Five years ago today ______________.(fill in the blank) Five years ago today I got married. Five years ago today my spouse died. Five years ago today I graduated. Five years ago today my son/daughter was born. Five years ago today I started a new job and company. Five years ago today I retired. Five years ago today I got divorced. This is just a very small sample of the number of things that happened in anyone’s life five years ago today. The number of things that have changed in your life in the last five years is probably extensive; what will the next five years look like? You may want to put in a little time on your next five years! Just like the last 5 years, there will be things you Plan for, and there will be things you cannot Plan for!
Well ladies, we’ve come in 2nd, again. Multiple studies show that women have worse credit scores than men. How is that possible? We are the ones proven to be more rational in our financial decision making compared to men. Cognitive neuroscience has proven that we ladies are a great deal more rational in financial decision making than are men! So what gives? What is keeping our scores down? Studies conclude that due to the gender pay gap women have suffered from for so long, our decreased income leads to higher debt to credit ratio than that of men. Due to a lower income level, women as a group overall are granted a lower credit limit than men. This leads to women using more of their credit, and getting closer to their given limit; resulting in a higher credit to debt ratio, which takes points off credit scores. So, there you have it ladies, once again we are fighting more to stay alive in this financial world. The good news? The gender pay gap is continuing to be a topic of discussion – which is a substantial win in itself compared to previous years. In the meantime, we will need to find other methods to continue to take control and excel with our finances. Stay tuned, Sisterhood …… “Second place is not a defeat. It is a stimulation to get better. It makes you even more determined.” -Carlos Lopes
Have you ever left the office (maybe to return home to kids doing homework) and think to yourself, if only I could go back to a level of high-school-difficulty-life. Sometimes I think about how easy it was at times; How we would love to exchange our adult responsibilities and problems with those of our 16- year-old self. Imagine that for 1 day, you can go back to high school. However, in that 1 day you must pass a financial literacy test. Do you think you could do it?? A New Bill? In March 2019, State Senator Rick Horner (North Carolina) co-sponsored a new bill that would require high school students to pass a financial literacy course in order to graduate. Currently only 17 states require high school students to take Personal Finance Course.1 According to an article, the financial course would cover “the true cost of credit; choosing and managing a credit card; borrowing money for an automobile or other large purchase; home mortgages, credit scoring and credit reports planning and paying for post-secondary education; and other relevant financial literacy issues” among other topics. What are your thoughts? Do you think this requirement is a good idea? Would you be better off today if you had learned about the basics of finance when you were younger? Do you think it’s important to support the idea that women and men should be armed with knowledge that directly affects their lives and future? Rather than keeping them in the dark thus making them susceptible to others taking advantage of them and their finances, or leaving them behind? If you want to check on the status of the Bill…here is the link to the Government’s Bill Lookup Tool: https://www.ncleg.gov/BillLookUp/2019/s134 If the bill is approved, it would cost taxpayers $2 million dollars to fund training for educators and would be added to the 2020-2021 school year curriculum. Let us know what you think about instituting a Financial Literacy requirement in schools. Comment below, send us an email, drop us a line on our social media platforms. We’d love to hear what you think! 1 Winston-Salem Chronicle- Winston-Salem, NC
Financial planning is much more than just buying life insurance, or an annuity and calling it a day. Many people have a false perception of what financial planning really entails accompanied by a false sense of fear. Financial planning is not just a singular action, the concept is a process to follow, much like a diet plan. If you wanted to lose weight, or live a more active lifestyle, would you just start by making random purchases of products you think can help? Most likely, you would not. One of the best examples I can think of to help explain the reality of financial planning is a weight management program, such as Weight Watchers or Jenny Craig. If you have ever been a part of these programs, then you know that they are more involved but generally lead to great results. When you join a program like these, you simply do not just try to eat better, workout more, and hope for the best. When you are creating a financial plan, you follow a similar format to that of a weight management program, acknowledging that both plans are to make your life better from now on so you can live longer and enjoy life! Financial Planning Weight Management Step 1: Find your starting point Where do you currently stand financially? What assets and investments do you have? What are your measurements: weight, diet habits, exercise frequency, etc. TO CONTINUE READING & FOR STEPS 2-7, CLICK HERE
(These terms are intended to educate, not to provide tax advice or legal advice. We want you to seek tax assistance from a professional as each person’s situation is unique) As tax season is once again upon us, here are a few key tax terms to help you through yet another scramble of a process that was never taught to us! AGI This stands for Adjusted Gross Income, which is the total of all of the income you receive over the course of the year. This total includes everything from wages, interest, capital gains, dividends, etc. The AGI calculation also subtracts items such as business expenses, moving costs, contributions to IRAs, etc. to establish the adjusted amount. [ as opposed to the Gross Income] Imagine when you go to a restaurant and they give you a check with the food expenses, taxes, and tip already included into one large number – it’s the absolute total of all individual pieces combined. Taxable Income An individual’s taxable income is the total income minus all of the allowable deductions, adjustments, and exemptions. This is the amount that one will be required to pay taxes on. [Note: be aware of filing options and requirements – i.e. “married individuals filing joint returns, heads of households, married filing separate” etc.] Exemption An exemption is the amount that the IRS allows you to subtract from your income to reflect the people who count on your income in their lives. The IRS allows you to claim exemptions on yourself, your spouse, and any dependents. The total of all the exemptions you take will be subtracted from your AGI. This is like a $10 off purchase of $50, $20 off purchase of $75, or $30 off purchase of $100 coupons. The more exemptions that you are allowed to claim (like the more you purchase), the more you get to exclude from your AGI. Deduction Expenses that the IRS allows you to subtract from your AGI so that you can determine your taxable income. For example, for an individual who has an income of $40,000 and $6,000 in deductions, the taxable income will be $34,000. There are two types of deductions as explained below. Standard Deductions This deduction is a fixed dollar amount for the year that all taxpayers can subtract from their income. This fixed amount is determined by the taxpayer’s filing status and will change each year due to adjustments in inflation,formula and regulation. *Note: The Tax Cuts and Jobs Act passed in December of 2017 results in increases to the Standard Deduction for the 2018 tax year and beyond. An individual filing their 2018 tax return now has a standard deduction of $12,000, an increase from $6,000 in the past, while joint filers’ deduction raises to $24,000. Itemized Deductions These deductions can include expenses incurred from Medical costs, other taxes (like state, local, or property), mortgage interest, charitable contributions, unreimbursed employee expenses, etc. Tax Credits A tax credit is an amount of money that a taxpayer can subtract from the taxes they owe. This amount is different from exemptions or deductions as those factors lower the income for which you can be taxed. A tax credit is used to reduce the amount of tax that you actually owe. You can think about a tax credit like a store coupon, it lowers your total cost that you have to pay. How do you get a tax credit? The government authorizes a tax credit to promote a specific behavior- such as replacing old appliances with more energy efficient ones. Progressive Taxation The U.S utilizes this system of taxation in which as income levels rise, higher tax rates are applied to the taxpayer. The United States uses tax “brackets” to implement this system. The lowest bracket starts at 10% and the highest bracket can reach 39.6%. The system works like a champagne tower! Each tax brackets contains a range of income. Think of your income as represented by bottles of champagne- one bottle is worth $10,000 of your income. Once your income fills up one of the champagne glasses, it spills over into the next glass. This next glass represents a different, higher tax bracket. Many people (including myself for the longest time) believe that if you are in the 25% tax bracket, you pay 25% of all your income. However, you are only charged the specific tax rate for whatever the amount is in the glass. When your income (champagne bottle is empty) is depleted, you pay the tax rate on the amount of income in each bucket, respectively. Voluntary Compliance The United States tax system is based on the philosophy that the U.S. taxpayers voluntarily report their income and taxes honestly and comply with all tax laws and regulations. Withholding Another name for this term is called “pay-as-you-earn”. This process allows for taxes to be paid to the IRS as you earn your money over the course of the year. When taxes are withheld, they can be taken out of an individual’s pay before they receive their paycheck. This money will be put into an IRS account and you will be credited [at the IRS] with the total amount when you file your taxes.
How does money directly affect every second of your life? Think about the decisions, choices, and lifestyle options you make everyday– It is all related to money… Let’s start by explaining Maslov’s Hierarchy of Needs Theory. We can refer to the pyramid shown below to explain Maslov’s theory. He states that the following categories are the most fundamental needs of a human being. The bottom category, physiological needs, are the most important and fundamental to a human. As you move higher up the pyramid, the needs become slightly less fundamental. Physiological needs include the need for food, water, shelter, love. The second category, Safety, includes the need for feeling safe and secure. According to Maslov, if either of these two needs are not met, the individual experience anxiety and fear. Money is directly related to both of these. While it is not imperative to have money for minimal shelter, food, and water, one feels more secure when they know they have money to help them achieve these fundamental needs. Money is what makes us feel safe and secure in today’s money-evolved world. Without sufficient money to feel a sense of security and safety, we experience anxiety. Our entire lifestyle is thus effected by the negative feelings we possess from uncertainty in our life. Money somehow directly affects every second of our life. We live in a world that is entirely controlled by money and in which every aspect of our lives can be traced back to money, or lack thereof. We need to make money a more important part of our life plans. While we don’t need to have it control our everyday life, we need to incorporate it so that we are able to achieve our most fundamental needs as a human and feel secure in doing so.
How does your mind react to those words? What emotions are sparked by those words? Do you immediately sigh and say, “whew I am not gonna panic because my ESF (Emergency Spending Fund) will take care of me.” Or, do you feel like so many people we heard from during the recent Gov’t Shutdown – “oh, no … I live paycheck to paycheck… this is an emergency spending problem.” Like all unintended consequences, the government shutdown has highlighted a guiding principle here at Financial Sisterhood. We repeatedly emphasize the theory of having money in reserve … call it an emergency fund, call it rainy day money, call it contingency funds, or any one of other terms … you MUST have a stash of cash that has no other purpose other than to fix entirely unexpected, unforeseen, serious, threats to your financial structure. The 2019 shutdown has shined a light on issues of personal financial security, national security and fiscal health and preparedness. In the 2018-2019 Government shutdown, employees were not being paid for the duration of the shutdown, with far too many employees having a hard time making ends meet. Does that inconvenient word “unprepared” come to mind? This circumstance just highlights a problem that thousands of other non-governmental, private sector employees have every month with any number of unexpected issues that challenge their financial foundation. We should all use this revealing example to gain greater financial literacy and fix our own future emergency days. Ladies, let’s not be naïve … it is when, not if! This is a lesson to learn from and to secure your own financial future. It’s not just in the USA either … countless international examples show this necessity of action for women around the world. Women are, arguably, the glue that holds families together. To keep your own family strong it is imperative that you have an emergency spending plan. Having exposure to such a risk without a thoughtful and disciplined solution is irresponsible in the adult world; it leaves you vulnerable, manipulated and open to poor or desperate choices. Often from those poor or desperate choices come outcomes that truly have even more devastating consequences. Think of an example of those consequences being things like a lower credit rating, higher future interest rates on borrowing occasions, lost personal and business opportunities that could make a career or personal life. Rarely can one define an emergency in advance, and often things don’t really seem like an emergency until … suddenly … there is a problem. Try as we all might, it is fantasy and not reasonable to assume that we can consistently live a life that is never interrupted and always goes as we wish. Or, worse yet, that someone else is going to bail us out of our problem. But let us all take heart and see the silver lining in an ugly situation … we can increase our financial learning and we can define an ESF (Emergency Spending Fund) for our own use. How do we start? Using the government shutdown as an example would be that those employees who receive their back-pay apply a portion to strengthening, or as it sounds many should start, an emergency fund. What makes an emergency spending fund? Most times an ESF (Emergency Spending Fund) is considered to be readily available money to cover 3 months to a 1-year timeframe of necessary expenses for a household. Certainly at a minimum it would mean having enough funds to carry a 14 day or 30-day paycheck, unlike what has been demonstrated in the government shutdown. ** Woman-to-woman TIP: Have tires, food, gas, hospital bills, water heaters, refrigerators, roofs, gone down in price in the last 3, 5 or 10 years? Certainly not. Be sure to have your ESF keep pace with inflation and your spending plan; which means once in a while you will have to increase your contribution to your ESF (Emergency Spending Fund) and not just sit without attention. And, please, don’t get enamored with trying to figure out if your money sitting in a cash account is not earning enough interest, or isn’t getting you “points” etc. Put it aside for its’ intended purpose … be disciplined and only use it for emergency; the slight trade-off in interest will be returned many fold when you actually need, and can immediately, access your ESF. How much should you have in your ESF? Use our free worksheet to find out Free ESF Worksheet
Question 1: Is it possible to be a millionaire in your lifetime? Answer A: No way Answer B: Does in my dreams count? Answer C: Maybe if I had a “small loan” to start like Donald Trump Answer D: Yes The answer is… D—Yes. It is possible. Question 2: Would you have to rob a bank to make the previous statement possible? Answer A: Um, yeah, it doesn’t seem that possible to me Answer B: Maybe rob a couple banks? Answer C: No, maybe if I had a “small loan” it would be easier? Answer D: Nope, you could do it legally! The answer is… D—it is totally possible to be a millionaire and stay out of jail at the same time. Question 3: How do I find out how I can become a millionaire? Answer A: I ask my mom Answer B: I ask my neighbor Answer C: I guess Answer D: I use the Cool Million Calculator on Financial Sisterhood’s Calculator Page The answer is…D – Go to the Calculator page and click on the Cool Million Calculator to determine how you can be a millionaire. It shows you at what age you can achieve a million dollars and how you can get there even faster. Being a millionaire is totally achievable! Check it out; I think you’ll be surprised!
Trick or Treat? Here are a few tips on what treats to purchase this month and what tricks to steer clear of. Jeans: Treat! Denim that is still left over from the Back-to-School sales will be discounted to make way for more winter-y items. Travel Destinations: Treat! As the summer travel season slows down, some travel hotspots may lower deals on items such as hotels and tours to encourage out-of-season travelers. Be sure to check out hotel deals and packages for summer destinations…you might be surprised! Winter Boots and Clothes: Trick If you can help it, refrain from buying big ticket winter items. These goods usually make great Christmas presents so retailers tend to jump up the price in the early season. However, there is a silver lining…Wait to buy these items on Black Friday or Cyber Monday where you will see major deals. Fin out how to save $490 by Christmas with this easy savings guide! In-Season Produce: Treat! Fall is a great time for cooking! Be sure to grab all the in-season produce while it lasts. Grocers tend to cut back on prices so that the items will sell before they go bad. Some of the produce in season: apples, pears, peaches, cranberry, melons, spinach, cauliflower, broccoli and brussel sprouts. Diamonds: Trick Although October brings the biggest shipments of diamonds to the jewelers, the law of supply and demand does not hold here. In preparation for the Christmas season, the big shipments also bring big crowds. This means that the jewelers can jump the price up on the diamonds as the demand is so high. Cars: Treat! Sticking with the Pre-holiday season preparations, cars follow suit. If you’re o.k. with last years’ model of automobile, this can be a great time to purchase. Dealers are preparing to make room for the upcoming years’ model in time for Christmas and will slash prices on older cars. Hurry though, the selection may run out quicker than you think! Electronics: Trick Black Friday and Cyber Monday hold some of the very best deals for electronics. If you can afford to wait a couple months, you will save a lot of dough! Camping gear & equipment: Treat! Since the summer camping season is quickly coming to an end, stores may offer some great end-of-season sales on gear and equipment. Perfect time to stock up for next year!