Mom Has Smart Financial Advice!

May 29, 2019

Mother’s Day has come and gone, but there are so many reasons to celebrate Mom year-round. Here at SWM, we like to celebrate her financial know-how.

While one study found that dads are often the ones to dole out allowances and oversee large purchases, it’s moms who tend to impart the sage advice about day-to-day finances that we carry with us throughout our lives — things like the importance of self-sufficiency and how to get the best deal via sales and coupons.

Today and every day, let’s celebrate Mom’s financial tutelage by living by her wise lessons.

Lesson #1: Live within your means.

When Mom says “live within your means,” she’s saying this: spend less than your after-tax income (the amount of money you earn minus taxes).

Not sure whether you’re living within your means? Consider building a budget, or adding up your previous month’s spending and comparing it to the amount of money you earned in the same period.

What “living within your means” doesn’t include is supporting the lifestyle you want by opening new credit cards, taking out loans, or dipping into your savings or emergency fund. While these may feel like immediate solutions, trust Mom on this — in the long term, living beyond our means does more harm than good.

Whether it’s dinners out, a personal trainer, a nicer apartment — we have to generate enough income to match the price tag on our lifestyle, or make some choices about what to prioritize.

Lesson #2: Debt is not an option.

We know that living within our means is imperative, but for a lot of us, that can be easier said than done — especially when credit card companies hound us with enticing offers.

This brings us to Mom’s second lesson — debt is a strategy, not a fall-back plan.

Credit cards and loans can be used strategically in order to build toward something better. The primary benefit of a credit card is building good credit. A good credit history can allow you to take out a more significant loan down the line, like a mortgage for a house.

The same idea applies to other kinds of debt, like student loans. When you take out a student loan, you’re making a strategic choice based on the estimation that you’ll be able to pay off your debt in the near future, likely with a higher income as a result of a specialized degree.

If you’re following lesson #1 and living within your means, you won’t be tempted to take out credit to support a lifestyle that’s out of your financial reach. Instead, use debt strategically to build an even brighter future.

Lesson #3: Place value in your purchase.

Whether buying a “want” or a “need,” make wise — not wasteful —purchases. And make them consciously.

A few ways to shop smart:

  • Always start with your budget and assess whether you will have to give something else up to pay for what you’re buying.
  • Understand your priorities by asking yourself: what matters to me most? Is this item worth giving up something else in my budget?
  • Watch how the store’s surroundings or marketing sway you. Is this item something you value?
  • If you’re on a tight budget, evaluate whether you can wait to buy the item or need it now.
  • Consider whether or not your purchase will go on sale and whether it makes sense to wait.
  • If it’s already on sale, be honest with yourself about whether you love the item — or just the price.
  • Read reviews, both good and bad.

Lesson #4: Investing is not a spectator sport.

It’s important to be careful with our money, especially when it comes to spending. But that doesn’t mean we should be scared of our money.

Time and again, studies show that women tend to be uniquely risk-conscious relative to male investors. This is an excellent trait when deciding among multiple investment options, but it can have negative consequences when risk analysis (“Which risk should I take?”) becomes decision paralysis (“Maybe I shouldn’t take a risk at all!”).

When we do nothing with our money because we’re scared or overwhelmed, that in itself is a decision. Money is like a muscle — if we let our money sit, our money atrophies and slowly loses its power. On the flip side, investing our money is like keeping that muscle active. Investing money in a way that keeps up with inflation is like keeping the muscle in shape (without getting stronger or weaker), while investing in portfolios that aim to keep up with the market is like beginning a strengthening plan that aims to build more muscle.

Bottom line: be involved with your investments. Have a question? Not sure what question to ask? Be in touch with a professional financial advisor.

Lesson #5: Healthy choices are more than physical fitness.

It’s not all in your head. Stress and overwhelm about our financial choices takes a toll on our bodies as well as our minds.

According to the American Psychological Association, money continues to be the top cause of stress for Americans. In addition to the mental impact, stress is fundamentally physical and can cause long-term health problems like high blood pressure, heart disease, obesity, and diabetes.

Pursuing a financial plan that is right for you isn’t just a financial choice — it’s a lifestyle and health choice. That’s why it’s so important to remember the financial lessons our mothers taught us.

The life you want is not only possible, it’s within reach. Let’s talk about how to get you there.

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