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How Money Works Educator - Bill Mitchell

Bill Mitchell

HowMoneyWorks Educator

November 23, 2021

The Scandal of the American Financial Education System

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The Scandal of the American Financial Education System

November 23, 2021

The Scandal of the American Financial Education System

The scandal of the American financial education system is that there is no American financial education system.

It doesn’t exist. And millions are suffering for it.

As it stands, only 21 states require financial education courses to graduate high school.¹ But that number is a mirage—60% of students in those states haven’t actually taken the classes!²

Simply put, almost no one in America is learning how money works. And it’s wreaking havoc on the lives of millions.

Would these statistics even exist if schools empowered students with financial literacy? You be the judge…

$167 billion wiped out by foolish investments in meme stocks in early 2021³

Over $1 trillion lost to volatile cryptocurrencies in a single week⁴

Over $1 trillion in student loan debt shackling Americans⁵

1/3 of millennials believe they’ll never have enough saved to retire⁶

These numbers tell a story.

Students go through high school without hearing a peep about how to manage money or build wealth. 

They sign off on student loans without being taught how debt can devastate their future.

Graduation comes around, and they start living paycheck to paycheck. How could they not? It’s all they know.

And then, no surprise, they’re suckered into get-rich quick scams that promise wealth but only deliver crushing losses.

Do these scenarios hit a bit too close to home? If they do, then know this—you cannot rely on the powers that be to show you how to change your story.

If you were let down by your school system—and even if you weren’t—ask me for a copy of How Money Works: Stop Being a Sucker. It may be the knowledge you need to turn your financial situation around and change your future.

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¹ “Should All Schools Teach Financial Literacy,” Shannon Doyne, The New York Times, Apr 20, 2021, https://www.nytimes.com/2021/04/20/learning/should-all-schools-teach-financial-literacy.html.

² “2019 Money Matters On Campus Report,” EVERFI/AIG Retirement Services, https://2gag5314usvg3k1yhz13gzy4-wpengine.netdna-ssl.com/wp-content/uploads/2019/05/MoneyMatters-2019.pdf.

³ “Meme Stocks Lose $167 Billion as Reddit Crowd Preaches Defiance,” Sarah Ponczek, Katharine Gemmell, and Charlie Wells, Bloomberg Wealth, Feb 2, 2021m https://www.bloomberg.com/news/articles/2021-02-02/moonshot-stocks-lose-167-billion-as-crowd-preaches-defiance.

⁴ “The crypto market has lost 47% of its value in just 7 days,” Isabelle Lee, Business Insider, May 19, 2021, https://markets.businessinsider.com/news/currencies/crypto-market-value-47-percent-lost-7-days-2021-5.

⁵ “Student Loan Debt Statistics: 2021,” Anna Helhoski, Ryan Lane, Nerdwallet, Aug 19, 2021, https://www.nerdwallet.com/article/loans/student-loans/student-loan-debt#:

⁶ “61% of older millennials believe they’ll be working at least part-time during retirement,” Megan Leonhardt, CNBC Make It, Jul 22, 2021, https://www.cnbc.com/2021/07/22/majority-of-older-millennials-believe-they-will-work-during-retirement.html.

What Does it Mean to Be Financially Literate?

September 1, 2021

What Does it Mean to Be Financially Literate?

People with a high level of financial literacy are able to make informed decisions by putting their financial education to work.

Understanding how money works is practical by nature and can be a make-it or break-it knowledge base and skill set for one’s life. Financially literate people are able to organize their money to meet their future goals—regardless of what those goals may be—by simply being smart with money. This is usually best accomplished with the assistance of a financial professional.

Financial literacy is becoming increasingly essential in today’s evolving world. A lack of financial literacy could lead to a wide number of financial difficulties for people, contributing to important social issues in our nation including poverty, job scarcity, and wealth inequality.¹ It can also create stress that can have a negative impact on mental and emotional health.² Financial skills can help provide benefits that go beyond mere financial awareness. They can also lead to an improvement of personal well-being because those who are financially literate usually have greater success and peace throughout their lives.

To understand what financial literacy means it’s important to know and follow the correct steps—like the 7 Money Milestones—which can be found in the book HowMoneyWorks: Stop Being a Sucker. Having financial literacy adds to the values, skills, and self-confidence necessary to make insightful, strategic money decisions. Yes, becoming financially literate takes a little work, but the outcome can greatly improve quality of life.

Financial literacy helps people understand relevant money concepts. Knowing about the Time Value of Money is a great example. This concept informs us that the money available now is worth more than the same amount in the future because of its ability to earn interest. Concepts like this create urgency, inspiring people to increase their financial education, and then use that knowledge to take action and create healthy money habits.

Financially literate people: <br> - Ask the right questions of their financial professional

- Are aware of the reasons behind their decisions

- Set aside part of their income on a regular basis

- Make plans for the future

- Protect their family in the event of sickness or premature death

- Set financial goals and make plans to achieve those goals

- Set aside savings for emergencies

- Keep their financial obligations under control

- Monitor their spending patterns

- Understand concepts such as loans, credit, and debt

- Are aware of the services banks provide

- Are knowledgeable about investment options

- Do not spend more than they earn

- Have an understanding of tax-related issues

One of the best resources that teaches the basic knowledge, skills, and behaviors of a financially literate person is the HowMoneyWorks: Stop Being a Sucker book. If you develop the skills outlined within, you can consider yourself well on your way to becoming financially literate.

— Tom Mathews

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¹ “COVID showed why we need to make financial literacy a national priority,” Carrie Schwab-Pomerantz, Fortune, Sept 24, 2020, https://fortune.com/2020/09/24/personal-financial-literacy-health-schwab/

² “The Link Between Physical and Financial Health,” Marcus by Goldman Sachs, Feb 27, 2020, https://www.marcus.com/content/marcus/us/en/resources/personal-finance/physical-and-financial-health

“FL 101” - Financial Literacy For College Freshmen

“FL 101” - Financial Literacy For College Freshmen

College can be a lot of things. Fun. Scary. Exciting. Confusing.

But one thing is for certain—it’s that time of life when students finally break away from their parents and start making their own decisions—like how to spend their money.

And it turns out they have no clue what they’re doing in that department—statistically speaking.

Only 35% of students entering university have received any previous financial education.¹ Is not knowing how money works the major reason why freshmen blindly contribute to the $1.5 trillion of total student loan debt that exists?² Of course it is. But taking on giant loans without understanding the full magnitude of their decision isn’t the only financial mine lying in wait for undergrads. According to Sallie Mae, in 2019 the average college student had $1,183 in credit card debt—a 31% increase from 2016!³

Massive student loans and thousands in credit card debt don’t position students well for post college success, prompting many of them to take a job they don’t care about, in a field they don’t want, for a boss they don’t like. The obligation to make debt payments, which the student once thought was far in the future, now robs them of their freedom to explore, grow, and develop.

If only they had been given a true financial education in high school—or even before, they would have learned the following financial literacy basics for college freshmen…

1. Manage your debt. Student loans help millions of students fund an education that, on average, is worth about $2.8 million over the course of their lives.⁴ But it’s important to highlight that debt is nothing to take on lightly. Many students are unaware of the heavy burden they’re acquiring in the form of student loans and credit card balances.

The company Student Loan Planner reports that roughly 90% of borrowers experience significant anxiety due to their loan burden.⁵ Couple that with a 2015 survey by Equifax that revealed 55.7% of students listed ‘student loan debt’ as their top reason for not being able to afford their first home.⁶

Along with student loan debt, the average college student holds a credit card balance of $1,183. Credit cards for students are often justified as a necessary lifeline to cover living expenses. In reality, they’re often used for frivolous, impulse purchases that contribute to 49% of students being saddled with permanent credit card debt in addition to their student loans.¹

If you can’t avoid using student loans and credit cards to afford your education and living expenses, follow these guidelines to help remove debt swiftly after graduation. With your psychological and financial future at stake, the key is to reduce your debt before an onslaught of new expenses (i.e., your mortgage, children, car payments) make it even harder to pay off.

First, get a part-time job or side-hustle if you haven’t already. Second, identify your credit card with the lowest balance. Third, put as much of your income towards eliminating that debt as you can. Once that’s done, move on to the next lowest card. Repeat until your credit card debt is a hazy memory.

2. Identify a money mentor. There are two ways to gain wisdom. You can either make mistakes or learn from someone else’s. Finances are no different. Never again will you have such a perfect opportunity to find a money mentor than when you’re attending university. It’s like a learning shortcut where you get access to a whole lifetime of experience without a lifetime of making mistakes. You just have to keep an open mind and be willing to establish a real relationship with someone with financial know-how.

Your money mentor could be a parent, a grandparent, an uncle or aunt, the parent of a friend, a professor, or even a responsible upperclassman. Once you’ve identified your mentor, ask hard questions about how to spend and manage money. Pick your mentor’s brain for how they built their wealth, mistakes they made along the way, and advice for specific challenges you face. Show them your budget and have them hold you accountable for your spending decisions. Be willing to put in the work of being open, scheduling and spending time with your mentor, and implementing their advice. The connections and networks you build today will serve you long after you graduate!

3. Start building wealth NOW. Look at your bank account. Then look at your income. They might not seem like much, but they’re the humble beginnings of your future wealth—if you play your cards right! Your money has more growth potential right now than it ever will again. Allow me to demonstrate.

Let’s assume you’re 20 and want to retire at 67 with a million dollars. You find an account with a 9% annual interest rate, compounded monthly. It would only take saving $113 per month to crush that goal. What’s more, you wouldn’t have to increase your saving as you get older to retire as a millionaire. Want to retire with more? Increase it. If you start saving $226 each month now—without ever increasing the amount—you’d have $2 million. If you’ve got the flow, and you want $4 million at retirement—make it $452 each month. Starting young is the most affordable way to build wealth with compound interest.

What if you didn’t start young? What if you decided to wait until you’re 35 to start saving? Those 15 years of procrastination means you’ll have to stash away $451 monthly just to reach your million dollar retirement goal. $452 monthly now for $4 million or $451 monthly starting at 35 for $1 million. You don’t need the wealth of a king or queen to enjoy the freedoms of royalty in retirement—if you start building wealth NOW. It’s your decision whether time robs you or robes you. Even if you start saving with less than these amounts, start the habit now to set aside a regular sum of money for your future.

4. Use a budgeting app. Budgeting is important. It can also be a huge pain if you don’t know what you’re doing. Punching in numbers, setting up spreadsheet formulas, and stressing if that pizza delivery tip counts towards groceries can make tracking your expenses such an aggravating process that you don’t even bother. Fortunately, there are some excellent apps and websites out there that can take the hassle out of money management. Mint and Pocketguard, for example, are free budgeting apps that sync to your bank account and credit cards to allow for real time updates to your spending and saving goals. And it’s all conveniently located on your phone, just a few taps away. Scrap the spreadsheet, do a little research, and download a headache-reducing app ASAP.

A financial education isn’t like a sociology or history class. Those last for a few months, you learn tons of facts, you pass a test, and you move on with your life. Learning how money works is a lifelong process that will impact almost all of your daily decisions and future experiences. Few other skills will open your eyes to the exciting possibilities that life can offer. So hit the books (the How Money Works, Stop Being a Sucker book, to be precise) and start being a student of personal finance TODAY.

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¹ “2019 Money Matters On Campus,” Daniel Zapp, EVERFI, https://everfi.com/wp-content/uploads/2019/05/MoneyMatters-2019.pdf

² “Student Loan Debt Statistics In 2019: A $1.5 Trillion Crisis,” Zack Friedman, Forbes, Feb 25, 2019, https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#50430199133f

³ “Majoring in Money 2019,” Sallie Mae and Ipsos, https://www.salliemae.com/about/leading-research/majoring-in-money/

⁴ “The College Payoff: Education, Occupation, And Lifetime Earnings,” Georgetown University Center On Education And The Workforce, https://cew.georgetown.edu/cew-reports/the-college-payoff/

⁵ “Mental Health Survey: 1 in 15 High Student Debt Borrowers Considered Suicide,” Melanie Lockert, Student Loan Planner, Sept 4, 2019, https://www.studentloanplanner.com/mental-health-awareness-survey/

⁶ “Millennials, Mortgages and Student Debt,” Rosie Biundo, Equifax, July 14, 2015, https://insight.equifax.com/millennials-mortgages-and-student-debt/

The True Cost Of Financial Illiteracy

August 9, 2021

The True Cost Of Financial Illiteracy

The average American reported that they lost $1,279 in 2019 due to financial illiteracy, according to a recent survey.¹

That’s enough to potentially cover a mortgage payment or car repair bill. If the assessment is accurate, that would mean the country lost $307 billion last year simply because citizens were clueless about how money works. (For reference, the entire annual GDP of Pakistan in 2019 was $278.22 billion.²)

But the situation is far worse than you might imagine.

The result of financial illiteracy is far greater than buying things you don’t need, sinking deeper in debt, and mismanaging your cash by shoving it all in low-interest savings accounts. It’s costing you the opportunity to truly build wealth and pursue your dreams. That’s the true price tag of financial illiteracy.

The opportunity cost of financial illiteracy. Think about a decision you wish you could redo. Maybe you missed out on an awesome job or experience because you chose a safer option or didn’t know what huge potential you were letting slip by. That’s called opportunity cost. It’s why you kick yourself for selling your home a year before a sellers’ market explodes or why you wish you’d studied abroad for a semester in college. Who knows what your life would look like now if you had just been able to see the future!

You need to start realizing that every dollar in your bank account is bursting with potential. What if the $1,279 that Americans think they lose every year was in an account earning 8% interest that compounded monthly? That squandered cash would grow to $13,987 after 30 years. That’s a much closer estimate to how much financial illiteracy actually costs Americans every year. We’re losing $1,279 every year plus however much that money could have grown if we had just known how money works.

The personal cost of financial illiteracy. But there’s more to the opportunity cost of financial illiteracy than just numbers. It can cost us the lifestyle that we’ve been daydreaming about. Financial instability and unpreparedness can result in massive emotional and mental stress that can take a serious toll on health and relationships. It can limit educational opportunities for our children. The true price tag of money ignorance isn’t just dollars in a bank account; it’s the ability to live our lives in confidence and to pursue our dreams.

The book, HowMoneyWorks: Stop Being a Sucker describes financial illiteracy as the #1 economic crisis in the world. As you can see, that’s not an exaggeration. Let me know if you want to learn more about the severity of our global financial ignorance pandemic and how it’s impacting you right now. I can get you a copy of the book and help you see the financial opportunities that surround you—if you just know how to take advantage of them!

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¹ “Financial Illiteracy Cost Americans $1,279 in 2019,” National Financial Educators Council, https://www.financialeducatorscouncil.org/financial-illiteracy-costs/

² “Pakistan GDP,” Trading Economics, accessed 2020, https://www.worldometers.info/gdp/gdp-by-country/

The Wealthy Love Suckers—And It Should Make You Very, Very Angry

June 7, 2021

The Wealthy Love Suckers—And It Should Make You Very, Very Angry

Do the wealthy know ways to make money that are unknown to everyone else? You better believe it!

John D. Rockefeller, one of early America’s richest tycoons, once said, “I have ways of making money that you know nothing of.” How does that make you feel? Shouldn’t everyone know the best ways to make money and create a prosperous future?

But the fact remains. There are wealth-building principles that are common knowledge to the wealthy but are largely unknown by the majority of the population.

So why is the average citizen in the dark?

How money works is simply not taught in schools. Only 21 states in the U.S. teach at least one high school class in financial education. ¹ Interestingly, all 50 states teach a class on sex ed. So the one thing you can learn on your own, they teach. And the one thing you’ll never learn on your own, they don’t. Go figure.

Actually, it does figure.

Think about it. If the financial industry were to educate consumers about money savviness, people might stop socking away so much of it in low-interest savings accounts that earn less than a 1% rate of return. And before you leave the branch do they offer you a brochure on financial concepts to help you get out of debt, avoid money missteps, and start saving like the wealthy?

Pfff—yeah right!

No. It’s like, if you’re dumb enough to open a low-interest savings account and take the free lollipop (it’s like their sucker litmus test), then they’ll try to sell you a car loan at 6% interest. ²

What a deal. You earn less than 1%—they earn 6%. It’s like a lose-lose for you, but you still thank them on the way out.

But they don’t stop there.

With your new car loan monthly payment, you might run low on cash from time-to-time. But thanks to partnerships with credit card companies, the bank can also offer you a shiny new charge card—but “just for emergencies.”

Do they make it clear how much they charge for late fees before they sell you on the benefits and points you can earn? No, that’s what the back of the brochure is for—as far away from the exciting offer as legally allowed. And you can bet it’s the same customer who opened the savings account and took the car loan who never flips the brochure over. They can always count on a customer with a sucker in their mouth to help drive their profits from late fees.

Hard to fathom there are that many suckers? It’s true…

With an overall outstanding balance of $6,354, the average American has 3.1 credit cards. Americans—a population of 328 million people—have over 1.5 billion credit cards and a credit card debt of $815 billion. 67% of all Americans have a credit card. ³

The financial industry thrives on customers who are stuck in the “Sucker Cycle” of foolish spending. While consumers are binging on Netflix, shipping on Amazon, and ordering from DoorDash, institutions are quietly leveraging the power of compound interest to make their customers’ money work for themselves. While consumers live paycheck-to-paycheck, financial institutions and shrewd businesses build profits sucker-to-sucker.

For most people, earning (and spending) a paycheck is the extent of their experience. But the wealthy know the real deal. To become financially independent, you must know the concepts and strategies to save, protect, and grow your money.

Did this article make you mad? Hopefully, it did.

So what do you do about it? You stop taking the sucker and you stop being the sucker. You learn how to take control of spending, protecting, saving, and investing your money. How? You do it by reading the book, “HowMoneyWorks, Stop Being a Sucker.” It will only take about an hour.

Don’t have a copy? Contact me and I’ll help you get one.

Use that anger to fuel action. Read the book. Then reach out to me and say, “Now that I know the ways of making money Rockefeller spoke of, I’m ready to chart my own course to financial independence.” We have a clear action plan for you to follow called “The 7 Money Milestones.” I’ll help you check off each one.

Let’s do it together.

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¹ National Financial Educators Council, “Financial Literacy Statistics,” [https://financialeducatorscouncil.org/financial-literacy-statistics/]

² Claudia Assis, “New-car loans hit highest interest rates in a decade,” MarketWatch, April 2, 2019, [https://marketwatch.com/story/new-car-loans-hit-highest-interest-rates-in-a-decade-2019-04-02]

³ Joe Resendiz, “Credit Card Usage and Ownership Statistics (2019 Report),” ValuePenguin, [https://www.valuepenguin.com/credit-cards/statistics/usage-and-ownership]

5 Myths You May Still Believe About Long-Term Care

April 14, 2021

5 Myths You May Still Believe About Long-Term Care

When a loved one needs extra help to take care of herself at home or needs to go into a nursing home,

the costs—averaging a total of more than $200,000¹—can be devastating. But the impact on families can be felt far beyond the pocketbook: An estimated 34.2 million Americans provide unpaid care to adult family members,² leading to greater incidence of depression and heart disease among caregivers, the majority of whom are women.² Anyone who has seen first-hand the destructive impact of these situations has at least thought about the need to protect their family from the threat of long-term care. But the vast majority haven’t taken action.³ That needs to change. Since change starts with financial literacy and education, let’s review the five most common myths about long-term care.

Myth #1: Medicare and health insurance plans cover long-term care. Private health insurance does not cover long-term care. Medicare only provides extremely limited benefits in a few very specific circumstances. The Medicare.gov website clearly states that Medicare does not cover most long-term care situations. There is one government insurance program that does cover long-term care: Medicaid. But to qualify for Medicaid, one must have income at or below the poverty level⁴ and in most states have less than $2,000 in financial assets.⁵ So unless one plans on being absolutely broke in retirement, they need to have a long-term care solution in place.

Myth #2: Long-term care means that you go into a nursing home. When we think of long-term care, we often think of an old lady wasting away in a nursing home. While a nursing home is certainly an example of a long-term care setting, only about 1/3 of care takes place in nursing homes.⁶ The majority of care takes place in a private residence. So if your stubborn father says, “I’d rather die than go into a nursing home,” your response should be, “fair enough, but how are we going to care for you at home?” When planning for long-term care, you should focus on solutions designed to help keep you in your home for as long as possible. Because no one wants to go into a nursing home.

Myth #3: Long-term care is only for the elderly. Many people are shocked to learn that 37% of Americans receiving long-term care are under the age of 65.⁷ One of the major reasons for this is that long-term care doesn’t only arise from getting old or getting sick. Sometimes long-term care claims stem from accidents or injuries—not illness. So something like a car accident or a traumatic brain injury can suddenly put you into a long-term care situation—even in the prime of your life.

Myth #4: It won’t happen to me. None of us wants to picture ourselves in a long-term care situation. We recoil at the thought of being a burden to our family—whether that burden be financial, physical, or emotional. But the fact is that 70% of us will need long-term care at some point in our lives.⁸ So if you don’t want to be a burden, you need to start planning now.

Myth #5: If it doesn’t happen to me, I will have wasted money on long-term care insurance premiums. If there’s a 70% chance you’ll need long-term care, there’s a 30% chance you won’t. Since there’s a 100% chance you want to retire comfortably, a 100% chance you want your kids to be able to go to college if they want to, and a 100% chance you want to protect your family in the event you die early, you need to prioritize the sure things in life. By the time you allocate money to cover all of the absolute necessities, there may not be any money left over to protect against things that are likely, but not guaranteed, to happen. In response to this conundrum, the financial services industry has evolved to create new products that can allow you to focus on the sure things while also protecting against long-term care. If you need it, these new solutions will cover your long-term care costs. And if you’re one of the lucky 30% of people who won’t need long-term care, all of the benefit for which you paid can go to your family in the form of a large, tax-free, lump-sum payment. Often, you can kill two, three, or four birds with one stone. That’s how money works!

Don’t be a sucker. Refer to page 87 of “HowMoneyWorks, Stop Being a Sucker” to begin increasing your literacy on this important financial concept. Then contact your financial professional to get started.


– Matt Luckey


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¹ “Genworth Cost of Care Survey 2019,” genworth.com/aging-and-you/finances/cost-of-care.html and “Long Term Care Statistics,” LTC Tree, Dec 2018, ltctree.com/long-term-care-statistics/

² “Executive Summary: Caregiving in the US,” AARP, June 2015, https://www.caregiving.org/wp-content/uploads/2015/05/2015_CaregivingintheUS_Executive-Summary-June-4_WEB.pdf

³ “The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations,” National Association of Insurance Commissioners, May 2016, naic.org/documents/ciprcurrent study_160519_ltc_insurance.pdf

“General Medicaid Requirements,” LongTermCare.gov, Oct 2017, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/general-medicaid-requirements.html

“Financial Requirements—Assets,” LongTermCare.gov, Oct 2017, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets.html

“Long-Term Care Insurance Facts - Statistics,” The American Association for Long-Term Care Insurance, 2020, https://www.aaltci.org/long-term-care-insurance/learning-center/fast-facts.php

“The Basics,” LongTermCare.gov, Oct 2017, longtermcare.acl.gov/the-basics/

⁸ “How Much Care Will You Need?,” Oct 2017, longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

Closing The Gap

Closing The Gap

Women earn 82¢ for every $1 earned by men.(1)

The median annual salary for men is around $50,000. At 82¢ for every $1 earned by a man, the median annual salary for women is around $40,000.(2) For someone taking care of a family, how significant do you think that extra $10,000 would be?

By the time a woman reaches age 65, she will have earned $1 million less than a man who stayed continuously in the work force.(3) Consequently, retired women receive only 80% of what retired men receive in Social Security benefits.(4)

Women tend to be the primary caregivers for their children, parents and partners.(1) So women end up taking time away from their careers to care for loved ones. These career interruptions can significantly impact women’s chances to climb the corporate ladder – promotions, raises, bonuses and full retirement benefits.(3)

Since women earn less, we have less money to set aside for our financial goals. Of the Americans who live paycheck to paycheck, is it a surprise that 85% are women?(5) As a result, women own just 32¢ for every $1 owned by men. We accumulate only a third of the wealth accumulated by men.(6)

We may not see the gender pay gap or the gender wealth gap close in our generation. But women can change the financial trajectory of their lives by learning how money works and applying the 7 Money Milestones. By understanding and paying attention to all of the things that make up our financial picture – Financial Education, Proper Protection, Emergency Fund, Debt Management, Cash Flow, Build Wealth, and Protect Wealth, we have the power to take control over our financial future and create equal wealth for ourselves.

And, women need to think about their career decisions. We should consider choosing a career that pays more to women and men equally. With a company that doesn’t penalize women for time spent taking care of loved ones. A place where women can create equal pay for ourselves.

Women have made a lot of progress in pursuing higher education and professional careers, but we’ve only made incremental progress in our finances. If we want to bring about profound change, we have to make it happen for ourselves. We have the power to close the gap in our lives for ourselves and our families.

— Kim Scouller

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Sources:

  1. “The narrowing, but persistent, gender gap in pay,” Pew Research Center, April 2018
  2. Bureau of Labor Statistics, Jan 2019
  3. “Women & Financial Wellness: Beyond The Bottom Line,” Merrill Lynch and Agewave, March 2018
  4. “Fast Facts and Figures about Social Security,” SSA, 2019
  5. “Women Live Paycheck to Paycheck Roughly 5 Times as Often as Men – Here’s Why,” CNBC Make It, Oct 2019.
  6. “America doesn’t just have a gender pay gap. It has a gender wealth gap.,” The Washington Post, April 2019

A Bold Strategy to Free Up Cash Flow

January 28, 2021

A Bold Strategy to Free Up Cash Flow

Need cash flow? Consider reducing your largest expenses.

Housing, transportation, and food consume more than 60% of the average American’s income.¹ If you’re willing to cut costs in those categories by just a fraction, you could save far more than eliminating smaller budget items. Think of it like this—cancelling a few unused online subscriptions is a good start, but it might not save you nearly as much as downsizing your apartment!

Here’s how it works…

You’re ready to get your financial house in order, attack your debt, and start building wealth. Let’s say you earn about $70,000 per year. $40,000 goes towards housing, transportation, and food, you spend $5,000 on non-necessities, and the rest goes towards insurance, healthcare, and education.

Looks good, right? But when you crunch the numbers, you realize you can’t put away enough each month to reach your savings goals. What a momentum-killer! How are you going to free up cash flow?

By totally eliminating non-necessities like coffee from the shop and streaming services, you could get back $5,000 dollars a year.² Not bad, but not great either.

Or—to save twice as much—you could scale back your housing, transportation, and food expenses by 25%. It might seem radical, but it’s worth considering if it can help get you to your goals.

The takeaway? Before you hack away at your lifestyle, consider your non-discretionary spending. It’s an aggressive strategy, but ask yourself if there are ways you could slash your rent, mortgage payments, car payments, and grocery bill. If so, take advantage of them—they could free up far more cash flow than by just cutting non-necessities.

Not sure how to cut back on your top expenses? Stay tuned for creative strategies for reducing your spending on housing, transportation, and food. Articles that outline how you can save money on the largest items in your budget are on the way!

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¹ “American Spending Habits in 2020,” Lexington Law, Jan 6, 2020, https://www.lexingtonlaw.com/blog/credit-cards/american-spending-habits.html

² “New Survey Finds Americans’ Spending Habits Are Ruining Their Retirement,” Cameron Huddleston, Yahoo! Finance, Jan 1, 2019, https://finance.yahoo.com/news/survey-finds-americans-spending-habits-100000015.html#:~:text=New%20Survey%20Finds%20Americans’%20Spending%20Habits%20Are%20Ruining%20Their%20Retirement,-Cameron%20Huddleston&text=GOBankingRates’%202018%20Retirement%20Savings%20survey,worth%20of%20expenses%20in%20retirement.

3 Painful Consequences of Minimum Payments

January 19, 2021

3 Painful Consequences of Minimum Payments

Do you send in more than the minimum payments on your credit cards each month? (The correct answer is ‘yes.’)

If you are making more than the minimum payments now—you’re thinking like the wealthy!

A minimum payment is the lowest amount you can pay on your credit card bill without suffering a late payment penalty. We all know making minimum payments may be necessary for a short period if you’re freeing up cash flow to pay down a bigger, more urgent bill. However, paying just the minimum for the long haul can lead to long-term negative consequences.

Just like any time you have to deal with challenges in life, considering long-term consequences is vital to success. It can wake you up from thinking and acting like a sucker with your money. It can give you the laser focus needed to pay off debts so you can start building wealth. What’s at stake? You know, just your future.

So what are those looming, long-term consequences of making only the minimum payments on your credit cards?

Consequence #1: You end up paying mostly interest forever. OK, maybe not forever, but it will feel like it. By making only the minimum payments over a long period of time, you’re basically giving the credit card company free money—your money. You’re not even paying down the principal for the item you originally purchased with your credit card. You’re basically paying a subscription to the credit card company for holding your debt—a monthly service for which you get nothing.

Here’s an all-too-common example:

Let’s say that an unexpected expense tightens your budget. As it stands, you owe $10,000 in credit card debt at a 20% interest rate with a minimum payment of 2%. In order to cover the basics like housing, food, and medicine, you drop your credit card payments to the minimum amount of $200 monthly.

In this scenario, it will likely take more than 30 years and interest payments of over $35,000 to fully eliminate your credit card debt. The credit card company becomes richer, and your financial future is squandered.
 Consequence #2: You can hurt your credit score. When you hold high debt on a credit card for a long period, even if you’re making minimum payments on time, your credit utilization ratio (or the percentage of available credit you’re using) can rise. If it remains above 30% of your credit card limit for long, your credit can take a substantial hit¹—hurting your ability to borrow for a car, education, or home mortgage—and hinder qualifying for lower interest rates on those loans. This all equals financial limitations for your future—less cash flow, higher interest payments, less money to save for the future.

Consequence #3: You never start saving. Today, the responsibility to save and build wealth falls on the consumer—that’s you! Your 401(k) and Social Security check may fall dramatically short of providing the income you need for the lifestyle you want during retirement. The earlier you start saving, the better chance you have of closing the gap on the money you need for the future. Paying minimum payments on your credit cards is a dangerous habit that can prevent you from saving enough.

You don’t have to fall victim to these consequences. You can create a strategy to knock out your credit card debt by paying more than the minimums. How much more? As much as possible—until your credit card debt is gone. That big sigh of relief and your new ability to save will be well worth it!

An important caveat: Paying the minimum on a credit card while you build an emergency fund or pay down another debt can be advantageous, as long as you’re working with a licensed and qualified financial professional to reduce debt methodically.

Learn more about reducing debt in the book, HowMoneyWorks: Stop Being a Sucker. Email, text, or call me to discover how you can get a copy ASAP!

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¹ “What is a Credit Utilization Rate?,” Experian, https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/#:~:text=Credit%20scoring%20models%20often%20consider,the%20scoring%20model%20being%20used.

5 Ways Parents Can Teach Their Children About Money Over the Holidays

December 22, 2020

5 Ways Parents Can Teach Their Children About Money Over the Holidays

The holiday season is an ideal time for your kids to learn, teach, and model how money works.

Yes, the long lines and Black Friday stampedes have become synonymous with the worst of consumer excess and foolish spending. But with its joy and light, the holiday stretch also brings high expectations to give generously. That’s a noble cause if you know how money works, but it can be a slippery slope if you don’t. Having a giving spirit is an admirable trait and considering the needs of others should be part of every family budget if possible. However, overspending on gifts, no matter how good your intentions, can throw you drastically off course financially, stealing from your future and creating hardship for years.

The holiday season is a great opportunity for families to discuss when to give with a heart that’s three times bigger—AND—how to make money decisions like the wealthiest Who in Whoville.

Here are 5 surprisingly simple ways for families to teach and model essential lessons for children about how money works this holiday season.

Give your child cash… and teach them to save it. <br> Opening up a card is always a bit of a letdown on Christmas morning… unless it contains some cold hard cash! Gifts of money are perfect opportunities to teach children about the importance of saving. Before they blow their “present” on a new toy, in-app purchases, or candy, sit down and have a money conversation with them. Explain that the dough Santa left in their stocking has the power to grow and grow via compound interest. You don’t have to be a grinch and make them hoard all of it. But you might be surprised at how eager they are to save once they discover the growth potential of their money to help them purchase something even bigger and better down the road.

Help your child with their holiday budget <br> This process starts well before the leaves change colors and snow covers the ground. Collaborate with your kids to guide them in deciding how much they should spend per person over the holidays. Help them develop a post-holiday budget as well. Work with them to nail down a percentage of any holiday cash gifts they’re comfortable saving (20% is a good starting point) and hold them to it! Don’t be discouraged if they give you a low number. That money has time to grow and could still make a difference for their long term goals like buying a car, paying for their education, purchasing a home, or even saving for retirement.

Wants vs. Needs <br> Explain to your kids that the holidays are not about things. They’re about remembering what really matters, like relationships, family, memories, and traditions. Model self-control for your kids this season. That might mean foregoing luxury gifts, especially those that depreciate in value. Practicing financial discipline not only sets a great example for your kids to follow later in life, it’s also good for them in the short-term. Removing the stress of overspending and holiday debt can open the door to realistic expectations, peace of mind, and meaningful experiences. And for your family, a light-hearted mood during the season of giving will be worth its weight in gold.

Show your kids how price tags really work <br> Price tags are liars. The true cost of that $500 you spent on trinkets, toys, or tech will be far higher if you factor in future earnings had you saved that money. Make sense? This is a radical shift in thinking—a wealthy way of thinking. Giving is good, but consider also teaching your kids that when you buy something you’re also giving up the time value of that money—its potential to earn more money for you over time. Teach them that one day they may be able to have far more by being smart with their money now.

The real spirit of giving <br> The subtitle of the HowMoneyWorks book is Stop Being a SUCKER—not Stop Being a GIVER. No one wants to turn their kids into little Scrooges. Once they have the knowledge to start building wealth, they have the potential to give back in ways that would have been impossible for someone trapped in a cycle of foolish spending (which includes giving gifts they can’t afford). Teaching your children how money works means positioning them to have more for themselves AND to provide more for others. They’ll be able to give—and receive the joys of giving—for a lifetime.

Ask me how you can get a copy of HowMoneyWorks: Stop Being a Sucker. It explains these concepts in a way that makes it easy for you to teach your kids all about how money works.

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When Crises Collide: 3 Ugly Financial Illiteracy Truths The Pandemic Has Exposed

October 7, 2020

When Crises Collide: 3 Ugly Financial Illiteracy Truths The Pandemic Has Exposed

A crisis will always expose truth.

The coronavirus pandemic has shown us all just how fragile our normal lives can be. But it’s also revealed the ugly reality of another crisis that’s been ravaging the world for years—the economic crisis of financial illiteracy.

The combined consequences of these two plagues will be with us for generations. Here are three truths that Covid-19 and the economic shutdown have revealed about the state of our financial education.

1. We’re not ready for emergencies <br> 26 million people have claimed unemployment over the last 5 weeks. That means 23% of workers currently don’t have jobs (1). Those numbers should stun you. That’s 26 million people with bills to pay, families to feed, and debt collectors to keep at bay with no paycheck coming in from their employers.

But it’s actually worse than it sounds.

44% of Americans don’t have enough cash to cover a $400 emergency (2). And that was before the economy shut down! What are millions of newly unemployed workers supposed to do without a financial safety net?

2. We don’t know how to use our money <br> The pandemic has conclusively demonstrated that too many people don’t know what to do even if the government quite literally puts money in their hands.

Given the unemployment numbers, it would make sense for people to use their Economic Impact Payments (i.e., stimulus checks) to cover things like groceries, gas, and rent. And some did. But only 29% of survey respondents planned to put the extra cash into savings and investments (3). While 35% plan to use their stimulus money to pay bills, 16% plan to spend it on non-grocery food, including delivery and takeout, and 5% plan to spend it on video games (4).

Buying groceries and paying bills is essential, but the fact that so few plan to save their stimulus checks exposes the massive numbers who have been living above their means with little to no emergency fund. Without knowing how money works, they live paycheck-to-paycheck—a lifestyle that prevents them from a perfect opportunity to put away a little extra cash for the future.

3. We want to learn more… But where are we looking? <br> The recent economic downturn has been a wake-up call for millions of Americans. 9 out of 10 respondents to a survey by the National Endowment for Financial Education (NEFE) reported financial stress due to the crisis, and 54% feared they hadn’t saved enough (5). 75% are trying to retool their financial strategy in the face of the crisis (6).

People are also reading about money and markets more than ever. Financial sites are seeing traffic soar as people try to keep up with the economy and learn more about preparing for the future (7).

Financial illiteracy is widespread, and it is devastating families across the nation. But people are also sick of it and want to take control of their money. The question then becomes who will step up to give families the resources they need to rebuild? Who has the cure for financial illiteracy and who can distribute it quickly and effectively across the country and eventually the world?

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