Tag: money tips

With paradigms of conventional financial literacy shifting to the digitized era, the impact of digitization on financial literacy has been profound. Whether it comes to managing funds, planning for retirement, or allocating funds for your kids’ education, you can’t separate digital and financial literacy. Even if you are financially literate, the lack of digital literacy exposes you to online vulnerabilities.

The Federal Reserve Bank of San Francisco survey in 2021 revealed that credit cards account for 28% of all payments made. Just 20% of payments were being made using cash. This statistic speaks a ton about where digital financial literacy stands in the US.

The digital era requires financially literate people to adapt to fresh technologies. While you are already aware of the concepts of retirement planning, insurance, and compound interest, digital financial literacy calls for a more inclusive approach. 

However, what if you fail to draw your line of defense against cyber fraud? A study reveals that in 2022, 75% of Americans were concerned about having their credit card or financial credentials stolen by hackers.

Evidently, the digital era calls for more than financial literacy to remain secure in money handling.

What is financial literacy, and why is it important?

Financial literacy encompasses the concept that an individual would be informed enough to manage finances by making the right decisions. These decisions include activities related to budgeting, investing, borrowing, tax planning, and taxation. To ensure long-term financial prosperity, you cannot possibly overlook financial literacy. The sad story is 66% of Americans still experience some kind of financial illiteracy.

Financial literacy is important since it enables individuals to make confident financial decisions. In a nutshell, financially literate citizens remain better poised to tackle monetary obstacles. This way, they can mitigate their financial distress. 

Whether you approach a financial decision like investment or deal with credit cards, mortgages, or student loans, financial literacy keeps you on the productive end.

Here’s why financial literacy matters, whether you operate your finances digitally or physically.

• Financial literacy enables you to understand your expenses and earnings transparently.
• It helps to avoid getting into debt and repaying the existing ones.
• Financial literacy prepares you to tackle financial obstacles.
• You get to make better financial decisions with adequate knowledge.
• Financial literacy is critical for ensuring better health conditions.
• With proper financial knowledge, you can plan your retirement securely.

Financially illiterate millennials might be digitally literate. However, this simply leads them to get into debt. A study reveals that 44% of millennials have excessive mortgage or student loan debt. However, a digitally and financially literate individual habitually refrains from getting into debt traps.

What does digital financial literacy mean?

Digital financial literacy is the ability to manage financial services and money using digital devices. Digitally literate individuals should have basic financial literacy before adapting to the virtual financial environment.

With digital literacy about finances, you gain adequate knowledge to handle monetary products with confidence. Think of e-payments, net banking, online share trading, virtual investment platforms, crypto investments, and internet-based insurance. Unless you carry adequate knowledge of finances as well as digital technologies, you remain susceptible to online thefts.

Again, Peer-to-Peer (P2P) lending and crowdfunding are increasingly gaining popularity in the digital age. Before indulging in these financial activities, you need serious digital knowledge. The digital era has significantly impacted the conscious decision-making abilities of individuals.

Whether you run a business or happen to be an employee, there’s no scope to dodge digital financial services. In the digital era, you need to adopt a defensive stance against potential fraud.

Digital financial services come under three broad categories.

Asset management: Managing assets digitally include dealing with online brokers, carrying out transactions through internet banking, counting on AI advisors, mobile trading, personal finance management, and trading crypto assets.

Making payments: In the digital era, you have access to online payment options like mobile wallets, electronic money, and remittance services.

Alternative finance: Digitally literate people can indulge in internet-based insurance services, online balance sheet lending, crowdfunding, invoice and supply chain finance, and P2P lending.

How can digital financial literacy influence your economic portfolio?

Successful citizens in the modern era prioritize digital literacy as much as financial literacy. Particularly, young adults and teens are proactive about mastering digital skills to consolidate their wealth portfolio. Falling victims to online or banking frauds simply erode wealth. No wonder digital literacy can go a long way in influencing your long-term economic portfolio.

Let’s understand what makes digital financial literacy so vital for millennials and the subsequent generations.

1. Participating in digital savings and investment options

With digital finance, individuals now have much broader access to savings options. Banks are coming up with a plethora of digital financial products. The positive aspect of these products is that you need not physically visit your branch to open or access your accounts. With virtual banking mechanisms available, investors can save time and effort.

Moreover, digital financial products are growing in complexity compared to what financial products were before. A slight mistake can affect your long-term savings adversely. With proper digital financial literacy, investors can make confident decisions. This translates to a positive impact on your finances in the long term.

2. Keep your finances safe from expensive blunders and frauds

Being aware of the best banking and financial practices in the digital era strengthens your defense against online fraud and blunders. For instance, a digitally literate person with basic knowledge of finances is less likely to fall victim to password theft or phishing. Moreover, adequate knowledge of digital finances can secure your funds, digital assets like cryptocurrency, and financial information.

3. Enjoy better money management with digital skills

Over the years, the share of digital consumer services has been increasing across the globe. For instance, people are now more obsessed with online gambling or remote shopping than a decade ago. All these financial activities call for digital money management skills.

An organized approach to managing digital assets can contribute to your long-term wealth portfolio. This also requires financially literate individuals to be responsible with money handling in the digital world.

With the right approach, even shopping online can help you save money. How about capitalizing on the best credit card deals or using promo codes during online shopping to curtail expenses? Over the year, you can save hundreds of dollars with the right money management approach over digital platforms. It simply takes time to master the best strategies and put aside funds for the future.

How do digital money management skills strengthen your finances?

Businesses and individuals can largely bank on the benefits of digital financial management. Let’s take a detailed look at how digital money management skills can put your finances on track.

1. Access to information in real time

Digital literacy in financial aspects enables individuals to access information in real time. Whether it’s checking your bank statement online or scrolling through share prices, timely information can facilitate effective decision-making. In the digital world, you must be comfortable with smart tools and software to use the available information and make financial decisions accordingly.

2. Enjoy the freedom to make financial decisions

With digital financial literacy comes the freedom to manage your funds at any hour of your choice. Presently, people invest in stocks or cryptos on the go, and business owners make transactions at odd hours after banks are closed.

One of the best perks of financial literacy, along with digital knowledge, is your liberty to check financial reports from any location. You simply need a mobile or computer device along with an internet connection to stay abreast of your finances.

Coordinating with your accountant or financial advisor has also become easier than ever before with digital financial skills. For instance, screen-sharing technology can help multiple people connect virtually over the same financial discussion.

3. Integrating business operations with finance management

With the financial sector rapidly digitizing, adequate knowledge of digital finances can help entrepreneurs integrate financial management with other operations. For instance, successful firms deploy smart payroll management tools. 

Besides, business owners should be aware of accounting, invoicing, and inventory management software. The more comfortable you grow with these tools, the faster you can scale your operations up.

Moreover, evaluating financial reports generated by apps and intelligent systems also requires adequate digital financial literacy. This way, you can capitalize on data analytics to make intelligent decisions.

Impact of the digital era on financial literacy

Digital literacy is much more about learning how to use mobile apps or websites to make online payments or indulge in share trading. Citizens in the digital era should be aware of digital financial risks or online vulnerabilities as they involve themselves in financial activities. Evidently, digital financial systems present you with a multiplicity of online threats.

Let’s take a look at these statistics to understand the threats associated with digital banking.

• In 2020, 46% of global cyberattacks targeted the US. This is more than twice as high as any other nation.
• In 2020, cases of data breaches in the financial sector were the second highest number, just after the government sector.
• The 2022 Phishing report reveals that more than 43% of banking employees operating in large companies fail to pass a phishing test.

Unless a financially literate individual is also digitally knowledgeable, chances of falling victim to cyber fraud remain pretty high.

What does digital literacy mean for your financial security?

Digital financial literacy involves a proper understanding of banking and investment threats in the era of virtual transactions. Banks and financial institutions have been hosting awareness programs to help clients strengthen their stance against online banking fraud. An informed, financially literate individual can maintain resilience against attempted online crimes.

Have a look at what you can do to stay secure from banking fraud.

Your access to digital financial services largely exposes you to phishing attacks. Other attack modules include SIM card swap, hacking, malware installation, and spyware.

Uncalculated borrowing through digital platforms can also expose you to risks like high interest and over-borrowing.

In the digital era, financially literate individuals should master strategies to avoid potential risks. For instance, refrain from sharing your credit card details or PIN over calls. Limiting your credit card transaction amount can also lower your risk profile.

Try to erase all types of digital footprints while dealing with money matters. Every transaction you carry out digitally leaves a trail. This footprint keeps growing prominent as you keep exploring social media platforms or browsing the internet. Digital financial literacy ensures that you don’t leave any trails for cybercriminals to pick up the cue.

Also, digitally literate individuals grow defensive about the financial information they share. Whether it’s your bank, a phone call, or next-door neighbor, the digital era has significantly impacted financial literacy.

It pays to be careful about where you purchase goods online or how frequently you use your credit cards.

Being conscious about what information you share through digital channels with financial institutions also defines your line of defense.

Endnote

At a time when smart technologies are taking over financial management, it pays to remain digitally as well as financially literate. Currently, financial information is more accessible than ever before. Once you adopt a defensive stance against online threats, capitalizing on the available information becomes easy!

With banking and financial apps now available at your fingertips, financial management over digitized platforms are easier than you think. The digital era has influenced financial literacy for good. But still, there’s a door for a sizable population to educate themselves financially.

In this blog, we have highlighted the potential threats of digital transactions. However, this shouldn’t discourage investors from participating in online investments or financial activities. Rather than shying away from advanced financial technologies, why not explore your opportunities and capitalize on them?

The post How Does the Digital Era Impact Financial Literacy? appeared first on Due.

Weddings are supposed to be joyous occasions where couples celebrate their love with family and friends. But in recent years, the wedding industry has become a multi-billion dollar business, with couples feeling pressured to have the biggest, most extravagant wedding possible.

From the most expensive ceremony to the most extravagant wedding dresses, the amount of money some people are willing to spend on their big day can be downright ridiculous. In this article, we’ll look at some of the most over-the-top wedding spending. Get ready to be shocked, amused, and maybe even slightly envious as we explore the 12 most ridiculous wedding expenses.

The Most Expensive Wedding Ceremony

As per the Guinness World Records, the world’s most expensive wedding is estimated to be that of Vanisha Mittal, daughter of billionaire Lakshmi Mittal. The Palace of Versailles in France hosted a luxurious six-day celebration for the wedding in 2004 that came with a hefty price tag of $55 million.

The wedding festivities were nothing short of extravagant, featuring a re-enactment of the couple’s courtship and an engagement ceremony at the Palace of Versailles. The reception was an absolute delight, with some of the world’s most renowned performers, such as Shah Rukh Khan and Kylie Minogue, entertaining the guests with their mesmerizing performances.

However, the most expensive wedding, as per Forbes, when adjusted for inflation, was that of Sheikh Mohammed bin Zayed bin Sultan Al Nahyan, the crown prince of Abu Dhabi, in 1981.

The wedding cost a staggering $100 million today and featured a 20,000-seat stadium built just for the occasion, with the Sheikh visiting every town in the emirate by horseback and feeding them all. 20 bejeweled camels delivered the gifts for the Sheikh’s wife at the wedding.

A £6 Million Wedding Dress

Queen Letizia of Spain made headlines when she wore the costliest wedding dress ever during her marriage to King Felipe on May 22, 2004. The stunning £6 million ($6m) gown was the creation of Manuel Pertegaz, a renowned Spanish couturier. It had a four-meter-long train with delicate long sleeves and a high-standing collar. The dress also had gold thread embroidery woven into the silk.

The dress had an open stand-up neckline in the form of a Corolla, and the lower half had a full skirt. It was composed of white satin that had been woven with Valencia silk. Queen Letizia accessorized with the Prussian Tiara, which her mother-in-law, Queen Sofia, had given her, to match the dress’ opulence.

A $80,000 Wedding Cake

The most expensive wedding cake ever made was priced at a whopping $80,000. The cake was designed for Prince William and Kate Middleton’s wedding. It featured 12 different flowers, including the Scottish Thistle, Irish Shamrock, and English Rose, each holding a special meaning for the couple. The most significant flower was the sugar lily, which symbolizes humility.

But the wedding cake doesn’t always have to be for a royal wedding to be expensive. Another expensive cake was created for the National Gay Wedding Show in Liverpool. The cake, costing $52.7 million, was adorned with more than 4,000 flawless diamonds and was eight tiers tall.

Although it was initially made for display purposes only, it was eventually eaten after the show. While these cakes were undoubtedly luxurious, it is clear that for some people, no amount is too much to make their wedding day truly unforgettable.

A $25,000 Bridal Bouquet

Typically, wedding bouquets cost between $700 to $2,500, and couples spend an average of $1,500 on flowers. However, some couples spend upwards of $4,000 too. Hydrangeas, peonies, gardenias, phalaenopsis orchids, and lilies of the valley are the most expensive flowers used in bouquets.

However, “Thien Hoa Bach Ngoc,” which literally means “Thousands of Flowers and Hundreds of Gems,” is regarded as the most expensive bridal bouquet. The bouquet has white orchids, roses, lilies, moonflowers, gemstones, rubies, diamonds, feathers, etc.

It is valued at a whopping $125,000, making it the priciest bouquet worldwide. This bridal bouquet also found a place in Vietnam’s Guinness World Records book.

The Most Expensive Wedding Ring

While most wedding rings are precious, some are exceptionally expensive. Here are the three most expensive wedding rings in the world.

First on the list is the engagement ring of Elizabeth Taylor, given to her by Richard Burton. The ring features a 33.19-carat IIa-certified diamond with high clarity and chemical purity. It was sold for a whopping $8.8 million to an anonymous Asian collector after her death, making it the most expensive engagement ring ever.

The second most expensive ring belongs to Beyoncé, given to her by her husband, Jay Z. The ring boasts a flawless 18-carat diamond set in platinum with an octagon cut. The diamond is officially certified as a premium and exceptional stone, and the ring is estimated to be worth around $5 million.

Lastly, Paris Hilton’s engagement ring is worth mentioning. The 24-carat diamond solitaire ring flanked by two more large diamonds was given to her by Paris Latsis. Although their engagement ended, the ring was auctioned, and the proceeds were donated to support people affected by Hurricane Katrina.

Most Expensive Wedding Invitation

The Ambani wedding, which took place in December 2018, has been the talk of the town since the invitations were sent out. The wedding invitation itself was a work of art, reportedly worth more than ₹300,000 (approximately $4,000)! It featured an ornate design full of interesting details.

The invitation, which included a chant and the Om sign surrounding a monogram made up of Isha Ambani and Anand Piramal’s initials, had a perfect personal and formal touch to it. The Gayatri Mantra began to play as soon as the invitation was opened, and it also contained a message from the couple asking for the goddess Gayatri’s blessings.

But the handwritten statement from the bride-to-be honoring their greatest role models—their grandparents—was what made the invitation truly unique. The card also had four 3-D flowers that represented the traits and principles that Isha and Anand’s grandparents exemplified.

In addition to four smaller boxes filled with gold-plated presents, the invitation came in a pink box with golden embellishments.

The Most Expensive Wedding Destination in the World

For those with unlimited funds, the sky’s the limit when it comes to wedding expenses. The most expensive wedding on record took place in Versailles, France, in 2004, with a staggering price tag of £42.4 million. But for those of us without a fortune to spend, the cost of tying the knot can vary significantly depending on the location.

A study by Magmatic Research on behalf of Holidu.co.uk revealed the cheapest and most expensive locations to host a wedding. The cost analysis included venue rental, decorations, catering, photography, cake, and travel and accommodation expenses for guests.

The Hamptons, in the US, was the most expensive location, costing £36,777 (around $45,681) for a destination wedding with 100 guests. The cliffside village of Positano in Italy came in second, costing an average of £34,460 (around $42,803).

Fogo Town, in Canada, completed the top three at £31,199 (around $38,752). For those on a budget, Lahore in Pakistan was the cheapest location at £2,823 ($3,506), followed by Goa in India at £3,085 ($3,831), and Nha Trang in Vietnam at £5,051 ($6,273).

Most Expensive Wedding Photographer

Joe Bussink, the most expensive wedding photographer in the world, didn’t choose photography as a profession, but rather it chose him. It all started when he captured an intimate moment of his wife and son with a camera about 15 years ago.

The photo held a certain power and meaning that made Bussink realize he could stop time and preserve moments for years to come. He found his passion in wedding photography, capturing the sincere emotions and love between two people.

Bussink is now known for his work and carries out about 50 orders per year, traveling worldwide. He has received numerous awards and prizes over the years and has worked with many celebrities, including Jennifer Lopez, Hilary Swank, and Steven Spielberg, to name a few. Bussink still shoots on film, using b/w Kodak T-Max, TMZ, and color Portra 400 and 800.

Bussink’s work is so impressive that a well-known producer paid $100,000 for his wedding in Venice, and Bussink received an additional fee of $70,000 for the fabulous photos he took. Bussink’s talent and unique perspective have made him the most expensive wedding photographer in the world, earning him a place in the hearts and memories of countless couples.

Most Expensive Wedding Bands

For those looking to create a truly extravagant wedding, The Rolling Stones have been named the world’s most expensive wedding band, charging a whopping £5 million ($ 6.21m) for a 90-minute set. The aging rockers, comprised of Mick Jagger, Keith Richards, Charlie Watts, and Ronnie Wood, top the list of pricey performers for nuptial celebrations.

While Sir Elton John and Kylie Minogue are also popular choices, with a charge of £2 million ($ 2.48m) for each wedding gig, Elton is known to donate all of his earnings from private concerts to his charity, the Elton John AIDS Foundation.

Christina Aguilera follows at £1.5 million ($ 1.86m) per show, while George Michael charges £1.3 million ($ 1.6m). Beatles legend Paul McCartney, X-Factor winner Leona Lewis, and American star Jennifer Lopez round out the list of high-priced performers, each commanding a fee of £1 million ($1.24m) for a post-nuptial performance.

The Most Expensive Wedding Gifts

They say it does not matter how much a gift costs; instead, the amount of thought put into it matters. However, if you have tons of money, there’s no harm in embodying your precious thoughts into an extravagant gift. At least, that’s what some of the most expensive wedding gifts in the world imply.

Take, for instance, the 95-carat pear-shaped diamond gifted to Evelyn Walsh Mclean on her wedding, which was mounted below a 34-carat hexagonal emerald and a 32-grains pearl named “The Star of the East.”

Another extravagant wedding gift was the Clive Christian Perfume Set, which cost a whopping $450,000. The perfume bottles were presented to Kate Middleton and Prince William at their wedding and had 24-carat gold collars with a 5-carat diamond inset.

However, the crown prince of Dubai, Sheikh Mohammed Bin Zayed Bin Sultan Al Nahyan, received the most expensive wedding gift ever from his father. The gift was a massive 20,000-seat stadium that cost around $22 million, which was also the wedding venue for the couple. The stadium witnessed a week-long celebration with various performances and events.

The Largest Wedding Reception

Jayalalitha Jayaram, the former chief minister of Tamil Nadu, India, and a renowned film star, organized a grand reception banquet for more than 150,000 guests on September 7, 1995, at her foster son’s wedding.

The event occurred on a 50-acre ground in Madras (presently Chennai), India, and is remembered as the costliest and most disputed wedding in the state’s history, with expenses exceeding $23,299,162. The dining area alone accounted for approximately $465,983, while the menu was estimated to cost around $621,311.

The entrance to the wedding venue was made of plywood, and the 3-mile path from the temple to the venue was adorned with rose petals and 600 Grecian columns draped with colorful lights, along with paper-mâché models of ancient Indian princes. The wedding venue was spread over an area of more than 70,000 sq ft, with the thatched roof concealed by a false ceiling, and decorated by the art director Thotta Tharani.

The extravagant display drew criticism from the public, who condemned the open misuse of official resources. Jayalalitha, however, remained unaffected by the criticism and dismissed it, stating that her private function was nobody’s concern.

How Can I Save on Wedding Costs?

One way to save on wedding costs is by creating a budget and sticking to it. Couples can prioritize the aspects of the wedding that matter most to them and allocate funds accordingly. For example, if a couple values a beautiful venue, they may choose to spend more on the location and cut costs elsewhere. Similarly, choosing a smaller guest list can help reduce costs on catering and other expenses.

Another way to save is by planning ahead and booking vendors early. This can help secure lower rates and avoid last-minute expenses. Couples can also consider DIY projects or enlisting the help of friends and family to save on costs.

In the end, a sensible wedding is about prioritizing what matters most and making informed decisions about where to spend money. By planning wisely, couples can enjoy a beautiful and meaningful wedding while also setting themselves up for a secure financial future.

FAQs

Is it necessary to spend absurdly to make your wedding day perfect?

Extravagant wedding is not an issue for someone with millions and billions of dollars. However, if you do not come from a very affluent and wealthy family, a sensible wedding with calculated expenditures would make more sense.

It is needless to mention that sound financial planning is essential for a happy and secure future. A couple who spends wisely on their wedding can save more for their future goals, such as buying a home, starting a family, or saving for retirement. Sensible spending means prioritizing the essentials and making informed decisions about where to allocate funds.

Who is the most expensive wedding planner?

Colin Cowie is one of the best wedding planners in the business. Colin Cowie has been active in the event planning industry for over 30 years, and his company has organized events for some of the most prominent names in the entertainment industry, such as Ryan Seacrest, Jennifer Aniston, Jennifer Lopez, and Kim Kardashian West.

Cowie’s team can manage everything from small intimate gatherings to large-scale productions for more than 5,000 people. Their prices range from $25,000 and can go up to $25 million, depending on the complexity of the event.

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Personal finance is a critical aspect of life that many overlook until they encounter financial difficulties. It is often associated with negative emotions such as stress, anxiety, and fear. However, understanding and managing your finances can be a game-changer that sets you on the path to financial success.

Like any other skill, it requires time, patience, and a willingness to learn. In this regard, it’s important to reflect on your financial journey and learn from past mistakes to make better financial decisions in the future. In this article, we will explore some of these essential lessons that can positively impact your financial life forever.

Understanding The Psychology of Money

Money is an essential part of our lives. It plays a significant role in shaping our behavior and influencing our decisions. It is a medium of exchange and a symbol of power, status, security, and identity. Therefore, understanding the psychology of money is crucial for your financial well-being and personal growth.

The Emotional Connection with Money

Money has a profound emotional connection with people. It can create positive or negative emotions, depending on how we perceive it. For some, it is a source of happiness, security, and pride; for others, it can cause stress, anxiety, and shame. Past experiences, cultural values, and societal norms influence our emotional connection with money.

For instance, if you grew up in a household where money was scarce, you might develop a scarcity mindset, leading to hoarding, fear, and a reluctance to spend. On the other hand, if you were exposed to abundance, you might have a more positive outlook toward money and its growth potential.

The Role of Cognitive Biases

Cognitive biases also influence your decision-making process around money. These inherent flaws in your thinking patterns can lead to irrational decisions. For instance, the sunk cost fallacy is the tendency to continue investing in a project or asset, even if it is not profitable, because of the money and time already invested. These cognitive biases can lead to poor financial decisions, such as overspending, too much debt, or risky investments.

The Power of Framing

The way you frame money also influences your decision-making. For instance, a product advertised as 40% off can be more appealing than the same product at its original price, even if the actual discount is the same.

Similarly, framing your financial goals

can impact your motivation to achieve them. Instead of framing a financial goal as a sacrifice or a burden, you can frame it as a positive and rewarding experience, such as investing in your future or living a fulfilling life.

The Impact of Social Comparison

Social comparison is another factor that affects your behavior around money. We tend to compare ourselves to others regarding wealth, income, and status. This can lead to feelings of envy, inferiority, or superiority. For example, seeing a neighbor driving a new car might make you feel inadequate or motivated to buy a better car.

The Role of Financial Education

Financial education is essential for understanding the psychology of money and making informed financial decisions. It helps develop financial literacy, the knowledge, and the skills to manage your money effectively. Financial education can teach you to budget, save, invest, and avoid financial scams. Financial education should start early, as it can have a lifelong impact on your financial well-being and overall success.

Budgeting Basics – How To Manage Finance

Budgeting is the foundation of sound financial management. Having a budget is essential to understand how much money is coming in and going out each month. Creating a budget helps you to prioritize your spending, avoid overspending, and achieve your financial goals. Here are some budgeting basics you should follow:

Debt Management

Debt can significantly burden your finances and cause stress. It is essential to manage your debt effectively to avoid falling into a debt trap. Here are some tips to help you manage your debt:

Prioritize Your Debts

List all your debts, including credit card balances, loans, and other bills. Once you have a clear picture of your debts, prioritize them based on the interest rate and the amount owed. This will help you focus on paying off the most expensive debt first, saving you money on interest charges in the long run.

For example, credit card dues and personal loans would carry higher interest rates than auto loans.

Pay More Than The Minimum

Paying more than the minimum monthly payment on your debts can help you to pay off your debts faster and save money on interest charges. Try paying as much as possible for your monthly debts, especially on high-interest.

However, as much as 50% of Americans prioritize emergency funds over early debt payment. While both these are prudent financial practices, one must not forget the effects of inflation. Your emergency funds, regardless of where you’ve invested them, are prone to inflation. On the other hand, paying debt early leads to saving in overall interest cost, more so in the current interest-rising market.

Know Your Limits

Maxing out your credit limits or being close to your limits can impact your credit score. Keeping your balance on revolving lines of credit, like credit cards, under 30% of your limit is a good idea to maintain a good credit score.

More than 31% of American millennials carry credit card debt simply because they aren’t able to meet their day-to-day expenses. This implies that more than 1/3rd of the new gen Americans aren’t able to survive on their paycheck. This only goes to highlight the importance of sticking to your monthly budgets and planning according to your income.

Invest In Yourself

Investing in yourself is a crucial step toward achieving financial success. By making smart investments in personal growth and development, you can increase your earning potential, build confidence, and broaden your perspective. Here are some ways to invest in yourself:

Create a Spending Plan

A spending plan helps you track how much you spend, save, and invest each month. Start by spending a few minutes each month to map out your goals and create an action plan to achieve them. You can use an app on your phone or an Excel spreadsheet to track your finances consistently. The key is to find what works for you and to control your spending plan so you decide where to spend your money.

Health and Wellness

Invest in your health and wellness by adopting a healthy lifestyle. This includes eating a healthy diet, exercising regularly, and getting enough sleep. By prioritizing your health, you can improve productivity and reduce healthcare costs.

Start a Side Hustle

Starting a side hustle is an excellent way to supplement your income and achieve your financial goals. It can also help you build valuable skills and gain experience in a new field. Consider turning a hobby or passion into a profitable venture or offering your services as a freelancer or consultant.

Don’t Buy What You Can’t Afford

The simple rule of credit is not to buy more than you can afford. This is a fundamental lesson that everyone should learn when it comes to personal finance. The interest charges alone can make you waste more money than an expense is originally worth.

Stick to a Budget

This means not relying on credit cards to purchase things you can’t pay off immediately or taking out loans you can’t realistically repay. The first step to avoiding buying things you can’t afford is to create a budget and stick to it. Your budget should include monthly expenses, including rent, utilities, groceries, transportation, and entertainment.

Avoid Impulse Purchases

To stick to your budget, it is essential to avoid impulse purchases. Before making any purchase, ask yourself if it fits within your budget. If it doesn’t, then it’s not worth buying. Impulse purchases can quickly add up and put you in a position where you must rely on credit cards or loans to make ends meet.

Save for Big-Ticket Items

If you need to buy a big-ticket item, such as a new computer or a vacation, it is essential to save up for it. This will help you avoid using credit or loans to finance the purchase. Set a savings goal and regularly contribute to a dedicated account until you reach your goal.

Building an Emergency Fund

An emergency fund is an essential financial tool to help you avoid debt when unexpected expenses arise. It is a sum of money to cover unexpected expenses, such as medical bills, car repairs, or job loss. Here are some tips and strategies for building an emergency fund:

35% of Americans, as of now, cannot meet an unexpected expense of $400 or more through cash. They have to rely on other lines of credit.

It’s important to clearly understand what constitutes a financial emergency. Only go towards your emergency savings in case of a genuine emergency. These include losing your job, a medical emergency, a car breakdown, or traveling to an emergency cause.

Keep Your Savings Out Of Your Checking Account

Having a separate savings account makes it less likely to spend money on something else. Consider opening a savings account at a different bank than where you have your checking account to make it harder to transfer money from your savings to your checking account. Americans, on average, have as much as $17,135 in an investment or savings account.

Setting up a direct deposit to your savings account effectively ensures that you consistently put money into your emergency fund. This method can make you feel like the money you shuttle to your savings every month appears out of thin air—even though you know full well it comes from your paycheck.

Planning for Retirement

Retirement is a major life event that requires careful planning to ensure a comfortable and financially stable future.

The first step in retirement planning is determining your retirement goals and timeline. Once you have determined that, the next step is to calculate your retirement savings needs. This includes estimating how much money you will need to live on during retirement, factoring in inflation, and any additional expenses you may have, such as healthcare costs.

Contribute to Retirement Accounts

One of the most effective ways to save for retirement is to contribute to retirement accounts, such as a 401(k), IRA, or Roth IRA. These accounts offer tax benefits and compound interest, allowing your money to grow.

Consider Diversifying Your Investments

Diversifying your investments is an important part of retirement planning, as it helps to spread your risk and maximize your returns. Consider investing in a mix of stocks, bonds, and other assets to diversify your portfolio.

Create a Retirement Budget

Creating a retirement budget is a key step in retirement planning, as it helps you estimate your expenses and ensure you have enough savings to cover them. Make sure to factor in your living expenses and any additional expenses you may have in retirement.

Plan Now!

Personal finance is a vital aspect of our lives that cannot be ignored. It involves understanding the psychology of money, creating and sticking to a budget, managing debt, investing in ourselves and our future, avoiding overspending, building an emergency fund, and planning for retirement. By adopting these personal finance lessons, we can make better financial decisions that will positively impact our lives.

FAQs

What is personal finance, and why is it important?

Personal finance strategically manages one’s financial resources, including income, expenses, investments, and debt. It is a crucial aspect of our lives as it directly affects our ability to pay for necessities, achieve our financial goals, and maintain our mental and emotional well-being. Managing personal financial risk, adapting to changes, and navigating financial crises are vital in maintaining overall financial health.

What is the Golden Rule of personal finance?

The Golden Rule of personal finance is to spend less than you earn. This means you should prioritize saving a portion of your income each month and avoid going into debt for non-essential expenses. By following this rule, you can avoid financial stress, build a solid emergency fund, and work towards achieving your financial goals, such as buying a home, starting a business, or retiring comfortably.

What are the three main areas of personal finance?

The three main areas of personal finance are budgeting, saving, and investing. Budgeting involves creating a plan for spending your money, while saving refers to setting aside money for future use, such as an emergency fund or a down payment on a home. Investing involves investing your money in assets such as stocks, bonds, and real estate to grow your wealth over time. A sound personal finance plan should address all three of these areas.

What are some common mistakes people make when spending less than they earn?

Some common mistakes people make when trying to spend less than they earn include the following:

• Failing to create a budget
• Overspending on non-essentials
• Ignoring monthly subscription fees and other recurring expenses
• Not negotiating bills, such as cable or internet
• Relying on credit

The post #1 Personal Finance Lesson That Will Change Your Life Forever appeared first on Due.

Cryptocurrency is still a relatively new technology, and many people are excited about its potential. However, crypto has experienced turbulent times in the past year after a meteoric rise. Major coins, including Bitcoin, have lost a significant chunk of their value.

Was the dramatic drop in 2022 just another bump in the road, or will crypto continue to fall as people become more skeptical of the technology? We’ll break down what you should know and how recent trends suggest the crypto space may continue to grow.

Key Takeaways

• Bitcoin’s price fell in 2022, losing roughly $30,000.
• The collapse of FTX significantly damaged the cryptocurrency industry, but the even more recent collapse of Silicon Valley Bank has arguably boosted confidence in decentralized banking.
• Investors remain uncertain whether digital assets will become a more popular form of currency, or could 2022 have been the beginning of the end for the technology?

What Is Crypto?

Cryptocurrency, or crypto, is a digital currency that doesn’t rely on central authorities like governments or banks. It serves as a decentralized system to complete transactions.

There are hundreds of different cryptos out there. One of the best-known is Bitcoin, which was released in 2009.

Different cryptos have variations in how they work, but they tend to share some features. Transactions are validated as part of a blockchain, and devices can connect to the crypto network to “mine” coins, which involves verifying transactions in exchange for coins. This makes crypto closer to something like the gold standard.

Fiat currency – used worldwide today – derives its value from the fact the government decrees it has value. The government trusts businesses to accept the currency as a form of payment, but the currency’s value isn’t tied to a specific commodity, like gold or silver. Bitcoins have to be mined, but not all cryptocurrencies have to be mined. The mining process is expensive, requires complex hardware, and uses significant energy.

Since crypto started gaining popularity, exchanges have launched to help people buy and sell different cryptos or to exchange real-world currencies for crypto.

Early adopters of the most popular coins have mostly seen their wallets grow thicker. In 2010, Bitcoin was worth less than a dime. In 2021, Bitcoin peaked at above $64,000.

However, less popular coins have seen investors lose significant amounts of money.

What Happened In 2022?

2022 saw significant upheavals in the crypto market.

Crashes early in the year

2022 was the year of the crypto winter. This bear market for cryptocurrency saw precipitous drops early in the year when stablecoins Luna and TerraUSD crashed in May. The trading platform Voyager filed for bankruptcy in July along with crypto hedge fund Three Arrows Capital. According to its bankruptcy filings from last year, Three Arrows Capital faced $3.5 billion in creditors’ claims.

Prominent celebrities like Kim Kardashian also faced scrutiny for endorsements of cryptocurrencies in 2022. Kardashian’s run-in with the SEC in October resulted in her settling with the commission for over $1 million.

The most high-profile crypto upheaval of 2022, though, was the collapse of FTX.

FTX Background

Historically, the cryptocurrency market has been volatile, seeing significant price spikes and drops. For example, the period from 2012 to 2014 saw Bitcoin start trading at $13.28, rise as high as $1,237.55, and fall to around $687.

During the COVID-19 pandemic, the crypto market experienced a meteoric rise, jumping from $6,635.84 to over $64,000. Many mainstream companies began getting involved in the crypto market, with investment firms offering crypto ETFs or direct investments in cryptocurrencies.

Crypto-focused companies, such as FTX, also began bringing in large amounts of money and becoming well-known among the public rather than solely among crypto or tech enthusiasts.

FTX, a crypto exchange, was one of the most important entities behind last year’s crypto crash.

The company was founded in May 2019 and quickly became one of the largest exchanges. It even made high-profile investments in its marketing, sponsoring the Miami Heat’s basketball arena, Major League Baseball, and the Mercedes-AMG Petronas F1 team.

FTX Collapse

On November 2nd, Coinbase, another cryptocurrency business, published an article revealing that a trading firm owned by FTX CEO Sam Bankman-Fried held a large portion of FTX’s own crypto, FTT. This could artificially boost the coin’s value.

Binance, a competing exchange and FTX investor sold its FTT holdings in response. This led to a price crash. Many FTX users rushed to withdraw their money from the exchange, which created a liquidity crisis and left investors unable to withdraw funds.

A Bloomberg report on November 9th revealed the SEC and Commodity Futures Trading Commission were investigating FTX and Bankman-Fried. FTX and 100 of its affiliates filed for bankruptcy on November 11th. Sources claimed the exchange had debts exceeding $8 billion.

That same day, FTX removed $473 million in funds in authorized transactions. Analysts currently estimate that billions of customer funds are still unaccounted for.

On December 12th, police arrested Bankman-Fried in the Bahamas for wire fraud and conspiracy charges.

Crypto Prices in 2022

Unsurprisingly, the events that destroyed one of the world’s largest exchanges had a significant impact on cryptocurrencies’ value.

Bitcoin started the year at $47,733.40. It bounced up and down through early April when it began a steady fall. It hit a low of $15,760.10 on November 21st but then rebounded. Currently, it sits at just over $30,000.

FTX and various crypto collapses weren’t the only factors behind the 2022 price drop. Economic uncertainty, the war in Ukraine, and persistent inflation mixed with interest rate hikes also contributed to pessimism about investing in crypto.

A few examples of other events that hurt crypto values this past year include:

• An early 2022 announcement that Russia might ban crypto
• A June 2022 problem with Binance pausing Bitcoin withdrawals
• A June 2022 announcement by Celsius Network freezing withdrawals and transfers

How Has Crypto Recovered?

The question for investors at the end of 2022 was whether this was the beginning of the end for cryptocurrency. Or was it simply another bump in the road? After all, crypto saw large price crashes before but continued to move to greater heights.

It’s worth remembering that even at its lowest point in the fall of 2022, Bitcoin’s value was still higher than it ever had been before 2020. Since the trough at the end of last year, Bitcoin has recovered a significant amount of its value, now sitting at over $30,000.

Many experts say easing inflation, anticipated rate cuts later in 2023, and lessened recessionary fears were factors in this bump in price. Also, the collapse of Silicon Valley Bank earlier this year could have urged investors to look into digital assets like cryptocurrency. With the banking crisis in America, many investors are skeptical of centralized banks’ ability to manage money.

Consumers have yet to use cryptocurrencies like Bitcoin widely enough to be considered a legitimate replacement for fiat currency. However, investors may turn to blockchain technology if centralized banks continue facing difficulties.

Could Crypto Be On The Way Out?

Some arguments against a full cryptocurrency recovery include skepticism from the Chinese government and crackdowns on the technology, major concerns over crypto’s environmental impact, and crypto exchanges’ history of security issues and hacks.

Given the nature of crypto, it can be difficult, if not impossible, to recover funds after a hack.

Crypto regulation has also increased recently, eliminating one of its primary draws of being a decentralized, unregulated currency.

On the other hand, blockchain technology has valuable applications for industries that rely on contracts. Crypto can make online and international trade more accessible by eliminating the need for currency conversion and intermediaries.

Due to many coins’ limits on the number of tokens that can exist, some argue that crypto can be a good store of value in the long term.

Investors should tread lightly because of the volatility of crypto and the uncertainty surrounding it. Those that do choose to invest should use basic risk-management strategies such as holding a diverse portfolio.

Additionally, investors may only want to keep a small portion of their portfolio in cryptocurrency to limit the risk of catastrophic loss should crypto plummet again.

Debates on the value of cryptocurrency

Skeptics of crypto often debate whether the asset has any underlying value. This debate involves related theories of currency. Though the world we know today uses fiat currency, traded on global markets and not tied to a specific commodity, we have historical precedent for currencies tied to a “made” thing.

Countries used the gold standard worldwide for many years, and it had distinct advantages, like managing inflation and limiting government power over printing money. But it also came with distinct disadvantages, like inflexibility and difficulty adjusting to crises like war. If you’re confused about the value of cryptocurrency – especially since it’s an asset not widely accepted as payment by most businesses – broader debates about currency may interest you.

The Bottom Line

Crypto is an exciting technology, and many people have jumped on the bandwagon over the past few years. Unfortunately, this past year, many investors were burned as crypto values plummeted.

With the collapse of the crypto exchange FTX, stablecoins like Luna and TerraUSD, and the SEC taking legal action against celebrity endorsements of cryptocurrencies, investors understandably weren’t confident about the digital asset.

In 2023, we’ve seen cryptocurrencies like Bitcoin recover some of their value, giving many hope crypto will rebound and recover most of its value in the coming years. We’ll have to wait to see whether this happens, but it’s still true that cryptocurrency is a volatile space, and investors should prepare to lose anything they invest in it.

The post How Has Crypto Recovered from the Crash? The State of Crypto in 2023 appeared first on Due.

How would you love to celebrate your financial freedom when you have finally achieved it? Well, we all dream of cherishing this privilege, but few achieve it. So, your efforts to maintain financial discipline and cultivate healthy saving habits have paid off. What’s next?

Of course, you would love to consolidate your wealth as you plan to live a lavish lifestyle. On attaining financial independence, you might be willing to realize your long-term dreams. Maybe you’d put in fewer hours to work each day or travel the world with your family. The concept that more expenses would bring in more fulfillment holds good up to a certain limit. It’s wise not to get carried away and squander your long-accumulated wealth.

In this article, we are going to help you with a direction after you achieve your financial freedom. How are you deciding to spend the money rather than invest it? Read on to understand how you can gratify your efforts of accumulating long-term wealth.

What Is Freedom of Money?

The meaning of financial freedom is not simply about being rich. Gaining financial freedom puts you in a position where you can control your money. Financially independent individuals cherish the privilege of having enough money to meet their expenses. This way, they can channel their time into activities that appeal to them rather than spending the time to earn their living. Financial freedom comes through years of planning and maintaining healthy savings habits.

The underlying meaning of attaining financial freedom indicates that you need to be debt-free, well-invested with your funds, and financially secure for the rest of your life. The US is currently placed in the 14th position in terms of financial freedom.

While financial independence prompts most people to live a lavish life, enjoy frequent vacations, explore fresh cuisines, and spend time outdoors, it’s imperative to capitalize on your funds. With high inflation and increasing cost of living, improper planning after attaining financial freedom can even deprive you of the desired living standard.

Remember that achieving financial freedom doesn’t necessarily mean being rich. What’s the point of having financial independence if your expenses are not in line? You would be losing your accumulated funds if you live an extravagant lifestyle without having fixed-income investments. Being financially independent means having adequate funds to fulfill the needs of your life and make smart investments.

This explains the importance of using your freedom wisely. We have recommended some strategic investment tools to help you intelligibly celebrate your financial freedom.

Where To Invest Your Long-Accumulated Wealth?

Looking beyond your financial independence, it’s time to strategize your investments wisely. Interestingly, most Americans attain their freedom of money in their late fifties. So, you’re pretty close to retirement by the time your funds come easy-flowing.

Now that you have achieved your financial freedom, it’s time to rebalance your asset portfolio. As you stride toward retirement, you’d look forward to protecting your assets and consolidating your wealth. Here’s how you can distribute your investments, playing well with aggression and precaution.

Real Estate Investment Trusts

Well, you have achieved your financial independence, so what prevents you from investing in real estate? If you already own your home and are not interested in directly investing in properties, go for REITs (real estate investment trusts).

Investing in REITs brings you the advantages of making real estate investments. From time to time, you would also receive dividends since it is a publicly traded instrument. With the real estate market in the US looking in good shape, investors have the potential to earn competitive returns from the market. Besides, investing in REITs helps you hedge against inflation. Compared to real estate investments, REITs bring you a greater level of liquidity.

Traditionally, REITs have earned 10-15% more than the average S&P 500 returns over the last 50 years. Annually, shareholders receive as much as 90% of the taxable income of REITs through dividends.

Compared to other equities, this is slightly higher. Historically, this dividend has provided a consistent income stream to the investors. Therefore, it’s wise to allocate a part of your wealth to REITs.

Government Bonds

While diversifying your asset portfolio after gaining financial independence, consider putting some funds into government bonds. A government bond refers to a loan that investors tend to the municipal or federal government for a specific period. Depending on the stage of your life, you can choose a tenure of up to 30 years. This would fetch you interest on the loan, resulting in a steady flow of income.

With an average annual yield of 3.5-5%, government bonds in the US are safe and are regarded as fixed-income security. While you have been investing in equities to achieve an aggressive investment portfolio, why not balance this risk factor with these safe government bonds? The returns or interest rates of government bonds are not too attractive. Nevertheless, these investments go a long way to anchor your retirement savings and mitigate risk from other investments.

If you are a conservative investor, not ready to play around with volatile markets, it’s wise to go for government bonds. Even when markets tumble and stock values dip, bonds continue to deliver steady returns. The lower volatility and fixed returns from government bonds make it a must-have investment retirement portfolios. Even if you are unwilling to go for long investment horizons and bypass severe market downturns, government bonds won’t disappoint you.

Corporate Bonds

Given that you have attained your cherished dream with financial freedom, you may be willing to take calculated risks. The potential of earning higher returns from corporate bonds compared to government bonds make them a lucrative investment avenue. They work in the same way as government bonds. The only difference is that you would be lending not to the US government but to a company.

Corporate bonds aren’t backed by the trust of the government and tend to be riskier. However, the right choice of corporate bond can fetch you much better yields. Historically, AAA-rated corporate bonds can fetch you anything between 4.5 to 5% annual returns.

So, it’s wise to balance your investment portfolio in bonds, picking mostly government bonds along with a few corporate ones. This way, you can maintain an aggressive growth profile of your retirement portfolio.

Corporate bonds will be ideal if you are on the hunt for fixed-income security capable of generating higher interest compared to government bonds.

Dividend-Yielding Stocks

Individuals with financial freedom often find a tactical investment strategy in buying dividend-yielding stocks. Historically, dividend-paying stocks have performed better than the S&P 500, and they are less volatile.

Evidently, investors can bank on these two-pronged benefits: getting regular dividends and benefiting from the appreciation of capital value. Considering the long-term returns, the growth appreciation looks impressive. It makes sense to invest in stocks of profitable and stable companies with strong fundamentals.

However, investors should note that brokerage accounts used in generating dividend income are taxable. Each year you receive a dividend, you need to shell out tax. On the other hand, investing in stocks that do not generate dividends doesn’t require you to fork out this tax. The tax is levied only when you sell off the stock.

Some dividend growers might not immediately undergo an increment in stock value. Nevertheless, they are reliable as long as you think of generating a fixed income. So, if you are looking forward to stabilizing your income source as you near your retirement, it’s good to go with these stocks.

Fixed Annuities

Now that you have included corporate bonds and dividend-yielding stocks to achieve an aggressive growth profile, it’s time to balance it with low-risk investments. How about including fixed annuities in your investment portfolio that deliver moderate returns?

Fixed annuities are insurance contracts that pay a guaranteed interest rate to the account holder based on their respective contributions. As you move closer to retirement, it’s wise to go for fixed annuities as they warrant a specific cash inflow, with annual returns being anything between 3.6 to 5.5%.

If you have achieved your freedom of money in your thirties or forties, you can even use fixed annuities for your mid-term financial planning.

The value of a fixed annuity might erode due to inflation. This explains why some annuity providers develop COLA (cost-of-living-adjustment) riders. This elevates the value of the annuity as prices rise. However, some fixed annuity products generate a fixed interest rate over a specified period, regardless of the conditions of the market.

So, you need not worry about share prices, stock values, or the economic downturns that the country goes through. With fears of recession and inflation haunting most investors, it’s wise to rebalance your portfolio with fixed annuities.

The life of an annuity involves two stages. In the first phase, or accumulation phase, you keep investing. In the second phase, or the payout phase, you keep receiving the promised returns. So, begin with a series of cash outflows into the annuity and wait for it to grow the interest. This interest is tax-deferred and helps in growing the value of your account.

Depending on the annuity plan, the payout phase can be customized. You can either go for a single lump-sum payment or distribute the amount into a series of cash inflows over time.

Treasury Inflation-Protected Securities (Tips)

Financial advisors often recommend Treasury Inflation-Protected Securities (TIPS) as one of the investment options. The US Treasury issues these inflation-protected securities, which are somewhat similar to bonds. This special mechanism ensures that your assets remain secure against inflation and keeps them up as per the inflation rate.

The maturity tenure for investments in TIPS is five, 10, and 30 years. In most investments, you would get a fixed or variable investment amount that accumulates over the principal. Although the rate of interest is fixed, the principal value may fluctuate.

If the principal amount on maturity proves to be higher than the actual amount you invested, the profit goes to you. However, if the principal is lower than the actual investment or equal to it, you will receive the actual amount back. Based on the principal, which undergoes adjustment, interest is paid every six months. Considering this flexibility, investing in TIPS would be an intelligent move.

Endnote

Juggling your finances across different investment avenues would consolidate your wealth and balance your portfolio. It’s easy to lose your way amidst real estate investments, stocks, bonds, mutual funds, CDs, TIPS, and fixed annuities. Again, it’s your financial literacy that can bail you out of this dilemma!

Acquiring financial freedom calls for a level of financial education. Now that you are looking forward to holding the fort, look beyond your financial independence to consolidate your long-term wealth.

FAQ

What Is The Goal of Financial Freedom?

The goal of financial freedom is to give you the liberty to control how much and where you spend. At the outset, you eliminate debt as you walk on the road to financial freedom. Next, you attain the privilege of spending quality time on things you love rather than earning money all your life.

What Type of Life Can You Lead After Attaining Financial Freedom?

After attaining financial freedom, you need not stress yourself with thoughts on how to earn money. Rather, you need to think about how to use your money correctly. Individuals attaining financial freedom need to make serious money-related decisions and make calculated investments to use their wealth to the maximum.

How To Grow Your Life Financially?

Financially resilient individuals habitually set their financial goals and live on a budget. Focus on clearing your debts and automating your savings. Also, start investing as early as possible and maintain a healthy credit score. Lastly, but most importantly, educate yourself financially to grow your wealth.

Should I Stop Working After Gaining Financial Freedom?

Whether you should quit your job or profession after achieving financial freedom largely depends on your priorities. Besides, this depends on the type of lifestyle you desire to lead. Do you want to travel the world or spend most of your time outdoors? Or simply allocate your assets into different investment channels and earn a fixed income every month?

If you gain your financial freedom close to your retirement, you might decide not to work anymore. However, individuals reaching this benchmark early in their careers may continue to work and further consolidate their wealth.

The post Freedom of Money – How Will You Spend Your Freedom appeared first on Due.

Payroll stats, which consist of the number of jobs added to (or removed from) the economy, are released monthly. Economists, workers, investors, and businesses watch these stats closely because they provide a glimpse into the economy’s strength.

Significant increases in payrolls mean a strong economy and falling unemployment. Shrinking payrolls mean a weak economy where people are losing their jobs. These numbers have held particular significance in recent months as economists and investors hope we can avoid a recession during this time of high interest rates.

Job growth was higher than expected in March, which could be a good sign for the economy. However, it may have complicated impacts on the market.

Key Takeaways

• Total nonfarm payroll employment grew by 236,000 in March 2023.
• Wage growth also remained strong, reaching 5.1% year-over-year.
• This news can actually be seen as troubling to investors as the Federal Reserve may be more incentivized to take action if they believe discretionary spending won’t decrease.

Background

The economy has been on a rollercoaster ride since the beginning of the COVID-19 pandemic in 2020. Payroll numbers dove from more than 152 million at its peak in February 2020 to a low of approximately 130.5 million in April of that year as the pandemic hit.

Since then, payroll growth has been relatively steady. Today nonfarm payrolls sit around 160.7 million, slightly above the pre-pandemic high.

Between the start of the pandemic and now, the economy has faced supply chain shortages and high inflation. Many workers have left their jobs as part of the Great Resignation or looked for jobs that offer higher pay.

The combination of persistently high inflation and increased interest rates has meant that some fear a recession is still on the horizon, further complicating predictions about the future of the economy and employment levels.

The Federal Reserve’s Mission

The Federal Reserve is the government body responsible for managing economic growth and maximizing employment. The operative phrase when discussing the Fed is “sustainable growth.” When supply and demand imbalances lead to higher prices spread across the economy, the Fed has to take action to keep price growth from becoming unsustainable (unaffordable to most Americans). 

The Fed walks a tightrope trying to encourage economic growth – 2% is the target inflation rate the Fed hopes to achieve – while preventing a price swing or drop so drastic that it crashes the economy. 

The Fed does this through interest rates, a form of monetary policy in which the Fed influences the rate at which banks borrow from each other’s reserves overnight to meet cash reserve requirements. When the Fed raises the fed funds rate, it causes banks to lend each other money at a higher rate, encouraging them to save more and make short-term borrowing more expensive. 

Conversely, when the Fed lowers the fed funds rate, banks can borrow from each other for less, so they lower interest rates on savings products and make short-term borrowing more accessible to consumers. 

The changes in the fed funds rate trickle through the economy, leading consumers to spend less money on discretionary purchases when rates are high, lowering variable credit cards rate when rates decrease, etc. 

Does the Fed Want High Unemployment?

The Fed is tasked with both managing inflation and maximizing employment. Therefore, it’s not accurate to say the Fed “wants” people to be unemployed. However, if you’ve heard this sentiment on the news or from a family member, the kernel of truth is that when inflation is high, an increase in unemployment can be interpreted by the Fed as a step in the right direction. 

Because the Fed wants to slow the economy down when inflation is high, increased unemployment is often a sign that businesses are registering higher borrowing costs and trying to save money. Letting employees go is a common way of doing this. 

With that in mind, it’s not entirely true to say the Fed wants unemployment to increase, but it’s also not entirely false. The fact employment rose in March may concern investors because it signals to the Fed that businesses are still expanding, hiring more people, who in turn will have more money to put into the economy. 

What Happened

The Bureau of Labor Statistics (BLS) annually announces payroll numbers. In its most recent report, the BLS announced that nonfarm payrolls, one of the most critical measures people track, increased by 236,000 in March 2023.

It also noted that the unemployment rate remained almost unchanged at 3.5%. This is close to the lowest unemployment rate the country has seen in the past 20 years.

These numbers were close to what many economists and analysts expected. The 236,000 jobs added to the economy beat some expectations but also signaled a slowing in the hiring rate generally. The BLS also announced an increase in hourly earnings of 4.2% year-over-year. 

The report also revised February’s payroll numbers up by 15,000 to +326,000.

Much of the growth in March came in leisure and hospitality, one of the areas hit hardest by COVID and which faced difficulties finding employees to return to work. Healthcare also saw strong gains. It’s important to note that with both of these areas, however, the monthly increase was still lower than the average increase per month of the previous six months. 

Retail saw payrolls shrink.

What Do Rising Payrolls Mean for Employees and Businesses?

In general, rising payrolls is a good thing for employees. The more jobs the economy adds, the more demand there is for workers. This means that people who are out of work have more opportunities to apply for and get a job.

For people who are already employed, it means more options if they want to move to a new role.

More jobs in the overall economy mean more competition to hire workers. That forces employers to offer more to people they want to hire. This puts upward pressure on wages and can lead to companies offering additional benefits, such as more paid time off.

Recent payroll reports have seen solid job numbers and moderate wage growth (though still below inflation), clearly showing this relationship.

On the other side of the equation, rising payroll numbers can make things more difficult for businesses. With more competition for workers, employers must pay higher wages to remain fully staffed. This increases costs and can lead to lower profits or price hikes for its products.

However, if the economy weakens, many employers will find themselves losing customers as people reduce their spending. Employers want to see steady growth, not growth that makes competition for labor too stiff.

What Do Rising Payrolls Mean for Investors?

One would expect that rising employment indicates a strong economy, which should be a good thing for investors. However, that is often not the case. 

The reason the market often opens lower after a strong employment report is released is the employer side of the equation and expectations for the economy going forward.

Investors purchase shares in businesses. Rising payrolls and wages mean companies must spend more money on paying their employees, reducing profitability. This can push stock prices lower.

Continued action from the Federal Reserve, which may think the economy is overheating, is also a concern. Inflation is still high – predicted to be around 5% again in April – and the Fed has not yet decreased interest rates.

Jerome Powell, the chairman of the Federal Reserve, was pessimistic late last year about the chances of engineering a “soft landing,” a situation in which the economy avoids a recession despite high interest rates pushing down demand. Analysts have become more optimistic in 2023 but still anticipate a recession will be called later this year. 

The Federal Reserve sees fighting inflation as necessary, with Powell saying last year: “we have got to get inflation behind us. I wish there were a painless way to do that. There isn’t.”

The economy adding more jobs than expected indicates to the Fed their actions thus far have not slowed things down enough to cause the necessary drop in inflation, which sat at 5.0% year-over-year in March. This is far higher than the Fed’s typical target of 2%.

If the Fed continues to boost interest rates, it will make fixed-income securities more appealing and stock less attractive. It also increases the odds of a recession rather than a soft landing, which could cause significant declines in the stock market.

The Bottom Line

Payroll numbers are an essential metric that economists and stock market experts track. In most scenarios, growth is a good thing for the economy. The Federal Reserve aims for an inflation rate of 2%, indicating demand for goods and services is naturally increasing their price over time. It’s when inflation exceeds that rate that things start to appear unsustainable. 

We’re living in an inflationary time, with the Fed attempting to curb inflation with high interest rates. Seeing unemployment rise and employment numbers decrease would signal to the Fed that their monetary policy is having its desired effect, pulling more money out of the economy. 

Instead, the most recent employment report has signaled to investors that the Federal Reserve will likely take more action to cool inflation in light of higher-than-desired employment numbers. Still, the employment rate is slowing down, which is a good sign. 

The post Payrolls Rise in March – What This Means for Employees, Businesses, and Investors appeared first on Due.

What mother doesn’t want to be spoiled and shown how much she means to us? This is probably why approximately 84 percent of American adults celebrate Mother’s Day. However, showing mom this affection comes with a cost.

According to the annual consumer survey released today by The National Retail Federation and Prosper Insights & Analytics, Mother’s Day spending reached $31.7 billion in 2002, up $3.6 billion from 2021’s record spending. If you’re curious, that’s a record high.

When you’re living on a budget, however, one-off spending events like Mother’s Day can throw your finances off. What’s more, to keep your credit card debt to a minimum, you must be savvy.

With that in mind, here are some ideas for a Mother’s Day celebration without spending a dime – or even next to nothing.

Take her to the movies — at home.

When it comes to gifts for mom, sometimes the most effective ones are the ones that require effort. In this case, converting her home into a movie theater.

To start, rearrange the furniture so that she feels comfortable. Ideally, make sure she also has something to prop her feet up on. Keep some of her favorite snacks and drinks available. And, most importantly, have her favorite film(s).

It is critical to let her know that you will clean up afterward so she will relax.

If the weather permits, you could even host an outdoor movie night thanks to a projector.

Create a custom video or sideshow.

Why not wish mom a happy Mother’s Day with songs, throwback memories, or a personalized video greeting? Best of all, you can do this easily and cheaply with tools like Canva, Vimeo, FlexClip, and Animoto.

Perform the chores she dislikes.

According to one study, an average American mother working with kids between the ages of 5 and 12 “clocks in” at 6:23 a.m. and “clocks out” at 8:31 p.m. That’s 14 hours of work a day on average. According to the survey, four out of ten moms report that the week is filled with never-ending tasks.

As such, offer to assist her with a chore she usually handles — especially chores she hates. For instance, cleaning the kitchen, folding laundry, or organizing the fridge. This free time can then be used for reading or taking a leisurely walk with friends.

Assist her with big projects.

As your mom grows older, or because of work deadlines and childcare, she may not have the time to do larger house tasks. You can help her with those tasks for free and it will be a huge relief for her.

For example:

• Remove junk from her attic or basement.
• Refresh rooms with a fresh coat of paint.
• Update the kitchen or bathroom, like installing new cabinets or sinks.
• Weed the garden or plant shrubs.
• Organize the hall closet.
• Stain the deck.

As long as it’s within your skill set, go for it. After all, more than anything, she wants those big tasks off her plate.

Give her a wildflower bouquet.

It’s true that roses are stunning, but wildflowers make for some of the prettiest arrangements. Choose beautiful wildflowers from a field near you and make a bouquet of them. In addition to giving your mom a cheap, but amazing gift, you’ll show her you care.

When picking on someone’s property, just ask first. There’s no point in trespassing for a bouquet of flowers!

Go on a family outing.

This is a relaxing and fun idea. Why? Because Mother’s Day always falls on Sunday. Consider having a picnic in the park or by the pond nearby for the entire day.

Consider visiting a botanical garden or going on a hike in the area if it allows picnicking. Spend a few dollars on some cheap party food and listen to the birds sing as the sun shines.

Here are some other ideas for a family outing:

• Go antiquing. If your mom has a passion for collecting things, take her to a variety of antique shops. Help her find items that hold a lot of meaning for her. Often, the simplest petty things are the most valuable.
• Take a trip to a farmer’s market. You might want to check out a farmers market on the other side of town. Discover new cooking inspiration with fresh produce, spices, and flowers.
• Visit a museum. There’s one thing all the nation’s best museums have in common – they’re free to enter. There are many examples of this, such as all of the Smithsonian Institution’s museums and galleries, the Mencil Collection, the Getty Center, the Frye Art Museum, and the Saint Louis Science Center.
• Volunteer for her favorite cause. You can also bond with mom by lending a helping hand. Donate your time to a cause that fills your heart with warmth and helps others. The only cost you’ll incur is time together.

Create an appreciation jar.

In some cases, a thoughtful gift is more valuable than a pricey one. Don’t spend a fortune on material items she doesn’t need; instead, create an appreciation jar. Decorate a jar with notes telling her what you appreciate about her and what she’s done for you. You can also have your kids write notes to Grandma.

As a family, you can read some of the notes on Mother’s Day. When she misses you or needs a reminder of your love and appreciation, she can dig through the jar whenever she needs it.

Take a trip down Mom’s memory lane.

Ask mom about her life for an hour or two. Listen to what she has to say. It’s possible you’ll discover that your mom had some adventures you didn’t know about. I learned several years ago, for instance, that my mom spent a week in Europe alone after high school graduation. I don’t know that woman!

If she needs some prompting, ask questions like:

• Can you recall your earliest memory?
• Is there an embarrassing moment in your life?
• Growing up, what did you enjoy most?
• What would you change about your life if you could?
• When you became a parent, did you promise never to do anything your parents did?
• How did your mom make you feel?

Similarly, you could ask her to share her favorite family recipes, and then compile them into a book. Give copies to all your family members as low-cost gifts.

Write her a letter or poem.

It’s rare to find handwritten notes these days, so why not drop your mom a note? What if you went one step further and spent a month or a year creating a journal just for her

Whether you give it to her on Mother’s Day or any other time, she will be able to reminisce about how much she is loved over and over again.

10 Create a coupon book for her.

The thought of “What can I do for Mother’s Day” begins to dominate your thoughts as the date draws closer. However, you can make this time memorable by making her a handmade coupon book.

Obviously, she’ll enjoy grocery coupons. However, don’t just give mom coupons on daily chores. If you want to make her feel special, give her coupons for movies, museums, her favorite restaurant, spa treatments, and boutiques. Besides your time, you won’t spend a dime.

Try scrapbooking.

Give mom a keepsake gift she will cherish. You and your mom will have a lot of fun creating your scrapbook. You will be appreciated for taking the time and effort to create something for her.

Cook together.

Spending time together while cooking is fun for the whole family. By cooking together, you can form closer bonds and create lifelong memories. In addition to listening, sharing, and talking with your mom, you can also use the time to catch up.

Choose a recipe from your family that has been passed down — ideally using ingredients you already have. And, now that you have this recipe, you can prepare it for mom next year.

Split the bill among the siblings.

Consider splitting the cost between your siblings if you need to spend money to make your mother feel special. You may want to ask your siblings if they would be willing to chip in as a family to get mom one grand gift or a bigger outing.

Call her.

I know. This is cliché. As far as I know, this advice has existed since the invention of the telephone. Even if you live far away and haven’t talked in a while, pick up the phone and call your mother — or even better, have a video call. You won’t have to spend anything, and she will be grateful.

Better yet? Make sure you call her regularly by setting up a recurring reminder on your calendar. This is the perfect Mother’s Day gift that keeps on giving. Besides putting a smile on her face, a study from Wisconsin’s Child Emotion Lab, found that hearing your mother’s voice over the phone reduces stress just like a hug.

FAQs

Who started Mother’s Day?

Today reports that Anna Jarvis was the one who created the current version of Mother’s Day in the early 1900s. Her efforts led to Congress recognizing Mother’s Day, founding the Mother’s Day International Association, and even trademarking the phrase “Mother’s Day” and “second Sunday in May.” In the Civil War, Jarvis’ mother had called for “Mothers Work Days” to improve conditions for soldiers on both sides.

What is a traditional Mother’s Day gift?

It’s not unusual for florists to sell huge bouquets of exotic flowers and designer names, but traditional gifts are single carnations.

In addition, a research study explains why moms love getting flowers. Nancy Etcoff, Ph.D., of Massachusetts General Hospital and Harvard Medical School, conducted a study that concluded that flowers affect human behavior, making people feel more compassionate and happier.

For Mother’s Day, what are some ideas?

We recommend spending time outdoors during this time of year since it is usually sunny and warm. A picnic, kayaking, hiking, or a stroll in the park are all fun ways to spend this day.

A good, homecooked meal is a must if you choose to stay at home. You can also organize a movie night, play board games, look at family photos, or karaoke session at home. You could also give her a gift card to a spa or restaurant.

Can I get free food on Mother’s Day?

During Mother’s Day, moms deserve some freebies and discounts. This is why on Mother’s Day, many places offer free food to moms.

It is not always the case that restaurants offer free meals as a whole, but sometimes only a specific course is offered for free. TCBY, for example, offers free frozen yogurt, wine, and burgers. The Shoney’s chain provides free strawberry pie slices to mothers, and Primanti Bros gives away free sandwiches.

For Mother’s Day, what are the best homemade gifts?

Depending on your skills and abilities, there are many options to choose from. The perfect gift for a mom who doesn’t want anything is original artwork and flowers. Embroider fabric flowers or pillows with unique messages.

You can also make molds of your hands or feet. Create your own treasure hunt with your own “Why I love you?” messages. Or, give your mom a day off from chores, and let her enjoy sleeping in, reading, or whatever else she wants to do.

The post What to Do for Mother’s Day with No Money appeared first on Due.

It is pretty common for parents to shy away from discussing money matters with their children due to cultural or societal norms that have been ingrained in them over time. However, this approach can do more harm than good in the long run. Entrepreneurial children who are shielded from discussions about money often grow up with a lack of understanding and knowledge about financial decision-making. This often leads to poor financial choices, which can cause financial insecurity, stress, and long-term financial struggles. Therefore, it is essential to break away from the taboo surrounding money talks and educate our children about financial literacy to ensure they are equipped with the skills they need to make informed and responsible money decisions in the future.

As a father to five children ranging in age from seven to eighteen and working as a fiduciary wealth manager for over two decades, I’ve seen firsthand the profound impact that a family’s attitudes and communication around money can have on their future. The way you approach discussions about money, the emotions you associate with it, and the language you use can leave a lasting impression for generations to come. 

A lack of financial literacy can leave young people ill-equipped to navigate their financial futures and can even cause strain on their relationships as they mature. This is why I’m going to help you break the money taboos preventing open and honest conversations in your family and give you real-life tips that I’ve used with my kids to teach them entrepreneurship at very young ages. 

To ensure your kids feel confident in their understanding of money and confident in their business ideas, it’s essential to start teaching them these skills as soon as they are able to comprehend the concepts.

Ways that I’ve been teaching my five entrepreneurial children: 

Start with giving them a checking account to manage their money

I started opening checking accounts for my children as early as eight years old; I found it was one of the easiest ways to teach them about managing their money from things like birthdays and Christmas gifts. They can learn everything from filling out deposit and withdrawal forms, checking their account balance, and using a debit card responsibly. 

In an age of ‘plastic money,’ it’s critical to allow your children to manage their own money, so they can learn about the value of money and how to make responsible spending decisions. Kids learn better by doing, so this hands-on experience will help them understand the power of compound interest and the benefits of saving money over time. It also helps to instill a sense of financial independence and responsibility, which will serve them well as they grow older and face more complex financial decisions.

Pay your kids to do extra work instead of an allowance 

In our household, we pay our kids to do extra things around the house on top of their daily or weekly chores. We feel that passing out money to our kids to make it through another week of life teaches them nothing. So, instead, we like to pay our kids for doing extra work around the house, so they can feel like they are genuinely earning money. It teaches them the value of hard work and the connection between work and money, helping them to develop a sense of pride and accomplishment in their work. 

Paying your kids for extra work can also help them to develop negotiation skills. By negotiating with them over the amount they will be paid for a particular task, you are teaching them the art of compromise and the importance of communication. This can help them to build stronger relationships with others and to navigate difficult situations more effectively in the future.

Incentivize your kids to self-educate with personal finance books

I believe in offering our kids a transparent way to earn more money, and one of those ways is for them to read books on personal finance, goal setting, and other personal development type books. So, when my kids have plans with their friends to go shopping or to see a movie, they know what they can do to make extra money quickly. 

After reading a book, have them put together a one-page report summarizing or a video of them explaining what they learned from their reading and what they liked most from the book. This ultimately helps them with learning proper time management, as well as sharpening their reading and writing skills. 

Encourage side hustles 

In order to instill a sense of entrepreneurship in your kids, you want to encourage them to start thinking in that capacity at an early age. Explain to them that if they want to make more money outside of what they can make at home, there are ways they can do that. Encourage them to offer neighbors a trash pick-up service, where they charge each homeowner a few dollars to bring their trash bins back once they’ve been emptied. Or, to learn a new skill, in this digital age, there are plenty of side gigs that many local businesses are looking for help with, for example, putting together social media content plans. 

Give them an opportunity to problem-solve

Help kids develop problem-solving skills by encouraging them to think critically about the challenges they encounter and brainstorm potential solutions. As they develop these skills, they will be better equipped to tackle complex problems and identify innovative solutions, which are essential qualities for successful entrepreneurs. Another way to encourage this problem-solving mindset is to bring them in on your own thought process and show them how you go about creating a solution to problems that come up in your business, your household, or your personal life. 

Cultivate a space for creativity

Provide your kids with opportunities to explore their interests and pursue their passions. This could involve enrolling them in classes or extracurricular activities related to their interests, such as music lessons, art classes, or robotics clubs. It could also include providing them with materials and resources to pursue their hobbies at home, such as art supplies, building blocks, or coding kits.

As they engage in these activities, it’s essential to encourage their creativity by avoiding overly restrictive rules or expectations. Instead, provide them with open-ended prompts or challenges that allow them to come up with their own ideas and solutions. For example, instead of giving them a specific project to complete, ask them to come up with their own project idea and then provide them with the materials and support to bring it to life.

Create a threshold for failure 

Help your kids understand that failure is a natural part of the entrepreneurial process and that taking risks is necessary for success. Encourage them to try new things and take calculated risks in their pursuits. Children are often taught to avoid mistakes and play it safe. However, taking risks is an essential component of entrepreneurship, as it involves taking calculated risks to achieve a desired outcome. Here are some ways to encourage risk-taking in kids:

1. Emphasize the value of trying new things: Encourage your kids to explore new hobbies and interests, even if they are uncertain about whether they will enjoy them. This can help them develop a mindset of experimentation and openness to new experiences.
2. Celebrate failures: Help your kids understand that failure is a natural part of the learning process and that making mistakes is okay. Emphasize the lessons that can be learned from failure and encourage them to persevere in the face of setbacks.
3. Provide a safe environment for risk-taking: Ensure that your kids feel supported and safe as they take risks. This can involve providing a safe physical space for them to explore their interests and emotional support and encouragement as they tackle new challenges.
4. Model risk-taking behavior: As a parent or caregiver, you can model risk-taking behavior by taking on new challenges and sharing your own experiences with your kids. This can help them see that risk-taking is a natural part of life and that it can lead to growth and success.

Teach them the power of a growth mindset 

Fostering a growth mindset in kids involves teaching them to embrace challenges and setbacks as opportunities for growth and learning rather than viewing them as indicators of failure or inadequacy. Here are some ways to encourage a growth mindset in kids:

1. Encourage effort over ability: Emphasize the importance of hard work and effort in achieving success rather than innate talent or intelligence. This can help kids understand that they can improve their skills and abilities through practice and perseverance.
2. Praise their progress, not just their achievements: Rather than focusing solely on the end result, celebrate the progress that your kids make along the way. This helps them develop a sense of accomplishment and motivation to continue working towards their goals.
3. Help your kids set realistic goals: Encourage your kids to set goals that are challenging but achievable, and break them down into smaller steps that they can work towards over time. This can help them build confidence and momentum as they make progress toward their goals.
4. Model this growth mindset: As a parent or caregiver, you can model a growth mindset by embracing challenges and setbacks in your own life and demonstrating resilience and perseverance. This can help your kids understand that setbacks are a natural part of the learning process and that they can learn and grow from them.

Provide them with mentorship and networking opportunities

Providing mentorship and networking opportunities can be invaluable for instilling an entrepreneurial mindset in your kind. Connecting them with other successful entrepreneurs in your network who are willing to offer guidelines and advice can help them not only learn from others’ experiences but also motivate them to develop their own entrepreneurial skills. A great way to do this is by bringing them with you to networking events or allowing them to listen in on some of your business meetings, so they can start to hear how you and your colleagues discuss your business plans. 

Encourage your kids to build their own networks to help them develop the skills, knowledge, and connections they need to succeed in the world of entrepreneurship. There is an abundance of events and conferences that they can attend and online forums or groups they can participate in. 

Teach them the 50/30/20 method

We encourage our kids to follow the 50/30/20 rule for managing their money. This means that we’ve instilled in them to always save or invest at least 30% and donate 20% of their earnings. The rest can be kept for their own spending, whether that be fire movie tickets, shopping, or for our older children, their car insurance payments, etc. Teaching a philosophy of disciplined saving, investing, and giving cultivates a mindset of abundance and nurtures beneficial financial habits early on in life. 

Share your own financial goals and plans 

One of the best ways to teach your children a real-life understanding of money is by involving them in financial conversations. You can do this by sharing your own financial objectives and strategies with them. Tell your children if a goal of yours is to purchase a new home, and share with them what steps you plan to take to achieve that. Explain to them how much money you need in order to achieve that goal, how much money you’ll need to put aside each week or month to reach that number, and how long it will take until you are ready to complete your goal of purchasing a new home for your family. 

Show them how to plan for big purchases 

When you involve your children in the discussions around the planning of big purchases you plan on making as a family, like buying a new car, a vacation, or a new home, it can help to give your kids a sense of responsibility and help them to feel like they are invested in your families financial well-being. Help them understand the added expenses they’ll need to think about outside of the big purchase; for example, if you are planning on buying a car, share with them how much more expenses your insurance premium will be, how much the car registration and maintenance fees will be, and how they can plan for those expenses. Or, if you are planning on a vacation, help them understand the real-world costs that will need to be allocated for things like excursions, food, transportation, and other accommodations that they may not think to include in the planning process. This all really helps them to gain a realistic understanding of how much things actually cost. 

Be transparent about the cost of everything 

Be honest with your children about the cost of things; tell them how much it costs to run a household and how much it costs to provide the family with groceries. Help your kids comprehend the true value of money, so they can understand how hard you work and how you had to budget to ensure they were taken care of with school supplies and sports activities. 

I find that many families aren’t very transparent in these areas, leaving their children to grow up and not realizing how much money it actually takes to do those things. 

It’s essential to understand that teaching your children about money isn’t just a one-time event. Rather, it’s an ongoing process that you, as the parent, must consistently model and teach your kids throughout their childhood and into adulthood. Starting off when you’re kids are very young with some simple and more basic conversations, and as they develop a deeper understanding, you can start introducing more complex and mature discussions for them to participate in. 

By breaking generational taboos surrounding money talks with your family, you will help your kids become prepared financially for their future. It will help them to feel confident in their thought processes and for when they are talking about money amongst their peers. As a result of gaining these necessary skills and knowledge, they will develop the ability to make wise financial decisions, which will eventually lead to enhanced financial security, stability, and prosperity.

If you leave with only one takeaway, let it be to stop keeping money a secret from your children. Stop expecting them to suddenly figure it out on their own once they leave your house after high school or college, even if that is the way you were forced to figure it out. The goal is to help put your kids in a position to do even greater things than you were able to at their ages. Have open and honest conversations with your children and instill financial responsibility and accountability from an early age. Involve them in financial decision-making, lead by example, and make financial education an ongoing process. Empower them to be self-sufficient and confident with money as they transition from childhood to adolescence. By taking these steps, you will be setting them up for a lifetime of success.

The post Are You Raising Money-Smart, Entrepreneurial Children? These Best Practices Can Help appeared first on Due.

ESG investing has grown in popularity in recent years as investors have become increasingly aware of sustainability’s importance in the long-term success of companies. Because of this, some mutual fund and exchange-traded fund companies have introduced ESG funds to investors. Here is everything you need to know about ESG funds and how to decide if you should invest in them.

Key Takeaways

• ESG investing is investing in companies that promote positive environmental, social, and governance fundamentals.
• ESG investing is not without controversy, as some see it as a money grab.
• ESG investing is very similar to socially responsible investing (SRI), and people often interchange the two terms.

What are ESG Funds?

ESG is short for Environmental, Social, and Governance. The acronym identifies companies engaging in business practices that align with the fundamentals of an ESG stock pick. 

ESG funds are portfolios of securities and bonds from companies that have included environmental, social, and governmental factors in their investment process. A company with a strong history and outlook in these areas qualifies for inclusion in such an investment portfolio. In contrast, a fund may not consider a company with a poor track record in these areas for inclusion in its portfolio. 

Some fund managers intentionally focus on companies they believe have room for improvement when addressing ESG risks and opportunities. Increased exposure may encourage a company to align its operations further with ESG standards. 

The rationale behind ESG funds is straightforward. Improving sustainability and the quality of life for the population are noble causes. Studies have shown that entities incorporating ESG into their investment decisions perform better than those who don’t. 

For example, a company that decides to stay ahead of government regulations by installing clean air equipment or finding ways to reduce energy consumption may receive good press. Hearing about the company’s responsible risk management, investors may extrapolate that the company is generally efficient and stands by sound principles. 

ESG funds are also a way for investors to get involved with ecological and sociological issues that improve life on the planet, all while getting a return on their investment. 

Why the Push for ESG?

ESG as a concept is controversial in many ways. On one side, investors who want to help shape a better future for the planet look for companies demonstrating these principles. On the other hand, many industry names are ideologically opposed to the concept. 

ESG has snowballed as a concept, and investors have embraced it as a way to make sustainability profitable by encouraging companies to engage in green practices. However, investors need to understand it’s still relatively new compared to other investment vehicles. 

Arguments for ESG 

Many investors, from individuals to major-name brokerages, have enthusiastically turned to ESG investing. A small-time investor can rest easy knowing their hard-earned money is going toward a company with responsible operations.

Meanwhile, brokerages can offer a new portfolio product that combines savvy investing principles with stocks from companies committing themselves to improve the world. Investing in these companies encourages them to stay the course and use their financial strengths to achieve as much good as possible. 

Criticisms of ESG 

The arguments against ESG usually focus on the lack of definition around the concept and concerns about “greenwashing.”

Some critics argue there need to be more standards for using ESG as a label and that many operations use the acronym to attract investors who won’t look deeper to determine if the companies are as socially responsible as an ESG rating makes them seem. 

Some conservative critics have argued ESG funds don’t focus on getting investors the best return possible but are instead efforts from funds to seem more “woke.” Because of this, ESG has inadvertently become part of a recent culture war. 

Both former vice-president Mike Pence and Florida governor Ron DeSantis publicly opposed ESG investing. Some proponents of ESG investing have criticized the backlash from Republicans as a form of climate denialism. 

ESG has a lot of promise as a way of combining investing with activism. It satisfies many global concerns about our world and encourages companies to create a brighter future for tomorrow’s children. 

Questions remain, however, about the label’s standards and whether ratings accurately reflect a company’s ethics. Sustainability can mean different things to different people. So while a business might think it’s ahead of the pack in its commitment to specific environmental issues, experts might disagree.

ESG vs. Socially Responsible Investing vs. Corporate Social Responsibility

Many investors use ESG, socially responsible investing (SRI), and corporate social responsibility (CSR) interchangeably. However, there are some slight differences between them. 

ESG investing considers environmental, social, and governance factors when deciding where to put money. SRI is broader and can include anything an investor finds important. This could be environmentalism, faith-based principles, or supporting companies with good customer service. CSR is what a company does to give back. It includes things like sustainability programs, community involvement, and charitable giving.

Most of the time, you’ll see ESG and SRI used together. This is because they involve a lot of the same principles. Some would argue that SRI is a type of ESG investing. The critical difference is that SRI can be more flexible in what it considers. ESG has specific environmental, social, and governance factors that it focuses on.

How does a Company Get an ESG Rating? 

No single entity reviews companies and assigns the most ethical an ESG rating. Instead, various investment firms, consulting groups, NGOs, and even government bodies can use their own scoring systems for rating companies. 

For example, the Institutional Shareholder Service (ISS) is an advisory service that provides various scores and ratings for companies, including a carbon risk rating. A group can evaluate a company by communicating directly with its employees about its sustainability efforts or by reviewing publicly available information. 

Any of the following factors could be involved in a group’s evaluation of a company: 

• Air and water pollution 
• Deforestation 
• Waste management 
• Labor standards 
• Gender diversity 
• Board composition 
• Allegations of bribery 

In the future, if groups apply a more universal rubric to ESG ratings, the investing practice may become more popular among skeptics. Because there is no unified SEC rating of “score” for ESG, the label can risk seeming inconsistent or arbitrary. Why should we believe a company upholds ESG values if it receives the label from one group but not another? 

Examples of ESG Funds

Currently, over 580 sustainable ESG funds and ETFs are available for investing. Here are five of the most popular funds. This does not represent an investment recommendation on our part. We want to give you the names of certain funds so you can research them further and better understand ESG funds.  

Vanguard FTSE Social Index Fund Admiral (VFTAX)

Vanguard’s VFTAX fund holds Apple, Microsoft, Amazon, and Alphabet. It’s classified as an aggressive fund, and its return tends to be volatile. However, despite this, the holdings in the fund are solid. 

The Vanguard website says the fund excludes stocks “of companies that do not meet certain labor, human rights, environmental, and anti-corruption standards as defined by the UN Global Compact Principles.”

Shelton Green Alpha Fund (NEXTX)

Shelton Green Alpha Fund focuses on identifying green economy companies with solid growth potential. It invests in companies focused on products and services that mitigate environmental and economic systemic risks. 

Parnassus Core Equity Fund (PRBLX)

This fund’s managers focus on finding stocks that engage in ESG and exclude ones that get most of their revenue from fossil fuels, tobacco, nuclear power, gambling, and alcohol. They use ESG screeners to refine their search and identify companies with competitive advantages and ethical practices. 

iShares Global Clean Energy ETF (ICLN)

iShares ICLN ETF is an example of how fund managers try to create ESG funds and keep them balanced while adhering to ESG principles. In April 2022, the fund underwent methodology changes to rebalance its holdings. ICLN contains securities, including companies producing solar, wind, and other forms of renewable energy. 

1919 Socially Responsive Balanced Fund (SSIAX)

1919 Fund’s SSIAX fund focuses on a high return from a socially responsible portfolio. It identifies undervalued securities and determines if the issuing companies are operating in a socially responsive fashion. SSIAX seeks to hold 70% of its assets in U.S. stocks and 30% in investment-grade U.S. debt. 

The Bottom line

ESG funds incorporate environmental, social, and governance issues into their selection processes. They allow investors to invest in companies with ethical practices. Critics of ESG are only sometimes arguing in good faith. No central organization decides which companies to include in ESG funds, so it’s always good to research different funds’ selection processes.  

Investing in ESG funds comes down to the individual investor and their beliefs about environmental, social, and government change. Investing in these types of funds is not required to have a diversified portfolio. Investors usually invest in these funds to support businesses that positively impact the world. But other investors not interested in investing in these businesses can still invest with success. 

The post What Are ESG Funds? appeared first on Due.