Financial and Lifestyle Insights – Part 1

1/10/2022

As long-time Money Talk readers know, I love to learn by attending webinars and conferences and listening to podcasts.

Then, to make sure that key points stick in my mind, I review my notes and summarize them for readers.

As you set goals for 2022, below are twelve tips from presentations that I heard during the past few months:

Deal With Debt

Do not be ashamed of how you got into debt. Make a plan to dig out from under. Two good options include adding extra money to payments using the snowball (paying extra on smallest debts first) or avalanche (paying extra on highest interest rate debt first) methods. Non-profit credit counseling agency services may also be useful.

Name Your Savings

Identify a purpose for savings/investment dollars such as “new car down payment fund” and “vacation fund” and “financial freedom account.” People who have an emotional attachment to their savings (versus just saving for savings sake) are more likely to delay gratification, set aside savings, and keep their savings intact.

Think 10 Percent

Act upon this verbatim comment from a webinar speaker: “You can generate a lot of wealth by investing ten cents of every dollar you make (i.e., 10% of gross income) over your entire working life.” Example: $5,000 of savings if you earn $50,000. Be the CFO (chief financial officer) of your financial life starting today!

Plan for Later Life

A podcast speaker noted “when you plan for retirement, it is easy to forget that you also need to plan for getting older.” Middle-aged adults and recent retirees have a hard time picturing themselves at age 80 or 90. Topics to consider include housing, solo aging, sources of long-term care (if needed), and the cost of long-term care.

Be Joyful

Spark more joy in your life. A webinar speaker noted that joy “is a feeling of grinning inside.” Speaking specifically about finding happiness in later life, she advised viewers to experiment with what makes them joyful, take risks, and do more joyful activities.

Reduce COVID-19 Risk

“Wear a mask indoors and keep a distance away from others when you do not know their vaccination status,” advised a webinar speaker.

This includes many public events where you are near strangers. Even if people are vaccinated, they can still get COVID and be asymptomatic. The virus thrives in cold and dry environments. This speaker also advised reducing COVID risk by staying away from indoor dining and “happy hour” situations.

Learn Key Economic Concepts

Review these four key concepts shared by a webinar speaker: 1. “There is no such thing as a free lunch” (TNSTAAFL), 2. Opportunity cost (the cost of foregone alternative decisions and actions), 3. Supply and demand, and 4. Behavioral finance (people do not always make rational choices).

Think Positively

Remember that “what people think about, they bring about.”

Mindset is such a critical component of success with finances and in life.

Small actions can lead to big results over time. One of the most important financial concepts that young adults can learn is the awesome power of compound interest and long-term investing.

Live a Healthy Lifestyle

Practice healthy habits (e.g., nutritious diet) that affect how long and how well you age. It is never too late to start living a healthy lifestyle. Try to stave off diabetes, which increases the risk of Alzheimer’s disease. Obesity also increases the risk of dementia. Mental exercise (e.g., games and socializing) help protect aging brains.

Practice Powerful Habits

Adopt habits with the power to improve your life. There are three components of habits: 1. Cues (triggers for habits to start), Routines (habitual behaviors themselves), and Rewards (outcomes that increase motivation). Habits are like compound interest: they don’t feel like much day-to-day but their outcomes add up over time.

Be an Organized Entrepreneur

Follow these four tips shared by a webinar presenter: 1. Do market research, 2. Track business costs, 3. Use a separate bank account, and 4. Set aside 25% to 30% of earnings for Social Security and income taxes. Income taxes need to be paid to the IRS on a “pay as you go” basis in four quarterly installments.

Plan Proactively for Later Life

Beware of future costs for four areas of spending that retirees often underestimate: 1. longevity (you could live to 100!), 2. health care (becomes more expensive with age), 3. home repairs (especially for people who “age in place” and need a new roof, etc.), and 4. income taxes (when required minimum distributions or RMDs start and when a spouse dies and the surviving spouse must file as a single taxpayer).