from the world's big
Essential financial life skills for 21st-century Americans
Having these financial life skills can help you navigate challenging economic environments.
- Americans are swimming in increasingly higher amounts of debt, even the upper middle class.
- For many, this burden can be alleviated by becoming familiar with some straightforward financial concepts.
- Here's some essential financial life skills needed to ensure your economic wellbeing.
When it comes to Americans' finances, the statistics paint a pretty grim picture. According to Northwestern Mutual's 2018 Planning & Progress Study, Americans are facing greater challenges than ever when it comes to their finances, and most don't seem to have the life skills needed to handle those challenges well.
One in five Americans have no retirement savings whatsoever, and a third of Baby Boomers have under $25,000 saved for retirement. With the increasingly dicey status of social security, this is going to mean a lot of older folks will be working for their entire lives. About 50% of Americans reported that they feel fear when considering their financial situation. The average personal debt rose to $38,000 in 2018 and that excludes mortgages, arguably the best form of debt one could have since its tied up with an asset. While mortgages are typically the most common form of debt, in 2018, credit card debt tied mortgages as the primary source of debt. And we don't even need to get into student loan debt.
These challenges aren't isolated to the lower class, either. Data from the Federal Reserve shows that all Americans aside from the top 10% are experiencing income stagnation. Upper-middle-class households are finding that the price of products and services are rising faster than inflation, forcing some to take on increasingly riskier forms of debt. In order to cope with this changing economic landscape, it's crucial that Americans master these financial skills.
Understand the power of compound interest
Compound interest refers to the exponential growth that happens when interest piles onto a sum over time. If you invest $5,000 at an interest rate of 7% per year, the next year that sum will increase by $350. If left untouched, the year after that, it will increase by $374.50. So long as that money remains untouched, it will grow at a rate that speeds up year over year, eventually reaching an impressive velocity.
Compound interest swings both ways: investing your money in a fund can be a fantastic way to build wealth, but leaving credit card debt to grow and grow is a fantastic way to give yourself an ulcer. If you have debt, it is vital that you pay off more than just the interest it gained. Consider the $5,000 example. After its first year of growing at 7% interest, you can't just pay $350 towards it — it'll never go away like that.
When it comes to student loan debt, programs like the Peace Corps can seem like a godsend. Joining volunteer programs like these often means you no longer have to pay your student loans for the duration of your service, but that doesn't mean your loan stops growing. Weigh all your options before letting debt accrue over time. Otherwise, you might be amazed at how horrifically large the beast has grown.
Understand retirement accounts
Though it might not seem too bad to put off saving for retirement until you've turned, say, 30, doing so means that your retirement account will be in fairly poor conditions. Because of compound interest, people who contribute more frequently and earlier to their retirement account will have disproportionately more money available when they retire.
Many people are not in the position to contribute to their retirement accounts. More immediate needs like groceries, rent, and other bills take precedence. But even small amounts can make a significant difference if they're started earlier rather than later. Even if you haven't been contributing for years and retirement looms nearer on the horizon then you'd like, remember that the best time to plant a tree is a decade ago, but the second best time is right now.
For those of you fortunate enough to be employed in a job with employer matching contributions, absolutely contribute the maximum percentage of your income that employer will match. If you can afford to do so, then meeting your employer's matching rate is literally free money.
Understand different investment vehicles (and when to use them)
Everybody wants their money to grow, but it may not be appropriate for everybody to invest in things outside of their retirement fund. Namely, if you have debt with a relatively high interest rate, investing in securities may not be worth your time. Stocks, for instance, don't have a guarantee rate of return, though the average return of the S&P 500 is 7% per year. The trouble is, this figure can vary tremendously in any given year.
On the other hand, your credit card or student loan debt will always remain the same in fair weather or foul. So, if that debt carries a particularly high interest rate, you can in effect become wealthier by paying it down.
If you've got money left over after contributing to your retirement account and if your debt has a low interest rate or you're fortunate enough to have no debt whatsoever, then it can be beneficial to invest in another investment vehicle, like an index fund. Index funds track some financial index such as the S&P 500 and enable you to buy a small portion of everything in the index they track. If you invest in an index fund tracking the S&P 500, you can expect a 7% return on average — though it's important to remember the golden rule of investing: Past performance is no guarantee of future returns. It's also important to look at the expense ratio of a given fund, or the amount that fund charges investors for its service. Funds with high fees can seriously hamper your returns.
That's not to say that this is necessarily the best option for you. Just as every investor is different, every investment vehicle is different, each with its own upsides and downsides. It's important to consider factors like your risk tolerance and goals when selecting an investment vehicle. Investopedia offers a great deal of information, like this page covering the basics of different kinds of investments. There are also many excellent books on investing, such as Benjamin Graham's classic The Intelligent Investor, which is reliably found on lists of the best investing books, and The Essays of Warren Buffett.
Financial management is an essential life skill, especially in 21st century America. Obtaining financial security is difficult, but it is even more difficult without the knowledge of how to go about these things. It can be tempting to avoid considering these kinds of things when things are tough, but those moments are precisely when thinking about your finances is essential. Understanding the three items discussed above can help navigate America's choppy financial waters.
Educators and administrators must build new supports for faculty and student success in a world where the classroom might become virtual in the blink of an eye.
- If you or someone you know is attending school remotely, you are more than likely learning through emergency remote instruction, which is not the same as online learning, write Rich DeMillo and Steve Harmon.
- Education institutions must properly define and understand the difference between a course that is designed from inception to be taught in an online format and a course that has been rapidly converted to be offered to remote students.
- In a future involving more online instruction than any of us ever imagined, it will be crucial to meticulously design factors like learner navigation, interactive recordings, feedback loops, exams and office hours in order to maximize learning potential within the virtual environment.
A leading British space scientist thinks there is life under the ice sheets of Europa.
- A British scientist named Professor Monica Grady recently came out in support of extraterrestrial life on Europa.
- Europa, the sixth largest moon in the solar system, may have favorable conditions for life under its miles of ice.
- The moon is one of Jupiter's 79.
Neil deGrasse Tyson wants to go ice fishing on Europa<div class="rm-shortcode" data-media_id="GLGsRX7e" data-player_id="FvQKszTI" data-rm-shortcode-id="f4790eb8f0515e036b24c4195299df28"> <div id="botr_GLGsRX7e_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/GLGsRX7e-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/GLGsRX7e-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/GLGsRX7e-FvQKszTI.js"></script> </div>
Water Vapor Above Europa’s Surface Deteced for First Time<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="9c4abc8473e1b89170cc8941beeb1f2d"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/WQ-E1lnSOzc?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
New study shows white dwarf stars create an essential component of life.
- White dwarf stars create carbon atoms in the Milky Way galaxy, shows new study.
- Carbon is an essential component of life.
- White dwarfs make carbon in their hot insides before the stars die.
What Are White Dwarf Stars?<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="7b046e546ce994682b2553a8c978eb32"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/77a1KSxfaR0?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
Master negotiator Chris Voss breaks down how to get what you want during negotiations.
- Former FBI negotiator Chris Voss explains how forced empathy is a powerful negotiating tactic.
- The key is starting a sentence with "What" or "How," causing the other person to look at the situation through your eyes.
- What appears to signal weakness is turned into a strength when using this tactic.
3 Tips on Negotiations, with FBI Negotiator Chris Voss | Best of '16 | Big Think<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="b86d518e9f0c9f9d7a7c686e07798152"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/-FLlBchonwM?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>This question forces a response, but—and this is key—the other person has to consider your side of the argument. They have to look at the situation from your perspective if they hope to offer a solution.</p><p>Offering a real-world example, Voss mentions coaching a high-end real estate agent. They were leasing an expensive home in the Hollywood Hills. The first time the negotiators asked the "how" question, the leasing agent relented on a number of terms. A little while later, they asked again. This time, the agent said, "If you want the house you're going to have to do it," signaling that the end of negotiations had been reached. </p><p>Voss says that "how" is not the only word that works. "What" is also a powerful entry into negotiations, such as "What am I supposed to do?" Again, you're forcing the other person to empathize. </p><p>This is a particularly tricky skill during a time when most conversations are online. Nuance is impossible without the immediacy of pantomimes and vocal fluctuations. Whataboutism is too easy an escape. </p>
Aikido Morihei Ueshiba (1883 - 1969, standing, centre left), founder of the Japanese martial art of aikido, demonstrating his art with a follower, at the opening ceremony of the newly-opened aikido headquarters, Hombu Dojo, in Shinjuku, Tokyo, 1967.
(Photo by Keystone/Hulton Archive/Getty Images)<p>Online debates often amount to little more than frustrated individuals pulling out their hair. In his book, "Against Empathy," Yale psychology professor Paul Bloom writes that effective altruists are able to focus on what really matters in everyday life.</p><p>For example, he compares politics to sports. Rooting for your favorite team isn't based in rationality. If you're a Red Sox fan, Yankees stats don't matter. You just want to destroy them. This, he believes, is how most people treat politics. "They don't care about truth because, for them, it's not really about truth."</p><p>Bloom writes that if his son believed our ancestors rode dinosaurs, it would horrify him, but "I can't think of a view that matters less for everyday life." We have to strive for rationality when the stakes are high. When involved in real decision-making processes that will affect their life, people are better able to express ideas and make arguments, and are more receptive to opposing ideas. </p><p>Because we "become inured to problems that seem unrelenting," it's imperative to make the problem seem immediate. As Voss says, giving the other side "the illusion of control" is one way of accomplishing this, as it forces them to take action. When people feel out of control, negotiations are impossible. People dig their heels in and refuse to budge. </p><p>What seems to be weakness is actually a strength. To borrow another martial arts metaphor, negotiations are like aikido: using your opponent's force against them while also protecting them from injury. Forcing empathy is one way to accomplish this task. You may get more than you ask for without the other side ever realizing they surrendered anything.</p><p>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">Twitter</a>, <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank">Facebook</a> and <a href="https://derekberes.substack.com/" target="_blank">Substack</a>. His next book is</em> "<em>Hero's Dose: The Case For Psychedelics in Ritual and Therapy."</em></p>