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The Biggest Threats To Your Financial Wellness: Debt and Undisciplined Behavior

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If you’ve overcome the challenges to building wealth and have put a plan in place to systematize your finances, you’re off to a great start. In addition to continuing these behaviors over time, you must guard your burgeoning wealth against threats from within and without. Undisciplined behavior can keep your financial wellness plan from taking hold while accruing too many debts of the wrong sort can slow down your momentum for years to come.

High-Interest Debts

Credit card balances.

Cash advance.

High-interest debts are the sort you want to avoid. They can act like an anchor, weighing down your financial game plan and holding back your life from improving and advancing. Some ways to avoid building up these problematic balances are:

  • Don’t spend what you don’t have. Sticking to your existing budget can be difficult, but it’s better than crushing debts.
  • Pay off credit card balances at the end of every month. If you have to use a credit card, you should pay off the balance in full every month.
  • Start an emergency fund at a separate institution from your regular accounts. This will let you build your fund and keep it separate from your regular pool of finances.
  • Set up automatic savings deposits. Take advantage of the systematized processes available to build your finances without having to think about it.  
  • Run your home’s finances on the cash envelope system. This process involves planning and setting your budget based on cash banked in envelopes. Once the envelope is emptied, your budget is depleted for the month and you have to wait to re-up your cash.

In addition to these avoidance behaviors, you should never utilize payday loans. These predatory lending vehicles are structured in a way to accelerate your debt load and keep you paying forever. They contribute to a vicious cycle of poverty in the US that affects far too many people. Negotiate with your bills due, explore a refinancing loan, or take on a second job to handle difficult financial issues rather than this high-risk move that does nothing to benefit you.

Healthy Debts

Not all debts are created equal. While high-interest debts are a threat to your well-being, some debts present opportunities to improve your life down the line. Examples of good debts are:

  • A mortgage – the opportunity to build equity and potentially create a second income stream by renting your property is a huge investment in your future.
  • Credit consolidation loan – using this option to eliminate your high-interest debts can keep some people out of bankruptcy. They do come with restrictions that should be considered very carefully, but consolidation loans can represent a step towards greater financial awareness and freedom.
  • Personal business loan – taking a smart loan to help finance a personal business venture can lead to greater financial prosperity. We suggest you begin personal business ventures as an alternative venture to establish your business before exploring financing.

As opposed to unhealthy debt, good debt offers a benefit to you that is equal to the financial risk involved. These debt options have more stable loan rates and are less exploitative, serving as a launching pad for you to invest in your future. Unhealthy debt only solves a temporary problem which stems from poor financial discipline.  

Lack of Financial Discipline

Much misery can be tracked to undisciplined financial behaviors. Unhealthy debts arise when people act out of desperation or on impulse. Anyone can come up with a financial game plan to improve their life, but it takes real guts and determination to stick to it.

That sort of hard work pays off in the end, but it requires a dedicated patience that has fallen out of style in a society that puts a premium on instant gratification. The trick is to build a healthy financial mindset and cultivate a relationship with your finances in which you realize that your money is a tool for wellness, not a delivery system for your happiness.

Building Your Financial Game Plan

If you’ve successfully avoided those problematic debts, pat yourself on the back. If debt is an issue for you, you deserve recognition too – learning more about personal finance is the first step in finding your way out. Exploring what solution works best for your case, or whether to employ the debt snowball or debt avalanche method can be eye-opening.

Set and track a budget and stick to it, and you will see those problems begin to melt away. The trick to sticking to your new, financially healthy lifestyle? A mindset of abundance and gratitude. Know that the future holds promises of opportunity to make your life better, and keep rising up to be financially ready to take advantage of those opportunities.

Want to learn more about building wealth and staying out of problematic debts? Change your world by joining us at JBWealthfit and start working on the future you want to live.

The Four Challenges to Building Wealth: Financial Organization and Coordination

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You’ve made it to our final segment of our series concerning the four challenges to building wealth. We’ve explored hurdles like financial institutions and ways to adopt their strategies, lost opportunity cost, and the velocity of money. Your biggest challenge to building wealth though?

It’s you.

No matter how savvy and dedicated you may be to growing your wealth, it won’t work if you are not approaching it in an organized and coordinated way.

You Can’t Grow What You Don’t Know

The biggest reason financial organization and coordination matters is because if you can’t track your financial life you can’t determine its performance. So many people let their accounts, bills, mortgage, and more stay separate and unassociated in their minds that it’s a miracle they can pay their taxes every year, let alone handle their bills every month. Without a centralized hub for your finances that makes it simple to check your financial health, it can be almost impossible to grow your wealth effectively.

Determine What Works for You

There are plenty of ways to build that hub. Some people opt for spreadsheets that track net worth and monthly bills. These can be powerful, since they’re self-driven and require you to interact with your money in an active manner. Other people opt for web-based applications that aggregate your financial data in one place. Some utilize desktop-based software to great effect. The secret is in determining what system best meets your needs and helps you along your path to financial wellness.

Consistency is Key

Once you’ve figured out your system of financial tracking, you have to build that into your life. Set calendar reminders. Create appointments with yourself. If your tracking and managing does not remain consistent, your progress will suffer for it. Being able to observe trends such as ballooning restaurant spending or growing interest on credit card debts can help alert you to issues before they get out of hand. You should do whatever it takes to make your financial health check part of your regular routine.

Coordinate Your Financial Goals and Strategies

Once you’ve found a method that works for you and made it part of your routine, you need to use it to track your net worth as well as your additional financial goals. By tracking goals such as paying off student loans, building home equity, or eliminating high interest debts, you can begin to coordinate your finances to support those goals.

If your equity growth isn’t outpacing growing interest, you should shift your focus and capital to eliminate those debts. Need to grow an emergency fund more quickly? Consider shifting funds away from your investment accounts and toward liquid savings funds.

By putting your financial health in one accessible, trackable space and tying overall performance to your goal progress, you put yourself firmly in the driver’s seat. It can be eye-opening, intimidating, and uncomfortable, but growth comes from discomfort. The difficulties you experience now can either teach you important lessons for your future well-being or you can ignore them, as so many people choose to.

Ready to tackle those financial goals and build a future to be excited about? Contact us to get started.

The Four Challenges to Building Wealth: Velocity of Money

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As we continue our series exploring challenges to building wealth, we need to introduce the concept of velocity of money. In personal finance, the velocity of money refers to using your funds to build wealth more quickly by getting your money to do more than one thing at a time.

This is a well-kept secret of the financial industry and one that can transform your relationship to your personal finance.

How Can I Use My Money Now?

Accepting the status quo is not going to help grow your money and efficiently organize your personal finances. You’ve got to ask yourself “how can I use my money now to make things better down the line?”

Much of our culture and advertising is devoted to making you chase the “next great thing,” the next bit of instant-gratification, and that next hit of dopamine. While pervasive, it’s not a sustainable model for your life.

Choosing to embrace the following behaviors now while delaying those small bits of gratification will make your future life much more enjoyable:

  • Pay down debts
  • Build an emergency fund
  • Invest in your future
  • Invest in yourself
  • Save for retirement

Those choices may not offer the immediate reward promised by so much of our flawed, impulsive human nature and the marketing campaigns designed to take advantage of it. But in the long run, those small changes now will have a big impact on your life.

The Magic of Compounding

The reason why your choices today have a magnified impact on the future is because of two things: Lost Opportunity Cost and Compounding.

A dollar invested today has the opportunity to compound over and over through the years, building its overall value. You shouldn’t underestimate the awesome power of compound interest; If you’ve ever struggled with high interest credit card debt, you know how the momentum of compounding can build.

Turning this principle into a positive is why we stress the idea of “time in the market” rather than “timing the market.” Building your wealth is a process, and compounding can work for you if you consistently make intelligent choices over time.

When to Refinance Loans

If you’ve taken out loans, you’ve likely received countless direct mail advertisements for refinancing programs. While these seem like a great way to lower your payments, you must be cautious when evaluating them. Many come with early repayment penalties and fine print rules that heavily favor the program and lender rather than you.

If you have a loan you’re looking to refinance- such as your mortgage- look first for ways to remove your private mortgage insurance (PMI) after you’ve built 20% equity or more in the home. You can also look into ways to change your repayment term so that you can pay loans off sooner and save yourself thousands of dollars in interest. Any time a loan term can be updated in your favor it’s worth exploring new options. Just be sure to evaluate the entirety of your new solution and not just the face value of the monthly payment.

Make Your Money Work Harder

The real way to build wealth and increase the velocity of your money?

You have to be as demanding of your money as you are of yourself.

Are your investment and savings strategies underperforming? Update them. Is accelerating interest of outstanding debts hurting your overall quality of life? Rebalance your strategy to pay off debts sooner or explore refinancing options to ease some of the burden. Personal finance is complex, but solving issues can be as simple as acknowledging a problem exists and then finding a workable solution to that problem. We’ll discuss visibility and organization in our final post in this series, but know this: accepting lackluster performance will lead to a stressful and lackluster financial life.

Ready to learn how we can help you increase your money’s velocity to build wealth quicker and more effectively? Complete this questionnaire to see which Jarred Bunch Consulting service is right for you.

Four Challenges to Building Wealth: Rules of Financial Institutions

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In continuing our exploration of the four challenges to building wealth, we’re looking into the rules of financial institutions today. We’ve written at length before about how financial institutions operate to get and keep more of your money. Take the time to educate yourself on these behaviors and how they get hold of your money and keep your finances operating in their ecosystem. These are definite hurdles for your wealth, but these principles can be adapted so you can grow your own personal finance.

Treat Your Finance Like a Bank

One way you can apply the rules of financial institutions to your own wealth growth is to remove some of the “personal” from your thinking about personal finance. Think of your funds as though you are a bank:

You want your money

  • Banks want you in their ecosystem. They want you to keep your funds with them, as much as possible. Work to hold onto your money with the same dogged determination. Eliminate high-interest debts and reduce what bills you can.

You want your money systematically

  • Sure, automatic deposits are convenient and secure, but that systematic deposit is more fuel for the bank to use while they hold your funds. Use these systems to your advantage, but keep track of your automatic payments and deposits. Cancel those you don’t use and keep your money systematically storing away for the future.

You want to hold your cash for a long time

  • Your balance year-over-year should be a gradual march upwards. Holding onto your funds and committing to the security of that growth will provide your life the security and abundance you deserve.

You want to give as little away as possible.

  • You never know when you’re going to need your emergency fund. You never know when the opportunity to invest in your dreams will arrive. Keep your funds around for when lighting strikes- good or bad.

Know All of the Details

Do you know your accounts’ rate of return? What about the annual percentage rate? Do you know if your mortgage or other loans have a prepayment penalty? Banks and other financial institutions don’t enter into a financial agreement or partnership without knowing every detail, and neither should you.

The details you don’t know can be what leads to financial disaster. Take the time to read, know, and clarify the details that the banks love to hide in the small print – it can be eye-opening.

Make Your Money Do Multiple Things at a Time

Sticking all of your savings in one account doesn’t make sense. In today’s uncertain world, you need to use a diversified strategy to make your money work harder for you. Other methods of saving your money include:

  • An Emergency Fund: This should be kept separate from your main checking and savings account. Keep the funds hard to access to prevent impulsive use and take advantage of automatic transfers to keep it juiced up. Most experts recommend that you have 3-6 minimum of living expenses in your emergency fund.
  • Investment Accounts: Exchange traded funds and mutual funds are ways to invest your money in shares of companies’ stock. You’re buying a piece of their business, in the hopes that the performance improves and more value is generated for your account over time.  
  • Retirement Accounts: 401Ks, the now-rare pension, and IRAs are types of deferred-income retirement accounts. Different types have different tax-incentives, and each offer crucial ways to build your nest egg for eventual retirement.

If you can find ways to accomplish more than one thing with a dollar, you’re hitting the big leagues alongside those institutions that are too big to fail. Spreading your investments out amongst these different accounts helps shield you from market volatility that can eat your returns, as well as providing vehicles to achieve different goals with your money.

Don’t Accept the Status Quo

The real secret to making your personal finance work as hard for you as the banks’ treasury does? Arm yourself with ambition and an abundance mindset. Know that there is always another option to explore that can benefit you in different ways. Don’t accept the current situation or enter into lopsided agreements that offer no benefit to you. If you are not growing or improving in your current financial situation, or career, or hobby, or workout routine why stay there? The world is full of alternatives worth exploring until you find something that works best for you.  

Ready to conquer the traditionally lopsided relationships between individuals and institutions? Learn more about personal finance with us at JB Wealthfit.

The Four Challenges to Building Wealth: Lost Opportunity Cost

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As we kick off our series exploring the four challenges to building wealth, we’re taking a deep dive into lost opportunity cost. The choices we make every day affect our lives in far-reaching ways, from our diet and fitness routine to financial discipline. When you decide to do something you aren’t just choosing that option over others – you’re choosing its future over the others. How are your choices affecting your life and your future?

The Future Impact of a Dollar

When you decide to spend your hard-won money on something, you don’t just lose that dollar. You are effectively giving up any future potential that dollar had to gain interest or grow in value through saving and investing. It’s not the total balance that you’ve passed on though. An impulsive lunch out today could mean you don’t have the funds you need for a medical bill or car repair later.

It seems extreme, but many small choices add up to either financial freedom or a paycheck to paycheck lifestyle. Evaluate every dollar spent carefully; is the outcome of its use at this moment worth sacrificing its future?

Measuring Lost Opportunities

To help guide your financial decision-making, you can calculate the value of lost opportunity cost to help weigh your options. While pro/con lists are great tools for evaluation, the hard numbers and figures of opportunity cost help provide firmer metrics, something essential for financial decision-making.

To determine the cost of your lost opportunity: subtract the value of the choice you made from the most valuable choice. The remaining value is the lost opportunity cost. This assessment can be applied to choices throughout your life, especially those linked to personal finance.

Volatility in Investments

When evaluating investments, it is important that you account for volatility. As we’ve written extensively – market volatility can be disastrous for your returns. Two investments which have the same expected return are not equal – the least volatile one has less risk and, therefore, a lower opportunity cost. Assessing the risk of an investment is key to continued successes, especially when expected returns are similar.

Using Lost Opportunity Cost to Fix Personal Finance

An awareness and use of this economic principle can help you to solve some of your problematic behaviors holding back your financial health. Assessing the true, long-term costs of frivolous spending, high-interest credit card debt, and lackluster savings plans can be eye opening. Take the time to fully examine your financial life to determine whether you are willing to pay to cost of your lost opportunities. The clarity this will bring can improve your financial life and transform your world.

Wrap Up

Nothing costs as much as a lost opportunity. It’s a heavy concept to grapple with, but taking extra time to be more thoughtful and direct in your financial decisions will truly change your life. This is also a skill that you can apply to all areas of your life, not just your financial accounts.

Ready to arm yourself with the knowledge needed to grow your wealth in an uncertain world? Join us at JB WealthFIT to learn the difference between thriving and surviving.

The Four Challenges to Building Wealth

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If you’ve set up automated deposits, selected an investment mix, and have a general awareness of your overall financial status, you’re doing well. This is especially true when you consider the huge number of Americans who have under $500 in savings and don’t track their spending.

Unfortunately, there’s a lot more to growing your wealth than setting up these healthy behaviors. In fact, there are four distinct challenges to building your wealth and overall financial wellness. We’ll take deep dives into each of these factors in the coming weeks to help arm you against these threats to your wealth building strategies. Today we’re offering up a preview of the posts to follow as part of our four part educational series. We’re hoping you tune in and learn along with us each week.

The very real threats staring down your personal wealth include:

Lost Opportunity Cost

You might think that if you spend one dollar, you’ve effectively lost one dollar, right? Sadly, it’s not that simple. If a situation arises that requires you spend money you would normally save or invest, you’ve lost more than just that amount of money- you’ve given up what that dollar could do for you in the future.

Whether this spending comes from unexpected bills (like medical expenses or emergency car repairs) or from impulse spending (we all remember Cyber Monday), the outcome is the same: you’ve traded the future growth potential of that dollar for the use of it right now. In our deep dive, we’ll look further into how to measure lost opportunity cost, the role of volatility in assessing it, and how to use these measurements to make decisions about your finances and life.

Rules of Financial Institutions

When is the last time you read your bank or credit union’s service agreement? Do you know the steps to take if you want to close your current checking account and open one elsewhere? There’s a reason why the fine print is small and difficult to discern; hidden within service agreements and fine print are many policies that make your money work harder for the institution than it does for you. It can be difficult to disconnect from your current bank’s ecosystem. They want to ensure that while your savings account earns 0.01% interest annually they can loan your funds to a credit card user and charge them 27% APR.

In our examination of financial institutions’ rules, we’ll reveal how they make it difficult to use your money, how to find a more beneficial partner, and ways you can use banks’ approach to finance to guide your own wealth management strategies.

The Velocity of Money

Velocity is the speed of something in a given direction. While “the velocity of money” is typically used by economists studying the GNPs of different countries, it also applies to your personal finance. In this setting, it means how you get your money to do more than one thing for yourself at the same time. Whether this means opening a higher-yield savings account to hold your quarterly payments for freelancer income taxes or refinancing your mortgage to remove a PMI and expedite your amortization rate, figuring out a way to make your finances work harder and faster is key to your financial health.

In our dedicated blog post we’ll further explore the velocity of money, its potential impact on your financial wellness, and ways you can adopt financial institutions’ strategies to make your money work harder.

Financial Organization and Coordination

You can’t build what you don’t know. It’s not enough to be aware of your finances – you have to aggressively coordinate and organize your money so that it moves and grows in a productive manner. This topic is one of the largest stumbling blocks for the general public – our financial systems mean ignorance is bliss for many. But taking time to organize your money and enact a strong plan will empower you and remove a lot of the stress associated with personal finance.

We’ll look into ways to organize your funds, why you should treat your household’s finances like a business, and how to get over the initial fear and pain that comes from discovering where your money may have gone wrong.

Wrap Up

The short story? These are in no way simple challenges to tackle. But taking the steps to empower yourself through this learning will put you on the path to building your wealth and improving your overall financial wellness.

Ready to tackle these challenges together? Complete this questionnaire to help us better understand what value we can bring to your life. It’s time to start making your money work for you.