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Emergency Funds: How to Build and Use Them

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An emergency fund can help you manage unexpected expenses without using a credit card or incurring personal debt.

“None of us, no matter our job, is immune to financial impacts,” Mikel Van Cleve, USAA advice director and CFP professional said. “Under the pandemic, we’ve seen major corporations close their doors, and small businesses that once were thriving fail.” Millions of Americans, who believed they were in secure recession proof positions, found themselves with jobs and regular paychecks.

Thus, Americans from every realm have witnessed firsthand the impact of unexpected black swan events can have on their livelihoods, hopes and dreams for the future.

“Emergencies—from a broken bone to a layoff—are a fact of life. When you’re faced with life’s unexpected events, you can be ready.”  Vanguard Investments

Even in the best of times, it might make sense to have a little extra money put aside for emergencies. A financial buffer can help if your car breaks down, you experience a loss of income, or you’re hit with a big medical bill. And having an emergency fund might also help you avoid tapping into savings and investments when an unexpected cost pops up.

An emergency fund is a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.

Saving money isn’t always easy, but it’s likely to be less painful than the alternatives. A 2012 FINRA Investor Education Foundation National Financial Capability Study found that many of the people surveyed currently or recently:

  • Had unpaid medical bills: 26%.
  • Overdrew their checking account: 22%.
  • Took a loan from their retirement account: 14%.
  • Took a hardship withdrawal from their retirement account: 10%.
  • Had more than one late mortgage payment: 13%.
  • Filed for bankruptcy: 3.5%.

Furthermore, if you don’t have an emergency fund, you’re not alone. A 2019 Federal Reserve report found that 27% of Americans in 2018 would have a hard time covering an unexpected $400 expense. And 12% wouldn’t be able to pay for it at all.

How to Build an Emergency Fund

You might think that emergency funds are only for people who can set aside lots of extra cash each month. But even if money is tight, an emergency fund could help you feel more secure. Here are a few suggestions for building yours.

  • Keep it separate. The Consumer Financial Protection Bureau (CFPB) recommends setting up a separate savings account for your emergency fund. This makes it accessible, but not so accessible that you’ll be tempted to dip into it.
  • Start small if you need to. The Federal Trade Commission recommends saving even if you can only manage $10 each week or month. You might find it useful to set a regular schedule for your contributions and stick to it. It can be motivating and satisfying to watch the deposits add up, however small they start off.
  • Pay yourself first. If you can, you might want to consider setting aside some of your income for savings before you spend it on anything else. You could even automatically transfer your chosen amount into a savings account each payday.
  • Bank any extras. A tax refund, cash gift or raise at work could provide a good opportunity to kick-start an emergency fund or give it a big boost. Immediately setting that money aside can be a great way to grow your savings without dipping into your wallet.
  • Say “yes” to the 52-Week Savings Step-Up Challenge. The premise is simple: This week, save $1; next week, save $2; in week 3, save $3. Continue adding a dollar a week for 52 weeks. A year from now, you’ll have saved $1,378 — and surpassed your first goal of $1,000.
  • Schedule a monthly automatic draft that transfers money from your checking account to your savings account. This is the perfect solution if you look at your budget and know how much you can save. Just set it and forget it.

When to Use an Emergency Fund

After building an emergency fund, here are a few common situations when you might need to tap into your emergency savings.

  • To protect your income. A financial buffer could help if anything threatens your ability to do your job—for example, if your car breaks down and you can’t get to work any other way, or you need a new piece of equipment.
  • To replace your income. If your job is downsized or cut, your emergency fund could help you pay rent, buy food and cover other necessary expenses until you can find another source of income.
  • To cover medical expenses. Using your emergency fund is a no-brainer if your doctor recommends treatment or medication for a health issue.
  • To maintain a habitable living environment. Damage to your home, like a leaky roof, could cause more costly issues down the line if it’s not taken care of as soon as possible.

Remember, everyone’s situation is different, and you might have multiple ways to respond to a financial emergency. If you’ve been laid off and you’re struggling to pay bills, the CFPB recommends reaching out to your lenders directly. And it might be a good idea to seek the advice of a qualified financial adviser.

Bottomline

Whether you’re considering putting your money in a savings account, checking account, certificate of deposit, money market deposit account, money market mutual fund, bond or equity investment, real estate, or some other form of investment, weigh the following pros and cons:

  • How liquid are the funds? In other words, can you immediately withdraw your money if you need it?
  • Are there any fees or limitations to accessing the funds?
  • If you access your funds, is there a risk of loss of principal?

In many cases, FDIC-insured savings accounts or money market deposit accounts are preferable options because your money is more easily accessible. Plus, it’s not subject to market fluctuations.

References:

  1. https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm
  2. https://www.consumerfinance.gov/start-small-save-up/start-saving/an-essential-guide-to-building-an-emergency-fund/
  3. https://www.consumer.ftc.gov/articles/0498-its-never-too-early-or-too-late-save
  4. https://www.usaa.com/inet/wc/advice-finances-emergencyfund

Saving and Investing

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“The easiest way to wealth are saving and investing in your mind and in appreciating assets.”

Save and invest today for the life and financial freedom you want later. Investing for the long-term is the only way to truly build wealth and achieve financial freedom.

Retirement doesn’t mean what it used to for a lot of Americans. It used to be something you could count on — and when it came, you were going to pursue the goals and lifestyle you dreamed about and love.

Today, many Americans don’t believe that they will retire, while others are not waiting until retirement and are doing what they love now.

Regardless of your unique circumstances or life’s priorities, it important to save and invest now so later the resulting financial freedom will allow you – in a tax advantaged way – to enjoy a better and happier life later.

A smart investor:

  • Plans for life’s unexpected challenges and investing in uncertain times
  • Conducts research on a product before investing
  • Assesses the impact of fees when choosing an investment
  • Understands that risk exists in all investments
  • Avoids “get rich quick” and “can’t lose” schemes
  • Recognizes the power of compound interest
  • Recognizes the importance of diversification
  • Plans for and invests according to his/her future needs and goals
  • Recognizes the benefit of long-term, regular and diversified investment
  • Verifies that an investment professional is licensed

Establish Emergency Savings

Unexpected emergencies often sabotage our financial goals, so getting in a savings mindset and building an emergency fund is crucial. Start small and think big by setting a goal of a $500 rainy day fund. Once you’ve reached that goal, it will be easy to continue!

Open Your Savings Account

If you don’t have a savings account, now’s the time! Ensure your savings account is federally insured with a reputable financial institution with no fees (or low fees).

Set up Automatic Savings

The easiest way to save is to save automatically!

Choose the amount you would like to automatically save each period. Even $10-50 of your paycheck, weekly or bi-weekly, can provide substantial savings over time.

Contact your employer to set up a direct deposit into your savings account each pay period or set up an automatic transfer from your checking account to your savings account at your financial institution.

Even small amounts, saved automatically each pay period, make a big difference.

Get Serious About Reducing Your Debt

Paying down debt is saving!

When you pay down debt, you save on interest, fees, late payments, etc. Not only that, by having savings you’re less likely to need credit for emergencies – allowing you to keep a lower credit usage percentage.

When you reduce your debt, you save on interest and fees while maintaining or improving your credit score! Create a debt reduction plan that works best for you. Utilize America Saves resources to see the different options to pay down debt.

Get Clear On Your Finances

Create a Spending and Savings Plan that allows you to easily see your income, expenses, and anything leftover. Once you have a clear view of your finances, you can determine where to make changes and what else you should be saving for based on your financial goals.

It’s always the right time to create a saving and spending plan (aka a budget). It’s also a good idea to revisit that plan annually or when a major shift occurs in your income or expenses.

Here are several tips to help ensure that your money is working smarter and harder for you.

Step 1. Determine your income.

To create an effective budget, you need to know exactly how much money you’re bringing in each month. Calculate your monthly income by adding your paychecks and any other source of income that you receive regularly. Be sure to use your net pay rather than your gross pay. Your net pay is the amount you receive after taxes and other allocations, like retirement savings, are deducted.

Step 2. Determine your net worth which is your assets minus your liabilities

Net worth is assets minus liabilities. Or, you can think of net worth as everything you own less all that you owe.

Calculating your net worth requires you to take an inventory of what you own, as well as your outstanding debt. And when we say own, we include assets that you may still be paying for, such as a car or a house.

For example, if you have a mortgage on a house with a market value of $200,000 and the balance on your loan is $150,000, you can add $50,000 to your net worth.

Basically, the formula is:

  • ASSETS – LIABILITIES = NET WORTH

And by the way, your income is not included in a net worth calculation. A person can bring home a big paycheck but have a low net worth if they spend most of their money. On the other hand, even people with modest incomes can accumulate significant wealth and a high net worth if they buy appreciating assets and are prudent savers.

Step 3. Track your cash flow which is both your expenses and your spending.

This step is essential. It’s not enough to write out your actual expenses, like rent or mortgage, food, and auto insurance, you must also track what you are spending.

If you’ve ever felt like your money “just disappears,” you’re not the only one. Tracking your spending is a great way to find out exactly where your money goes. Spending $10 a day on parking or $5 every morning for coffee doesn’t sound like much until you calculate the total cost per month.

Tracking your spending will help you pinpoint the areas you may be overspending and help you quickly identify where you can make cost-efficient cuts.  Once you’ve written out your expenses and tracked your spending habits, you’re ready for the next step.

Step 4. Set your financial goals.

Now you get to look at your present financial situation and habits and decide what you want your future to look like. Ask yourself what’s most important to you right now? What financial goals do you want to achieve?

Some common goals include building an emergency fund, paying down debt, purchasing a home or car, saving for education, and retirement.

Step 5. Decrease your spending or increase your income.

What if you set your financial goals and realize there’s not enough money left at the end of the month to save for the things you want?

You essentially have two choices. You can either change the way you manage your current income or add a new source of income. In today’s gig economy, it’s easier than ever to add a stream of income, but we know that everyone’s situation is different, and that’s not always an option.

Even if you can add income, you may have identified some spending habits you’d like to change by decreasing how much you spend.

Take a look back at your expense tracking. For the nonessential items, consider reducing your spending. For example, if you find that you are spending quite a bit on entertainment, like movies or dining out, reduce the number of times you go per month.

Then apply the money that’s been freed up to your savings goals.

For more ideas on how to increase your savings, read 54 Ways to Save.

Step 6. Stick to your plan.

Make sure you stick to your spending and savings plan. To make saving more efficient, set up automatic savings so that you can set it and forget it! Saving automatically is the easiest way to save.

Reassess and adjust your plan whenever you have life changes such as marriage, a new baby, a move, or a promotion.

Following your plan ensures that you’re financially stable, are ‘thinking like a saver,’ and better prepared for those unexpected emergencies.

References:

  1. http://www.worldinvestorweek.org/key-messages.html
  2. https://americasaves.org/media/yordmpza/7steps.pdf
  3. https://old.americasaves.org/blog/1754-creating-a-budget-for-your-family

Top 10 Investing Terms Google Search

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Investing can feel intimidating when you’re just starting out, but it won’t feel that way forever. If you take things one step at a time, you’ll be a seasoned investor before you know it.

Every successful investing journey starts with a set of clear and concise goals, whether they’re as big as retirement or as small as wanting to save for new tires for your vehicle. It’s important to determine and write down what are your savings, investing and wealth building goals.

Additionally, before you start investing, it’s important that you’ve paid off your credit card and consumer debt, that you’re not investing money or capital that you will need within the next six months to three years, and that you have created emergency savings with six to twelve months of essential expenses in cash or cash equivalence.

Here are the top 10 investing terms people search on Google the most:

Search engine data is a great barometer for what’s really on people’s minds, according to Vanguard Investments —and if you’ve ever felt a little embarrassed about googling an investing term you think most people already know about, take comfort in the fact that there are millions of people out there who have exactly the same question.

References:

  1. https://investornews.vanguard/the-top-10-investing-terms-people-google-the-most/

Understanding Your Credit

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Building credit is an important part of your financial life.

Credit is effectively your reputation as a borrower, made up of information about your borrowing and repayment history. Good credit histories generate good credit scores and are rewarded by lenders with lower rates and favorable terms; bad credit can cost you.

Stack of credit cards and american dollars, close-up view. Horizontal financial business background.

Your spending habits—including purchases made with credit cards, as well as payments for insurance, car loans, utilities and cell phone bills—are the blueprint for your credit history and can make or break your reputation as a borrower.

Paying bills on time and in full is key to good credit and makes it easier for you to secure a mortgage, car loan or private student loan in the future.

Paying late or defaulting on payments is a red flag for lenders. If you have poor credit history, you’ll likely be seen as a risk and may not get a loan or credit card, or may be given one with a higher interest rate.

In addition to helping you get a loan, credit can affect other aspects of your life, from renting an apartment to getting hired for a job. Why? Just like lenders, if landlords or employers see a low credit score, they may perceive you to be financially irresponsible and too risky to take on.

Credit: Histories, Reports & Scores

You need a history of responsible credit use to establish a solid credit history and credit score.

For many, the terms “credit history,” “credit report” and “credit score” may appear interchangeable. In fact, they are three separate entities that are directly related to one another.

  • Credit History: an unofficial record of your debts and repayments
  • Credit Report: an official record of your credit history collected from sources like lenders, utility companies, landlords and collection agencies, and compiled by the three credit bureaus, Equifax®, Experian® and TransUnion®
  • Credit Score: a statistically calculated numeric value indicating your creditworthiness based on the information contained in your credit report. While there are several credit-scoring formulas, FICO® (the acronym for Fair Isaac Corporation, the company that provides this model to financial institutions) is the most widely recognized. Scores range from 300 to 850, with under 400 typically indicating very poor credit and above 670 demonstrating you’re a responsible borrower.

Scores are available for lenders, landlords and others to use in assessing if you’re a good financial risk to take on. Ranges of scores are often translated into quality ratings, such as good, fair and poor. While ranges may vary by lender, here is an example of how scores may be broken up:

Score Range Rating
800+ Exceptional
740-799 Very Good
670-739 Good
580-669 Fair
580 and less Poor

*Scores are based on the Understanding FICO® Scores Booklet. Lenders may use other qualifying ratios and factors when approving loans. Speak to your lender for more information.

Credit Card Limit

Credit cards are a form of borrowing, like a short-term loan

It’s important to know what the credit limits are on your credit cards and where you stand, because the percentage of credit you have available can impact your credit score, for better or worse.

When you’re approved for a credit card, you’ll be given a pre-set limit of how much money you can put on the card. Keep in mind that you’ll be charged interest on your purchases if you don’t pay your bill in full each month. If that balance creeps up, the interest can push you above your limit.

Credit Utilization and Your Overall Credit Health

It’s easy, purposely, for you to pull out your credit card to buy items you want or need. If you pay that debt off each month, it won’t negatively affect your credit. However, if you keep a balance on one or more cards, it can start to reduce your credit score due to a high credit utilization.

Credit utilization is the sum of the debt you have on all your revolving credit—essentially, your credit cards and lines of credit—divided by your limit. Many experts recommend to keep credit utilization below 30%, but lower is always better since it’s an influential part of figuring your credit score.

Understanding Credit Facts

  • Income has nothing to do with your credit score and isn’t even reported to the credit bureaus, so it’s not listed on your report.
  • Bankruptcy does not erase bad credit history. Although declaring bankruptcy frees you from paying back all or part of your debt, the delinquent accounts aren’t deleted from your credit report. Instead, they’re added to show they were included in bankruptcy and can remain there between 7 and 10 years.
  • Negative information and late payments remain on your credit report for seven years from the date of the initial late payment. The effects of these black marks on your credit score will, however, lessen over time.
  • Paying cash for everything isn’t better than using credit responsibly. You need a history of responsible credit use to establish a solid credit history and credit score. If you don’t establish and maintain various types of credit accounts, your scores won’t be as good as someone with a long history of responsible credit use.
  • You can’t hide debt. Having many credit cards affects your credit, as does the amount of debt you carry. You can opt for a balance transfer to help you save money and pay off your loan faster by moving debt from a high-rate card (or cards) to a low-rate card. Balance Transfer is the balance of money owed on one credit card transferred to another credit card, generally to take advantage of lower interest rates.

Effect on Credit

“Most American’s spending habits are based on the amount of available credit they have, and not on their pay check, cash flow or checking account balance.”

Credit cards are known for their convenience, safety and dependability, but did you know they also offer excellent financial benefits that cash just can’t beat? When used responsibly, credit cardholders can maximize their financial opportunities now while making a positive impact on their financial future.

How you use a credit card affects your credit history and can effect one aspect of your credit report. So it’s really important to create a credit history that reflects responsible and intelligent financial habits.  You can take positive steps to build a positive credit history:

  • Use your card regularly
  • Make your payments on time
  • Keep your balance below your limit
  • Continue to use your credit card over an extended period of time
  • Regularly read your credit report to make sure it’s error-free

When you practice these tips and responsibly use your credit card, you’ll improve your credit and may even get a higher credit limit. With a higher credit limit and the same responsible practices, you can maintain a low debt-to-credit-limit ratio and further improve your credit standing—which will give you the opportunity to finance large purchases, such as a home, at lower interest rates.

Why Would I Want to Increase My Limit?

There are several reasons you may want to consider asking your creditor for an increase, including:

  • When your credit has improved. If you got a credit card at a time when your credit was on the low side or just starting out, chances are your limit is small. If you feel your credit has improved, now may be an appropriate time for an increase.
  • When you want your credit to improve. As mentioned before, a high credit utilization can hurt your credit. Increasing your credit limit would reduce the utilization numbers and possibly increase your credit score, provided you don’t increase your balance as well.
  • When you need to buy a big-ticket item. Should you need to cover a larger expense that you’d like to budget for and pay off over time, such as a new water heater or vet bills, a credit limit increase can be helpful. If you’ve been diligent in paying your credit card bill, your creditor may approve an increase that can take the stress off your purchase.

Before You Ask

It could cause a temporary drop in your credit score. Although an increase in your credit limit ultimately may help your credit score, it will create a “hard inquiry” on your credit history and could lower your score in the short term. If you continue paying your bills on time and keep your utilization below 30%, it should come back up.

Make sure a higher limit won’t cause too much temptation. Whether you’re asking for a limit to help increase your credit or another similar reason, be careful that you don’t overspend once your credit is increased. Being unable to make payments or keep your utilization level low could cause long-term problems you didn’t intend on facing. Be mindful that those are the two most important factors in credit scores.

Items Taken Into Consideration

When you ask for an increase, the creditor will usually take the following into account before making their decision:

  • Account age and standing
  • Time since last increase request (avoid asking frequently; space out your requests)
  • Annual income
  • Employment status
  • Payment history

In some instances, the company will ask you how much of an increase you’re asking for. Be realistic in order to increase your chances of approval. Once you’ve asked, you’ll usually get an answer quickly—sometimes even instantly if you apply online or through your bank’s mobile app.

Credit is a financial tool, debt is bad.

References:

  1. https://www.navyfederal.org/makingcents/knowledge-center/credit-cards/articles/6-benefits-of-using-a-credit-card.html
  2. https://www.navyfederal.org/makingcents/knowledge-center/credit-cards/how-credit-cards-work/credit-card-basics.html

Quote of the Week

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“So smile when you read a headline that says ‘Investors lose as market falls.’ Edit it in your mind to ‘Disinvestors lose as market falls—but investors gain.’ Though writers often forget this truism, there is a buyer for every seller and what hurts one necessarily helps the other.” Warren Buffett, billionaire investor, and Chairman and Chief Executive Officer Berkshire-Hathaway

“The most common cause of low prices is pessimism—some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.” Warren Buffett

Additionally, Buffett said, “We don’t have to be smarter than the rest, we have to be more disciplined than the rest.”

More from Warren Buffett:

Retirement Planning

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Saving is a good first step, but planning and investing are the keys to building wealth and achieving financial security for retirement.

Most of us know we should save money. But when it comes to actually doing it, people tend to fall into two camps: non-planners and planners.

Non-planners typically save when they can, perhaps putting a small amount into a workplace retirement plan, hoping that everything will work out in the long run.

Planners generally know what they’re saving for, how much they need to put away, and how long it will take them to reach their goals.

A financial plan will help you see what it will take to retire the way you want.

Only 28% of Americans have a written financial plan, according to Schwab’s 2019 Modern Wealth Survey.1 Of the rest, almost half said they didn’t have enough money to make a plan worthwhile. Others said it was too complicated, or they didn’t have time to develop a plan.

Five reasons why:

1. A written financial plan increases confidence.

Sixty-three percent of people with a written financial plan say they feel financially stable, while only 28% of those without a plan feel the same level of comfort, according to the 2019 Modern Wealth Survey. Fifty-six percent of planners felt “very confident” they would reach their financial goals, compared with only 17% of non-planners.

2. A financial plan leads to better habits.

Financial planning isn’t just about investing, and in fact it can be misleading to calculate the benefits of each financial decision in dollars and cents. Many sound financial decisions are more easily explained in quality-of-life terms—such as the security that life insurance offers, or the peace of mind that having an emergency fund can provide. There are healthy money habits and there are good investing habits; a written financial plan can lead to both.  (Source: 2019 Schwab Modern Wealth Survey)

3. A financial plan can help even if you don’t have much money saved.

The most common reason cited for not having a plan is “I don’t have enough money.” This is a misconception. Planning even in small steps doesn’t take large sums of money to start.

In fact, financial planning can have a profound impact on lower-income households, by helping people improve their saving and budgeting habits. A written plan helps savers prioritize their goals and provides a way to measure success.

Source: 2019 Schwab Modern Wealth Survey

4. A financial plan can be tailored to help every personality type.

Schwab’s Modern Wealth Quiz can tell you what type of person you are with regard to financial planning, and can provide tips on taking the next steps toward your financial goals based on your personality type. During the recent Modern Wealth Survey, most of those who took the quiz could be characterized as having a “Dreamer” planning personality type. To a Dreamer, life should be lived—not planned. Yet Dreamers may find that a bit of planning can significantly help them achieve the freedom to live the way they want.

What’s your financial personality type? Here are the six types, with the percentage of people surveyed who matched them:

  • Dreamer (43%): Dreamers are the free spirits of our world, who shake their head in confusion at all those who schedule their lives to the last detail.
  • Improviser (18%): Improvisers are typically quite self-sufficient, with a deep desire for independence and doing things their own way.
  • Organizer (11%): Admit it—you love lists. Categorizing and organizing everything from your sock drawer to your personal finances gives you a warm, fuzzy feeling.
  • Architect (10%): A master of both creativity and logic, the Architect is the rare individual who not only imagines the future, but designs solutions to make it happen.
  • Maverick (10%): Unafraid and unapologetic, Mavericks are those rare individuals who would rather reshape their world than try to fit in it.
  • Philosopher (8%): Taken from the Greek word meaning “lover of wisdom,” Philosophers enjoy thinking about and solving problems.

5. A plan helps you create an investment portfolio.

A choice of investments, portfolio or financial products ideally are the result of a plan—they’re not the plan itself. That’s why the first of Schwab’s 7 Investing Principles is “Establish a financial plan based on your goals.” Investment products—like stocks and bonds—are the tools that are used to potentially realize the goal. They’re part of a larger puzzle. A financial plan can also include retirement, insurance, tax, and estate planning, as well as strategies—such as retiring early, or saving more—that are actions, not products. Effective planners use all these tools, with the financial plan as the playbook.

Working with a professional financial planner can help. Research has shown that households that work with a professional financial planner were more likely to make better financial decisions than those without a planner, taking into account portfolio risk levels, savings habits, life insurance coverage, revolving credit card balances and emergency savings.2

Bottom line

A financial plan is the foundation on which to build, understand and achieve your goals. Having a written plan which takes a holistic look at your needs, can increase confidence and result in more constructive financial behavior and more favorable financial results.

Financial planning relegated down into five easy steps:

  1. Identify your goals. Think broadly about your goals and determine how you’ll be able to financially achieve them.
  2. Collect all of your financial data. It’s very important to determine how much is coming in, and how much is going out.
  3. Develop an immediate and long-term plan. Make a budget and stick to it.
  4. Put your plan into effect. It’s very important not to stray from it. You need to set realistic goals for yourself so that you’ll be able to stick to them.
  5. Monitor and update your financial goals to adjust to your life.

Saving for retirement is one of the most important financial goals.

References:

  1. Source: Schwab Modern Wealth Survey. The online survey was conducted by Logica Research from February 8 to February 14, 2019, among a national sample of Americans ages 21 to 75 and an augment sample of 200 older Generation Z-ers ages 18-22 for generational comparisons. The national sample was balanced to be demographically representative. The margin of error for the national sample is three percentage points. Quotas were set to balance the national sample on key demographic variables.
  2. https://www.schwab.com/resource-center/insights/content/does-financial-planning-help

9 Ways to Keep Your Brain Healthy

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“We’re seeing evidence that lifestyle changes can significantly improve brain health and even reverse brain disease.”  Dr. Sanjay Gupta, M.D.,CNN’s Medical Correspondent and a practicing neurosurgeon at the Emory University School of Medicine

We thought of the heart that way, and some other organs, but the brain was always this black box.”  In his fourth book, Keep Sharp: Build a Better Brain at Any Age, due out early next year. It’s an evidence-based exploration of the latest science on brain health and what tactics are working for Dr. Gupta himself.  Your lifestyle and habits influence your brain health more than genetics, says Dr. Gupta

Tips and strategies—basically, what to do with your body, your meals, and your mental energy—for keeping your brain sharp. Here’s how to make it happen:

1) Think of inactivity as a disease

“Every time I’m about to sit, I ask myself: Do I need to sit right now?” Dr. Gupta says. If you can stand or walk during meetings, phone calls, and other activities, do it. Think of inactivity as the disease rather than working out as the cure, he says.  A team of medical researchers at Harvard Medical School in Boston analyzed global data on deaths in 2008 and came up with an alarming result: 5.3 million deaths were attributable to physical inactivity, compared to 5 million smoking-related deaths.

2) Always be prepared to workout and train

Exercise boosts blood flow to your brain, tamps down inflammation, and promotes the growth of new brain cells. You need at least 150 minutes a week.

3) Walk, talk, gripe

Take a brisk walk with a friend and talk about your problems. It’s a brain trifecta: moving, socializing, and releasing stress. “Doing those three things ends up measurably detoxifying your brain,” Dr. Gupta says.

4) Fuel yourself right for better focus

To protect your brain, you need to control your blood sugar. Sugar in excess can be toxic, causing neurons to die and possibly triggering cognitive decline. Dr. Gupta experienced this firsthand when he cut added sugar from his diet for a 60 Minutes story and saw his “cognitive day” (how long you can be productive) increase.

Use the Global Council on Brain Health’s framework to prioritize what to eat. Here’s what’s on the A-list, and the B- and C-lists, too:

A-list foods: Consume these regularly

  • Fresh vegetables, especially leafy greens
  • Whole berries
  • Fish and other seafood (but not fried!)
  • Healthy fats, such as extra-virgin olive oil, avocados, whole eggs
  • Nuts and seeds

B-list foods: Include these foods in your life

  • Beans and other legumes
  • Whole fruits (in addition to berries)
  • Low-sugar, low-fat dairy, such as plain yogurt and cottage cheese
  • Poultry
  • Whole grains

5) Eat real foods, not individual nutrients or supplements

Real food contains a multitude of components that help beneficial ingredients (such as omega-3 fatty acids) travel through your body or even help unlock receptors so those beneficial ingredients can do their jobs. Doctors call this the “entourage effect,” and it’s why real food, like fish, is better than supplements, like fish-oil capsules, for brain health.

6) Drink instead of eat

“We often mistake thirst for hunger,” says Dr. Gupta. “Even moderate amounts of dehydration can sap your energy and your brain rhythm.” After all, your brain is primarily made of water, and just 2 percent dehydration has a measurable impact on memory, processing speed, and analytical thinking. Dr. Gupta carries a 60-ounce water bottle with him and aims to finish it each day.

7) Make time for your friends

Research shows that individuals with large social networks are better protected against the cognitive declines related to Alzheimer’s than those with smaller networks.  Prioritize social activities and things like that: It’s important to spend time with people, since it engages all parts of the brain—and find purpose by spending time with people, understanding their lives and letting them in on your life.

8) Try the bubble method

Dr. Gupta practices analytical meditation, a technique he learned from the Dalai Lama himself. With your eyes closed, think about a problem you are trying to solve and separate it from everything else by placing it in a large, clear bubble. This helps you isolate the problem from your emotions and solve it logically, he says.

9) For lasting brain health, maintain ikigai

Ikigai is a Japanese word meaning “your reason for being”. There’s power in forging a sense of purpose, says Dr. Gupta. In researching his new book, he typically found that actions preceded thought. “It was just an activity, something that you were interested in, and through that you find purpose, whether it’s volunteering, coaching, music, writing, art.” He says he gains meaning from helping people, whether sharing medical information or treating patients, as well as from his family and friends.

References:

  1. https://www.menshealth.com/health/a35120035/keep-brain-healthy-sanjay-gupta/
  2. https://www.supermoney.com/health-is-wealth

A Little Exercise Goes a Long Way

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“Exercise is a miracle ‘drug.”  Keri L. Denay, MD, lead author of an American College of Sports Medicine advisory that encourages Americans to not overlook the benefits of activity during the pandemic

Everyone either knows  or accepts that exercise is good for you. But not everyone knows just how good. When you see the multitudes of health benefits of physical activity, they can seem almost too good to be true.

The relationship between exercise and a healthy life is really dramatic, according to Consumer Reports.  Exercise really could be looked at as a fountain of youth. If you’re looking for something to extend your lifespan, it’s exercise. Patients who exercise regularly live longer and healthier lives than those who are more sedentary.

Health Benefits of Physical Activity

Stay active and fit – Diseases like diabetes, hypertension, high cholesterol, heart disease, are all dramatically reduced in patients who exercise regularly.

Moving your body has been shown to reduce anxiety and depression, lower rates of many types of cancer and the risk of a heart ­attack, and improve overall immunity. It also helps build strength and stamina.

Exercising consistently can help prevent heart disease and muscle weakness; control and treat chronic conditions such as diabetes, arthritis, and hypertension; increase bone and muscle strength; improve brain function and sleep; and boost mood and enhance your overall quality of life, says Dori E. Rosenberg, Ph.D., an associate investigator with the Kaiser Permanente Washington Health Research Institute.

Even 30 minutes of exercise per week was more beneficial than none. The researchers concluded that the “majority of the protective effects of exercise against depression are realized within the first hour of exercise undertaken each week.”

And a whole lot of exercise may not necessarily be more beneficial for mental health. A large study published in The Lancet Psychiatry in 2018 found that those who worked out regularly had fewer days when they reported feeling stressed or depressed than their sedentary counterparts—and that people who exercised more than 6 hours a week felt stressed or depressed more often than those who did so between 2 and 6 hours weekly.

Start small. Increase time, distance, and intensity gradually. 

Small amounts of activity may cut dementia risk, too. Take, for example, a 10-year study involving people older than 65 that was published in the journal Alzheimer’s & Dementia. It found that those who were active three times a week for 20 minutes at a time reduced by 20 percent their chances of developing cognitive impairment severe enough to require moving to a full-time-care facility.

Furthermore, the physical activity can be made simple. For example, park your car further away to encourage yourself to walk, use the stairs when you can, or even take your phone calls on-the-go as you walk around the block.

Taking the time to stretch or move your body is known to boost immunity, promote a healthy weight, and generally improve your well-being.

Only about half of adults get the 150 minutes per week of moderate-intensity aerobic activity (such as brisk walking) or 75 minutes of vigorous aerobic activity (such as jogging) recommended by the Centers for Disease Control and Prevention.

Build Exercise Into Your Daily Life

Picking a cue that turns exercise into a habit can help to you build a routine that you actually stick with. That could mean always jumping on the treadmill after you brush your teeth, or stopping at the gym on your way home from work.

Making a detailed, concrete plan rather than setting an overarching goal can also help you follow through, says Katherine L. Milkman, Ph.D., a professor at the Wharton School of the University of Pennsylvania and co-director of the Behavior Change for Good Initiative.

Key Points

There are many important health benefits for health and longevity you can get from just 30 minutes of exercise, 5 days a week. It’s never too late to make regular exercise a part of your life. 

The type of exercise you do is not as important as the frequency and intensity of the exercise. So, whether you like to swim, bike, or run, as long as you do it 30 minutes, 5-days a week, the benefits will be the same.

Exercise helps in a number of ways. First of all, it keeps you mentally sharp. Second, it keeps you toned as far as your body, and it’s fun. It’s something that is enjoyable and you can do it with yourself, friends, anyone at anytime.

References:

  1. https://www.consumerreports.org/exercise-fitness/major-health-benefits-of-even-modest-exercise/
  2. https://www.washingtonpost.com/health/want-to-get-back-into-exercise-following-pandemic-lull-then-go-slow-and-stay-safe/2021/01/28/8c1a8dfe-5f4e-11eb-9061-07abcc1f9229_story.html
  3. https://www.consumerreports.org/exercise-fitness/how-to-get-active-again
  4. https://healthy.kaiserpermanente.org/health-wellness/videos/live-healthy/exercise
  5. https://thrive.kaiserpermanente.org/thrive-together/stay-active/better-workout-8-fitness-tricks
  6. https://www.cdc.gov/physicalactivity/basics/pa-health/index.htm#brain-health

Mindset: Two Wolves – A Cherokee Parable

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“Feed your faith and your fears will starve. Feed your fears and your faith will starve.” Pastor Max Lucado

An old Cherokee chief was teaching his grandson about life…

“A fight is going on inside me,” he said to the boy.

“It is a terrible fight and it is between two wolves.

“One is evil – he is anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, self-doubt, and ego.

“The other is good – he is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion, and faith.

“This same fight is going on inside you – and inside every other person, too.”

The grandson thought about it for a minute and then asked his grandfather,

“Which wolf will win?”

The old chief simply replied,

“The one you feed.”

Takeaway

Your thoughts can be your best friend or worst enemy. That is, if you let them.

Think about how you may be “feeding” your positive or negative thoughts, and allowing them to control your prevailing mood, attitude and behavior.

You have the ability to change anything in your life that no longer serves a purpose. Start today by believing that there is nothing in life that you can’t achieve. It is vital that you maintain a positive mindset and focus on what’s positive in your life. Dreams and goals cannot come to pass with a negative mindset.

References:

  1. https://www.virtuesforlife.com/two-wolves/
  2. https://m.huffpost.com/us/entry/us_580fda27e4b06e45c5c6ffd6

Saving for the Future

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“Don’t just save money, save for your future and with purpose.” America Saves

Many Americans spend more than they save, and nearly one in five people are saving less than 5 percent of their income according to a Bankrate’s 2015 Financial Security Index survey.

Saving money isn’t the easiest thing to do, especially if you’re one of the many of Americans living paycheck to paycheck. Yet, saving for the future remains a vitally important endeavor — not just to enable you to make large discretionary purchases such as a big screen television or a luxury vacation, but for emergencies, living a life of dignity in retirement, or buying a home.

Many Americans have more month left than money

And, unfortunately, many Americans aren’t where they should be financially. A 2019 Charles Schwab Modern Wealth survey found that about 59 percent of American adults are living paycheck to paycheck.

If you’re having a hard enough time paying the bills and making rent payments without racking up debt, saving for the future is probably the last thing on your mind. Only 38% of people have an emergency fund, according to Charles Schwab, and one in five Americans don’t have a dime saved for retirement, according to a survey from Northwestern Mutual.

Building a “cash cushion” is an important step towards financial freedom. A cash cushion, or emergency fund, is essential if you want enough cash on hand to cover three to six months’ essential expenses.

A well-rounded savings strategy should focus on both short-term and long-term goals, says personal financial expert, Carrie Schwab-Pomerantz CFP®. And, if you can make moves to save extra dollars, they should be used in two ways: to pay off debt (credit cards and student loans) and to save.

The first step is to set a clear savings goal. Having this savings goal will help you when it comes to setting aside a specific amount every month or year in order to reach that milestone. Whatever your goal, the amount you set aside to get started does not have to be large. To jump-start your savings, consider automating your accounts to transfer the budgeted amount to your savings each month.

“Save and invest too little, and you might not be able to retire. Save and invest too much, and you may decide to retire early.” Vanguard Investments

Once you’ve set your savings goals, it’s time to start saving. Here are seven tips for saving:

  1. Make savings a priority. Each time you’re paid, put a portion of it toward savings. Saving money is a good habit no matter how much or how little you put away each month.
  2. Pay yourself first. Think of saving as paying yourself. In other words, before you spend your first dollar on monthly expenses, first you should set aside 10% to 15% of income for your savings.
  3. Automate your savings. Most financial institutions allow you to automatically transfer funds online or via mobile apps from checking to savings accounts.
  4. An emergency fund is a must. You will need an emergency fund somewhere in the ballpark of three to six months of your income. According to America Saves, and their motto ‘Start Small. Think Big’, they recommend starting with an emergency fund savings goal of just $500. 
  5. Find money to save. Keep track of everything you spend for a week – you’ll be surprised where the money goes. Adjust your spending habits a little and suddenly, you’re saving. And, don’t simply spend less. Save with a purpose, such as college expenses, retirement, or for emergencies.
  6. Keep the change. Some supermarkets have machines that count your coins and give you cash in exchange for a small fee. Gather up your spare change, pour it into the kiosk and see how much your coins add up to. Instead of spending it right away, consider diverting your newfound funds to savings.
  7. Cancel extra costs. Check to see if you have any old subscriptions that you’re not using anymore – whether it’s to a gym, magazine, or streaming service that you no longer use. Many services that you may no longer want could cost you hundreds of dollars per year.

Compound Interest

Interest can build your wealth for you. For example, if you deposit $100 in a savings account that offers 6 percent interest, by the end of the year your savings will have grown to $106. Compound interest can enhance these savings even more by earning interest on interest. With compound interest, the $106 you have after the first year would earn 6 percent again the next year: $6.36, or a 36-cent increase. Add that to the total, and you would have $112.36. If you leave your money in a 6 percent interest account for 40 years, you’ll have $1,028, over ten times the original amount.

The Rule of 72

Want to double your money? Use the “Rule of 72” mathematical formula to find out how long it will take to grow your money. First, divide 72 by your account’s fixed annual interest rate. For example, if your rate is 6 percent, divide 72 by 6. At that rate, it will take 12 years to double your savings. When you think about your financial goals, the Rule of 72 can make a positive impact on your savings over time by helping you make informed decisions.

Micro-saving

There’s a way to effortlessly save money, and turn tiny amounts into big savings.

Micro-saving is the process of regularly saving small amounts of money over time, and it’s something you can do nearly every day. You don’t have to earn a huge income to grow your savings, and better yet, it’s never too late to start.

There are many ways to micro-save — some simpler than others like “rounding up” and saving cashback rewards. These methods requires you to consistently transfer any redeemed cashback rewards from credit cards to a savings account — instead of opting for a gift card.

Perhaps the easiest micro-saving method of them all is via electronic automation. Several apps, like Digit and Acorns, make it foolproof to save spare change, but they charge fees.

Key Point

Starting small and starting now can make savings add up faster than you’d think.

The easiest way to save is to save automatically! Contact your employer to set up a direct deposit into savings each pay period or ask your bank to set up an automatic transfer from your checkings to your savings.

References:

  1. https://www.bustle.com/life/3-women-share-how-theyre-saving-for-their-big-life-goals
  2. https://money.cnn.com/2015/03/30/pf/income-saving-habits/
  3. https://content.schwab.com/web/retail/public/about-schwab/Charles-Schwab-2019-Modern-Wealth-Survey-findings-0519-9JBP.pdf
  4. https://news.northwesternmutual.com/2018-05-08-1-In-3-Americans-Have-Less-Than-5-000-In-Retirement-Savings
  5. https://www.practicalmoneyskills.com/learn/saving/growing_your_money
  6. https://communities.usaa.com/t5/Your-Future/The-Magic-of-Micro-Saving/ba-p/201610