A new survey of young workers published by the AFL-CIO suggests many Americans under 35 can’t manage the basic financial building blocks of an adult life. The union calls the last ten years a “lost decade” for these young people during which many fell short on critical responsibilities like getting their own place, finding a stable job with benefits and saving money for emergencies.

About 31% of survey respondents said they made enough money to pay their bills and set some money aside, and seven out of 10 respondents said they did not have enough money saved to cover two months’ worth of living expenses. Parents of these young workers know how far they are from making it on their own; one in three is living at home.

“Along almost every metric, people under 35 are doing much worse than they were 10 years ago,” says Jennifer Jannon, 29, a regional director for Working America, the ALF-CIO’s community organization for non-union workers. “People are literally putting off starting their adult lives because of the conditions they’re facing economically,” Jannon says.

She says the results should not be interpreted as laziness. “Young people are really yearning to move out on their own [and] to start their adult lives,” she says. “[But], they can’t find the type of work that supports an adult life.”

Some take issue with the suggestion that the current job market is more difficult for young workers than for their counterparts over 35. “It’s easier for younger people because they have less experience, and they don’t cost as much,” says Robin Ryan, a career counselor and the author of “60 Seconds And You’re Hired.” “If you’re over 40, a lot of employers see you as expensive,” Ryan says. Employers may also assume younger workers are more tech-savvy and can more quickly adapt to a changing workplace, she says.

Regardless of who’s to blame, the result for young workers will be a substantial loss of potential wealth over their lifetimes. A person who’s able to save $2,000 a year between ages 22 and 30 will retire with more money than a person who saves the same amount over a longer period from ages 30 to 60, says Thomas Holland, a partner at the wealth advisory firm Global Vision Advisors.

It’s crucial that those seven out of 10 young workers who don’t have enough savings to last two months start saving right away. “Though the economy may be poor, what I find is that if you don’t establish savings habits early in your career, it’s not likely that at some golden age you’ll learn to save,” Holland says.

Here are some tips for workers in Generations X and Y who are trying to start saving:

Cut Your Expenses

“’Spend less than you earn’ is the fundamental principle of personal finance,” says J.D. Roth, co-author of the book “10,001 Ways to Live Large on a Small Budget.” “It seems really simple and obvious, but so many people don’t do that,” Roth says.

Evaluate regular expenses like a gym membership, Netflix subscription or unlimited text-messaging plan to see how much you’re really using them. “If you’re not actually using it very much, get rid of it,” says Trent Hamm, 30, author of the book “365 Ways to Live Cheap.”

“People in their 20s tend to do a lot of expensive things with their friends,” Hamm says. Don’t spend without thinking just to keep up with your peers, Hamm says. He suggests finding a hobby that you’re really passionate about. By focusing your mental energy on one thing you love – and seeking out friends who share that interest – you may find yourself not “spending money just for the sake of spending money,” Hamm says.

Set Goals

It’s easier to save if you have a clear idea of what you’re saving for, Holland says. “If you really spend the time to think about why you’re working in the first place, you’re much more likely to save more and be more intentional with where you’re saving,” he says. Choose to build up an emergency fund of six months’ worth of expenses or to put a down payment on a house, and each small amount you put aside will feel more meaningful.

Saving for specific purposes might also help you stay more focused on your personal goals. It’s a mistake to act because of your envy of someone whose car, apartment or shiny gadgets are nicer than yours, Holland says. “Never judge people based on their lifestyle and where they live in terms of their worth because it’s never a correlation. More times than not, they’re worth less than the person living in the smaller house driving the Honda Accord,” he says.

Make It Easy

The easiest way to save for retirement is to take advantage of an employer’s offer to match your contribution to a 401(k) – the money comes out of your paycheck automatically, and you’re getting free money. You can also set up automatic transfers from your checking account to make building an emergency fund just as easy. “It’s a lot easier to save because you don’t have to think about it every time [and] you don’t have the opportunity to talk yourself out of it,” Hamm says.

Workers whose jobs don’t offer a matching contribution to a retirement fund can set up a Roth IRA. “They’re easy as pie to set up; it’s just actually doing it and taking action, that’s always the trick,” says Hamm. Low-income workers may be eligible for a tax credit of up to $2,000 for contributions to a retirement savings account such as a Roth IRA.

Once you’ve established a saving habit, stick with it. One common problem is what Roth refers to as “lifestyle inflation,” the inevitable desire to respond to a raise or a bonus by spending more.  The most successful people I’ve seen with personal finance don’t spend more money as their incomes increase; instead, they bank that money, he says.

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Thirtysomething and Strapped: What to Do?

You know the part of the classic wedding ceremony in which couples vow to stick together “for richer, for poorer”? Well, a lot of spouses lately are really putting the latter part of that promise to the test.

Blame the economy for shaking up once-solid unions. Marital roles are shifting as onetime breadwinners adjust to long bouts of unemployment. Husbands and wives are blaming each other for bad investments and onerous debt. Spouses who once smoothed over spats with a little shopping therapy can no longer afford to fill that prescription. “It’s the biggest stress on married couples in the past 60 years,” says Margaret Shapiro, a clinical social worker in Philadelphia.

How are you and your spouse coping with the challenges you’re facing? And what can you do to ensure you pull together to solve those problems instead of being torn apart by them? The following quiz provides insights into the specific ways the economy may be affecting your marriage, plus the steps you can take to strengthen your relationship — and your finances.

Question 1: Your company reduced salaries 10% this year, and you’re looking hard for ways to cut your family’s expenses. But your spouse insists that you’re exaggerating the financial difficulties and resists attempts to ratchet back your lifestyle. Every conversation about money is turning into a battle. What is most likely to result in a lasting solution to the tension?

A. Let your spouse pick one splurge each month and enjoy it.

B. Together, take a look at the numbers in your investment and checking accounts.

C. Split up your finances so you don’t have to discuss every purchase.

Answer : B. While some couples might benefit from dividing their money or looking the other way when one makes an occasional indulgent purchase, one of the biggest breeding grounds for arguments is simply that most spouses appear to be operating under different sets of “facts” about the resources they have to work with.

According to a study by Jay Zagorsky at Ohio State University’s Center for Human Resource Research, the typical husband reports that the couple earn 5% more and have a net worth 10% higher than his wife thinks they do. And men believe household debt is lower than their wives do.

Moreover, the gap between what husbands and wives say their household earns, saves, and owes gets bigger the longer they are married. (The study didn’t reveal which spouse is usually closer to the mark.)

Rather than fight about whether you can afford to take a ski vacation this winter or whether it’s necessary to ditch your premium cable-TV channels, get the facts you need to make an informed decision. Block out time to sit down together and sort out the basics.

At a minimum you both need to know — and agree on the numbers for — your income (look at last year’s tax return and this year’s most recent pay stubs), your assets (check your account balances online and get a rough estimate of your home’s market value at zillow.com), and your liabilities (add up your most recent loan and credit card statements to see how much you owe overall and do a back-of-the-envelope total of your monthly expenses). That way you’ll know for sure whether you need to cut back and what extras you can swing.

If the exercise reveals you can’t afford the slopes in Vail, find a compromise. Ask your spouse why the trip matters so much: family tradition of a big trip? Relaxation? Love of snow? Then see if you can find a cheaper way to fulfill that goal.

Question 2: It’s been a tough year. The value of your home and your portfolio are way down (even after the recent surge in stock prices), and the payments on the big home-equity loan you took to buy that new motorboat are starting to feel out of reach. Which of the financial issues you face is putting the greatest strain on your marriage?

A. Your plummeting portfolio.

B. Your eroding home equity.

C. Those oversize loan payments.

D. Trick question. They’re all stressful — duh! There’s no way to rank this kind of financial pain.

Answer: C. Sure, a sharp decline in the value of your most important assets can easily put a damper on your relationship — it’s depressing, after all, to watch your savings shrink, and depression doesn’t exactly put you in the mood for love.

But studies by Utah State University professor Jeff Dew show that so-called bad debt, such as balances on credit cards or installment loans, has a much more direct effect on marital happiness than issues with assets, and the impact is largely negative: The more bad debt a couple have, the more likely they are to argue and the less likely they are to be satisfied with their marriage.

By contrast, “good debt” — such as student loans or mortgage payments — doesn’t seem to affect how they feel about each other. And while having more savings and investments can certainly help alleviate feelings of economic pressure, it doesn’t stop the fighting.

So if you’re looking to improve the state of your union, the course is clear: Pare down on the amount you owe.

Feel free to reward yourself along the way — say, a small dinner out to compensate yourself for all the ones you’ve skipped. Or be silly — put stars on the refrigerator, just like you got for your third-grade homework.

“It marks and commemorates that you did it together,” says Lili Vasileff, president of the Association of Divorce Financial Planners. That way you can enjoy a pat on the back while you whittle down your debt — for a double dose of marital contentment.

Question 3. Your spouse was laid off a few months ago. You’ve cut out the housekeeper and family vacations, but your emergency fund is still dwindling, and your partner has no job prospects in sight. In the scenarios below, who suffers the least?

A. Your spouse, the laid-off husband

B. Your spouse, the laid-off wife

C. You, the husband of the laid-off wife

D. You, the wife of the laid-off husband

Answer : C. Losing your job is tough for both men and women, especially if the man strongly identifies with the traditional role of provider. But the effect of your spouse losing his or her job is different for the sexes.

Various studies indicate that women are likely to feel depressed when their husbands are laid off — an increasingly common occurrence nowadays, with male unemployment rising faster than women’s. Yet husbands don’t seem to take it so hard when their wives lose their jobs.

Any negative feelings can easily aggravate the strain couples are already experiencing owing to loss of income, says Scott Stanley, co-author of the book “Fighting for Your Marriage.” The laid-off partner may feel too low to put all his or her energy into looking for work, especially given how discouraging the job market is — or even to prepare a meal or pick up the dry cleaning (chores that also serve as a reminder of the stay-at-home spouse role).

The employed partner, meanwhile, may become frustrated by the spouse’s lack of get-up-and-go on the job and the home fronts. Both partners may find themselves more critical of their spouse than before, which in turn makes them unhappier with their relationship.

If this describes your household, it’s time to alter the pattern. The best way to avoid arguments about changing family responsibilities is to set a few ground rules about how much housework the unemployed spouse should be doing and how much time he or she should spend looking for a job. Then focus on upholding your end of the bargain, not micromanaging your partner’s.

“It doesn’t matter how you arrange things, but that you both agree to it,” says therapist Shapiro.

Question 4. You and your spouse were counting on retiring in 2011. But the 30% decline in your portfolio last year is forcing you to rethink. Now you’re constantly bickering about when you’ll be able to stop working and what kind of lifestyle you’ll have once you do. What’s the most important step you can take now to improve the odds you’ll eventually have a happy retirement?

A. Aggressively pump up the amount you’re saving in your 401(k) and IRA.

B. Start practicing the kind of lifestyle you’d like to have once you retire.

C. Bite the bullet and plan on working for five more years, possibly longer.

Answer: B. Money does have an effect on how happy you will be as a couple in your later years, according to a 2005 study in the International Journal of Aging and Human Development. But the size of your nest egg is not nearly as critical as the quality of the time you spend together.

Studying more than 100 upper-middle-class couples (average age: 69; average length of marriage: 42 years), the researchers found that disagreements about leisure activities were the biggest downer, cited by nearly 40% of couples in unhappy marriages.

Intimacy problems — both emotional and physical — were a distant second, and finances came in fifth, behind health and household issues like home repairs.

So by all means, be aggressive about saving and work a little longer if you can. But you and your spouse also need to lay the groundwork for hanging out together for longer periods and having fun together.

The next time you both have a few days off, make it a staycation. Visit a museum. Find a sport or activity that the two of you can learn together. Playing at retirement should help reduce the friction now and contribute to greater happiness later on.

Question 5. You can’t help it: You think the financial pickle your family is in now is your husband’s fault. After all, he insisted that you buy a too-expensive house, which drove up your expenses by a third. He, on the other hand, says it’s your fault for poorly managing your IRA s, which lost almost half their value last year. Which of you is to blame?

A. You. You should never have loaded your IRAs with risky stocks.

B. Your husband. Digging out from a financial hole is tougher than waiting for the market to bounce back.

C. Both of you are equally to blame.

D. Neither of you should feel that it’s your fault.

Answer : C or D. Ultimately it doesn’t matter who was responsible for your financial predicament; what’s important is that you don’t get hung up on finger-pointing.

Stressful situations often lead couples to lay blame, says Barbara Mitchell, a clinical social worker in New York City who specializes in money issues. “There’s a tendency to scapegoat one another, which starts a real downward spiral,” she says. Researchers have consistently found that the more “negative interactions” you and your partner have — and laying blame for the family’s financial woes certainly qualifies — the worse your relationship will be and the more likely you’ll start thinking about divorce.

Instead of criticizing each other, fault the true culprit, the economy, and form a united front against it.

Schedule regular weekly meetings in which you and your spouse discuss financial problems and possible solutions calmly. That sort of quarantine will prevent your financial gripes from infecting the rest of your day-to-day interactions. Defuse the emotion by focusing on the task. Instead of arguing about who wanted the McMansion more, look into refinancing to lower your costs or trading down to a smaller house.

Question 6. All you and your spouse seem to do these days is fight about money. Even though you hate to admit it, your marriage has reached the breaking point. Given how tough the economic crisis has been on relationships, you have plenty of company, right?

A. No, the evidence suggests that fewer people are getting divorced.

B. Yes, the divorce rate typically spikes during a recession, and this one is proving no different.

C. No, there’s been no change in the divorce rate, which historically has not been affected by the economy.

Answer: A. First things first: It’s a myth that money problems are the leading cause of divorce — infidelity is far and away the biggest predictor. In fact, although official stats aren’t in yet, there’s mounting evidence that the recession is keeping couples together, not breaking them apart.

In a survey by the American Academy of Matrimonial Lawyers, 37% of the divorce attorneys polled reported that they see a drop in cases during recessions, nearly twice as many who said their business grows.

However, the dropoff in divorce doesn’t indicate that marriages are any happier these days, but rather that many would-be exes believe they can’t afford to split up (think about the hit you’d take selling your house in this market or how costly it would be to maintain separate households). The number of these too-poor-to-divorce cases has increased in the past year, say 63% of the financial pros recently surveyed by the Institute for Divorce Financial Analysts.

If, after trying to work through your problems with your spouse, you’re both truly convinced you should call it quits, at least try to split up economically. Hiring lawyers to hash out a settlement can be expensive: Boston attorney David Hoffman, studying nearly 200 divorce cases at his firm over a four-year period, found that the median cost per couple was about $54,000.

Alternatively, look into mediation ($16,000), in which a neutral expert helps a couple work out their own agreement. Or consider what’s known as a collaborative divorce ($39,000), in which each spouse has a lawyer but both sides pledge to negotiate respectfully and share information about assets.

Find pros who can help at collaborativepractice.com or mediate.com. No matter how bitter you are, work hard to avoid a contentious split (typical cost of a courtroom divorce battle in Hoffman’s study: $155,000). After all, while true love is priceless, divorce can get really expensive.

Source:
Is the economy ruining your marriage?

Robert Kiyosaki is a master when it comes to explaining things in simple terms. This is a review on the book Cash Flow Quadrant. I learned 3 major things from reading this book. The biggest is the importance of leveraging a system.

 

President Barack Obama’s campaign theme was “Change.” We’ve all seen plenty of change in the past year, specifically economically and financially. Much of this change most people would label as negative. If you take into account the banking crisis, the growing numbers of people facing unemployment, the double-digit losses in so many 401(k)s and retirement plans, and the number of cities and states whose budgets are upside-down, then it does paint a pretty dismal picture.

And some—those hoping the government will save them or those who are not willing to change what isn’t working—will face a very rough road ahead. No doubt most of us will have to do many things differently, regarding our money, our investments and our businesses, in order to not only survive but to thrive in this economic climate.

That being said, and being the optimist that I am, I have to look and ask, “Where’s the upside in all of this?” And I do believe that there is not just one diamond in this rough, but there are three positive gems that could manifest out of this turmoil.

1) A Wake-up Call for the World Sometimes things have to get bad before we take action. This time in history could very well be our fi nancial and economic wake-up call. There are many pieces of this puzzle that are broken, and it will take more than a new president, new rules for Wall Street and a few crooks going to jail to fix it all.

This is undoubtedly a global problem, and it will take resources from around the world to turn this one around. I trust this is a wake-up call for our political, business and financial leaders that real and tough changes have to be made, now.

There is an even more important wake-up call for the individual, if you’re willing to tell yourself the truth. That wake-up call is this: You can no longer be clueless about your money. It is the realization that turning your money over to the so-called fi nancial experts isn’t working. It is the light bulb that goes off when you see you have an absolute need for real financial education. No more disguising a sales pitch for sound fi nancial advice. No more taking the advice from fi nancial advisors who don’t practice what they preach, who tell you what to do but don’t do it themselves. And no more allowing ourselves to be ignorant enough to blindly follow their recommendations.

Fortunately, the message is spreading. Peter Applebome, a talented journalist, recently wrote in an article for The New York Times titled, “Contemplating the Boobs We Were,” “…a yearend toast to us all—the boobs and easy marks who from time immemorial have mastered the art of buying high and selling low, investing in bubbles as transparent as an open window….”

He goes on to say, “…is there anything we can learn from this latest round of financial catastrophe?… So, here’s a revolutionary idea: Maybe it’s time we even start thinking about ways to teach [people about money].”

Applebome ends with this: “One lesson of this year is that these days, no one, not even the most fi nancially secure, can afford to be stupid.”

What a novel idea—teaching people about money. I’ll be that optimist who says that maybe this is the wake-up call to the masses really taking hold. Is the general public fi nally recognizing the vital need for true fi nancial education? That would be a breakthrough and a positive result from this economic breakdown.

Sometimes it takes a wake-up call to bring us to our senses. I optimistically trust that these cataclysmic events unfolding will serve as one giant wake-up call so that we as individuals become aware, educated and in control of our money. And in the bigger picture, that the same holds true for our cities, states and nations. Ignorance is not bliss; it’s foolish, expensive and painful.

2) Adversity as a Gift
Most of us are taught, beginning in kindergarten, that mistakes are bad. How often did you hear, “Don’t make a mistake!” In reality, the way we learn is by making mistakes. A mistake simply shows you something you didn’t know. Once you make the mistake, then you know it. Think about the fi rst time you touched a hot stove (the mistake). From making that mistake, you learned that if you touch a hot stove you get burned. A mistake isn’t bad; it’s there to teach you something.

In the economic times ahead, most people will encounter adversities at one point or another. Most people view adversity the same way they view mistakes: They see it as bad and something they want to avoid. It’s time for a new outlook.

Donald Trump gave me an insight about success that I will not forget. He said that the No. 1 key to being a successful entrepreneur or businessperson is how you respond to adversity. When faced with a hardship, do you crumble and quit, or do you stand up, take action and push through? When confronting a tough problem, do you take it on, learn from it and grow, or do you let the problem beat you down?

Adversity has the power to build your character and strengthen your spirit. It also has the power to weaken you and cause you to contract. It’s all a matter of how you react to the situation. I have faced many tough times in my life, and although it was hell at the time, I can honestly say that each time I pushed through it I became stronger, smarter, more confi dent and more successful. For me, adversity is a great teacher.

One of my all-time favorite books is As a Man Thinketh by James Allen, published in 1902. The message throughout the book is that your thoughts create your reality. It’s a very small and simple book. One of the most memorable lines in the book for me was this: Circumstance does not make the man; it reveals him to himself.

I interpret this to mean that how you handle the different situations in your life—good, bad and indifferent—determines the quality of your character. It reveals who you are.

So how you and I respond to these unfolding economic times will be very revealing and, ideally, enlightening.

3) Opportunity Comes Knocking
The third benefit this financial dilemma presents is the abundance of opportunities surfacing. The only question is, do you know what to look for to take advantage of them?

Real estate prices are coming down—opportunity. Business needs are changing—opportunity. Stock prices are correcting—opportunity. Innovation and creativity will rule— opportunity. Small business is growing—opportunity. Etc., etc., etc.

Are you focusing on the potential opportunities ahead, or are you cutting back, clipping coupons and reverting to survival mode? In my opinion, this is the best time to get educated and to start seeking out the opportunities—opportunities that not only allow you to survive, but to thrive and prosper in the years ahead.

As Charles Dickens wrote, “It was the best of times. It was the worst of times.”

May these be your best of times.

Kim Kiyosaki is co-founder of the Rich Dad Company, a speaker and best-selling author of Rich Woman.

Originally posted here:
The Upside of a Downturn