Posted by Mary Caraccioli
It occurs to me that becoming involved in your finances and learning how to approach money matters can be a transformative experience. It is with this premise in mind that I have decided to launch a new project, which will empower you by building your confidence in all matters financial. You will be surprised to learn that your money breakthroughs will have less to do with math and more to do with emotion.
The Confidence project is designed for everyone, but I will be paying particular attention to women because I still see a general lack of money confidence with so many women. From executives who can balance a corporate budget but fear negotiating for the best car deal, to the stay at home mom who doesn’t realize how her fear over losing money is – well losing her money.
This project starts a conversation but it also will do more. It will ask you to take action. Unless you are involved and do the work (which by the way takes only 5-15 min per assignment) you will not get the maximum benefit.
Developing confidence with money is not punitive- it is fun and puts you in the drivers seat.
My aim will be to deal with the emotions behind money issues and really delve into the personal reasons for your financial attitudes and approaches. But most of all I want to provide a place where women can come and share their stories, seek advice or just find a space where they have the opportunity to vent, laugh at their faux pas and learn how to take the next step.
I believe, that a platform for sharing in this way is currently missing for women, and I want to be the one to bring it to you all. However, I cannot expect you to share your stories with me, without first sharing mine with you. So, coming soon I’ll be sharing regular insights into my financial foundations, experiences, approaches, mistakes and triumphs in an effort to relate to you all, and in doing so establish a common ground. I hope reading these regular posts will encourage you to welcome me into your life as your Money Confidante.
I had the chance to play teacher for a few days with a terrific group of middle schoolers. What did I teach? You get one guess. Yep- money! While keeping the attention of 6th and 7th graders was a real lesson for me- I also discovered how interested this age group really is in figuring out how to earn, grow and save money.
Today I want to share the lesson they loved – Doubling Your Money using the The Rule of 72.
A long time ago a math wiz discovered that if you use the number 72 in certain mathematical equations, you can figure out two things:
• How long it takes to double your money
• What interest rate you need to double your money
Creating the Rule of 72. BTW you don’t have to be a genius to put these equations to work for you. But if you like equations- here they are!
72 ÷ interest rate = the number of years it will take to double money
72 ÷ the number of years you want to double your money = the interest rate you need
You can use these equations with whatever the going interest rate is. And, you can use the answer to figure out how to double any amount of money.
Dividing 72 by the interest rate
72 ÷ 4 (the interest rate) = 18 (years)
At a 4 percent interest rate, your money will double in 18 years.
If the interest rate is 8 percent, how long will it take for your $50 to double?
72 ÷ 8 (the interest rate) = 9 (years)
So you can see, the higher the interest rate, the faster your money doubles.
I know what you are thinking, “I have to wait 18 years to turn my $50 into just $100? Seriously!”
Chances are you’re going to save a lot more than $50 over the course of 18 years. Each time you make a deposit into your account, it, too, will double in value in 18 years if it earns 4 percent interest.
Ok, let’s use the second equation to find out what interest rate we need to double our money. Again, you can use any amount of money. In my example below, we used $50 again.
So you want your $50 to double in four years so you can use it toward college expenses. What interest rate will you need to double your money?
Divide 72 by the years in which you want to double your money.
72 ÷ 4 (years) = 18 (the interest rate)
You think, “Wow, 18 percent is pretty high, I don’t think I can earn that rate right now.” So you decide to wait 8 years for your money to double. What interest rate do you need now?
72 ÷ 8 (years) = 9 (the interest rate)
You need 9 percent interest to double your money in 8 years.
Posted by Mary Caraccioli | Filed under Videos
As a woman working to make ends meet and to raise a family, I understand the challenges and the relationship between the two. That is why I have a personal commitment to help other women become more financially fluent and responsible. Having a money smart mom, helps all of society because she will teach her children. But to have the breakthrough- you have to want to learn. For the money student it needs to be a “want” not a “should.”
Before that “want” can take root I have discovered that women need to work through some money myths first- otherwise the life change will never really take hold. This story is a good start. Stay tuned- there is more to come.
My job takes me around the country talking to people about their financial health. What I have heard over and over is that there is nothing left at the end of the month. No matter how big or small the paycheck- most families couldn’t stay afloat financially if they lost just one week’s pay.
Today new statistics reaffirm what I have seen; more than four in 10 Americans are living paycheck to paycheck and nearly one in 10 doesn’t earn enough to pay for essentials. The study done for Allstate insurance by FTI Consulting, also revealed 8% of Americans don’t have enough cash to make it through the month. They can’t afford everyday essentials.
So 41% of us live from one paycheck to the next- that is where we are in this country. How we got here is important, but it is a story for another day. Today I want to address the reality of this new normal.
If you find you are part of the 41% here are some steps you can take immediately to start changing your situation.
1) Get Real
Know exactly what you have and what you spend every month. When you have a firm understanding of what you are dealing with you can create a smarter plan for changing course.
2) Be Vicious
No not to you friends and family but to your spending. Where can you cut immediately. Do it. No more excuses. Necessities are food, shelter and healthcare. End of story. If you don’t have the cash for cable, cell phones, dinners out, etc. then stop the spending.
3) Be Honest
To be vicious with your spending cuts you need buy-in from the family. When the entire family is on a mission it is an easier sell. Let everyone in on the problem and allow them to contribute ideas to a solution. Show spouses and older kids the money- or at least where you are spending the money. Ask for their suggestions on where to cut – rather than handing down and edict.
4) Map an End in SIght
Make the process finite. We need to cut our spending by $500 a month until we have $5000 in savings. Spelling out the terms to your fellow stakeholders (family members) and showing them how this will help everyone in the long run may not bring cheers but it will help create buy-in.
5) Follow Through
The greatest plans in the world mean nothing unless you follow through. Get mentally tough and make this happen. Isn’t it time you left the 41%?
More like this
Confidence Project Assignment!
By now you have set your goals and have taken some baby-steps toward your goal. Now you are ready for the meaty stuff. Today you get your first assignment. This chore can change your life if you do it right. It is… Organize Your Bills!
If you are a neat freak you’ve just screamed “done!” I’ll get back to you in a minute. Now for those of you who are about to run-wait! Remember this is for you and it will help you change your financial health. I will walk you through the process. Remember bringing order to the money-stuff in your life will create clarity. Still scared? Then take a second to imagine this: There is a fabulous beach 50 paces in front of you, but the brush and weeds make the journey so frightening and unpredictable (are their creepy-crawly’s in there?) that you don’t move a muscle. That first step toward the beach retreat is never taken.
Now imagine you had the tools to cut through the brush and carve a clear path to the beach. Those 50-paces would be no big deal! Right? Organizing the papers, shoe-boxes or piles is clearing the brush. So lets get started.
Two Ground Rules
1) Pick a time when you aren’t under the gun. Set aside two-four hours.
2) Mentally prepare that things will get a lot messier before they get cleaner- that is why budgeting plenty of time is important
Here is the Money Confidante approach to organizing your bills- adapt it to fit your needs.
* Find all of your unpaid bills. Did you know pay bills on time which cuts back on late fees and immediately starts to improve your credit rating?
* De-clutter before you pay. Get rid of all unneeded paper with those bills. If you pay online get rid of payment envelopes and those annoying advertisements. *Shred everything that has personal info and recycle the generic stuff.
* Front and center. Have easy visible access to what needs to be paid and put the important and timely stuff on top. Do not file bills away until they are paid- you will forget about them. I like clear trays but you don’t need to buy anything to do this step.
* Assign a day each week to bill pay. Yep I said once a week. Once a month is not enough and it creates stress. If you have any fear that you will run out of cash- pay your most important bills first and then organize by due date.
* Pay online. Pay as many of your bills as possible online. You will save time and money on stamps. But most importantly you will know when the bill was paid. Mailing bills leaves the “received payment time” to chance. Paying some bills even 15 minutes late could cause you to get a 30 days late penalty on your credit report. Yep. Blew my mind too. So pay early not late and pay online when possible.
* Shred and file: Once a bill is paid – decide if you need to keep it or if you should shred it. My rule of thumb is this- if I will need it for taxes or to help me budget I file it- otherwise I shred. Still not sure- no harm in filing it away.
* Oops I can’t pay them all. If this happens to you (probably the reason you didn’t want to organize in the first place) relax. Now I want you to figure out what you owe and to whom. See if you an do a reduced payment or create a payment plan. If not what can you do to raise some extra cash? Got a designer handbag or fab pair of shoes you never wore that you can sell online? Do you have skills that can earn you extra cash as a tutor or instructor? Get a plan and get rid of the dark cloud of unpaid bills.
* Repeat. This is your new way of dealing with bills. Okay you may be a little sore (emotionally) its like the first time to the gym after a break. But that soon fades and I promise you will like how this new way of life feels after a few weeks.
And for you neat freaks- the organizing may come easy but follow the rest of the rules about paying the urgent stuff first and then develop a calendar for everything else. Since organizing is your thing- I expect to see spread sheets or wall charts that show your plan of attack! Make me proud and share your stories! Remember hearing about both victories and setbacks helps everyone.
When money is tight we often think about what we don’t have rather than what we do have. I get it – but I also know that is a self-defeating mindset and a surefire way to miss an opportunity.
Looking for money? Start your search at home and shift your thinking to what you do have. My guess is you probably have more than you think. Making the most of what you do have is like finding money. Let me show you how it works by starting at home.
3 Places to Find Money in Your House
1) Act Like a Beancounter!
We may like to make fun of them but a good beancounter not only looks at how much was spent but why and asks, “could there be better solutions?”
How it works: Review every purchase over the last year. Get out the checkbook register, credit card statements and piles of receipts. If you make a lot of cash purchases – track every dollar you spend for a month.
Why: No don’t worry I am not going to ask you to give up that latte. I want you to know where your money is going and even more importantly ask if there are better deals for your regular purchases- the boring stuff like car insurance and internet access, a storage unit. Every family who has done an audit for me has found hundreds of dollars in savings without sacrificing anything. This is found money!
Key to make it work: Look at every purchase and ask is this the best deal or the best fit for me or my family where we are today. Routines we had 5 years ago may not work for us today.
2) Treasure Hunt!
Go through your house and make a list of all you have – not just the obvious stuff but the hidden possessions to.
How it works: Go through those boxes buried in the back of closets, the attic, garage or basement. The stuff you’ve moved from place to place without unpacking- what is in there? The baby gear you’ve been holding on to- do you still need it? The recreation equipment that you used to use- but just don’t have the time to use these days- clearing out this stuff will not only give you the gift of new square footage- but it could put cash in your pocket.
Why: if you are not using it anymore then you need to ask yourself if warehousing it is really worth it- because that is exactly what you are doing- paying to store it. Taking a hard look at what you no longer use and investigating whether it can be sold to someone else or donated can give you cash, space or a tax benefit.
Key to make it work: This can be a dirty job and you will make a mess before you get the space back. So get a partner to help you. A partner will also help you when you start rationalizing why you should keep something that has outlived its usefulness.
Tip: To find out what something is worth – list as much info as you have: make and model, year purchased, use, etc. Then jump on the internet and try to find similar items for sale. That will teach you where the item should be sold and how to price it. If it is an antique, don’t repair, but clean it up. You’ll get more money for the item.
Forget the caffeine, I want you to think, gas, electric and oil. A simple assessment of your home’s energy use can save you big bucks.
How it works: No need to install a major geothermal system- chances are simple weather-stripping and caulk can go a long way. I like to call it sealing the envelope of your home. Don’t want to pay for an assessment (about $150) you can do it yourself. click here to learn how http://maryandmoney.com/videos/diy-energy-assessment/
Why: It not only saves you money when its hot and when its cold- it also makes your home more comfortable year round!
Key to make it work. Follow up. Find the leaks and the big problems and fix the cheapest stuff first. If you need to make big changes- check into state and federal programs for tax incentives and low interest loans.
Some helpful links
I have received quite a few emails about setting goals. Some of you want to know why this is necessary right now and others want some guidance on how to narrow down or prioritize goals- because there is a lot you want to accomplish. So let me share the Money Confidante approach to goal setting and why I have chose this approach. Let me know if it answers your questions.
Approach: It is two-fold. Think big picture and then baby steps. What type of money person do you want to be? Describe it. Here are some ideas: I want to be debt-free, wealthy, in control, less worried, live in a less complicated financial situation, etc.
Only you know what you really want, so spend some time thinking about it and then pick one idea you feel is the most important. Write it down and then put it aside. Tuck it in a drawer or a journal – don’t tape it to the fridge (I’ll tell you why later).
Next, the baby step. This part of the approach is where you will see the immediate change in your financial life. Pick a small money step that you have been wanting to make and do it. When I say small I mean small. If you eat out seven days a week, and want to change that- go to six. If you want to move out of your parents house, start a savings account for that purpose and put in $10. Baby steps. Each small success will make big improvements to your confidence. When one baby step is taken, set another and another until you are taking toddler, teenager, then grown-up steps.
Why I like baby steps: After working with families around the country, I decided on this approach rather than going for the big life-changing commitment. Why? Simple, because I know that you have other things going on in your life and that saving money or changing money habits often feels like punishment. I want it to feel like a reward. The baby steps give you regular, confidence-building rewards. This approach shows you that you really are in control of your life and your decision-making. It is also super easy to fix a mess up. Oops you forgot to put $10 into your account this week- put in an extra dollar or two next week. This approach makes it very hard for you to “fall off the wagon.” That is the magic.
Critics tell me that $10 a week won’t be enough to rent a cardboard box let alone an apartment. Of course not. If we were trying to match the total rent right off the bat- it would be overwhelming. You don’t sign up for a triathlon as your first step to getting fit- that would be ridiculous. But you also don’t sit on your butt and hope you will be in shape for the triathlon either. You start working out and slowly build up to the point where you are fit enough to try.
Are you with me? Baby steps give you the series of success that build confidence. That gives you the power to make bigger changes. And what about that big picture goal you write down at the start of this process? It the backdrop for the entire process. As you build on the baby-steps that big picture goal informs your next set of baby-steps- without you stressing over it or even consciously thinking about it. This works because it is quiet and not in your face.
So you want to build confidence. Try this two-step approach to goal-setting and see the small change in your life in a week and the big change in your life forever!
Keep emailing me on your progress!
Confidence in Action
Confidence Project Tips in Parade Mag
Parade Magazine and writer Kate Lockwood want you to start your year off right- they have crafted a wonderful article that has ways to save and build wealth. I help them kick things off with my Money Confidante confidence building tips. You can get Parade in your Sunday paper. Looking for more ways to develop confidence. Check out the Confidence Project page right here at The Money Confidante.com
3 Tips for Building Confidence
Welcome back to the Confidence Project! Building financial confidence and transforming your life begins with three simple steps:
1) Describe the ‘money person’ you want to be and write it down.
2) Take a very small step in that direction.
3) Set a slightly bigger challenge for yourself, but still a very attainable one.
With each success you will boost your money confidence and increase your interest in money topics. If you stick to this plan and are dedicated to seeing progression in your financial attitude within 3 months you will be a changed person with newfound confidence. Before long you will be well on your way to being the ‘money person’ you described in step one.
If you’re feeling a little overwhelmed on day one of your Confidence Project – don’t fear! I, along with the Confidence Project community, am here to help. Have a look at the example below of one of the Project’s members and see how her steps may be applicable to you. Of course her situation and goals may differ from your own but by using the outline detailed above and Amy’s example as a general guide, putting together your first 3 steps is simple.
Amy feels she is always behind with money and has become frustrated with what seems to be an inescapable situation.
Step 1: Amy describes the money person she wants to be: ‘I want to be debt free and be the person who has cash for a rainy day.’ Remember it is important to write this down – having visible proof of your goals will help you to enforce them.
Step 2: Amy looks at what she will be doing in the next 7 days and sets a goal. She knows her Saturday trip to the mall will leave her with buyer’s remorse. So, rather than taking her credit card to the mall she takes with her a set amount of cash for lunch and an extra $20 for a ‘splurge.’ Success! Amy enjoys the social time she wants and has fun window-shopping but comes home with no regrets. This may seem like a simple enough task – and it is! But it leaves Amy with a sense of personal accomplishment.
Step 3: For her 3rd step Amy cuts out one night of take-out from her food bill. This is a slightly bigger challenge for Amy but still an achievable one. This goal means Amy must be a little more organized to ensure that there is already a meal planned for Wednesday night and she has what she needs to prepare it – perhaps even making it ahead of time.
Here’s why I find this approach so important for those of you who feel stuck and why it really yields results:
Very few of us set out to be financial failures but when the economy changes, jobs change or as life changes, our bad habits catch up with us. Financial worries can seem so daunting; like a trap you will never escape. This strategy frees you from the trap by making clear that many money issues in your life are actually in your control and can be managed through simple measures.
By setting a big picture goal, and then making sure that the required actions for success are small and do-able, you set yourself up to succeed. As in Amy’s case, taking small measures which result in success built her confidence and empowered her to tackle bigger issues. With this process being repeated time again, she is developing new money habits and redefining they type of “money person” she is.
It can work for you too. This feeling of empowerment, born from these small initial successes, changes the dynamics of your world and now you have the power to decide your financial destiny. It is a beautiful thing to watch and I have seen people’s lives transformed by this experience.
Thank you for all of the inquiries into the Confidence Project. I decided to start this after talking to women (and men) across the country and hearing what was really keeping them from developing strong financial habits- it was lack of confidence. They believed (wrongly) that they were not destined to be blessed with money management skills and that those attributes were for other people.
That way of thinking is all wrong. What keeps us from doing something that is truly important to us, can often be boiled down to one word- fear. With money there is fear we are going to mess it up, really get taken, end up worse off or made a fool of. Do any of these sound familiar?
I get it. If you have no skill with something- of course there will be fear. Before you learn to ride a bike- those two wheels can be terrifying. But with money all of this runs a little deeper. Not being a “money person” makes us somehow feel inferior and we think it is destiny. It doesn’t help that the “money people” we do know can sometimes be arrogant about their knowledge. I have heard stories about dismissive spouses and condescending financial professionals – and scam artists love to make you feel stupid. But usually the toughest voice scolding us is – the voice in our head. I will help you banish that voice and indeed become a “money person.” You will become your type of money person- and that is all you need to succeed. If you hate spread sheets that doesn’t mean you are destined to a life drowning in debt or wallowing in worry. There are many ways to express your financial savvy – this is about discovering your self expression and maximizing it.
Through my research and my experience with families all over the USA, I have learned how important developing confidence is if you want to find peace in your financial life. I also know developing that kind of confidence takes more than a positive attitude (although that helps!). The Confidence Project will help you develop real confidence that you can carry with you for a lifetime. My hope is that once you have it- you share it. There is room for everyone at this table.
How do I do it? I will ask you to tackle various types of assignments- some may seem fluffy – some may seem mundane- but all together they will uncover your authentic approach to money and build on that with concrete financial lessons. The combination is powerful and do-able. I will be with you 100% of the way for morale support and money tutoring.
So let’s get started – your first assignment is set a financial goal or define an area of money where you would like to develop confidence and write it down. You can share it here with me and others by commenting, or you can email me, or you can keep it to yourself. You choose what makes you comfortable.
Don’t put it off. I want you to get started today. This is an easy assignment but crucial for moving forward.
Thanks for joining me.
My Confidence Story
For me my confidence in confronting money issues was formed long before my skill level matched it. I appreciate this is not the way for many people and this is part of the reason I feel so compelled to share my story with you all and launch this new project which will allow me to build a community in which I can be your confidante and create a space where we can all share our insecurities and seek council and gain confidence.
It all started for me when I was a little girl, probably around 5 years old. I used to love to steal some snuggle time with my dad by climbing on his lap while he read his ValueLine stock pages. He would tell me about stock quotes and what he was investing in at the time. It wasn’t my interest in stocks that kept me coming back- but the opportunity to have some time with my dad. This experience gave me a false sense of confidence with stocks and investing. I thought I knew what was going on and was never afraid to dive in. I started buying stocks and later, options soon after getting my first full time job.
I did say false sense of security- the truth is I didn’t know that much and made plenty of mistakes (and also had a few accidental wins like Intel in the early 1990’s). But I learned as I participated and then went on to dive more deeply into investing and related topics as a journalist and then later as a student when I went back to school. The best teacher was simply being brave and just doing it – buying a stock, selling too early or too late – and learning along the way. All of this only bolstered my confidence to stay in the game and to blend instinct with homework. Only by taking action could I learn from my mistakes and as it turned out had I waited for the perfect opportunity or more knowledge I probably would still be waiting to invest for the first time.
The magic that happened with me can happen with any child. Talking to your kids about money – showing them some of the choices you are making and confiding in them by sharing your strategy for investing or paying off debt or what every money issues is in your life is the key. I didn’t learn that much from my dad- but I thought I did and that sense of confidence and familiarity with money decisions propelled me to take chances with my own money later. I may have lost some cash (can you say Lucent 2000-2001) but I gained insight with every trade and I am not afraid to learn. I want to see every family share their money know-how with their kids and challenge them to know more and do better. This requires each of us to find what we do know- not what we don’t and share that. Get your kids involved with money. Teach them respect for their investments but not to live or die by them- give them wiggle room to make mistakes and grow. That investment does not have to be stocks or bonds- it can be their own business (kids are very entrepreneurial) or creating a savings fund. Get talking and get doing – even if you are in a financial hole yourself. Don’t wait – start the conversation today.
Share you confidence building stories or challenges by commenting on our Confidence Project page. You are never to young or too old to be part of our community. Welcome.
Comments are closed.