Retirement Alternatives to a 401(k)

By Andrew Tavin

Retire in something resembling style.

Throughout history, humanity has experimented with many different kinds of retirement plans. The earliest retirement plan was the “no-one-lived-past-their-30s” plan. While this had the advantage of not actually requiring any planning, it did not leave much time for relaxation.

Later, if legend is to be believed, putting the elderly out to sea on an ice floe gained some popularity. However, with arctic currently melting, this retirement plan is less viable than ever.

Since 1978 the 401(k) account has become a common solution for building retirement funds. 401(k) plans are investment accounts offered by employers as part of their benefits package. Employees can direct a small percentage of their pre-tax income into these accounts and their employer will match a portion of those funds.

But many jobs do not offer a 401(k). Perhaps your job does not. If that’s the case, how can you avoid being put out on the proverbial ice floe when you reach retirement age?

When you want something done right…

There are tax-advantaged retirement accounts you can open on your own that are separate from an employer-provided plan . You will not receive the benefits of that employer matching your contributions (unless you are remarkably persuasive), but it is likely better than nothing.

“Individual retirement accounts give anyone the option to save for retirement outside of an employer plan,” offers Sam, who writes about early retirement with her husband at How to FIRE. “You could open one at a brokerage firm like Fidelity or Vanguard. However, the IRS does have income requirements and contribution/distribution limits that you should be familiar with. Roth IRAs grow tax-free and traditional IRAs grow tax-deferred. If you are married and one of you does not work outside the home, you may even have the option for a spousal contribution.”

Property possibilities

If you want your retirement investments to be more tangible, you could consider putting money into property. Unfortunately, this will require you to have quite a bit of money already saved up. There are a few upsides if you can manage it, however.

“Rental properties complement stocks and more traditional retirement accounts extremely well,” says Brian Davis, co-founder of SparkRental.com. “To begin with, they generate ongoing passive income … Rental returns adjust for inflation automatically, as well. Not only do rents rise alongside inflation, they are a primary driver of inflation, and often rise faster than the broader inflation rate.”

While the money you put into the property will likely be subject to taxes, property ownership has its own sets of carve outs.

“They offer tax benefits, with every conceivable expense deducted from your profits,” Davis explains. “Even some paper expenses like depreciation are deductible. Taxpayers do not have to itemize their deductions to take advantage of these deductions, either – they come off your rental income before it is added to your adjusted gross income.”

Getting into the franchise game

Have you ever fancied yourself a business owner, but you just are not able to do it full time? Well you may be able to get into the franchise game as an investor.

“Most investors are unaware that you are able to invest in a full-time or semi-absentee franchise tax free and penalty free with the Rollover for Business Startups (ROBS) program,” says Kenny Rose, founder and CEO of Semfia. “A semi-absentee franchise investment can be owned while working full time and can both build equity and produce a significant income. These are an out-of-the-ordinary investment that can also be paired with with a [U.S. Small Business Administration] loan to leverage pre-tax funds.”

Rose says the best way to approach this type of investment is to selectively pick your marketplace and do your research to vet different brands. “Although most people hear the word ‘franchise’ and go straight to food, the best way to reduce market risk is to look into recession-resistant industries like haircare, automotive, and fitness,” he says.

One caveat to be aware of is the time commitment. Even though it may not require your full time attention, investing in a franchise is not a completely hands off endeavour.

“Unlike other typical 401(k) investments, franchises are not passive money earners,” Rose warns. “Even for a semi-absentee investment you will need to manage a manager for 5 to 15 hours per week. Newer trends for semi-absentee are for nonworking spouses and recent college graduates to handle overseeing the management with the franchise structure.”

One other risk of note about small business loans: Know that your personal credit may impact your ability to get a small business loan, and a small business loan can impact your credit report, as well. Always make sure you understand the ins-and-outs of taking out any type of personal loan or business loan before moving forward with a money-borrowing decision.

If all else fails…

You may not have access to a 401(k) through your job. You may not meet the requirements for individual tax-free accounts. You may not have the money to invest in property or a franchise. But you can still do your best to put away money for retirement.

“Saving for retirement can be intimidating when you know that there are penalties for distributing the money before you are eligible,” Sam says. “If you would like more flexibility with your money, consider opening a taxable account. You can still earmark the money for retirement, but also use it without penalty before your golden years. Just be mindful that you won’t have the same tax advantages that retirement accounts offer. Any option to get you saving is better than not saving at all.”

It is not easy to think about retirement while you are dealing with so many daily expenses. But if you can make it a habit to regularly put aside retirement money, it should make a big difference later on.

Contributors

Leslie TayneG. Brian Davis is a landlord, personal finance writer, and co-founder of SparkRental.com, which provides free video courses and rental investing tools for landlords. He spends most of the year overseas, splitting his time between Abu Dhabi, Europe, and his hometown of Baltimore.
Sam blogs about personal finance and financial independence at How To FIRE. She uses her Bachelors in Finance and MBA degree to help others get control of their finances through budgeting, saving, investing, and side hustles. For more information, visit her @HowToFIRE.
Kenny Rose is the founder & CEO of Semfia, a franchise brokerage to provide education and guidance on investing locally through semi-absentee franchise ownership. Rose founded Semfia after working in finance at Merrill Lynch and also spending time in the franchise industry. He realized that people want to hold a franchise business as an investment and not a full-time job, but they can’t get past that pesky F-word. A graduate of San Diego State University’s Top 10 Financial Services program, he has appeared on ABC, in the Amazon Best Seller “More Than Just French Fries,” and has been a featured speaker for the U.S. Small Business Administration, Small Business Development Centers of America, and SCORE. Follow him @InvestLocally.

10 Big-Money Scholarships That High School Students Can Apply for This Fall 

Because cash doesn’t grow on trees. Or does it?

Picking a college is exciting. You research class size, majors, and dorm life. You choose your schools and picture yourself on campus. But then you take a peak at tuition costs and your stomach drops.

College is expensive. Very expensive.

It’s easy for sticker shock to set in, but high school students who have  their sights set on a dream school have a number of options to offset costs. One of the best? Scholarships, which are essentially free money. Seriously.

Of course, you need to win a scholarship to receive a scholarship, and that’s easier said than done. (There are ways to boost your chances, at least when writing a scholarship essay.) But if you apply strategically, it’s not unreasonable to hope to land one of the many scholarships that provide much-needed tuition money to students around the country every year.

So what scholarships can high school seniors apply for this fall? Here are 10 that offer the largest awards.

1. Cooke College Scholarship Program

Award: $160,000

Deadline: November 13, 2019

How to Apply: Learn about applying through the Common App here

Eligibility: High school seniors

The Cooke College Scholarship Program is available to high school seniors who have a strong academic record and need financial assistance. Although this is a highly competitive scholarship, the chance to score nearly a full-ride is well worth it. One lucky winner will receive up to $40,000 each year.

2. Dr. Pepper Tuition Giveaway

Award: (5) $100,000, (5) $25,000, and (10) $2,500

Deadline: October 17, 2019

How to Apply: Create a profile and submit a video here

Eligibility: Ages 18-24

Dr. Pepper — yes, the soft drink company — has offered the very generous Dr. Pepper Tuition Giveaway to deserving students from all backgrounds for nearly a decade now. Twenty recipients will have the opportunity to win scholarship aid ranging from $2,500 to $100,00.

Applicants need to submit a video pitch of a goal, then provide updates of their progress towards reaching that goal. Pretty simple.

3. Francis Ouimet Scholarship Fund 

Award: $60,000

Deadline: December 1, 2019

How to Apply: Submit an application here

Eligibility: High school seniors who have dedicated  more than 2 years of service to particular golf services at any golf course in Massachusetts

The Francis Ouimet Scholarship provides funds to students who have worked professionally in the golf industry, caddies included. As the largest private scholarship in New England, it promises up to $60,000 for educational costs. To enter, students need to submit an application that details their academic achievements.

4. Burger King James W. McLamore Whopper Scholarship Award

Award: $50,000

Deadline: December 15, 2019

How to Apply: Submit an application here

Eligibility: High school seniors

Fans of the Whopper rejoice! Your favorite burger chain gives away scholarship money, too. The Burger King Scholars Program was created in memory of co-founder James W. McLamore in an effort to aid high school seniors and Burger King employees pursuing higher education. The minimum requirements to enter include a 3.3 GPA, 25 ACT, or 1220 SAT score, and active leadership in an extracurricular or community service role.

5. Elks National Foundation Most Valuable Student Competition

Award: (2) $50,000, (2) $40,000, (2) $30,000, (14) $20,000, (480) $4,000

Deadline: November 5, 2019

How to Apply: Submit an application here

Eligibility: High school seniors

The Elks National Foundation Most Valuable Student Competition is one of the largest scholarships available to students in the United States. Don’t worry if you’re not a first-place recipient scoring the grand $50,000 award — there are a total of 500 chances to win a sizeable chunk of money! Since it’s a merit-based scholarship, students need to prove their strong academic record, ability to lead, and commitment to service activities.

6. Horatio Alger National Scholarship Program

Award: $20,000

Deadline: October 25, 2019

How to Apply: Submit an application here

Eligibility: High school seniors

Have you heard of Horatio Alger? You might want to brush up on American literature, because this scholarship honors his legacy. Alger was a great American writer who wrote about the struggles of impoverished youth overcoming adversity to rise to the middle-class. The Horatio Alger National Scholarship program offers a need-based scholarship that aids students who have also overcome adversity while remaining high-achieving. The national winners receive $20,000, but there are plenty of awards at the state level.

7. Coca-Cola Scholars Foundation

Award: $20,000

Deadline: October 31, 2019

How to Apply: Submit an application here

Eligibility: High school seniors

Coca-Cola has three national programs to provide scholarship aid to students, but the largest of these is the Coca-Cola Scholars Foundation, which awards $20,000 to 150 students annually. High-performing seniors with a strong record of leadership have the best chances of winning.

8. Foot Locker Scholar Athletes

Award: $20,000

Deadline: December 2019

How to Apply: Application will open on September/October 2019 here

Eligibility: High school seniors

Are you an athlete? Then this Foot Locker scholarship is for you. Twenty students planning to pursue a collegiate sports career will receive $20,000, with one receiving the Ken C. Hicks Scholarship and an additional $5,000. Submit an application with your essay on how you demonstrate fair sportsmanship and moral character.

9. Dell Scholars Program

Award: $20,000

Deadline: December 1, 2019

How to Apply: Application will open on October 1, 2019 here

Eligibility: High school seniors

The Dell Scholars Program is for students who have overcome socioeconomic disadvantages to pursue higher education. Winners receive $20,000, a new Dell laptop, and credits toward textbooks. To be eligible, students should have completed a college readiness program approved by the foundation. Dell selects 300 winners each year.

10. Voice of Democracy Scholarship Competition

Award: $30,000 and an all-expenses-paid trip to Washington, D.C.

Deadline: October 31, 2019

How to Apply: Download and complete an entry form here

Eligibility: Grades 9-12

To apply for this scholarship, students write and record an essay. For 2019-20, the theme is “What Makes America Great.” Get creative, as you’ll be judged on content, originality, and delivery.

Do you know of any high award scholarships for students? Share with us on Twitter at @OppUniversity.

Legitimate or Scam: Is that Apartment Listing Too Good to be True?

By Andrew Tavin

Know how to spot these rental listing red flags to protect your wallet during the home-hunting process.

Moving is one of the most stressful activities in modern American society. According to at least one study, moving is even more stressful than divorce. You are, after all, divorcing your previous home, in a sense.

The stress of moving also applies to the process of finding your new home. There is often a deadline to find a new place, and a lot of pressure in knowing that wherever you choose, you will likely be locked in to your decision for at least an entire year of your life.

We are not happy that the moving process may cause you stress. But do you know who is happy about it? Potential scammers. Scammers will take advantage of your stress to trick you while your guard is down. It is important to learn the kinds of rental scams you may encounter and how you can both recognize and avoid them.

Fake listings

Through websites like Craigslist, the internet has made it easier than ever to find apartment listings. However, it has also made it easier than ever to post fake apartment listings “to cheat unsuspecting victims,” according to Steve Weisman, lawyer, author, and identity theft expert who writes at Scamicide.

Weisman references a 2016 study called Understanding Craigslist Rental Scams by New York University’s School of Engineering. The study analyzed more than 2 million home and apartment rental ads across 20 cities. The results: About 29,000 of the ads were most likely scams.

“The most common scam involved an ad for rental housing that required the person responding to the ad to obtain their credit score by clicking on a link in the email,” Weisman said. The scammer would then reply to the victim who responded to the advertisement. “Under affiliate programs with companies that provide credit scores, the scammers would get up to $18 for every referral. The victim ends up paying for a credit score he or she doesn’t need.”

Fake lister

Just because a listing has photographs and a legitimate address, it does not mean the person who made the post is the legitimate owner, warns Ron Humes, vice president of operations for the southeast region of Post Modern Marketing.

“Typical home rental scams occur when someone who does not own the property hijacks the property online to offer for rent to the public,” Humes says. “These properties may be for rent or sale by the actual owner, but the scammer steals the pictures and information and advertises a rental with their own contact information. They often use alias phone numbers and email addresses and offer to ‘hold’ the property for a potential tenant with the submission of a deposit. They offer the home for rent on a variety of online platforms to hook potential tenants.”

Real property, really unnecessary credit check

Even if you are dealing with the actual owner of a legitimate property, they could still be trying to squeeze you for money, according to Holy Zink, an identity theft expert with Kiwi Searches.

“It’s common for landlords to run a background and/or credit check to make sure the person would make a good tenant,” Zink says. “However, if the landlord is scamming you, they may ask you to pay them for running a check on you prior to showing you the apartment. Typically, landlords will do such check after you’ve seen the apartment and are seriously considering renting the place. If they also charge you more than $60 for running a background check, they are clearly trying to take every penny they can from you.”

Watch out for wires

Do not drop your vigilance just because you have already moved in.

“Today, there are dozens of free online websites that allow tenants to pay their rent easily online,” says Logan Allec, CPA, owner of personal finance website Money Done Right. “Due to these services, there is no need for anyone to ever need to wire money anymore. As such, a landlord who asks for a wire payment is either a slow adopter of new technology or is looking for a scam. To avoid this scam, ask if you can use an online free rent software instead to pay your monthly fee.”

Prepare before moving forward

Always do your research and be absolutely certain what you are getting before you sign anything. If possible, consult an attorney or real estate agent you can trust. Happy home hunting!

Contributors

Logan Allec is a CPA and owner of the personal finance website Money Done Right. After spending his twenties grinding it out in the corporate world and paying off more than $35,000 in student loans, he dropped everything, and in 2017, launched Money Done Right. His mission is to help everybody—from college students to retirees—make, save, and invest more money. He resides in the Los Angeles area with his wife Caroline. Follow him on Twitter @moneydoneright.
Ron Humes is currently the vice president of operations, southeast region for Post Modern Marketing, a full-service digital marketing company. He has been a realtor as well as an owner and principal broker of his own realty company for 20 years. He has been a custom home builder and owner of a remodeling company. He is an active investment property owner of flips and rentals. He has been a property manager for 20 years. He trains investors to purchase, flip, and rent properties. Follow him  @PostMM.
Steve Weisman is a lawyer, college professor at Bentley University and author.  He is one of the country’s leading experts in identity theft.  His most recent book is “Identity Theft Alert.”  He also writes the blog Scamicide.com, where he provides daily updated information about the latest scams and identity theft schemes. Follow him @Scamicide.
Holly Zink is a tech and security expert for Kiwi Searches. She is up-to-date on the latest security issues, from online scams to identity theft. Follow her @kiwisearches.

Finance Tips That Should be Taught In School

By Amanda Finn

Global economics and history classes are all well and good, but how about classes on retirement contributions, tax filing, or other financial lessons for the real world?

If you live in the United States, chances are you didn’t learn how to balance a checkbook or understand a basic budget in high school. That’s because, according to Forbes, there are only 17 states across the nation that “require high school students to take a course in personal finance.”

The numbers don’t stop there. According to a Bank of America and USA Today 2016 survey collaboration, only 31% of young Americans aged 16 – 26 felt their high schools taught them good financial habits. On top of that, only 58% of those young people had started a savings account while only 27% of those surveyed aged 22 – 26 had contributed to a 401K.

Despite these statistics, Champlain College’s Center for Financial Literacy says finances should be taught at many levels of education and start at an early age:

“Personal finance education should start early at both home and school. Ideally, personal finance concepts should be taught in elementary, middle and high school, and should continue into college. In mathematics, you start with counting, move on to addition and subtraction, and then move on to division and multiplication. You need to learn letters before you can read. Personal finance education should be a cumulative process, with age-appropriate topics taught each school year. The reality is that many states and school districts do not provide any substantive personal finance education until high school, if at all.”

Online resources like OppU provide courses on financial literacy in addition to articles on topics like how to teach kids about certain money-related and credit topics. If you are looking for some basics on financial literacy, OppU is a good place to start. In the meantime, here are some universal topics that are largely ignored in primary and even secondary educational spaces.

Save your pennies  

Barbara Stanny’s list for Forbes of what she wishes she knew about finances after graduating college  provides insight into the multifaceted ways people can save their hard earned money. One of those ways is understanding the power of compound interest.

If there is interest accruing, your money isn’t just sitting there doing nothing. “Understand the miracle of compounding—where your money earns interest, then your interest earns interest, and then that interest earns interest, and before you know it, you’ve got a lot more than when you started,” Stanny wrote.

Money grows if you help it

Investing (and knowing how to do it well) is something a lot of folks don’t quite understand, especially coming out of school. Unless they studied finance, there is a lot of confusion about the world of stocks and bonds and mutual funds.

But Stanny advises against waiting too long to start investing. Even if it’s just a little at a time, the more you invest the more it will grow. That doesn’t mean, however, that you should invest in anything or everything. Be sure you understand your investment choices. “Otherwise, you won’t know what you’re buying; you won’t know when to sell; and you can’t accurately evaluate the advice you’re given.”

“Learn about investing,” she wrote. “Take a class. The only way to make sure your money grows (enough to buy a castle and also maintain it!) is by putting at least some of your cash in long-term assets (like stocks & bonds) that will grow faster than inflation and taxes will take it away.”

How to build and maintain a credit score

Austin Netzley wrote for Insider that, despite how boring it be, it’s important to get a credit report to not only know the status of your credit score, but to also get the clearest understanding of your debt-credit life.

“You may be (like I was!) surprised to see some open lines of credit that you thought you closed or still have a balance on,” Netzley wrote. “The starting point to fix your finances is to get super clear on your current situation, and a credit report will help you do just that.”

Champlain College also supported knowing (and understanding) one’s credit because having a low score can be seriously detrimental to one’s livelihood.

A person’s credit score and borrowing history affects their daily life, they wrote. Doing everything from purchasing or renting a home/apartment, acquiring insurance, or sometimes even getting a job can be impacted by one’s credit history. They went on to explain that a high credit score could save someone upwards of $100,000 in interest payments during their life.

Having more than one income 

This idea is crucial, particularly as fears of a recession swirl around the media. Economic experts like Netzley point to making one’s income as “recession proof” as possible. One way to achieve that is to secure multiple streams of income.

Netzley explains that there are three forms of income:

Working income: Do work once, get paid once, such as through a salary or hourly wages

Residual income: Do the work once, get paid over and over again, such as by producing and selling a book or programs

Passive income: Do no work, get paid over and over again, such as through investments

By cultivating multiple revenue opportunities people are not only protecting themselves from potential economic downturns, they are also creating ways to make money in their sleep and freeing up their time.

Start as young as possible

Instilling financial literacy at a young age is important, particularly since young people are met with so many financial decisions so quickly after high school and college.

“The number of financial decisions an individual must make continues to increase, and the variety and complexity of financial products continues to grow,” Champlain College wrote. “Young people often do not understand debit and credit cards, mortgages, banking, investment and insurance products and services, payday lending, rent-to-own products, credit reports, credit scores, etc.”

Post-Vacation Money Blues: Those Beachside Splurges May Be More Costly Than You Think

Nearly half of Americans spend beyond their means on vacation — and suffer guilt, stress, and financial consequences because of it.

Everyone knows the feeling: It’s your first day back after a relaxing vacation and you just can’t deal. All the worries you left behind are there waiting for you, but sometimes there are new ones, too — money woes.

We surveyed 7,480 American adults and found that a shocking percentage (43%) admitted to spending beyond their means on vacation. And many came home to a rude awakening because of it:

  • 27% suffered financial consequences that included excessive credit card debt, missed payments, or being forced to borrow money from family or friends.
  • 49% reported spending-related guilt.
  • 46% experienced stress from their spending, with more than half (55%) of those losing sleep because of it.

The state where residents ranked worst for managing money while on vacation? New Mexico, which also holds one of the highest percentages of credit card debt in the country. At the top for guilt was West Virginia, and Utah ranked No. 1 for post-vacation money stress.

Surprisingly, the states where residents had poor money management habits weren’t necessarily the ones where they had the highest levels of stress and guilt. In fact, New Mexico ranked No. 1 (followed by New Jersey and New York) for poor money management but relatively little guilt. At the other end of the spectrum was Iowa (followed by Oregon and Nebraska), where residents had good vacation money management but still felt guilty about their spending.

Money Blues: Which States Feel Most Guilty About Vacation Splurges?

Post-vacation money blues

Excessive Vacation Spending

According to our survey, almost half of Americans spend more on vacation than they should.

  • 43% of respondents admitted to taking a vacation they couldn’t afford within the past five years.
  • 43% said they typically spend outside their means on vacation.
  • 59% of respondents indicated that a “vacation mentality” causes them to make poor spending decisions.

To pay for out-of-budget trips, many respondents in our survey said they rely on credit cards or loans — 42% said they’ve used one or the other to help fund a vacation they couldn’t afford otherwise.

Financial Consequences

While vacation purchases may feel innocent at the time, breaking budget can cause serious money troubles. Twenty-seven percent of respondents in our survey said a vacation splurge in the past five years had led to negative financial consequences. The most common problem they encountered was high levels of credit card debt.

  • 49% of respondents reporting financial consequences took on excessive credit card debt.
  • 34% missed important payments.
  • 16% took out a loan.
  • 35% borrowed money from friends or family.

Stress and Guilt

In addition to a financial toll, overspending can have a psychological impact, too. About half of survey respondents reported experiencing guilt or stress from their vacation splurges within the past five years.

  • 49% said they have felt guilty about vacation spending.
  • 46% said they have suffered stress from overspending on vacation.
  • Of those who have suffered stress, 55% said they’ve lost sleep because of it.

Of those who experienced guilt, 83% said it primarily set in after vacation — not when they were spending.

  • 49% of respondents reporting guilt said it typically set in once they returned home.
  • 34% of respondents reporting guilt said they usually felt most guilty once they saw their credit card statements or checked their bank account.

In Which States Are Residents Best at Managing Money on Vacation?

Overall, our survey revealed a nationwide trend of risky vacation spending. However, residents in some states practice better vacation spending habits than others: they were less likely to take vacations they knew they couldn’t afford, experience financial consequences because of their vacation spending, or use credit cards or loans to pay for out-of-budget trips.

States Where Residents Are Best at Managing Money on Vacation

  1. New Hampshire
  2. Wisconsin
  3. Connecticut
  4. Louisiana
  5. Vermont
  6. Idaho
  7. North Dakota
  8. Alaska
  9. Minnesota
  10. Iowa

States Where Residents Are Worst at Managing Money on Vacation

  1. New Mexico
  2. Maryland
  3. New Jersey
  4. Kentucky
  5. West Virginia
  6. New York
  7. Nevada
  8. Arizona
  9. Florida
  10. Arkansas

States Where Residents Feel Most Guilty About Vacation Spending

Guilt was a common emotional consequence of vacation overspending. West Virginia came in at No. 1 for states with the highest levels of post-vacation spending guilt, and Louisiana was No. 1 for low-guilt spending.

States With the Highest Levels of Guilt

  1. West Virginia
  2. Utah
  3. California
  4. Oregon
  5. Iowa
  6. South Carolina
  7. Nebraska
  8. Nevada
  9. Missouri
  10. Indiana

States With the Lowest Levels of Guilt

  1. Louisiana
  2. Connecticut
  3. New Hampshire
  4. Rhode Island
  5. Oklahoma
  6. Colorado
  7. Ohio
  8. Massachusetts
  9. Alabama
  10. Michigan

States Where Residents Report the Most Stress About Their Vacation Spending

The top 10 states where residents reported spending-related post-vacation stress were led by Utah while those with the lowest levels of stress were led by Ohio.

States With the Highest Levels of Stress

  1. Utah
  2. West Virginia
  3. Wyoming
  4. Montana
  5. New York
  6. California
  7. Pennsylvania
  8. Arkansas
  9. New Jersey
  10. Kansas

States With the Lowest Levels of Stress

  1. Ohio
  2. Louisiana
  3. Alabama
  4. Michigan
  5. Rhode Island
  6. Texas
  7. Mississippi
  8. South Dakota
  9. North Carolina
  10. Nebraska

States Where Residents Are Too Hard on Themselves — Or Not Hard Enough

One interesting finding from our survey is that the states where residents were most likely to overspend were not necessarily the states with the highest levels of spending guilt. And the reverse of this is true, too — some states spent responsibly but nonetheless had high levels of guilt.

Iowa led the country for states where residents had relatively good vacation money management and disproportionately high levels of guilt. New Mexico led the country for poor spending but low levels of guilt.

States That Are Too Hard on Themselves

  1. Iowa
  2. Oregon
  3. Nebraska
  4. Alaska
  5. California
  6. North Dakota
  7. South Carolina
  8. Vermont
  9. Wisconsin
  10. Missouri

States That Are Too Easy on Themselves

  1. New Mexico
  2. New Jersey
  3. New York
  4. Maryland
  5. Ohio
  6. Texas
  7. Rhode Island
  8. Louisiana
  9. Massachusetts
  10. Florida

How to Bounce Back After Vacation Spending

For vacation-goers who overspend while away, the flood of bills and a depleted bank account can be a harsh welcome home. But there are ways to get back on track. We asked Len Hayduchok, founder and president of Dedicated Financial Services, for his best advice. Here’s what he recommends.

1. Go on a spending ‘fast.’ To get your budget back on track, cut your spending to the essentials. Separate ‘need’ expenses (rent, utilities) from ‘want’ expenses (lattes, eating out). Do this for a week and see how much you save. Rinse and repeat as needed.

2. Break it down. Change large annual payments on life or auto insurance to bite-size monthly installments. Keep in mind that the additional cost for spreading out the payments should be less than the monthly finance charges on the credit cards.

3. Put the piggy bank on a diet. Especially if credit card interests are high, temporarily put savings strategies on hold. Even contributions to 401(k) plans should be limited unless matched by an employer. Feel free to pork up the bank again once credit card balances are back under control.

4. Channel your inner minimalist. Take some time to look through your closet for those items that haven’t seen the sun in a few years. Make some quick cash by bringing them to a consignment store, co-hosting a garage sale with some friends, or selling them online!

5. Think outside the wallet. In addition to reducing your spending and boosting income, find potential borrowing sources (if you must) such as 401(k) plans or life insurance policies as a temporary financial buffer. Caveat: Make sure you pay those loans back as soon as possible!

Len HayduchokLen Hayduchok is a Certified Financial Planner™ practitioner with over 25 years of experience. A graduate of the Wharton School and a Master of Divinity recipient, he is the founder and president of Dedicated Financial Services. His firm advises clients on taxes, income, retirement, estate planning, and asset management and protection. He and his wife live in Princeton Junction, New Jersey, and Rehoboth Beach, Delaware, and are the parents of four adult children.

How to Relieve Post-Vacation Stress and Guilt

According to our survey, about half of Americans have recently suffered post-vacation guilt or stress from their spending. How can they beat their blues? Here are five tips from Raffi Bilek, director of the Baltimore Therapy Center.

1. Harness the guilt. It’s normal to feel guilty after overspending. Use the discomfort to motivate yourself. Sit down and create a budget. Call up a financial coach and request an appointment. Make a change, no matter how small. Harness your feelings and turn them into action.

2. Engage in self-care. Life is stressful enough, even before you upped your budget problem. Take care of yourself by engaging in the things that help you keep an even keel — whether it’s yoga or painting, mountain biking or meditating. Everyone needs to manage their stress. This is all the more important when your stress is on the rise.

3. Allow for imperfection. Everyone makes mistakes. Remember that even your friends who look like they have it all together on Facebook sometimes mess up — they just tend not to post those moments. You shouldn’t ignore problems, financial or otherwise, but you also shouldn’t allow them to consume you. You’re human. It’s OK.

4. Get some perspective. How bad is it really? What are the ramifications of your overspending? Going over budget by $100 is different from going over by $1,000, and it certainly depends on your individual financial situation. Don’t assume the worst — crunch the numbers and see whether you’re actually in hot water or you just dipped your toe in it.

5. Start saving up again. There’s a Japanese proverb that says, “Fall down seven times, get up eight.” If you’ve overspent your budget, the time to start saving back up is now. Skip the Starbucks today and put $2.10 aside. Consider this financial misstep the beginning, not the end.

Raffi BilekRaffi Bilek, LCSW-C, is a clinical social worker and director of the Baltimore Therapy Center. He graduated from Brown University with honors and has a diverse professional background that includes clinical experience in psychiatric outpatient settings, family therapy institutes, domestic violence units, community service agencies, and private counseling practices. He lives in Pikesville, Maryland, with his daughters and wife.

How Do the States Stack Up?

Alabama
No. 11 for responsible spending
No. 42 for guilt
No. 25 for should feel less guilty
No. 48 for stress

Alaska
No. 8 for responsible spending
No. 15 for guilt
No. 4 for should feel less guilty
No. 15 for stress

Arizona
No. 43 for responsible spending
No. 24 for guilt
No. 11 for should feel more guilty
No. 19 for stress

Arkansas
No. 41 for responsible spending
No. 11 for guilt
No. 24 for should feel less guilty
No. 8 for stress

California
No. 27 for responsible spending
No. 3 for guilt
No. 5 for should feel less guilty
No. 6 for stress

Colorado
No. 14 for responsible spending
No. 45 for guilt
No. 17 for should feel more guilty
No. 35 for stress

Connecticut
No. 3 for responsible spending
No. 49 for guilt
No. 22 for should feel less guilty
No. 40 for stress

Delaware
No. 13 for responsible spending
No. 39 for guilt
No. 24 for should feel more guilty
No. 39 for stress

Florida
No. 42 for responsible spending
No. 29 for guilt
No. 10 for should feel more guilty
No. 23 for stress

Georgia
No. 39 for responsible spending
No. 26 for guilt
No. 12 for should feel more guilty
No. 34 for stress

Hawaii
No. 34 for responsible spending
No. 16 for guilt
No. 23 for should feel less guilty
No. 30 for stress

Idaho
No. 6 for responsible spending
No. 40 for guilt
No. 18 for should feel less guilty
No. 21 for stress

Illinois
No. 16 for responsible spending
No. 33 for guilt
No. 20 for should feel less guilty
No. 24 for stress

Indiana
No. 22 for responsible spending
No. 10 for guilt
No. 11 for should feel less guilty
No. 29 for stress

Iowa
No. 10 for responsible spending
No. 5 for guilt
No. 1 for should feel less guilty
No. 14 for stress

Kansas
No. 36 for responsible spending
No. 22 for guilt
No. 16 for should feel more guilty
No. 10 for stress

Kentucky
No. 47 for responsible spending
No. 14 for guilt
No. 13 for should feel more guilty
No. 26 for stress

Louisiana
No. 4 for responsible spending
No. 50 for guilt
No. 8 for should feel more guilty
No. 49 for stress

Maine
No. 30 for responsible spending
No. 35 for guilt
No. 14 for should feel more guilty
No. 20 for stress

Maryland
No. 49 for responsible spending
No. 23 for guilt
No. 4 for should feel more guilty
No. 27 for stress

Massachusetts
No. 29 for responsible spending
No. 43 for guilt
No. 9 for should feel more guilty
No. 16 for stress

Michigan
No. 19 for responsible spending
No. 41 for guilt
No. 19 for should feel more guilty
No. 47 for stress

Minnesota
No. 9 for responsible spending
No. 30 for guilt
No. 13 for should feel less guilty
No. 36 for stress

Mississippi
No. 35 for responsible spending
No. 20 for guilt
No. 20 for should feel more guilty
No. 44 for stress

Missouri
No. 24 for responsible spending
No. 9 for guilt
No. 10 for should feel less guilty
No. 17 for stress

Montana
No. 33 for responsible spending
No. 21 for guilt
No. 22 for should feel more guilty
No. 4 for stress

Nebraska
No. 12 for responsible spending
No. 7 for guilt
No. 3 for should feel less guilty
No. 41 for stress

Nevada
No. 44 for responsible spending
No. 8 for guilt
No. 21 for should feel less guilty
No. 13 for stress

New Hampshire
No. 1 for responsible spending
No. 48 for guilt
No. 14 for should feel less guilty
No. 22 for stress

New Jersey
No. 48 for responsible spending
No. 31 for guilt
No. 2 for should feel more guilty
No. 9 for stress

New Mexico
No. 50 for responsible spending
No. 25 for guilt
No. 1 for should feel more guilty
No. 12 for stress

New York
No. 45 for responsible spending
No. 32 for guilt
No. 3 for should feel more guilty
No. 5 for stress

North Carolina
No. 17 for responsible spending
No. 37 for guilt
No. 25 for should feel more guilty
No. 42 for stress

North Dakota
No. 7 for responsible spending
No. 17 for guilt
No. 6 for should feel less guilty
No. 38 for stress

Ohio
No. 31 for responsible spending
No. 44 for guilt
No. 5 for should feel more guilty
No. 50 for stress

Oklahoma
No. 15 for responsible spending
No. 46 for guilt
No. 15 for should feel more guilty
No. 31 for stress

Oregon
No. 18 for responsible spending
No. 4 for guilt
No. 2 for should feel less guilty
No. 18 for stress

Pennsylvania
No. 40 for responsible spending
No. 13 for guilt
No. 23 for should feel more guilty
No. 7 for stress

Rhode Island
No. 20 for responsible spending
No. 47 for guilt
No. 7 for should feel more guilty
No. 46 for stress

South Carolina
No. 25 for responsible spending
No. 6 for guilt
No. 7 for should feel less guilty
No. 33 for stress

South Dakota
No. 26 for responsible spending
No. 19 for guilt
No. 19 for should feel less guilty
No. 43 for stress

Tennessee
No. 28 for responsible spending
No. 28 for guilt
No. 21 for should feel more guilty
No. 25 for stress

Texas
No. 37 for responsible spending
No. 34 for guilt
No. 6 for should feel more guilty
No. 45 for stress

Utah
No. 38 for responsible spending
No. 2 for guilt
No. 12 for should feel less guilty
No. 1 for stress

Vermont
No. 5 for responsible spending
No. 27 for guilt
No. 8 for should feel less guilty
No. 28 for stress

Virginia
No. 21 for responsible spending
No. 38 for guilt
No. 18 for should feel more guilty
No. 32 for stress

Washington
No. 23 for responsible spending
No. 18 for guilt
No. 16 for should feel less guilty
No. 11 for stress

West Virginia
No. 46 for responsible spending
No. 1 for guilt
No. 15 for should feel less guilty
No. 2 for stress

Wisconsin
No. 2 for responsible spending
No. 36 for guilt
No. 9 for should feel less guilty
No. 37 for stress

Wyoming
No. 32 for responsible spending
No. 12 for guilt
No. 17 for should feel less guilty
No. 3 for stress


Methodology

Money Management Score

The Money Management Score is based on 7,480 responses to the following questions and calculated as follows:

“In the past 5 years, have you taken a vacation you knew you couldn’t afford?”

  • 0 points were assigned to those who respond, “No, I haven’t.”
  • 50 points were assigned to those who respond, “Yes, but just once.”
  • 100 points were assigned to those who respond, “Yes, multiple times.”

“In the past 5 years, have you used a credit card or loan to help fund a vacation you couldn’t otherwise pay for?”

  • 0 points were assigned to those who respond, “No, I haven’t.”
  • 50 points were assigned to those who respond, “Yes, but just once.”
  • 100 points were assigned to those who respond, “Yes, multiple times.”

“In the past 5 years, have you suffered negative financial consequences for vacation spending?”

  • 0 points were assigned to those who respond, “No, I haven’t.”
  • 50 points were assigned to those who respond, “Yes, I’ve suffered mild to moderate financial consequences.”
  • 100 points were assigned to those who respond, “Yes, I’ve suffered severe financial consequences.”

Each respondent’s Money Management Score was calculated as a weighted average of the points assigned to their responses for each of the three questions: (0.25)(Q3) + (0.25)(Q4) + (0.50)(Q6).

Each state’s Money Management Score is equal to the average of all the respondents’ scores from that state. Within each state, responses were weighted based on gender so that males and females received equal weight. After weighting, the effective nationwide sample size for the Money Management Score is 5,948.
The states are then sorted by their score from low to high and ranked such that Rank No. 1 is the lowest score (best money management) and Rank No. 50 is the highest score (worst money management).

Guilt Score

The Guilt Score is based on 7,480 responses to the following question and calculated as follows: “In the past 5 years, have you felt guilty about spending too much on vacation?”

  • 0 points were assigned to those who respond, “No, I’ve never felt guilty.”
  • 50 points were assigned to those who respond, “Yes, but only once.”
  • 100 points were assigned to those who respond, “Yes, after a few or more vacations.”

Each respondent’s Guilt Score is equal to the points they were assigned for Q8 (0, 50, or 100). Each state’s Guilt Score is equal to the average of all the respondents’ scores from that state. Within each state, responses were weighted based on gender so that males and females received equal weight. After weighting, the effective nationwide sample size for the Guilt Score is 6,055.

The states were then sorted by their scores from low to high and ranked such that Rank No. 1 is the lowest score (least amount of guilt) and Rank No. 50 is the highest score (highest amount of guilt).

Stress Score

The Stress Score is based on 7,480 responses to the following question and calculated as follows: “In the past 5 years, have you experienced stress from overspending on vacation?”

  • 0 points were assigned to those who respond, “No, I’ve never experienced stress from overspending on vacation.”
  • 50 points were assigned to those who respond, “Yes, I’ve experienced mild to moderate stress from overspending on vacation.”
  • 100 points were assigned to those who respond, “Yes, I’ve experienced severe stress from overspending on vacation.”

Each respondent’s Stress Score is equal to the points they were assigned for Q10 (0, 50, or 100). Each state’s Stress Score is equal to the average of all the respondents’ scores from that state. Within each state, responses were weighted based on gender so that males and females received equal weight. After weighting, the effective nationwide sample size for the Stress Score is 6,107.

The states are then sorted by their scores from low to high and ranked such that Rank No. 1 is the lowest score (least amount of stress) and Rank No. 50 is the highest score (highest amount of stress).

Guilt vs. Money Management Gap

The Guilt vs. Money Management Gap is calculated as Guilt Score – Money Management Score.

The Gap is highest if the Guilt Score is high and Money Management Score is low, meaning the respondent has high guilt, but good money management. They should feel less guilty. The Gap is lowest if the Guilt Score is low and the Money Management Score is high, meaning the respondent has low guilt, but poor money management. They should feel more guilty.

Each state’s Guilt vs. Money Management Gap is equal to the average of all the respondents’ gaps from that state. Within each state, responses are weighted based on gender so that males and females get equal weight. After weighting, the effective nationwide sample size for the Guilt Score is 6,093.
The states are then sorted by their gaps from low to high and ranked such that Rank 1 is the lowest score (too easy on themselves) and Rank 50 is the highest score (too hard on themselves).

How Do You Become Financially Literate?

Financial literacy is within reach—and often free.

From setting aside money in a piggy bank to scoring the best mortgage rates, financial literacy helps people make decisions that benefit not only their financial present but their financial future. And while this sounds good, for many people, it can feel easier said than done.

Unless you know where to look, it can be hard to come by financial literacy resources. And without proper instruction, it’s difficult to know which concepts and skills are most important to acquire.

Want to become financially literate? Here’s how.

How do you gain financial literacy?

To become financially literate, find a trusted source of financial information. Learn the fundamentals of personal finance and apply them to the financial habits and decisions in your life.

A good place to start is with Jump$tart Coalition, a nonprofit that advocates for financial education. This organization covers relevant concepts in its national standards, which identify six core areas of knowledge needed to gain financial literacy:

  • Spending and saving.
  • Credit and debt.
  • Employment and income.
  • Investing.
  • Risk management and insurance.
  • Financial decision-making

Resources for becoming financially literate

Financial education can be acquired in person and online—often for free. Some sources of educational resources include:

  • Federal, state, and local agencies.
  • University extension programs.
  • Libraries and community centers.
  • Banks, credit unions, and financial service providers.
  • Nonprofits with financial education services.

Below are several specific organizations that provide free online resources:

  • EconEdLink: The Council for Economic Education provides classroom-tested online finance lessons geared toward K-12 students.
  • Better Money Habits: A collaboration between Bank of America and Khan Academy, this site features animated videos that cover financial literacy basics (such as budgeting, saving, and debt) as well as more in-depth topics (college and retirement).
  • Money Smart: The Federal Deposit Insurance Corporation (FDIC) created a program for people of all ages to provide tools and resources for increasing financial literacy. This includes free lesson plans for educators and personal financial management videos for the public.
  • OppU: At OppU’s core is a standards-aligned, free online financial literacy education curriculum. It covers the fundamentals of personal finance through interactive videos and quizzes based on four modules: spending, credit, budgeting and saving, and debt and loans. There’s also an extensive resource bank of tips and materials (worksheets, videos, and ebooks) published on the OppU Answers blog.

How to test your financial literacy

To test your basic financial literacy, try this basic quiz from Georgia State University. For a more advanced financial literacy quiz, visit the Financial Industry Regulation Authority (FINRA).

Why become financially literate?

In 2016, only 37 percent of respondents passed the FINRA quiz with ‘high financial literacy.’ That means almost two-thirds of respondents had room for improvement.

There are many benefits of financial literacy. Financial literacy is what helps people distinguish between good and poor financial decisions, ultimately leading to either a difficult life or one that is successful and fulfilling. Bankruptcy? Not so great. Saving money in a retirement account? Wise choice.

Without financial literacy, financial decisions and habits lack an informed foundation of knowledge. This can lead to dire consequences.

Frequently asked questions about financial literacy

What is financial literacy?

By definition, financial literacy means having the knowledge and skills to effectively manage money. A high level of financial literacy enables people to control their finances and understand the impact of their decisions on their financial stability. For instance, financially literate people know that treating credit responsibly leads to a higher credit score, lower interest rates, and greater opportunities to finance their goals.

Why is financial literacy important?

Financial literacy is important because it helps people make informed decisions about their financial lives. People who possess financial literacy are equipped with the concepts and skills they need to pursue financial health.

Ask the experts: How do you gain financial literacy?

Marissa Sanders, founder of Simple Money Mom

  • Read books. Reading financial books will definitely help you become financially literate. Some of my favorite books are “The Total Money Makeover,” “Rich Dad Poor Dad,” “The Millionaire Nextdoor,” “Rule 1,” and “InvestED.”

  • Take a course. Taking a course whether free or paid can really give you a leg up when managing your finances. There are many courses available such as learning to budget, learning about credit, learning how to save money, and investing. Many libraries offer free budget and finance workshops as well so be sure to keep a lookout for what may be available in your area.

  • Read a blog. Blogs are free. Many of them are run by financial experts who have experience with managing money and becoming debt free as well. Most of them have a personal connection to their readers so if you feel that you learn best from people who have actually gone through what you are going through, then reading a personal finance blog might be right for you.

  • Go to a conference. Going to a conference is another way to learn about finance topics. These conferences are not free but by attending, you can make connections and network with like-minded people.

Marissa SandersMarissa Sanders is a personal finance expert and financial coach. She is passionate about helping women become financially literate and explains how to manage money in a simple and less intimidating way. It is Sanders’ belief that all women can flourish in their finances and her passion is to make it happen.

Jim Wasserman, retired teacher of economics and media literacy and writer at Your Third Life

  • Start by admitting that you need to learn more. Too many people, daunted by the many paths to financial success (and afraid to admit their own ignorance) grab one path and then defend it to their own demise, like a financial Alamo.

  • 101 yourself. Financial literacy is gaining traction and becoming a more popular topic in schools. Find a great financial literacy education site (like Next Gen Personal Finance) or a wonderful book series on teaching behavioral economics, media literacy, and financial literacy (Media, Marketing, & Me).

  • Consult others ahead of you in the game. When I hike a trail and meet others coming the other way, I ask them what is ahead (or read the experiences of those who have walked the trail). There are great websites (like HumbleDollar or MarketWatch) where people share their experiences. Some are applicable to one’s situation, some are not, but they get you to think about what you want and how to get it.

  • Distinguish wisdom from tradition. There are standard ways to financial well-being, and to the extent they are based on accumulated wisdom (don’t overspend, max out your 401K) they should be followed. But be ready to say that, just because it was done before, it shouldn’t be done now. Term life insurance may not be the best vehicle for saving anymore, and many have achieved financial independence by moving abroad (myself included).

Jim Wasserman taught economics and media literacy for more than 20 years. Retired from the classroom, he continues to write on education, economics, media literacy, and financial literacy. He has a three-book series, “Media, Marketing, and Me” (teacher’s guides for introducing media literacy and behavioral economics to elementary, middle, and high school students), publishing in 2019. With his wife and two feline overlords, he also maintains a blog, yourthirdlife.com, about exploring the world during retirement.

Logan Allec, owner of Money Done Right

  • The first way to gain financial literacy is to visit your local bank branch and talk to the officers who work there. Most bankers are more than willing to share their advice and opinions on different aspects of finances. By visiting a few different banks and asking questions about finances, you’ll quickly build up financial literacy.

  • The second way is to take a free class. Many community centers and schools now offer financial literacy classes due to the importance of understanding your finances. Simply Google ‘financial literacy class’ and your town name to find out if a free class is offered in your area.

  • The final way consumers can gain financial literacy is by reading the business section of the newspaper every weekend. Most business decisions are made based on money. If you can read and understand why corporations make the decisions they do, you will be practicing your financial literacy.

Logan Allec is a CPA and owner of the personal finance website Money Done Right. After spending his twenties grinding it out in the corporate world and paying off more than US$35,000 in student loans, he dropped everything and launched Money Done Right in 2017. His mission is to help everybody—from college students to retirees—make, save, and invest more money. He resides in the Los Angeles area with his wife Caroline.

How did you gain financial literacy? Tell us your story on Twitter at @OppUniversity!

The Debt Spiral: What It Is and How to Escape It

If you end up having to take out new debt to cover costs incurred by all the payments you have to make on your old debt … you just might be in a debt spiral!

Finance, like life in general, is often unfair. The richer you are, the easier it’ll be for you to hold on to your money. And the more you’re struggling with debt and budget issues, the worse those issues will become.

Almost like some sort of… slippery slope. Or maybe even a spiral. A debt spiral!

Yes, one financial slip-up, whether within or outside of your control, can set you down an unfortunate path. One late payment or unexpected expense causes you to fall behind on your financial obligations, and it can seem impossible to catch up.

So what is the debt spiral, how can it trap you, and how can you escape it?

Read on to find out!


The debt spiral: What is it?

We alluded to the definition of the debt spiral in the intro, but let’s just lay it out really quickly. Or rather, have one of our valued contributors lay it out.

“A debt spiral is when an individual, company, or even country falls into major debt over time,” explained Monica Eaton-Cardone, owner & COO of Chargebacks911 (@Chargebacks911). “The reason behind this is simply because individuals don’t know how to use their credit cards properly. You begin to miss payments and the number of late payment fees you have increases.

“You’re eventually in debt and decide to borrow money, but then you aren’t able to pay off the money you borrowed and get a little more behind. Ultimately, the whole thing snowballs on you as your interest rates get higher and higher. You’re then stuck with multiple loads of debt. The more you try to catch up, the worse it gets and the more behind you get.”

Credit cards are a common cause of a debt spiral, but they can also result from unsecured personal loans, installment loans, and online loans or even home, auto, and student loans. People with poor credit scores can also easily get caught up in a debt spiral if they’re relying on short-term bad credit loans and no credit check loans (like payday loanscash advances, and title loans) to regularly make ends meet.

It won’t always be obvious that you’ve entered a debt spiral.

“You may not even realize at first that you’re on your way into a debt spiral,” warned Leslie H. Tayne Esq. (@LeslieHTayneEsq), Founder and Head Attorney at Tayne Law Group (@taynelawgroup). “It can start as simply as not paying off your full credit card balance one month and then spending more on top of it the following month.

“Before you know it, your balance is continuing to increase each month as interest accumulates and your minimum payment is not making a dent. If you continue to be unable to make significant payments, it will just continue to grow and grow, making it even more difficult to break free of the spiral.”

Now how can you escape it?

Recognize the spiral.

You can’t fix a problem until you realize the problem exists.

“The first step to getting out of a debt spiral is recognizing that this is the problem,” offered Tayne. “One of the reasons debt spirals can get out of control is from a sense of denial or not recognizing how serious the problem is. While it can be difficult to admit that your finances have gotten out of control, this is the first step to getting yourself back on track.”

Make a plan.

Odds are you never wanted to get into a debt spiral. If you did, you need to get better goals! But you probably didn’t, which means you’re going to have to make some changes. And that means making a plan.

“Imagine you’ve just started college,” suggested Ben Watson, CPA, virtual CFO of DollarSprout.com (@DollarSprout) and founder of Fiscal Fluency. “But instead of carefully choosing courses, you take a few random classes each semester and hope you’ll have the requirements to graduate in four years.

“Newsflash: you won’t. Now apply that concept to your finances. Without a blueprint for your income and spending, your finances will consistently teeter on collapse. Also, people graduate from college early all the time. Based on the amount of time, effort, and earning potential, it’s possible you can pay off the credit cards in a shorter time than you even realize.”

You might already think you’ve cut everything you can out of your budget, but it could be worth taking another look.

“It’s important to take a good, long look at your finances,” urged Tayne. “Review your budget and see if you can find areas where you can cut back or downsize to free up some funds to make more sizable payments on your debt. If there aren’t any places where you can cut back, many times this signals a cash flow problem.

“Consider ways to increase your income, whether it’s taking more hours at your current job, looking for different opportunities, or taking on a side job. Use your extra income to make payments on your debt.”

Seek help.

It might be embarrassing to admit you’re stuck in a debt spiral, but you also may not be able to get out of it without some help.

“Finances aren’t just pushing numbers around, there are a lot of emotions attached to money,” Watson explained. “Reaching out to a financial coach or some sort of accountability partner can greatly increase your chances of successfully navigating the hurdles you’re facing. One of the main things they provide is helping you refocus, making a plan, and then gaining control as you move forward with the plan.”

If the situation is dire enough, you may need to look into bankruptcy options.

Preventing future debt cycles.

Even if you claw your way out of debt, if you don’t have an emergency fund, a surprise expense could throw you right back in.

“Don’t worry about putting together 6-12 months worth of expenses,” began Watson, “but having even $500-$1,000 in a savings account set aside for legitimate emergencies can save a lot of lost sleep and stress. If you’re starting from zero cash, spend a weekend or two cleaning out the attic, garage, and spare room and sell things you don’t need anymore.

“Go full Marie Kondo on your place and list items on Facebook Marketplace and eBay, or have a garage sale. Anything you haven’t even thought about for more than 12 months should be considered as potential cash. There are tons of simple ideas to make a quick buck on the internet, find one that fits you and go for it.”

The debt spiral is not a fun ride to be on. Hopefully, you won’t need a ticket! To learn more about how to improve your long term financial outlook, check out these related posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Contributors

Monica Eaton-Cardone is the owner, co-founder, and COO of Chargebacks911 (@chargebacks911), the first global company dedicated to preventing chargeback fraud, eliminating cyber-shoplifting and safeguarding the “eCommerce experience” for retailers, banks, buyers and sellers.  Chargebacks911 manages billions of online transactions annually and has helped its clients recover over $1 billion in disputed revenue. Monica is also the author of Chargebacks for Dummies (published in 2018), part of the best-selling instructional/reference book series.
Leslie Tayne HeadshotLeslie H. Tayne, Esq. (@LeslieHTayneEsq) has nearly 20 years’ experience in the practice area of consumer and business financial debt-related services. Leslie is the founder and head attorney at Tayne Law Group (@taynelawgroup), which specializes in debt relief.
Ben Watson, CPA is the virtual CFO of DollarSprout.com (@DollarSprout) and founder of Fiscal Fluency, a personal finance and business coaching company. He equips small businesses and entrepreneurs with the skills and accountability to manage their businesses with confidence rather than fear. He’s also the co-creator of the Business Launch Kit—an online course with simple to follow steps of how to create your own business without making a mess.

Going Global? How to Save Money on International Travel

by Amanda Finn
Traveling internationally can get expensive—and fast. But there are still plenty of ways for you to cut expenses and experience more of the world for less.

Just because it’s summer doesn’t mean you have to go on vacation. But if you feel so inclined, and are setting your sights on international destinations, there are a plethora of ways to throw your budget out the window. If you’re planning on going across the pond or across the globe, a little preparation could save you big time in the long run.

Obviously, you aren’t taking to the skies without at least a little planning, but there may be some things you haven’t considered for your budgeting arsenal—especially if you haven’t been overseas in a few years. Whether it’s creating a physical budget, getting a credit card with zero foreign transaction fees (Visa cards will be your best friend for this as they’re widely accepted) or being flexible with your destination, there are plenty of ways to make sure you don’t overspend.


Be choosy with hotels.

As wonderful as it might be to wake up to the sight of the Eiffel Tower or Big Ben, you will be paying for that sight more than for the hotel itself. Unless you’re totally sold on that hotel room view, it’s best to stay a little bit away from the center of the city or major attractions.

Sure, it would be a fun wake-up or goodnight view, but how much time are you actually going to be spending in your hotel?

Hopefully, if you’re in Paris or London you’ll be seeing those famous views more up close than just from the window of a cozy room. Not only would getting a hotel a little bit off-center save you some money (or a lot of money) it may also mean seeing things you might not otherwise see.

Skyscanner (a great way to scout cheap airfare across the internet) suggests the same price saving advice.

“If your hotel room has a view of the Eiffel Tower chances are it’s going to be tiny and very overpriced,” according to Skyscanner. “Instead of blowing all your money on a city centre location, opt for a hotel outside the city limits where you can still enjoy all the attractions during the day but get to retreat to a quieter (and cheaper) location to rest your head at night.”

Eat local.

This seems like a no-brainer, but with a little research you can find some of the best local cuisines that will come at a cheaper price than any chains or imported restaurants.

Smarter Travel goes one step further and advises not asking hotel concierges for advice about where to eat and take to local food blogs for advisement instead.

“They tend to have a set list of pricey or touristy spots near the hotel that they suggest,” according to Smarter Travel. “Instead, ask bartenders or baristas where they personally like to eat, or consult travel guidebooks and their companion websites for lists of the best cheap eats in a city. The ‘Rough Guides’ and ‘Let’s Go’ series of guidebooks are two good choices.”

You definitely need to look into restaurants beforehand or ask around before eating out just to make sure it’s reputable, but broadening your palate will colorize your experiences. Of course, just like in your own town or city, you want to know enough to not end up in a … messy situation afterward. Read reviews and get a sense of the cleanliness of the place before you venture in.

This advice is particularly important when taking street food into consideration. Even Smarter Travel suggests being cautious of street vendors. There is a way to find great treats on the street, but there are many ways it can go wrong as well.

When it comes to ordering on the street, Smarter Travel offers some tried and true thoughts on food safety: “Be sure your dish is served hot, and take a look at the cart or kiosk before ordering. Does it look clean and well kept? Is it busy? (The fewer the customers, the longer the food may sit before being served.)”

Life Hack recommends the grocery shopping route as another way of saving some money. You can eat like a local and make your own food to go or picnic somewhere nearby.

Be a flexible traveler.

If you’re searching for airline deals, you’ll obviously be better off not having your sights totally set on one destination or one set of dates. The more flexible you can be, the more options you’ll have both budget and destination-wise.

Frugal Travel Guy (FTG) suggests the flexible approach to save as much money as possible while still getting that international travel adventure.

“Of course, flight ‘deals’ always work best when you’re able to keep an open mind,” Holly Johnson of FTG said. “If you are willing to consider multiple destinations or even plan your trips around airfare deals, you can explore new corners of the world and save money in one fell swoop. For example, if you’re willing to travel anywhere in Asia and wait until a deal comes along, you’re more likely to find a sale than if you were only willing to fly into Phuket, Thailand or Beijing, China.”

The other thing to keep an eye out for is airfare sales. Sales and mistake fares happen on occasion, and if you’re lucky enough to find one, snag it.

Johnson said she has seen economy flights from major US cities to places like Europe, Asia, and South America for less than $500 round-trip! Especially for some Asian destinations, that’s a bargain. Economy flights to Beijing, for example, can start at $1,000 so it’s definitely worthwhile to keep an eye out for deals.

You should also try to book flights in the afternoon as prices tend to be lower. There is a rumor that Tuesday afternoons are the cheapest time to book flights, so that’s worth a try too.

House-sitting for free accommodation.

If you aren’t opposed to roughin’ it out of a hotel, house-sitting while traveling abroad is a great way to score free accommodation while also getting the chance to live like a local during your travels. Ordinary Traveler suggests turning to Trusted Housesitters to get yourself in the house sitting game.

As of June 2019, the yearly membership for Trusted Housesitters is $119/year. That’s a far cry from the cost of hotels domestic or abroad.

“Trusted Housesitters is the best website to connect with homeowners looking for people to house-sit and care for their pets while they are away,” Ordinary Traveler said. “They have the largest selection of houses all over the world. I recommend becoming a member to get the best selection of house-sit gigs and have the opportunity to apply for the most popular locations as soon as they are listed!”

Housesitting is like AirBnb without the price tag, but it does come with the responsibility of keeping an eye on someone’s home or pets. If you’re willing to take on that responsibility you can reap the rewards of the traveler life. To learn more about traveling on a budget, check out these related posts and articles from OppLoans:

Do you have a personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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8 Money Habits Parents Should Start Modeling Right Now

Walking the walk is tough. Here’s how to get started—and stay on your feet.

For many kids, “the talk” is a rite of passage. You know: the birds and the bees, and all the other things that parents don’t want to discuss—and kids don’t want to hear.

But what about another talk that can be equally uncomfortable?

How much money do we make? How much do we have for college? How about for an emergency?

That’s right. Having a talk about family money is something that many parents view as important but, understandably, would rather avoid. And “the talk” itself is just the beginning. Then it’s time for parents to follow their own advice, which can be even more intimidating.

But modeling good financial habits is one of the best ways to teach kids about money.

Ready to talk the talk—and then walk the walk? We spoke to nine parenting and personal finance pros. Here are eight first steps to get you started.

1. Discuss Money

Kevin Heaton, CFO at i3 Family Office Services

The most important habit to model is to discuss money. Talk about it, read about it, ask questions, discuss it. I would much prefer my 9-year-old make mistakes with her money now rather than at 29 or 39, and so we discuss it.

All of our children are bombarded with a view of hyper-reality, hyper-consumerism through social media: Instagram would have you believe that a $60,000 Birkin bag is an acceptably normal purchase, and afterward should be worn while posed on a waterfall in some exotic location, yacht framed in background. That is manufactured reality, and counter-productive if the growth of existing wealth is the goal.

Heaton recommends focusing on three main topics:

1. Work for Money

Work for Money is the start: Children who work for their money either through household duties, school achievement or other earned reward/recognition experiences value the reward. More important, it is less about the amount and more about the transaction itself, and the opportunity to discuss money in a coached, supportive environment. Start as early as possible: a child at 5 can help with small tasks for a piggy bank reward. Once a child has money, they must next understand that even if they can’t see the money it does exist. Last, they can only spend the same dollar once.

2. How Money Works

How Money Works: Earning money is not enough; the child should next understand that income and expenses are a part of having money. How much will you earn, what will you spend the money on by choice, are there set expenses you have to spend the money on to live comfortably? This is the opportunity to explain budgeting, taxes, utilities and other expenses, and plan for small ‘want-to-have’ and large ‘want-to-have’ purchases. It’s also a great time to introduce setting aside amounts for education, sport activities, or charitable gifts for the future. There will also come a time to discuss setting aside a fixed amount for investment.

3. Make Money Work for You

Make Money Work for You: Many families cover the first two points well, but never discuss borrowing and lending, stocks, investments, and asset management. They will discuss saving, but saving is not investing. To start to teach your child about investing, create a graph—for the refrigerator or in an app or spreadsheet depending upon the child’s age—and have your child pick one thing they love that has a public company association: a toy, a movie, shoes, an amusement park, a food. Then start to graph the price together—if you bought one share for $8 this day, it would be worth + or – XX this day. Begin to discuss what a share of stock is, why some are more expensive than others, how you can earn or lose money, and how one buys a share of stock. After a period of time, you may wish to pick a specific stock or fund or other investment of which the child has a keen interest to make a small investment.

All of this is important, but as with most things, effective communication—discussion about money matters—is the start.

Lucy Harris, CEO of Hello Baby Bump

When it comes to money habits and children, I believe that it is incredibly important to start early. Laying down the foundation for good money habits is essential. However, having said that, it is super important to allow your children to learn through mistakes as well.

My children get pocket money for completing chores and getting good grades. They have to put money into three different piggy banks. One is for saving, one is for spending and one is for emergencies. Getting your children into the habit of dividing up their ‘earnings’ into these three categories is teaching them early about sensible spending and habits such as always having an emergency fund.

When it comes to my children spending money, we try to talk them through their purchases. We ask them questions such as:

  • Do you want it or need it?
  • Is it going to serve a purpose?
  • Is it going to be useful?
  • Why do you want/need it?
  • Is it worth the price tag?

Questions such as this get the children into a habit of analyzing their purchases to ensure that they don’t waste their money.

Of course like any child, they are going to have impulse buys. We allow the kids to make their own decisions when it comes to the impulses. Then, when they don’t have enough money for something they need or really want due to them spending their money on the impulse buy, they learn and teach themselves a lesson.

Watch your own spending habits and if your children are old enough, talk to them about the basics of the family money habits. Children learn a lot from their parents and they pick up the things you do. If you have poor spending habits yourself and your children see you, they are more than likely going to pick it up as well.

2. Set a Budget

Alexandra Fung, CEO of Upparent

As a mom of three kids (ages 12, 10 and 2) and co-founder of parenting website Upparent.com, I have had ample opportunity and reason to consider how to best model and support good money habits to my children—and am always looking to learn more! Some tips that have worked well for our family include:

  • Don’t be afraid to talk with your children about your household budget, and how you decide where and how to allocate resources based on your family’s finances and values. For example, if we are considering whether or not to enroll one of our older kids in an extracurricular activity, we are open with them about how it would fit into our monthly budget, and how it compares to other monthly expenses, so they begin to understand the process we undergo to decide whether any particular expense is worthwhile for our family.
  • Discuss and agree on budget limits for certain expenses, such as gifts, to teach an appreciation for thoughtful and deliberate buying habits.
  • Set personal limits on fun or extra expenses (such as fancy coffee!), to make it clear that even small purchases add up, and need to be accounted for in a budget.
  • Create a shopping list before heading to the store (or online), to avoid unnecessary impulse purchases.

Paul Moyer, founder of Saving Freak

Budgeting is the most important tool we try to teach our kids. All of their money goes into a jar marked work. Before they can spend that money it gets split into three different jars marked give, save, and spend. 10 percent of everything they work for goes into give, 20 percent into save, and they are allowed to spend the rest as they please.

Our oldest is 10 and it is so ingrained in him now that he rushes to move money from the work jar to the other jars just so he can know how much he has to spend. He’s also pleased that his savings is getting bigger so that he can buy a car once he turns 16.

3. Earn Money

Monica Lam, blogger at Lucky Mojito

Let kids earn their money. Our kids do not get allowances. They know that money has a value and if you do something like chores or other form of work, you earn money. This teaches kids that time has value and should be spent wisely. By saving money or investing it, you are giving yourself the freedom to do more things.

Use a save, spend, donate money jar to teach money basics. Just because your kids are young, it doesn’t mean they can’t grasp money concepts. To make it easier to visualize we have three money jars. When our daughter, who is 5, earns some money helping around the house, we let her put her money into the jars she wants. She can either save her money for the future, spend it on something now, or donate it. She loves animals so she has chosen to donate money to the ASPCA.

Deborah L. Meyer, owner of WorthyNest

Don’t spoil. Even if you have the financial resources available, resist the urge to say yes to every request. Before you know it, your teen will be a young adult. Relying on your economic handouts will hurt, rather than help him later in life. Engage in an honest conversation with your teen about wants versus needs.

Have your teen get some financial skin in the game. If your daughter insists on purchasing something she does not need, decide on a dollar amount or percentage that she must contribute from her own funds.

Encourage part-time employment. It is rare for your child to become an olympian or professional athlete. Extra-curricular activities are great for fostering teamwork and self-confidence, but they do not pay the bills as an adult. In fact, select sports teams and one-on-one lessons are costly. It is quite possible for your teen to work part-time and participate in one extra-curricular activity per quarter. Part-time employment fosters responsibility, and earnings can be saved or applied to living expenses such as gas, entertainment, and meals out with friends.

4. Save Money

Caroline Vencil, founder at Caroline Vencil

I think the most important skill parents can share with their kids is showing them that saving comes before spending. It’s easy to see parents spending money as kids, but to have a conversation about savings and how important it is is even more important. Growing up, I remember going with my parents to open my first bank account at 8 years old. The idea of making constant deposits and watching that money grow was exciting to me. I’m very thankful that I was taught about savings early on in my life.

Deborah L. Meyer, owner of WorthyNest

Match it. If you have the financial means, offer to match your child’s savings in a Roth IRA. The beauty of a Roth IRA is that you never have to withdraw from it during your lifetime. Earnings grow tax-free and are great savings vehicles for young people.

5. Compare Prices

Monica Lam, blogger at Lucky Mojito

It’s important to teach your kids that you don’t need to buy everything new or at new prices. Our kids have more toys and clothes than they need because we’ve scored great deals at thrift stores, second hand shops, and at retail stores. Our kids have learned it’s important to compare prices and by doing so they can either save more money or get more things because they are at cheaper prices.

6. Negotiate

Monica Lam, blogger at Lucky Mojito

My kids are ages 2 and 5. My husband and I speak about finances in front of them all the time because we want them to feel comfortable with money and have a better understanding as they get older.

We teach our kids the importance of negotiating. To do this we go with them to garage sales and flea markets. They see us both buy and sell items. Negotiation is a skill that can save you hundreds if not thousands of dollars. This applies when buying a car or house, choosing banks based on fees and interest rates, and even hiring contractors.

7. Practice Patience

Kath Gilbert, blogger at The Life Spotters

My top tip is to write down potential purchases in a wish list on your phone (or notebook if you prefer) and also to allow a measured cooling off period. My son, in particular, is very impulsive and switches between hobbies and passions faster than I can get my purse out—we saw he was making a habit of wasting his money on things that he quickly lost interest in. I started modelling patience by choosing not to purchase something until I’d given myself time to think about it, and making a note of the item I’d seen to refer back to later. I created a list for myself and one for each child.

Now if anybody sees something they want we make a note of it and allow at least 2 weeks to see if it’s still the ‘must have thing’ we originally deemed it to be. (So far so good—yesterday my son went through his list and crossed off nearly everything on it!)

8. Live Frugally

Jonathan Huang, aka Mr. Centsible

As a brand new father, I get to contemplate all the time on how I’m going to raise financially savvy kids. I think the overarching concept that I go back to is that, as parents, it’s important to lead by example. If you live a life of luxury, say having house cleaners come biweekly, or eat out a couple of times a week, or buy things in the store without hesitation…these are all things kids will pick up on and think are normal. This could teach bad financial habits by thinking these actions don’t have consequences if they are not discussed beforehand.

To me, this means that parents may need to consider sacrificing their lifestyle a little bit in order to not instill a sense of luxury or entitlement in their kids. This means that even if the parents have the financial means to live a certain lifestyle, it may be beneficial for their kids to not live that lifestyle. If kids live their childhood without realizing the value of money, they could be in for a rude awakening when they graduate into young adults.

Bottom Line

Whether they realize it or not, parents and other role models pass financial lessons to their kids. To instill healthy habits, model sound personal finance. The youngsters in your life will take note—and walk away with the gift of financial literacy to last a lifetime.

Contributors

Alexandra FungAlexandra Fung is the co-founder and CEO of Upparent.com, a unique new website that makes it easy for parents to discover and share recommendations with one another about local things to do, places to go and products to try as a family. Family and community have long been central to Alex’s life, and after graduating from the University of Notre Dame and NYU School of Law, she served as an advocate for children and families in the nonprofit sector for many years before helping to launch Upparent. Originally from Southern California, Alex currently lives with her husband and three kids in the suburbs of Chicago.
Kath Gilbert is a writer, mother and debt survivor. She blogs about life-design, money and adventure at The Life Spotters.
Lucy Harris is a mother and the CEO of Hello Baby Bump.
Kevin Heaton is a CFO who understands the cycles of wealth, the dynamics of family change and resultant behaviors. His expertise is in developing and implementing focused tactics to protect and manage private assets through the objective application of information tools, infrastructure support and investment strategies. Mr. Heaton is the founder and principal of i3, LLC, a Family Office Private Asset Management firm, and has grown the organization into a team of professionals who provide clients with access to relevant information to make informed decisions, the infrastructure (team and tools), to actively manage their assets and investment opportunities (directly or through managed funds) to (re)invest their capital. As an accomplished speaker and presenter, Kevin’s talks give in-depth analyses of his own experiences in family office asset management and makes even the most complex asset strategies clear with concrete action plans.
Jonathan Huang is the founder of Mr. Centsible, a blog with the tagline “Your Sensible Guide to Personal Finance.” It’s a blog dedicated to helping millennials understand personal finance and reach financial freedom.
Monica Lam is a personal finance blogger at Lucky Mojito. She and her family paid off over $33k in credit card debt and built a net worth of 6 figures and growing. She shares her best money making and saving tips so others can do the same.
Deborah L. Meyer, CPA/PFS and CFP®, is a fee-only financial planner and author of Redefining Family Wealth: A Parent’s Guide to Purposeful Living. Deborah is the owner of WorthyNest®, an independent advisory firm dedicated to helping parents build wealth. She is Saint Louis University’s School of Business 2019 Distinguished Young Alumni and a recipient of the 2018 AICPA Standing Ovation Award for Personal Financial Planning. Deborah has been featured in The Wall Street Journal, Forbes, Yahoo! Finance and CNN Business and is a regular contributor to Kiplinger. Outside of work, Deborah spends time with her husband Bryan and three sons.
Paul Moyer is the owner and founder of Saving Freak. He has been writing and teaching others about personal finance since 2007.
Caroline Vencil is a money-saving expert, especially when it comes to her family of 6 living on one low income. She is a master of living on a tight budget and still having a full life. Her passion is to teach other women how to make their money work for them and to take charge of their own financial lives.

What healthy financial habits do you want to pass down to your kids? Tell us on Twitter at @OppUniversity.

Happy Bobby Bonilla Day!

If you struggle to understand how compound interest can help build your retirement savings, you’ll find Bobby Bonilla Day very instructive.

Here on the OppLoans Financial Sense blog, we write a lot about how people can fix their credit scores, build their savings, and generally improve their long-term financial outlook. But sometimes it’s fun to write about—well—the opposite of that: People who luck into ridiculously sweet financial situations where all they have to do is sit back and watch the money roll in.

On that note: Happy Bobby Bonilla Day! It’s by far the world’s #1 niche sports-finance-based holiday, a time to sit back and reflect on the two most incontrovertible truths that govern this vast and mysterious universe of ours: First, that former Major League Baseball star Bobby Bonilla has it made in the shade; second, that the New York Mets are very bad at business.


What is Bobby Bonilla Day?

Bobby Bonilla Day falls on July 1st because that is the day, every year, that the New York Mets pay Bobby Bonilla $1.19 million. If that sounds like it’s a fairly run-of-the-mill arrangement, it helps to note that Bonilla has not played in the MLB since 2001 and hasn’t played for the Mets since 1999.

The first Bobby Bonilla was celebrated in 2011 and the final Bobby Bonilla day will be commemorated in 2035. In that timespan, Bonilla will collect a whopping $29.8 million from the Mets, all for doing absolutely nothing! Sounds like a pretty sweet gig right? So what happened?!

Deferred payments and compound interest.

Bobby Bonilla was a very good baseball player. He played in the Major Leagues from 1986 to 2001, collecting six All-Star appearances and three Silver Sluggers along the way. He even won a World Series ring with the 1997 Florida Marlins. But the following year, he was traded to the Los Angeles Dodgers midseason who then traded him to the New York Mets the following November.

Bonilla had already played with the Mets from 1992 to 1995, but this reunion was not exactly a happy one as Bonilla’s declining play leading to numerous clashes with Mets manager Bobby Valentine. After the 1998 season concluded, the Mets decided to wash their hands of Bonilla entirely and release him from his contract.

There was only one problem: Bonilla was still owed $5.9 million on said contract. Under these circumstances, teams who can’t find a trade partner will simply pay out the rest of the player’s contract in order to get him out of the clubhouse. If the player is eager to leave the franchise as well, their agent can also negotiate a smaller payout in order to facilitate their release.

What Bonilla’s agent did in this case, however, was slightly different. (Okay, okay, it was a lot different.) Bonilla’s agent, Dennis Gilbert, offered to have Bonilla defer payment for a full decade. In return, the Mets would let that $5.9 million accrue interest at a rate of eight percent annually starting in the year 2000. It’s similar to the structure seen in many life insurance contracts—a fact likely owing to Gilbert’s previous work as an insurance agent.

After the decade had passed, Bonilla would then start collecting a portion of the money every year until 2035. If you’ve ever wondered how compounding interest works on your retirement savings, this deal is a great example: That eight percent annual interest rate on Bonilla’s salary turned $5.9 million into $29.8 million overall.

Bonilla took his first payout on July 1st, 2011. Now, every year, July 1st is celebrated as Bobby Bonilla Day by an incredibly esoteric blend of hardcore baseball nerds, finance aficionados, and aggrieved Mets fans (otherwise known as … Mets fans). For reference, the Mets are paying Bonilla over twice as much in 2019 as they are paying rookie Pete Alonso, whose 27 home runs are good for second in the National League.

How did this deal work out for the Mets?

Frankly: not well!

If attaching an eight percent annual interest rate onto the remaining money in Bonilla’s contract seems like a curious decision by Mets owner Fred Wilpon, it helps to understand some of the surrounding contexts.

At the time that they agreed to defer Bonilla’s contract, the Wilpon family was invested in an absolutely superb New York investment fund that was enjoying unheard of annual returns of 12 to 15 percent. So even with that eight percent annual interest rate tacked on, they were still coming out ahead!

Here’s the problem. That fund’s improbable-seeming success was all thanks to one man: Bernie Madoff. Oops! Those returns that the Wilpon’s had been enjoying were actually just funds from new investors being passed off as profits. When Madoff’s multibillion-dollar Ponzi scheme collapsed during the 2008 financial crisis, it took approximately $500 million of the Wilpon family’s money with it.

Here’s the kicker: This is actually the second set of deferred payments that Bonilla has with the Mets. When they traded Bonilla to the Orioles in 1995, the two teams split a $12.5 million payment between them into 25 separate installments. Bonilla received his first payment in 2004 and will receive his last payment in 2028 for a total of $15.3 million.

Be like Bobby.

If you’re debating whether or not you should start contributing to your retirement account, take the lesson of Bobby Bonilla Day to heart. Putting that money aside now and adding some compounding interest to the mix will result in a lot more money down the line. It probably won’t be worth $1.19 million a year, but it’ll still be well worth the wait.

To learn more about the financial side of sports, check out these other posts and articles from OppLoans:

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