached, keep up to date on modern security measures. From there, you should be settled.
To reduce your financial stress, the key is to lower your costs, increase your passive income, and protect your assets.
4 Money Principles You Cannot Ignore
We all want to achieve financial independence which is the final stage of having sufficient personal wealth without having to punch in the clock at work daily to afford basic amenities.
When your friends or family complain about the stress associated with their 9-5 jobs, you can’t relate as you’ve reached the stage where you can sit and watch your money grow.
However to reach this level of Zen in the personal financial sector, there are some things you should know about money and certain principles you should follow. Here are 4 money rules you cannot ignore:
You Can’t Afford Everything.
Look at that long list of things you want and look at your account balance. What can you afford to buy and what can you afford to let go of? You can afford to buy some things but definitely not everything which leaves you with the decision to choose which is more important and sensible to you.
It’s Your Money, Act Like It.
Have you ever seen questions or statements like “He/She has so much and won’t donate to so-and-so charity” or “why did you spend that amount buying a bag as opposed to giving to the church?” Learn to get rid of strange expectations society has over you and do what you want with your money.
If you listen to what society deems right, you’ll end up spending money where you really do not want to which is really a shame.
Mind the Money Gap.
People are of the notion that the more you earn, the more you save. I think that’s wrong. Most people who earn a lot more than they used to earn before, spend more than they used to spend before.
What you should be watchful of is the Money Gap. This is the space you leave between your savings and expenses. If you can increase that space as you earn more, you’re on a good way to financial freedom.
I’m serious. Try it for a month. What you should do is, take of your savings from your income the minute you get it and do with the rest as you please for the month. Don’t touch the savings at all no matter what. At the same time, don’t stress over which brand of cereal is $2 cheaper than the other.
4 Reasons The Corona Virus Could Make You Very Wealthy, Very Quickly
“Those who remain calm in the eye of the storm are those who stand tall when the smoke clears.” — Myself.
“The time to buy is when there’s blood in the streets.” — Not myself, but Baron Rothschild.
Yes, it’s all over the news. It’s here so we might as well make the best of it. And the best part of all?
It’s the best time to be a resourceful entrepreneur. Like the good Baron says, when there’s blood in the streets, is the time to get down.
I wrote a story awhile ago on BiggerPockets, based on a coffee chat with super entrepreneur Neil Patel, basically outlining why mass scares are gold rushes.
Here are three ways this “COVID-19 pandemic” are creating mass opportunities to get ahead in the game. Especially as it pertains to real estate (which never will go out of style), stocks, and just opportunity, period.
1. Stocks are plunging for no other reason than panic
The world is pausing right now. Shutdowns everywhere. Stocks, with solid fundamentals, are plunging into the abyss with no end in sight.
Per the New York Times, the airline industry alone is seeking more than $50B in grants, loans and tax relief from Washington.
So what does that mean? Well, it means that you can pick up stocks for pennies on the dollar. And when the dust settles and life goes back to normal (trust me, it will), you will have INSTANT gains.
If you’re looking for a place to look, CNBC’s stock expert Jim Cramer picked out 10 strong tech stocks to look into (Shopify and Square were two; not bad ideas) where the fundamentals are robust but value plunged for no other reason than…you know.
2. Interest rates just dropped to (near) zero…
In Europe, negative interest rates have been a thing for quite a while with outrageous mortgage rates in the 0.5% range.
Now, because of all this chaos, the Federal Reserve took emergency action, cutting interest rates suddenly and dramatically to close to 0%.
The move was done in a reactive attempt to try to offset the impact of the coronavirus outbreak and stimulate some spending action.
So what does that mean? Well, it means that if you own real estate, assets, anything, you can refinance and cash out.
In even more layman’s terms. If you have a mortgage at 4%. Cut that bad boy to whatever low ish they’ll give you, save that extra.
Or even better, refinance your property. Let’s say you owe $300K on your $500K property. With interest rates down, refi at $350K, pocket the $50K and launch your business idea.
(And don’t forget about all the tax benefits that await on the other side.)
3. People are going to get tired of each other
According to Forbes, divorce rates go up when the economy goes down, with economic uncertainty putting a strain on once-happy homes.
These quarantines are forcing people to be with their spouses, which leads to either one of two things: family additions or family reductions.
“Scary times have the potential to drive people together or apart,” Pepper Schwartz, a psychology professor at the University of Washington, told Quartz in an email.
And when couples split, the assets have to be divided evenly, opening up opportunities for shrewd investors.
See where I’m going with this? Yes, we must prepare for the strain. But also prepare for the opportunity.
4. People are sitting at home, BORED
So what does this mean? Well, it means that no sports are on, no entertainment options, reducing attention to Netflix and social media.
That also means that NOW is the perfect time to start blogging, posting stuff on social, testing out your new business idea. Launch a #corona drop-shipping clothing line on Shopify.
Whatever it is, hit ‘em with the Nike (#justdoit) and do something. The majority of people are at home going crazy, trying to figure out what to do.
Take advantage. And let’s face it. Do you really want to be this exposed to a crisis in the future? If you have your own business, you wouldn’t have to worry about your job shutting down…
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