SUSTAINABLE GIVING FOR BETTER LIVING

ARE YOUR DONATION DOLLARS MAKING LONG-TERM POSITIVE IMPACT?

The secret to living is giving, but what are the best ways to give? Maybe you volunteer or make regular donations. But does this help create systemic change or solve the real problems creating poverty and need? What are sustainable, productive ways to help others surpass their need for outside aid and thus, in turn, start giving back to others?

To put it another way, one persistent problem with charities is that if they succeeded in their missions – as in their clients no longer need what they have to offer – they then put themselves out of business. Worldwide conversations about unconditional basic income and government subsidies raise questions about creating dependency. But to assume people need help because they are lazier or less motivated than others is a mistake.

Take these three models of giving, all aid types that help people break free from the cycle of poverty, supporting the creation of lasting change in their communities as a result.

DIRECT GIVING

Evidence has been mounting about the effectiveness of cash aid over traditional aid to the poor, such as food or seeds, for years, reports NPR. But evidence and data still must fight against preconceptions about what aid should look like.

Today most aid comes as “in-kind” donations, meaning the aid providers decide what poor people need most, whether that’s schoolbooks, certain foods, or other assets. But what happens when the people who need help decide what they want to spend money on?

A recent study in Zambia looked at how people spent cash they were given with no strings attached through two government programs. They found the cash had an incredible multiplier effect. Household spending increased by over 50% more than the government aid. In other words, if someone got $150 from a program, that same year they spent $300 more than they had before. People used their free money to make more money, boosting the overall economy as people spent their money at local shops and businesses.

With such incredible returns, scaling this program seems like the logical next step. Yet persistent beliefs about who should get aid – the elderly, people who can’t work – instead of able-bodied people living in poverty means this particular initiative is only growing slowly.

Other organizations like GiveDirectly have also found lasting impact from single-time donations to poor people with no strings attached. People often use the money to start small businesses or invest in their children’s education, leading to lasting improvements in their quality of life.

TRAINING INSTEAD OF DONATING

Other initiatives strive to create local job opportunities through training programs. Warby Parker’s “Buy a Pair, Give a Pair,” works through this model. Instead of donating frames to communities in need, the company partners with organizations like VisionSpring to train people who then sell ultra-affordable glasses.

The benefits here are twofold: people who sell the glasses can earn a living and people with untreated vision problems can get back to working and learning now that they can see. VisionSpring calculates that glasses can increase a person’s productivity by 35% and their monthly income by 20%.

FEEDING TO FUEL CHANGE

What about need in the USA? Food insecurity (a lack of consistent access to food to support an active, healthy life) impacts an estimated one in eight Americans; that’s 42 million Americans, including 13 million children. Without consistent access to food, it’s difficult for people to live productive, healthy lives. But feed someone and they have the energy to live in a high quality way.

“In this country we have a large empathy gap,” explains Diana Aviv, chief executive officer of Feeding America. “A lot of people think that because we have a low unemployment rate, at the moment, that the problem of hunger is poor people are lazy and anybody can get a job if they like. That’s just not the case. Well over 50% of the people who are part of our system are kids, seniors, peoples with disabilities or working families.” Feeding America fights to end hunger with their national network of food banks and meal programs, aiming for a hunger-free America. It’s why Tony Robbins himself supports their cause so strongly, with annual 100M Meals challenges every year where he matches all donations – with the goal of providing one billion meals by 2025.

TAKE SUSTAINABLE ACTION

Ready to add your contribution and help make lasting change? No matter how you give, do your due diligence to see how the organization manages its resources. Charity Navigator and GuideStar both give you a closer look at how organizations use your donations. The best organizations are transparent about their contributions and expenses as well as their vision for breaking the cycle of dependency, improving life for us all.

Source: https://www.tonyrobbins.com/leadership-impact/sustainable-giving-better-living/

HOW TO CUT YOUR MORTGAGE IN HALF

ONE SIMPLE STRATEGY THAT WILL SAVE YOU HUNDREDS OF THOUSANDS

Posted by: Team Tony

Although there is still some debate about whether or not you should pay off your mortgage early, the truth is that the math is almost always in your favor. By paying off your mortgage early you will end up paying as little as half your mortgage payments, which is far less than any tax write-off you would otherwise receive.Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

“It’s a pity,” mortgage expert Marc Eisenson, author of The Banker’s Secret, told The New York Times. “There are millions of people out there who faithfully make their regular mortgage payments because they don’t understand […] the benefits of pocket-change prepayments.”

WHAT ARE POCKET-CHANGE PREPAYMENTS?

When you sign on the dotted line and take on that 30-year fixed-rate mortgage at 6%, as much as 80% of your mortgage payments will go toward interest. Ouch. In fact, your interest payments will tack on an additional 100% or more to your loan value. To find out how much you’ll pay in interest on your own home, use this calculator.

In order to maximize your payments and end up paying less interest, you simply need to start making payments against your principal along with your normal monthly payment. So the next time you write your monthly mortgage check, write a second check for the “principal only” portion of next month’s payment.

Image © Yulia Grigoryeva/shutterstock

THE NOT-SO-MAGIC MATH, IN ACTION

For example, the average American home is $270,000. (This strategy, however, works whatever the cost of your home). A 30-year loan at 6% requires an initial monthly payment of $1,618.

With this technique you would make your usual monthly payment, and then you would also write a second check for an extra $270, which will cover next month’s principal balance. If the whole $270 – or whatever your number is – seems out of reach right now, pay whatever you can. It will still add up. If you continue to do this every month, you will never have to pay interest on the principal that is pre-paid.

To be clear, you are not paying extra money; you are simply paying a little bit sooner, and saving yourself potentially hundreds of thousands in the process. Imagine being free from mortgage payments in just 15 years instead of 30. Would that make those small sacrifices now worth it?

If you aspire to home ownership – or if where you live, owning a home makes more financial sense than renting – taking this one simple step can eliminate one of the single largest expenses of your life.

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/how-to-cut-your-mortgage-in-half/

MAKING FINANCIAL DREAMS A REALITY

5 SIMPLE STEPS TO TAP THE POWER OF MOMENTUM

Posted by: Team Tony

“All men dream, but not equally. Those who dream by night in the dusty recesses of their minds, wake in the day to find that it was a vanity: but the dreamers of the day are dangerous men, for they may act on their dreams with open eyes, to make them possible.” – T.E. Lawrence

Steve Jobs called them “crazy ones,” T.E. Lawrence called them “dangerous men,” but both recognized that those who dare to live their dreams are powerful outliers. Although we all have dreams, very few of us follow through to make our dreams a reality.

What is your dream? Are you living it? Or is it more of a blurry vision, like a mirage teasing you in the distance? Maybe you want to lose 50 pounds, or to connect with your teenage daughter. Maybe you want to become absolutely financially free, or to finally buy that condo in Aspen.

The truth is that most people are not where they want to be simply because they never get started. Perhaps you don’t know where to start, or perhaps you have been too scared to start. Whatever the reason, now is the time to break through the excuses, the fear, the scarcity mindset. It’s time to take the first step. Because once you start, you will gain momentum. And once you gain positive momentum, it becomes so much easier to succeed.

The momentum model is specifically designed to create tangible results by allowing you to just take one step at a time. Before you know it, just like ball rolling downhill, you will pick up speed and become a driving force.

1. PUT YOURSELF IN A PEAK STATE

First things first: if you want to change the results of anything, you first must put yourself into a peak state. This means you massively change your physiology in order to maximize energy levels. If you remain in a low-energy state, you will not change anything because it will only remain a concept in your head.

Do whatever you need to do to get into this state: jump up and down, dance, yell. Channel an enthusiastic sports fan or a teenage girl at a Taylor Swift concert.

2. FIND YOUR PASSION

Once you are in a peak state, in order to keep the momentum going, you must tap into your passion. If you don’t know what your passion is, then being in a peak state is the perfect state to be, because it as if you have primed the pump. When you find your passion, it will be like you have tapped the well and your energy will be sustained by your passion.

But, to find your passion you must ask the right questions. What do you love? What do you hate? What will you not tolerate? What makes you say, “Not another day, not another hour, this is changing now!”

Write it all down. Go on a rant. And be sure to do it with energy and passion!

3. DECIDE, COMMIT, RESOLVE

Finding your passion is going to give you tremendous energy, but to maintain the momentum, you must do the next thing. The decision really is the power that changes your life. Make this decision while you’re still in a passionate state. If you make a decision without passion, you will kill the momentum.

Decision is like war – the internal back and forth – until you say, “Alright, I’m going to make myself do this.” After you have made your decision, you must commit that no matter whether it is easy or difficult, you are doing it. And finally you must resolve. Resolve means it’s done – there is no question whatsoever.

Remember two decisions you have already made sometime in the past that changed your life for the better. Maybe it was a small but difficult decision and it led to something really important in your life. Then think of a big decision – maybe one that you came to the edge of doing multiple times and kept pulling back. But eventually you did it, and it changed your whole life for the better. What finally got you to decide? Write down two decisions, one small and one large, that if you decided today they would change your life for the better. Once you’ve decided, commit to them. Finally, be resolved, knowing it’s a done deal. Resolve brings peace because the internal wrestle is over. 

4. TAKE IMMEDIATE, INTELLIGENT, CONSISTENT AND MASSIVE ACTION

After you are resolved, the only way to keep the momentum is to take immediate and massive action. Massive action is the cure-all. If your relationship is not where you want it to be, if your finances are not where you want them to be, or your body, or your business, whatever the case, you need to take massive action. And if it doesn’t work, try something else. Continue to take massive action until you find a way forward.

Now close your eyes and decide what two actions you are going to take immediately on your first decision. Make a phone call, schedule a meeting, enroll in a class. But do it immediately because otherwise, despite your best intentions, you likely won’t follow through.

5. BE S.M.A.R.T. — AND BE HONEST WITH YOURSELF

The last step to continue the momentum you’ve got is to be S.M.A.R.T. Make sure the results you are moving toward are Specific, Measurable, Achievable, Realistic and anchored within a Time frame. Is your action working? Be honest with yourself. If it is not, go back into peak state and work through Step 4, with a new action. Wash, rinse, repeat — until you find an action that does work for you.

Do not be content to be mediocre when your heart aches for so much more. Be courageous enough to take the first step and allow the power of momentum to propel you into a future where your dreams become reality.

images ©DragonImages/shutterstock, ©ponsulak/shutterstock

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/how-money-makes-dreams-reality/

THE $13 TRILLION LIE

WHAT YOU'VE BEEN TOLD ABOUT MUTUAL FUNDS IS NOT TRUE

Posted by: Team TonyLegal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

For years we’ve been told that mutual funds are the safe place to invest our money and expect a 12% return. But the 12% return was a myth – one that Americans currently invest $13 trillion in. The ugly truth is that you have less than a 4% chance of picking a mutual fund that matches or beats the S&P 500 index. By way of comparison, consider the game of blackjack. If you’ve ever played, you know the goal is to get as close to 21 without going over, or “busting.” If you get two face cards in blackjack (each face card equaling 10), and your inner idiot shouts, ‘Hit me!’ you have about an 8% chance of winning – double your chance of picking a mutual fund that performs better than the index.

In March of this year, Warren Buffett advised LeBron James to invest in a low-cost index fund; it is advice that Buffett follows himself. In fact, Buffett intends to provide for his wife after his passing through low-cost index funds.

David Swensen, manager of Yale’s nearly $24 billion endowment also endorsed index funds, stating, “When you look at the results on an after-tax basis, over reasonable long periods of time, there’s almost no chance that you end up beating the index fund.”

While it may seem convenient to be able to bet on an active manager, trusting in their past performance and our own intuition, the research shows that the index funds will beat it 96 times out of 100.

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/the-13-trillion-lie/

CREATE A MONEY MACHINE

HARNESS THE POWER OF COMPOUNDING

Posted by: Team Tony

Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

How? Step one to financial freedom is to tap into the power of compounding.You can absolutely become financially independent in your life without ever having to make a fortune in annual income. It starts by giving up the illusion that you have to hit a home run or make a giant score, and instead decide right now you will make your money work for you so you don’t have to.

Let’s make this real with an example from Burton Malkiel, author of the classic finance book A Random Walk Down Wall Street. Imagine two brothers; William and James. William invests $4,000 annually starting at age 20 – and at age 40, he stops. His brother James invests $4,000 annually starting at age 40 – and at age 65, he stops. Now, imagine these brothers, now both 65 years old, are comparing their returns.

Which brother has more money in his account at the age of retirement?

The answer is William who started sooner and tapped the power of compounding. But here’s the kicker – how much more does he have? Get this – 600% more!

The end result is William ends up with $2.5 million, and James – who saved all the way to 65 – has less than $400,000. That’s a gap of over $2 million!

This example – and the corresponding advice to tap into the power of compounding – applies to you no matter where you are on your personal timeline. It’s a power that gives you an insurmountable edge and a money machine for life. In fact, Albert Einstein once called compounding the most important invention in all of human history!

The best part about this is you can take full advantage of the power of compounding today. Here’s how: Make the most important decision of your life right now by deciding what portion of your paycheck you will pay yourself – off the top – before you spend a single dollar on your expenses. How much of your paycheck will you leave untouched no matter what else is going on in your life?

Decide on this number today. The rest of your life will be determined by your decision to keep this percentage of your income in order to always have money for yourself and your family in your future. Do this, and you will be building a money machine that makes you money while you sleep, doesn’t stop working if you stop working and enables you to walk the path to financial freedom.

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/create-a-money-machine/

5 COSTLY INVESTING MISTAKES

Posted by: Team TonyLegal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

#1 WRONG ASSET ALLOCATION

The top financial minds in the world differ in their strategies and approach to investing, but the common denominator is how they avoid making the following mistakes. Whether you are brand new to investing or you are a seasoned investor, you could be making these investment mistakes.

Anybody can become wealthy; asset allocation is how you stay wealthy.

Asset allocation is the most important investment decision of your life. It’s something that most investors may have heard of (or even fully understand) but know little about the practical application. Asset allocation protects you from a lack of diversification, from falling in love with one type of investment and not owning a variety of different types of assets.

However, asset allocation is more than just diversification. You may be diversified across asset classes or investment types, but are you also diversified across risk?

Asset allocation means dividing up your money among different investment classes (such as stocks, bonds, commodities, or real estate) in specific proportions that you decide in advance, according to your goals, needs, risk tolerance, and stage of life. 

Yes, that’s a mouthful! Let’s walk through what that really means for you.

In order to create successful asset allocation think of it as your favorite sports team. The best teams have both an aggressive offense and a strong defense. And, most importantly, the coach knows the strengths and weaknesses of each. You want to set up a specific proportion of your portfolio as your tail end, or defensive position – we call this your Security or Peace of Mind bucket. In this bucket you will allocate lower risk assets, designed to protect you if your offensive players take a hit.

You will then set aside a specific portion of your money to be your offensive strategy – this is your Risk/Growth bucket. It is named this because although it will likely be the real wealth-growing portion of your portfolio, it is also the riskiest and most volatile.

Finally, you have a Dream bucket. This is for the really fun things you want in life. The dream vacations…the outrageous gifts… you fill in the blanks. You can fill this bucket by setting aside a proportion of your money like these other two or you can fill it when you have big wins – like a big bonus. This bucket isn’t meant to give you a financial payoff; it’s designed to give you a greater quality of life and keep you inspired to keep making your dreams a reality.

Because asset allocation is the most important investment decision you will make, it’s very likely that you’ll seek help in building that portfolio and filling those buckets. Take advantage of a free evaluation of the health of your own asset allocation and see how you compare to professionally designed portfolios. And when you do seek help, be sure not to make mistake number two.

#2 USING A BROKER INSTEAD OF A FIDUCIARY

You may have recently heard President Obama exhorting the Department of Labor to update their regulations of the financial industry and implement a fiduciary standard.

Why is the executive office concerned about the regulations of your broker? Because currently, brokers – also known as registered representatives, financial advisors, wealth advisors and more – are held to a “suitability standard” which does not require them to have their client’s best interests in mind. (Learn more about the fiduciary standard here.)

They oftentimes work for large, name-brand firms that are working only to make a profit. So, the person you turn to, although kind and trustworthy, is working in a closed-circuit environment, where the house it set up to win. A fiduciary, on the other hand, is independent and free of conflicts (or, at a minimum, they must disclose). A true fiduciary advisor never receives commissions to sell you a specific investment, or what you might call “having a dog in the fight.”

So what does it cost you to receive conflicted advice?

Using a broker instead of a fiduciary costs Americans one percent point of their return annually, according to The President’s Council of Economic Advisors. One percentage point may not sound like much, but one percentage point lower return could reduce your savings by more than a quarter over 35 years.

In other words, instead of a $10,000 retirement investment growing to more than $38,000 over those 35 years (after adjusting for inflation), it would be just over $27,500.

#3 INVESTING WITHOUT TAXES IN MIND

Insiders know that it’s not what you earn that matters, it’s what you keep. In fact, tax efficiency is one of the most direct pathways to shorten the time it takes to get from where you are now to where you want to be financially.

Did you know that the average American will pay more than half of his or her income to interest expense and taxes (income tax, property tax, sales tax, tax at the pump, etc.) over the course of their lives?

You can guarantee that this seriously impacts your ability to created compounded growth for your future life. There is no good reason to pay more in taxes than you have to, and every reason to avoid unnecessary taxes. Tax efficiency = faster financial freedom. Talk to your registered investment advisor, your CPA and utilize resources such as MONEY: MASTER THE GAME and this blog to discover 100% legal strategies for maximum tax efficiency.

#4 OVERPAYING FOR HIGH-COST MUTUAL FUNDS

For years, we have been sold the lie that mutual funds are the most effective way to grow our 401(k)s. Unfortunately, it’s just not true. The truth is that 96% of actively managed mutual funds do not beat the market over a 15-year span. Active managers are trying to beat the market by being a great stock picker. And the 4% that does beat the market is changing all the time, so betting on a jockey that won the last race does not mean that he will win again. Chasing performance is a fool’s errand.

How badly does this actually hurt us? Over a 20-year period – December 31, 1993 through December 31, 2013 – the S&P 500 returned an average annual return of 9.28%. However, the average mutual fund investor made just over 2.54%, according to Dalbar, one of the leading industry research firms. That’s nearly an 80% difference!

To add insult to injury, the “all-in” cost of mutual funds is on average 3.17% per year, according to Forbes. This is when you add the management fees, the transaction costs, the sales loads, etc. Perhaps this number doesn’t sound high to you. Consider this: The market was “flat” between 2000 and 2009, a period known as the lost decade. There were lots of ups and downs, but nobody made money. If you were paying 3% annually during this period, your $100,000 portfolio would have approximately $70,000 (or be down 30%) at the end of this “flat” period.

You put up the capital, you took all the risk — and they made the money.

#5 FAILING TO DEVELOP THE DISCIPLINE OF REBALANCING

To be a successful investor, you need to rebalance your portfolio at regular intervals. This means you have to take a look at your buckets and make sure your asset allocations are still in the right ratio. From time to time, a particular part of one of your buckets may grow significantly and disproportionally to the rest of your portfolio and throw you out of balance.

Let’s say, for example, you start out with 60% of your money in your Risk/Growth bucket and 40% in your Security bucket. Six months later, you check your account balances and find out that your risk/growth investments have taken off and they no longer represent 60% of your total assets – it’s more like 75%. That means that only 25% of your money is safely in your security bucket. It’s time to rebalance!

The challenge with rebalancing is the emotional and psychological discipline it takes to actually do it. When a portion of your portfolio is doing really well, it’s easy to be hypnotized into the illusion that your current investment successes will continue forever, or that the current market can only go up. This is what causes people to stay with an investment too long and end up losing the very gains (and often more) that they were originally so proud of. The rules of rebalancing don’t guarantee you’re going to win every time. But rebalancing means you’re going to win more often.

How often do you need to rebalance? Most investors rebalance once or twice a year. Some rebalance more frequently, choosing to watch their portfolio more closely and adjusting when it starts to shift, but too frequently can hurt you as it doesn’t give a chance to “let your runners run.” The number of times you rebalance does have an impact on your taxes, however. If your investments are not in a tax-deferred environment, and you rebalance an asset you have owned less than a year, you’ll typically pay ordinary income taxes instead of the lower long-term investment tax rate.

Images copyright @connel/shutterstock, @Phase4Studios/shutterstock, @Anatoli-Styf/shutterstock

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/5-costly-investing-mistakes/

HOW TO CUT YOUR MORTGAGE IN HALF

ONE SIMPLE STRATEGY THAT WILL SAVE YOU HUNDREDS OF THOUSANDS

Posted by: Team Tony

Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

“It’s a pity,” mortgage expert Marc Eisenson, author of The Banker’s Secret, told The New York Times. “There are millions of people out there who faithfully make their regular mortgage payments because they don’t understand […] the benefits of pocket-change prepayments.”Although there is still some debate about whether or not you should pay off your mortgage early, the truth is that the math is almost always in your favor. By paying off your mortgage early you will end up paying as little as half your mortgage payments, which is far less than any tax write-off you would otherwise receive.

WHAT ARE POCKET-CHANGE PREPAYMENTS?

When you sign on the dotted line and take on that 30-year fixed-rate mortgage at 6%, as much as 80% of your mortgage payments will go toward interest. Ouch. In fact, your interest payments will tack on an additional 100% or more to your loan value. To find out how much you’ll pay in interest on your own home, use this calculator.

In order to maximize your payments and end up paying less interest, you simply need to start making payments against your principal along with your normal monthly payment. So the next time you write your monthly mortgage check, write a second check for the “principal only” portion of next month’s payment.

Image © Yulia Grigoryeva/shutterstock

THE NOT-SO-MAGIC MATH, IN ACTION

For example, the average American home is $270,000. (This strategy, however, works whatever the cost of your home). A 30-year loan at 6% requires an initial monthly payment of $1,618.

With this technique you would make your usual monthly payment, and then you would also write a second check for an extra $270, which will cover next month’s principal balance. If the whole $270 – or whatever your number is – seems out of reach right now, pay whatever you can. It will still add up. If you continue to do this every month, you will never have to pay interest on the principal that is pre-paid.

To be clear, you are not paying extra money; you are simply paying a little bit sooner, and saving yourself potentially hundreds of thousands in the process. Imagine being free from mortgage payments in just 15 years instead of 30. Would that make those small sacrifices now worth it?

If you aspire to home ownership – or if where you live, owning a home makes more financial sense than renting – taking this one simple step can eliminate one of the single largest expenses of your life.

Header image © V. J. Matthew/shutterstock

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/how-to-cut-your-mortgage-in-half/

HOW MONEY-SAVVY IS YOUR TEEN?

WHY WE NEED TO GET SERIOUS ABOUT TEACHING KIDS TO BE FINANCIALLY LITERATE

Posted by: Team Tony

Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

Meet Megan. Megan just graduated from college and has about $35,000 in student loans and $5,000 in credit card debt. Fortunately, Megan was able to secure a job, which pays $45,000 annually — the average across the country for recent college grads — which means that every month, she will take home roughly $2,700.

Like most recent grads in her position, Megan doesn’t set a budget for herself. She’s not thinking about saving for the future or putting money into an emergency fund. After all, retirement is 43 years away and as it is right now, she can barely afford rent. And rather than making a concerted effort to pay down her credit card debt, she pays the minimum balance due. In fact, some months, she misses the payment altogether, because she’s not completely aware of how important her credit score is.

Fast forward 15 years. Megan is still making many of the same financial mistakes. But now, her credit card debt has increased substantially, the interest on that debt has skyrocketed, and she is still paying off her student loan debt. And because of missed payments and increased debt, her credit score has plummeted. On the plus side, she has started thinking about retirement, but she still only has less than $25,000 put away.

Does Megan’s story sound familiar? It may, because it’s the story of tens of millions of Americans today.

The alarming truth is that, in total, American consumers owe $918.5 billion in credit card debt and $1.19 trillion in student loans. As for retirement, most Americans are grossly unprepared, with 57% reporting to have less than $25,000 put away in savings or investments for the future. And money continues to be the leading cause of stress for Americans and the most common cause of conflict in a marriage, with a whopping 76% of people saying that they feel out of control when it comes to their finances.

How did we get here? If money is such a critical factor in the quality of our lives, why were we never taught the importance of personal finance?

What if we were able to go back to Megan and give her better guidance on her personal finances? What if she were required to learn the basics of paying bills, building good credit, budgeting her income and paying off debt in high school? Would this make a difference in her financial future and ultimately, her quality of life?

Perhaps.

A recent study conducted by the Center for Financial Literacy at Champlain College in Burlington, Vermont, graded states on their efforts to improve financial literacy in high schools. Only five states across the country scored an A. These states — Alabama, Missouri, Tennessee, Virginia and Utah — require students take a dedicated semester of personal finance courses. Utah, the only state to receive an A+, mandates students learn about savings, investments, credit and online banking. Students there are also required to take and end-of-course financial literacy assessment administered by the state. And teachers of the personal finance course receive special training on topics like financial training, credit and investing.

On the other end of the spectrum, nearly a quarter of the states — including California, Massachusetts and Pennsylvania — received a failing grade. These states have, according to the report, virtually no requirements for teaching financial literacy at the high school level.

In lieu of high school courses, a number of students have to rely on their parents for financial guidance, which can be particularly problematic. For one, parents may be uncomfortable talking about money. In a 2014 survey from T. Rowe Price, parents were more inclined to talk to their children about alcohol and drugs than finances. Many adults may also lack the necessary financial knowledge to give sound advice. According to a recent survey from GoBankingRates.com, more than 60% of adults do not have a financial cushion for emergencies.

“When you look at the adult behavior, you can’t help but wonder whether or not these adults are doing a good job teaching their children,” said John Pelletier, director of the Center for Financial Literacy and author of the report.

This means students will ultimately have to learn financial lessons through trial-and-error, which can deal a hefty blow, especially considering that the majority of young people have no baseline to attach their expectations to. Pelletier has noted that he’s walked into a number of classrooms where the bulk of students believe their chosen career will make them at least $100,000 a year.

“You can see how people, based on that flawed analysis, think that they can afford $70,000, $80,000 or $90,000 in debt,” he said. “What needs to be taught is more career exploration, more understanding about income.”

This is particularly critical for the 71% of bachelor’s degree recipients who will graduate with a student loan. According to a recent survey from the Pew Charitable Trusts, nearly a third of white student loan borrowers and roughly a half of black and Hispanic student loan borrowers under the age of 50 said they would have found a different way to finance their education if they could make their borrowing decision again.

Of course, whether or not high schools should be responsible for teaching students personal finance skills is still up for debate. If financial literacy were mandated by the state, schools would have to train or hire new staff and implement new resources, which could put additional strain on already strapped budgets. But it is clear something must be done. Students need to understand that no matter what career path they pursue — whether they become a teacher, a physician, an artist or an engineer — they will need personal finance skills. And in an age of predatory lending, speculative investments and rampant consumerism, the earlier they can begin to become financially literate, the more prepared they will be to make the best financial decisions for their future.

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