Business Ideas for Students

August 3, 2020

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MUTHUKRISHNAN G. MUDALIAR

MUTHUKRISHNAN G. MUDALIAR

Financial Professional

5801 BLAZING STAR ROAD

FRISCO, TX 75034

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August 3, 2020

Business Ideas for Students

Business Ideas for Students

Starting a business is never easy.

The U.S. Bureau of Labor Statistics reports that 65% of businesses fail within 10 years.(1) Only 25% make it past 15 years.(2) Those odds aren’t great. It would take a full time effort and a huge arsenal of resources to even consider starting a business, right?

But you might be surprised how easy it is to get started, even if you have a full time commitment like school. Here are a few ideas to get you situated on the path towards entrepreneurship!

Writing
The written word gives us the power to communicate our ideas, learn from others, and persuade. No wonder the demand for high quality writing is so consistent! And if you’re a student with a gift for prose, you might be sitting on a cash cow. Businesses all across the country need good writers, and they’re willing to pay for your services. There’s a good chance that you already have the tools you need (i.e., a laptop and writing software). Find a site for freelance work and start writing!

Tutoring
Do you have a special grasp of a particular subject? Is that subject taught at your university? You might want to consider tutoring if you answered yes to both of those questions. University is hard! Students need all the help they can get and they might be willing to pay you for your insights and expertise. Make sure you actually know your stuff, do some research on teaching techniques, and make a paper ad you can post on campus. The level of interest may surprise you!

Exercising
Maybe you’re the person who prefers sound nutrition and pumping iron to reading and studying. Have no fear, my creatine and protein shake pounding friend; there are plenty of opportunities for you to leverage your fitness know-how to make money. That’s right; you could try being a personal trainer! Get some videos of your lifting exploits out on social media, ask your more puny friends if they’re trying to get yoked, and get the word out there.

Marketing
You’re surrounded by marketable brands. It might seem counterintuitive, but technically speaking, anyone with a social media presence has the power to become an influencer. And that’s where you come in! Do you have a knack for social media? Do you seem to intuitively know what kind of content will get followers and likes? Then your skills are in huge demand. Companies, small businesses, and even your classmates might be willing to shell out big dollars for your help creating content. Assemble a collage of your most popular posts, come up with some strategy ideas, and start giving your peers advice.

Starting a business takes some work. But if you use skills you’ve already mastered and make sure you keep your commitment levels reasonable, you might find it’s not as difficult as you think. Do some brainstorming, identify your strengths, come up with a plan, and spread the word!

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July 31, 2020

Tips For Working At Home

Tips For Working At Home

You’ve most likely become a work-at-home pro over the last few months.

At this point you’re probably perfectly comfortable with your routine and feel like you’re highly productive!

But you also might need a refresher on some working at home basics. Even at the office—where you’re more likely to be held accountable—it’s easy to slide into bad habits. Here’s a quick rundown of some tips to help you get back in your groove!

Start strong
Sleeping in is almost always a temptation. Crawling out of bed, hitting the snooze button until it breaks, and rushing out the door just feel like a routine to many of us! Working from home can compound this. Suddenly, you have the luxury of peacefully sleeping until 8:55am, making some tasteless instant coffee, and booting up your laptop in your PJs right before your 9 o’clock video call. Sounds like the life, right?

But this ritual of jumping right from your mattress to your dining room table/temporary desk can have serious drawbacks. Staring at a computer screen while barely keeping your eyelids open is an incredibly uninspiring way to start a day. It’s much better to do things that help you wake up and get your mind focused. Make breakfast! Go for a walk! Meditate! Use that time you would normally spend looking at brake lights for something productive.

Make a workspace
Homes are (hopefully) relaxing. They’re where we go at the end of a long, stressful day to binge watch shows, eat delicious food, and spend time with our families and friends. Those associations can make working from home tricky. You might notice that the temptations to watch TV, talk to a roommate, or reorganize your kitchen for the 100th time are interfering with your job performance.

The solution to this problem is to create a workspace in your home that is dedicated to being productive. Remind your family that you love them, but that you’ll need some space when you’re in your home office. Move TVs and other distractions out and create a place where you can focus. And it’s probably wise to avoid setting yourself up in your bedroom unless absolutely necessary!

Always communicate
One of the biggest downsides of working at home is that it can strain communication with your coworkers. On one hand, that’s probably not awful. Less chatter with your office buddies about the latest reality TV show might be a welcome productivity booster! But collaborating with your team, getting approvals from bosses, and receiving feedback are essential parts of getting projects done and growing your skillset.

So don’t go off the grid. Stay in touch with your colleagues. Ask your boss for feedback. Get advice from your mentors. Staying vocal keeps work moving forward, it keeps you socialized and feeling accomplished, and it reminds the higher-ups that you still exist!

Whether you’ve finally decided to upgrade your work-at-home game or you just needed a reminder, try out these tips and let me know how it goes!

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July 27, 2020

Power Naps

Power Naps

It’s 3:00 pm on a Wednesday and you’re running out of steam.

You didn’t get much sleep last night and keeping your eyes open feels impossible. The energy drinks and coffees and caffeine pills gave you a quick boost in the morning, but your yawns are getting deeper and that stack of papers is starting to look like a comfy pillow. What can you do?

It turns out that a quick power nap might be the solution to your midday energy slump. But there’s an art and a science to productive sleep. Here’s a quick guide to power naps!

The science of sleep
Sleep is surprisingly complicated. Even though we all need it to function and survive, scientists haven’t been able to figure out exactly why our bodies and brains have to shut down for about 8 hours every night. Theories exist (you can read those here), but there’s no definitive answer. For the purpose of power naps, what’s important is understanding what happens while you sleep.

Your body goes through 4 different stages while it sleeps. The first three are essentially your body’s transitioning from a light sleep (stage 1) to a deep sleep (stage 3). These are followed by the Rapid Eye Movement (REM) stage. This is when your brain processes information and when most people experience dreams. You then start the cycle over at stage one and repeat. A full four stage cycle happens over about 90 minutes, and it occurs multiple times when you get the recommended 8 hours of sleep.

The art of power naps
The key to nap powerfully is to control when you wake up in the sleep cycle. The goal is to wake up during the lightest stage of sleep. That normally occurs within 20 to 30 minutes after drifting off. Anything more than that will have you waking up in the middle of a deep stage of sleep. Ever emerge from a nap feeling like you’re on a different planet? Then you know how awful waking up too far into a sleep cycle can feel!

The benefit of power naps
A quick nap that doesn’t go through all the sleep cycles can have big benefits. It can boost alertness and motor function for up to two to three hours.(1) And it normally doesn’t produce the stress-inducing and hyperactive side effects of caffeine. Naps that go over 30 minutes can still have benefits as well, despite the grogginess.(2)

The greatest drawback of the power nap is how inconvenient it can be in an office setting. But if you find yourself working at home, it might be worth developing a nap routine. Skip the mid-afternoon coffee, let everyone know you’ll be unavailable for around 30 minutes, get some quick shut-eye and see how it goes!

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July 22, 2020

What Are We Spending Money On?

What Are We Spending Money On?

We spend a lot of money.

All things told, we spend about $101 per day, whether we feel it directly or not.(1) That comes out to roughly $36,764 per year. Over half of all Americans spend more than what they earn.(2) The bulk of that goes to important categories like shelter and utilities.(3) But it doesn’t take much digging to find some less important spending patterns. Here’s a quick look at what we’re spending (i.e., wasting) our money on!

Food
How can you waste money on food? It’s essential to survival and health!

But it turns out that throwing away cash on food is really easy. Americans spend an average of $209 per month on just eating at restaurants, which comes to a total of $2,508 yearly. Add in the cost of drinks and you’re at $4,776!(4) But that’s just eating when you’re out. Another huge issue is chronically overbuying food to consume at home. We throw out around $1,600 of food per family every year.(5)

That brings us to a grand total of $6,376 dollars spent each year on restaurants, drinks, and wasted food. And that’s not including categories like takeout!

Shopping
We’re notorious shoppers. We spend around $108 on approximately five impulse purchases per month. Online shopping is a substantial category as well, with our digital purchases costing us around $84 monthly. Interestingly, we spend nearly $94 per month on subscription boxes. That adds up to $3,432 on non-essential shopping annually.

Personal care
Everyone wants to look, smell, and feel attractive. And it turns out that most people are willing to pay a king’s ransom on their appearance. Personal grooming comes out to $94.25 monthly. Gym memberships (which often go unused) cost the average American $72.53 per month. All told, we spend around $2,000 annually on looking good.

Cable and streaming
Another big category of spending is entertainment and apps. The biggest culprit here is—surprisingly—cable. On average, we shell out $90 per month for unlimited access to reality shows and documentaries, many of which are now available online. Throw in spending on movie streaming ($23.09), music streaming ($22.41), and other paid apps ($23.24), and our overall spending on digital entertainment is around $1,904.88 per year!

Tallying these four categories, we see that Americans are spending about $13,712.88 annually on non-essential items. That’s a staggering amount of money! It’s enough for a full year of college, including tuition and books.(6)

Non-essential spending does have its place—it can actually be very important to your quality of life and overall well being. But you might be surprised by how much of your financial power is getting wasted on things that are truly unnecessary or have cheaper alternatives.

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July 15, 2020

The Stock Market Crash of 1929

The Stock Market Crash of 1929

What comes to mind when you think of The Great Depression?

Maybe images of long unemployment lines and dusty farmers.

But it all started with a massive stock market crash. Here’s a quick history of the Stock Market Crash of 1929.

The Roaring Twenties
The decade leading up to the Great Depression is referred to as the Roaring Twenties. The First World War had just ended and Europe was in shambles. But the United States was poised to become an economic powerhouse. The U.S. economy was exploding in the years before the war and, unlike Europe, had escaped the conflict relatively unscathed. It didn’t take long for the U.S. economy and culture to kick into overdrive.

During the 1920s was the birth of consumer and mass culture. Women now had access to white collar jobs. That meant more money for the family and more freedom to live and dress how they wanted. Affordable cars, courtesy of Henry Ford, meant families could travel and vacation in places that were never before possible. Radios and phonographs meant that popular music (a.k.a., jazz) could reach a wider audience and make big money for artists.

The Big Bubble
But people weren’t content to just spend their money on Model-Ts and the latest Louis Armstrong record. They were buying stocks. And when they ran out of money to invest, they borrowed more. Banks were eager to lend out money to a new generation of investors with stable incomes. One of those things that seemed like a good idea at the time.

By the end of the decade, the American economy was booming. But underneath the surface was a tangle of high debt and wild speculation that the economy would keep on expanding. In reality, the only direction things could go was down.

The Stock Market Crash of 1929
The stock market set a record high in August 1929. Then it began to moderately decline in September. But by the middle of October, a modest slump became a total free fall. Spooked by the cooling market, investors started selling their shares in the millions. The technology of the time was overwhelmed trying to calculate how much was being sold. The massive bubble that had expanded during the roaring twenties was collapsing.

But the catastrophe didn’t end in the stock market. The public panicked. Droves of people started withdrawing money from banks as quickly as they could. But those banks had used that capital to invest in the market. Huge amounts of wealth were wiped out.

Aftermath
This upheaval caused the U.S. economy to take a nosedive. By 1932, stocks were worth only 20% of their 1929 peak.(1) Half of America’s banks were belly up, and nearly 30% of the population was unemployed.(2) Economies around the world were deeply shaken by the collapse of the U.S. market, making the Great Depression a global phenomenon. It would take the massive economic mobilization of World War II to resurrect the U.S. economy.

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July 13, 2020

The Gambler’s Fallacy

The Gambler’s Fallacy

Humans are amazing.

We’ve sent people to the moon, we’ve constructed gravity-defying skyscrapers, and developed incredible medicines and machinery to make our lives better.

But there is something we’re generally not great at—understanding probability.

It’s a mental blind spot that many of us seem to have. Sure, we can learn math formulas that help us make predictions in the abstract, but most of us will fall prey to a common misjudgment called the Gambler’s Fallacy. Here’s how it works!

Consider a coin toss
You and some friends are incredibly bored one day and start tossing a coin to pass the time. Somehow you flip 5 heads in a row, so maybe you can make a little cash off this run! You wager $10 that the next coin toss will be tails. Afterall, isn’t there a huge chance that the next toss won’t be heads?

Wrong!

You flip the coin, slap it on your wrist, and see heads for the 6th time. Congratulations, you’ve fallen prey to the Gambler’s Fallacy. You assumed that because an event frequently happened in the past, it was less likely to occur going forward.

But the past doesn’t always predict the future
We love noticing patterns and seeing trends. They are mental shortcuts to understanding the world, and they help us predict future events so we can come up with a game plan. It seems intuitive that 5 coin flips for heads somehow means that getting tails is right around the corner! We expect a 50/50 overall outcome, so the coin must have exhausted its ability to land with heads up for a bit, right?

But that’s not how pure randomness works. Each coin flip is its own separate event. The past few tosses have nothing to do with how the next one will turn out. It’s always 50/50, no matter what has happened in the past!

The cost of the Gambler’s Fallacy The Gambler’s Fallacy might not seem like a big deal. But if you’re not careful, your assumptions about the future could lead to big mistakes in the present. The Gambler’s Fallacy is sometimes called the Monte Carlo Fallacy because of an incident at the Monte Carlo Casino in 1913. A ball fell on the black several times on a roulette table. Gamblers noticed the string of black and decided to start betting on red. Surely the streak couldn’t last much longer! But the run of black continued for 26 rounds. Millions of dollars were lost because people fell into the classic trap of the Gambler’s Fallacy.

It’s easy to trust your gut. Sometimes certain decisions just feel right! But traps like the Gambler’s Fallacy can crop up when we’re trying to plan our futures. How many people make wild emotional calls when they see the market going up or down? How many people assume they’ll never need financial protection because everything is fine right now? It’s always worth seeking professional guidance when you’re making an important call. They can help cut through the confusion and help you avoid pitfalls and mental blindspots!

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July 6, 2020

Should You Only Use Cash?

Should You Only Use Cash?

Bills and coins are outdated.

Who actually forks over cash when they’re out and about anymore? Paper money and copper coins are a relic of the past that are useless in a world of credit cards and tap-to-pay…

Except when they’re not.

Using cards and digital payment systems actually comes with some pretty serious drawbacks. Here’s a case for considering going cash only, at least for a little while!

The card convenience (and curse)
Plastic cards can make spending (a little too) easy. See an awesome pair of shoes in the store? No problem! Just swipe at the counter and you’re good to go. Online shopping is even more frictionless. Everything from new clothes to lawn chairs is a few clicks away from delivery right to your front door.

And that’s the problem.

You might not notice the effect of swiping your card until it’s too late. Those shoes were a breeze to buy until you check your bank account and see you’re in the red, or you get your credit card bill. It’s easy to find yourself in a hopeless cycle of overspending when buying things just feels so easy.

The pain of spending cash
Handing over cash can be a different phenomenon. Paying with actual dollars and cents helps you connect your hard-earned money with what you’re buying. It makes you more likely to question if you really need those shoes or clothes or lawn chairs. Studies show that people who pay with cash spend less, buy healthier foods, and have better relationships with their purchases than those who use credit cards.(1) That’s why going with cash only might be a winning strategy if you find yourself constantly in credit card debt or just buying too much unnecessary stuff every month.

Security
To be fair, cash does have some safety concerns. It can be much more useful to a criminal than a credit card. You can’t call your bank to lock down that $20 bill someone picked out of your pocket on the subway! That being said, cards expose you to the threat of identity theft. A criminal could potentially have access to all of your money. There are potential dangers either way, and it really comes down to what you feel comfortable with.

In the end, going cash only is a personal decision. Maybe you rock at only buying what you need and you can dodge the dangers of overspending with your cards. But if you feel like your budget isn’t working like it should, or you have difficulty resisting busting out the plastic when you’re shopping, you may want to consider a cash solution. Try it for a few weeks and see if it makes a difference!

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June 29, 2020

All About Food Deserts

All About Food Deserts

You’re hungry.

You just got home from work, you haven’t had anything since lunch, and you need a bite to eat ASAP. What do you do? Most of us just pop over to the local grocery store, pick up some ingredients, and prepare a meal. But that’s actually not possible for many Americans who live in areas without access to fresh groceries. It’s a phenomenon known as “food deserts”, and it affects millions of people throughout the country.

What’s a food desert?
Defining food deserts can be tricky. Roughly speaking, a food desert is an area where residents have limited access to healthy food options. But limited access doesn’t always look the same. The United States Department of Agriculture looks at things like distance from grocery stores, income, and access to vehicles when delineating a food desert.(1) Consider a few examples…

Let’s say you live in a densely populated, low income, urban area. You and your neighbors mostly take public transportation to work, and there aren’t many cars to go around. While there might be plenty of gas stations and corner stores nearby, the closest supermarket or grocery store is around a mile away. Technically speaking, you live in a food desert. You don’t have easy access to healthy food options.

But there are examples from the other side of the spectrum. Let’s say you live in a low income rural area. You own a vehicle out of necessity, but your closest neighbors are a mile away and the closest real grocery store is over ten miles away. Once again, you would technically live in a food desert. The settings and details are totally different, but getting healthy food is still a massive hassle.

Why do food deserts matter?
Remember that a food desert is all about access to healthy food. There might be plenty of fast food and processed food to be found in urban and rural food deserts. But living on junk food carries a steep price tag. The upfront cost of constantly eating out can add up quickly. That’s already less than ideal for a family in a low-income neighborhood. But consuming junk food may also increase your risk for obesity and other health problems. That could eventually translate into increased healthcare expenses. It’s a double whammy of problems; you pay more for bad food that will cost you more later down the road!

How many people live in food deserts?
According to a 2009 report by the USDA, there were roughly 23.5 million people who lived in food deserts.(2) About half of those people were impoverished.(3) Americans drive on average over 6 miles to go grocery shopping.(4) In the Lower Mississippi Delta, locals sometimes drive over 30 miles just to find a supermarket!(5)

We’re still trying to figure out solutions for food deserts. Some communities have formed local gardens that grow fresh produce. Grocery trucks have started to pop up throughout the country, bringing healthy options into neighborhoods. Only time will tell for the long-term effectiveness of these solutions!

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June 19, 2020

3 Ways to Shift from Indulgence to Independence

3 Ways to Shift from Indulgence to Independence

On Monday mornings, we’re all faced with a difficult choice.

Get up a few minutes early to brew your own coffee, or sleep a little later and then whip through a drive-thru for your morning pick-me-up?

When that caffeine hits your bloodstream, how you got the coffee may not matter too much. But the next time you go through a drive thru for that cup o’ joe, picture your financial strategy shouting and waving its metaphorical arms to get your attention.

Why? Each and every time you indulge in a “luxury” that has a less expensive alternative, you’re potentially delaying your financial independence. Delay it too long and you might find yourself working when you should be enjoying a comfortable retirement. Sound dramatic? Alarmist? Apocalyptic? But that’s how it happens – one $5 peppermint mocha at a time. This isn’t to say that you can’t enjoy an indulgence every once in a while. You gotta “treat yourself” sometimes, right? Just be sure that you’re sticking with your overall, long-term strategy. Your future self will thank you!

Here are 3 ways to shift from indulgence to independence:

1. Make coffee at home. Reducing your expenses can start as simply as making your morning coffee at home. And you might not even have to get up earlier to do it. Why not invest in a coffee pot with a delay brewing function? It’ll start brewing at the time you preset, and what’s a better alarm clock than the scent of freshly-brewed coffee wafting from the kitchen? Or from your bedside table… (This is a judgment-free zone here – do what you need to do to get up on time in the morning.)

Get started: A quick Google search will yield numerous lists of copycat specialty drinks that you can make at home.

2. Workout at home. A couple of questions to ask yourself:

1) Will an expensive gym membership fit into your monthly budget? 2) How often have you gone to the gym in the last few months?

If your answers are somewhere between “No” and “I’d rather not say,” then maybe it’s time to ditch the membership in favor of working out at home. Or perhaps you’re a certified gym rat who faithfully wrings every dollar out of your gym membership each month. Then ask yourself if you really need all the bells and whistles that an expensive gym might offer. Elliptical, dumbbells, and machines with clearly printed how-tos? Yes, of course. But a hot tub, sauna, and an out-of-pocket juice bar? Maybe not. If you can get in a solid workout without a few of those pricey extras, your body and your wallet will thank you.

Get started: Instead of a using a treadmill inside the gym, take a walk or jog around your local park each day – it’s free! If you prefer to work out at a gym, look into month-to-month membership options instead of paying a hefty price for a year-long membership up front.

3. Ditch cable and use a video streaming service instead. Cable may give you access to more channels and more shows than ever before, but let’s be honest. Who has time to watch 80 hours of the greatest moments in sports every week? Asking yourself if you could cut the cable and wait a little longer for your favorite shows to become available on a streaming service might not be a bad idea. Plus, who doesn’t love using a 3-day weekend to binge-watch an entire series every now and then? There’s also the bonus of how easy it is to cancel/reactivate a streaming service. With cable, you may be locked into a multi-year contract, installation can be a hassle (and they may add an extra installation fee), and you can forget about knowing when the cable guy is actually going to show up.

Get started: Plenty of streaming services offer free trial periods. Go ahead and give them a try, but be careful: You may have to enter your credit card number to access the free trial. Don’t forget to cancel before your trial is over, or you will be charged.

Taking time to address the luxuries you can live without (or enjoy less often) has the potential to make a huge impact on your journey to financial independence. Cutting back here and investing in yourself there – it all adds up.

In what areas do you think you can start indulging less?

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June 10, 2020

The Food Waste Epidemic... And What You Can Do About It

The Food Waste Epidemic... And What You Can Do About It

Food waste is a big problem.

Don’t believe me? Just check out these food waste facts:

- The average family throws away around $1,500 of food every year.(1)

- One recent study found that we toss around a third of all consumable food, with wealthy nations being the biggest culprits.(2)

- Cutting back our food waste just 15% would free up enough food to feed 25 million Americans.(3)

Those are incredible numbers. And they touch everything from the poor in other parts of the world to your own wallet! But what can you do? How can you not only combat a global problem but also look out for your own financial needs? Here are a few practical ways to reduce food waste and save some money while you’re at it!

Shop with a plan
The first step to not wasting food is only buying food you plan on eating. That means deciding ahead of time what you want to eat, making a list, and only buying those items at the store. Sure, it’s thrilling to walk down the produce aisle just waiting for an exotic veggie to catch your eye or buying extra meat just in case you want pork chops instead of chicken thighs. But you’ll quickly find that shopping without a strategy can lead to overbuying. This raises the potential that food won’t get prepared and will get thrown out. Always start with a list and shop from there.

Online shopping may help you stay on track with your list—and save you a ton of time! It’s fairly simple these days to log in to your favorite grocery store app, check items off, then click Delivery or Pick-up. (Keep in mind the store may charge a small fee for these services, but if it means not throwing out yet another unopened box of spinach, it might be worth it!)

Store wisely
Even the best planner will overbuy at some point. Maybe there’s a great sale on your kids’ favorite snack crackers, or you want to pick up a couple extra bottles of wine since they’re BOGO. You might stock up on Monday and then remember you have dinner plans with the in-laws on Friday. Don’t panic! Keeping your food from going bad is actually pretty simple. For many perishable items, just take a deep breath, open your freezer, and put your food inside. Close the freezer door. Your food should be safe from going bad until your schedule clears up. Just remember to dethaw your food before you try cooking it!

If you find you’re stocking up often on dry goods, you might want to invest in some quality containers (plastic, glass or metal) to help keep your food fresher, longer.

Reuse (safely)
But what happens if you prepare a ton of food for a meal only to discover that your stomach is smaller than you anticipated? Open up the trash can and dump all of that delicious, edible food?

Never!

The classic leftovers loophole is to put your food in proper containers and leave them in the fridge until you can get back to them in the next day or two. You can also freeze leftovers if you need. But why stop there? Those leftovers are just begging to be transformed into something fresh and delicious! Why not stir fry them with some rice or cook them into a casserole? Get creative and make something new and amazing!

Reducing food waste takes a little work and planning. But with the right attitude, it can be a fun way of contributing to your community, helping the planet, and avoiding a hunger strike by your bank account!

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June 8, 2020

What Happens When You Don't Pay Your Debts

What Happens When You Don't Pay Your Debts

Movies make defaulting on debt look scary.

Broken glass, bloody noses, and shouts of “Where’s my money!” come flooding to mind when we think of those poor souls in films who can’t pay back the down-and-dirty street lender. But what happens if we’re late on a mortgage payment or our credit card bill? It turns out there are several steps that creditors typically go through to get their money (and none of them involve baseball bats!).

Debt collectors
Debt that doesn’t get paid within 60 days typically gets handed over to a debt collection agency. These companies will attempt to entice you into coughing up what you owe. They’ll then hand that cash over to whoever hired them, keeping a portion for themselves. Remember, debt collectors can’t drain your account directly. Instead, you’ll receive calls and notifications and reminders to pay up. This can occur until up to 180 days after you fail to make a payment.

Credit score hit
Lenders want to know if you’ll be able to pay back money that they loan you. They look at your credit report (a history of your debt payments) to determine if they can trust you. The information in that report gets crunched by an algorithm to produce a credit score. It’s a shorthand way for lenders to evaluate your creditworthiness and decide if they want to loan you money.

Failure to pay your debts can end up on your credit report. Consistently missing payments and not paying for days and months can seriously affect your credit score. That means creditors can deny you loans or crank up your interest rate. Yikes.

Lawsuits
But what happens if you don’t pay when the debt collectors come around? After about 180 days your debt will be considered charged-off, meaning it’s not likely to be paid.(1) This presents creditors with a few different options. Sometimes, they’ll decide that the debt just isn’t worth it, cancel the collection effort, and move on. Collectors could also negotiate, settle for a smaller portion of the debt, and call it done. But creditors could also take the debtor to court and legally attempt to recover the money they’re owed.

A great practice is to not rack up debt at all. A good practice is to take on debt only in rare circumstances. But the best practice is to make sure you pay off any debt you owe on time!

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June 1, 2020

What Are the Effects of Closing a Credit Card?

What Are the Effects of Closing a Credit Card?

Americans owe over $900 billion in credit card debt, and credit card interest rates are on the rise again – now over 15%.

If you’re on a mission to reduce or eliminate your credit card debt, you may decide to just close all your credit cards. However, some of the consequences may not be what you’d expect.

Lingering Effects: The Good and the Bad
Many of us have heard that credit card information stays on your credit report for 7 years. That’s true for negative information, including events as large as a foreclosure. Positive events, however, stay for 10 years. In either case, canceling your credit card now will reduce the credit you have available, but the history – good or bad – will remain on your credit report for years to come.

Times when cancelling a card may be your best bet:

  • A card charges an annual fee. If you’re being charged an annual fee for the privilege of having a credit card, it may be better to cancel the card, particularly if you don’t use the card often or have other options available.
  • Uncontrolled spending. If “retail therapy” is impeding your financial future by creating an ever-growing mountain of debt, it may be best to eliminate the temptation of buying with credit by cutting up those cards.

When You Might Want to Hang Onto a Credit Card:
You may not have known that one aspect your credit score is the age of your accounts. Canceling a much older account in favor of a newer account can leave a dent in your credit score. And canceling the card won’t erase any negative history, so it may be best to hang on to the older credit account as long as there are no costs to the card. Also, the effects of canceling an older account may be larger when you’re younger than if you have a long credit history.

Credit Utilization Affects Your Credit Score
Lenders and credit bureaus also look at credit utilization, which refers to how much of your available credit you’re using. Lower percentages help your credit score, but high utilization can work against you.

For example, if you have $20,000 in credit available and $10,000 in credit card balances, your credit utilization is 50 percent. If you close a credit card that has a credit limit of $5,000, your available credit drops to $15,000, but your credit utilization jumps to 67 percent (if the credit card balances remain unchanged). If you’re carrying high balances, going on a credit card cancelling rampage can have negative effects because your credit utilization can skyrocket.

To sum it all up, if unnecessary spending is out of control or there is a cost to having a particular credit card, it may be best to cancel the card. In other cases, however, it’s often better to just use credit cards occasionally, or if you have an emergency.

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May 27, 2020

How Do Youtubers Make Money?

How Do Youtubers Make Money?

People make tons of money on YouTube.

And a lot of it doesn’t seem to make any sense. The highest paid YouTuber is Ryan Kaji, an eight-year-old child who opens toys and plays with them on camera. He made $26 million from June 1, 2018 to June 1, 2019 (1). The list of highest earning YouTubers includes another child, multiple gamers, and a group of guys who do tricks.

So how do people make money opening toys, playing video games, or doing makeup tutorials? What value are these people bringing to their millions of viewers?

The power of the parasocial
It’s important to understand why people watch YouTube. Part of it is for the occasional funny video. Those are great, but they’re difficult to monetize. What’s become more common is for someone to start a channel dedicated to creating a certain kind of content. It can be anything from music reviews to makeup tutorials to skit comedy. Viewers stumble onto the channel and enjoy what they see, but soon something special starts to happen; they form a type of relationship with the content creator.

This is a well-observed phenomenon called a parasocial interaction. People start to feel like they know someone without ever actually meeting them in real life. You’re not just watching someone play video games or watching the news or listening to a music review. You’re spending time with someone you relate to and think of as a friend, sort of. And that results in racking up consistent viewing hours.

Ads
Roughly 1 billion hours of YouTube videos get watched every single day (2). It’s really the perfect platform for almost anyone trying to advertise their business. Content creators can become YouTube partners once they have a certain number of subscribers and watched hours. This allows them to put ads in their videos with Google Adsense, provided they follow certain guidelines.

On paper, ads don’t pay much; Forbes estimated in 2018 that top YouTube talent could make about $5 per 1,000 views from ads (3). That’s why the key is to create lots of bankable content. Uploading 5 days a week with an average of 100,000 views per video 52 weeks per year could hypothetically earn you $130,000 annually. But there’s more ways to monetize YouTube than ads.

Sponsorships
There are plenty of businesses looking for more personal ways of marketing their products. (Remember that YouTubers can have parasocial relationships with their audiences.) A recommendation from your favorite channel feels like a recommendation from a trusted friend. And brands are willing to pay big dollars to cash in on that opportunity. Compensation for a sponsored video varies on the size of a YouTuber’s audience, but on average it’s around $2,000 per 100,000 subscribers. This is where the numbers start to skyrocket. A single sponsored video per week with 100,000 views can now potentially net you $130,000 annually. At that point, you’re poised to grow your audience and further increase your cash flow.

Realistically, YouTubers make money the same way entertainers have for years. They draw attention to ads and are mouthpieces for brands. The differences are that the barriers to entry are incredibly low and scope of the audience essentially limitless. There’s no doubt that YouTube has revolutionized who gets to shape modern media.

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May 20, 2020

New Money

New Money

Last time we looked at old money.

We saw that it’s built on a very specific set of values and exists in very specific places. But what about so-called new money?

The new money story
New money is characterized by a story. It begins at nothing, or next to nothing, and builds a fortune through hard work, grit, and determination. These rags-to-riches tales have been around for a while, but they’ve gripped the American imagination, especially since the last half of the 19th century. Andrew Carnegie and Steve Jobs are the classic examples of new money narratives, both men coming from immigrant families and amassing huge fortunes for themselves to change the world.

New money values
Building a fortune from scratch relies on a different mindset than managing a pre-existing legacy. Risk taking and innovation are often encouraged and even flaunted by the new money class. It’s a forward-thinking, even progressive, attitude that’s always looking for the next way to make another dollar.

The openness of new money
Progressivism and hustle are the hallmarks of new money. That’s resulted in new money existing in a unique world. New money tends to be found in the hotspots of entertainment or technology. That means movie studios attracting actors look for a break or technical schools swarming with students trying to build a digital future. The new money ethos has also resulted in very specific spending patterns that are more public. Highly visible charities, brash social media presences, and expensive toys and gadgets are all part of the package. But so is an interest in looking like an everyman. Fashion choices tend to be simple, most classically t-shirts or turtlenecks. It’s a far cry from the aloof elegance of old money!

Blurry borders between old and new
The lines between old and new money get complicated in how life plays out. Plenty of tech fortunes have been squandered over the last 30 years, while others have quietly decided to manage their wealth in obscurity. Plus, there’s no shortage of American aristocracy looking to flex on social media!

The biggest key is that old money and new money are built on values and mindsets. You can manage wealth earned from a mobile game like an oil tycoon from a long lost era and secure a legacy for your kids. Or you can forsake your family’s business of 200 years and forge your own path with hard work and grit. It’s up to you how you manage your specific circumstance!

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May 18, 2020

Old Money

Old Money

What do you see when you think of a rich person?

Probably a big house with huge glass windows, a fancy electric sports car, and a latest-fashion outfit. But wealth doesn’t always look the same. Folks from families that have been rich for generations tend to act and present in different ways than an entrepreneur who stumbled on a billion dollar idea. But there’s more to it than wearing a suit or turtleneck. Let’s start by focusing on old money.

Old money, then and now
The concept of old money vs. new money originated in the early 20th-century as a way of discussing moguls like J.D. Rockefeller and Andrew Carnegie. These were men from poor backgrounds who essentially invested their way to the top, much to the chagrin of wealthy elites who could trace their fortunes to before the American Revolution. But most of us today would consider the Rockefellers and Carnegies to be textbook old money. So why have these families been assimilated into the upper upper class?

The old money mindset
Not every family that makes a fortune is able to keep it. Old money is built on careful planning, self-discipline, and intentional parenting with the goal of preserving a legacy and passing wealth from generation to generation. It’s a long-term approach with a conservative set of values. Plenty of people have built massive fortunes overnight throughout history. But not everyone is able to adopt a new set of values and blend in with the upper class of their time

Old money enclaves
Old money exists in a very specific world. It tends to vacation in specific places, live in specific neighborhoods, and send its children to specific schools in the Northeast. The world of old money is governed, and in many ways preserved, by rules and expectations designed to keep wealth inside the family. These aren’t people you’ll see flashing watches and cars on YouTube videos!

But what about new money? Check out my article on Wednesday to learn more about what sets these two classes apart.

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May 15, 2020

Questions To Ask When Buying In Bulk

Questions To Ask When Buying In Bulk

Buying in bulk is a no-brainer, right?

It seems cheaper and you can (hopefully) get all your shopping done for the family in one trip. What’s not to love?

But there are certain things to consider when shopping wholesale. Here are some questions you should ask yourself before buying in bulk

Can you afford the upfront cost?
Overall, buying in bulk at a big box store can be cheaper than normal shopping at your local supermarket. But it may not feel that way at the register. The upfront cost can be higher than you’re used to, so just make sure that you’ve budgeted that in. Remember, this is a long-term game where the savings can show up further down the line.

Will this product expire?
As a general rule of thumb, you want to avoid perishable items when buying in bulk. Let’s say you go to the wholesaler and notice that you can get a bargain on chicken. Sounds awesome! Should you buy 45 pounds of chicken and slam it in your fridge? Probably not. You’ll have about a week to get through that amount of poultry. Whatever is leftover will have to go into the freezer (more on that later).

But that still means that non-perishable paper items and personal care essentials are fair game. Buying razors in bulk? Go for it. Party cups? Fire away. Canned foods, beans, rice, and spices are also excellent to buy in bulk. But there’s another factor to consider…

Do you have enough space?
Getting a good deal is amazing. But stuffing your house to the brim isn’t. Make sure you have enough storage space before you decide to buy something in bulk. That deal on toothpaste might be a once in a lifetime opportunity, but will you have enough room to store it? You might be able to get away with buying perishable items and jamming them in a freezer, but how much freezer space do you have? Will you need to purchase an additional freezer? Just because you can afford a deal doesn’t mean you can afford to store it.

Buying in bulk can be a great way to save money. Just make sure you prepare and do your research before you start purchasing huge quantities of items!

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May 11, 2020

When Wall Street Bailed Out Washington

When Wall Street Bailed Out Washington

We all know about government bailouts.

They’ve been around for a while. But did you know that the government was once bailed out by Wall Street?

Gold Runs
Dollars used to represent actual gold in the treasury—what we call the “gold standard”. Dollars had value because they could be traded in for gold. But here’s the catch; the US didn’t have gold to match every dollar floating around the economy. If everyone suddenly decided to trade in their dollars for gold, the government would eventually run out and have to start turning people away. Faith in the US economy would collapse.

This nightmare situation was called a gold run, and it was pretty common in the 19th century. But the Panic of 1893 was especially bad. European investors, startled by collapsing investments in South America, started what became a huge gold run on the U.S. Treasury, pulling out millions of dollars. People quickly started pulling their money out of banks, trying to secure as much of their cash as possible. The economy was in total meltdown.

J.P. Morgan Enters the Scene
Business mogul J.P. Morgan had enough powerful connections to realize that the U.S. Treasury was in deep trouble. Morgan wasn’t the wealthiest man in the world; his fortune of $120 million ($1.39 billion in 2020) was pocket change compared to the net worth of John D. Rockefeller, who would be worth about $340 billion today (1 & 2). But Morgan had influence and connections, and he was committed to bailing out the government.

However, there was a problem. Morgan and the gold standard were both unpopular. Grover Cleveland, president at the time, wasn’t excited about aligning himself with either to save the economy. Fortunately, Morgan had a trump card; he knew from inside sources that the government was almost literally within hours of defaulting. And he had done his research. An obscure statute from the Civil War allowed for the government to sell Morgan bonds while he gave them enough gold to avoid going broke. Cleveland knew he was picking his poison. He would either look like a Wall Street pawn or let his country go broke. But he eventually gave Morgan the bonds and accepted the gold.

The aftermath
It worked. The economy restabilized and the country was solvent. Cleveland lost his next election. Morgan continued to prosper. But the days of Wall Street bailouts were numbered. Business owners decided after a panic in 1913 that the government should be the one to fix economic downturns. And the Fed has been bailing out Wall Street ever since!

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May 6, 2020

How Much Should You Save Each Month?

How Much Should You Save Each Month?

How much are you saving?

That might be an uncomfortable question to answer. 45% of Americans have $0 saved. Almost 70% have under $1,000 saved (1). That means most Americans don’t have enough to replace the transmission in their car, much less retire (2)!

But how much of your income should you send towards your savings account? And how do you even start? Keep reading for some useful strategies on saving!

10 percent rule
A common strategy for saving is the 50/30/20 method. It calls for 50% of your budget to go towards essentials like food and rent, 30% toward fun and entertainment, and the final 20% is saved. That’s a good standard, but it can seem like a faraway fantasy if you’re weighed down by bills or debt. A more achievable goal might be to save around 10% of your income and start working up from there. For reference, that means a family making $60,000 a year should try to stash away around $6,000 annually.

A budget is your friend
But where do you find the money to save? The easiest way is with a budget. It’s the best method to keep track of where your money is going and see where you need to cut back. It’s not always fun. It can be difficult or even embarrassing to see how you’ve been spending. But it’s a powerful reality check that can motivate you to change your habits and take control of your finances.

Save for more than your retirement
Something else to consider is that you need to save for more than just your retirement. Maintaining an emergency fund for unexpected expenses can provide a cushion (and some peace of mind) in case you need to replace your washing machine or if your kid needs stitches. And it’s always better to save up for big purchases like a vacation or Christmas gifts than it is to use credit.

Saving isn’t always easy. Quitting your spending habit cold turkey can be overwhelming and make you feel like you’re missing out. However, getting your finances under control so you can begin a savings strategy is one of the best long-term decisions you can make. Start budgeting, find out how much you spend, and start making a plan to save. And don’t hesitate to reach out to a financial professional if you feel stuck or need help!

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May 4, 2020

Where Did Banks Come From?

Where Did Banks Come From?

Banks are so common that we never really question where they came from.

But banks actually have come a long way since they first got started. Here’s a quick lesson on the origins of banks!

The First Banks
Coins first came on the scene as a way to pay for goods or services around the 5th or 6th century BC. But there was a problem; where do you store huge troves of them? Homes were vulnerable to robbery. So people started trusting temples with their cash. They were everything you would want—accessible but still secure, temples were the perfect balance of public and prestigious. Eventually, temples started loaning out money in addition to protecting it.

Eventually, the Romans created distinct banking institutions. These were large-scale enterprises that developed enormous power; they could confiscate land from nobles if they weren’t paying back their obligations. Some of these institutions even outlasted the empire after it fell.

Medieval Banks
The Middle Ages were an odd time for banking. The Catholic Church developed strict rules about usury; lending money for profit was seen as decidedly unchristian. In a somewhat dark twist, small-time money lenders were often heavily regulated as the Church started employing private merchant bankers to fund its various exploits.

These bankers had one problem; they failed a lot. The Middle Ages were violent and kings often turned to papal bankers for war time loans. It wasn’t uncommon for rulers to default on these loans either due to defeat or costly victories, bankrupting lenders.

Goldsmiths and Endless War
This only got worse as wars became intercontinental during the Age of Discovery. The English in particular found themselves in constant war with both Spain and France and started looking for innovative ways of funding their conquests. Private citizens in England had started taking their money to goldsmiths for safekeeping. Goldsmiths often had huge vaults, meaning they could easily protect cash for a fee. They also started issuing notes that allowed customers to withdraw money as they needed.

The crown was not so lucky. The credit of England was so bad that by the end of the 1600s they couldn’t borrow enough money to build a navy. Merchants came together to form a centralized lending institution to raise money and make loans on behalf of the government. They started issuing bonds and banknotes to customers and essentially became one of the first centralized banks in the world.

Banking would evolve by leaps and bounds as the industrial revolution transformed European economies in the 18th and 19th centuries. But the foundations of modern banking had already been set to fuel the massive technological changes of the next few centuries.

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April 29, 2020

Budget Date Ideas

Budget Date Ideas

Budgeting might seem like the death knell for your dating life.

No more extravagant dinners? No more fun times at the movies? No more nights out on the town? How else can you keep that spark alive? But sometimes adding constrictions to your dating life can be a fun change of pace and actually spice things up. Here are some great budget-friendly date ideas.

Cook dinner together
An expensive dinner in a nice part of town is always a killer date idea. But it can start to add up if you’re not careful. That’s why cooking a special dinner at home as a couple is a great alternative. You save money on ingredients, you get real portion sizes that will last you for days, and it’s a fun activity that takes teamwork. Not a chef by nature? YouTube will be your best friend. There are tons of great recipe walkthroughs that will help you two knock this one out of the park!

Go on a hike
You should never tell your partner to take a hike. But you should definitely ask your partner to go on a hike! There’s nothing much better than some physical exertion in the great outdoors with someone you care about. Just remember that this one can add up if you’re not careful. Here are some pointers to make your hike a thrifty winner:

-Drive your most fuel efficient car

-Avoid cutesy stops full of expensive trinkets

-Research and see if the trail you’re hiking charges for parking

-Pack as much food as possible

Follow these tips and you might be surprised how inexpensive a trek can be!

Watch a sunset
Sunsets are incredible. There’s no reason that you and your significant other shouldn’t be sitting outside to take in the everyday beauty of the sun slipping behind the horizon. Any sunset is good, but here are a few steps you can take to find the absolute best sunset for your dollar!

-Choose the right day. The best sunsets typically occur a few hours after rain while there’s still a bit of cloud coverage. Too many clouds hide the sun, but just a few will catch the final light of the day. Check your forecast ahead of time!

-Choose the right location. You don’t have to go far to find the perfect sunset viewing spot. Watching the last beams of the sun shine through skyscrapers? Amazing. Hitting up a small, local airport to watch planes at twilight? Gorgeous. Bathing in the light of golden hour on your front porch with your gal (or guy) beside you? One for the books.

-Pack a picnic. Wherever you decide to watch the sunset with your partner, just remember to pack some food. It’s a great alternative to an atmospheric (and expensive) restaurant!

Creativity is key. The more inventive your budget date ideas are, the more memorable they’ll be. You might find yourself looking back on your budget dating years as some of the best and most exciting of your relationship!

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