6 Types of Financially Toxic People

Wouldn’t it be great if the world was truly fair? Where every person you knew was truly 100% reasonable in every way, including with money?

Watch out for Financially Toxic People!

Well, as we know, that isn’t the case. The world isn’t always “fair”, as many of us define that term anyway.  And no, not everybody is totally reasonable, certainly not with money.

The reality is that when it comes to money, there are a variety of different approaches that people take and the habits that they possess.  Some people are highly responsible, some are not. These differences can cut across many dimensions, to the point where some people can pretty much be classified as having toxic money personalities.

They aren’t always a joy to deal with.  But, often there is no choice but to deal with them. They could be friends, family, or acquaintances. Maybe even coworkers.  But deal with them we must.

Here are some of the more insidious ones I’ve come across:

The Extractor

An Extractor is the type of person who tries to others to pay for as many things as possible but accomplishes this through sneaky means.  I’ve dealt with a few of these, including one couple in particular in which both husband and wife were of this type.

One way they get free things is by employing stealthy, conniving measures to get you to pay for them.  The best example of this that I can think of is an Extractor couple I knew that would regularly find ways to avoid paying for dinner.  The initial tactic was to come up with “alligator arms” when it came to reaching for the wallet when the check arrives.  In other words, pretending to reach for the wallet but always coming up short, so the other party pays. Or, in other cases, getting up to walk to the restroom when they see the waitress coming toward us with the bill.

In short, they’re wired to slither out of paying what they owe.

The Chiseler

This isn’t someone with a chiseled physique or some type of artisan. Rather, it’s someone who likes to chisel away at others in order to get something.

A woman I knew would fit this description.  One tactic was to complain about the quality of a product or service that she had purchased.  Whether it was writing letters to companies, calling them, or simply complaining at restaurants - she would get free things by expressing displeasure at how they didn’t get what they expected.

I suppose that I wasn’t being “chiseled” away at in those cases. But as Confucius reportedly said, “it’s hard to smell like a rose when you’re rolling in a dunghill”.  In other words, keep the company of people like this, and your own reputation can get tarnished!

The Moocher

This person is always looking to borrow from you.  Whether it’s a book, a lawnmower, or simply a small amount of money – this person always has a “need” to borrow.  They never seem to have enough money

on them, or time to actually buy or rent something they need. Rather, they want to borrow from you.

Why not? It saves them time and money for the time being and offers an escape for their laziness. Plus, if they keep borrowing when needed, they can use your stuff and let it depreciate while avoiding spending any money of their own.

These people sometimes also have the additional attribute of being forgetful. As in, they forget to pay you back, or they keep forgetting to give back what they borrowed from you.  It takes time and effort to remind such people to return what they borrowed.

Thankfully, it has been a long time since I have dealt with one of these. Since college, actually, which was quite a while ago. But what a treat that was!

The Over-Giver

This person, actually, is NOT trying to take your money. That’s a good thing.

However, what he or she will do is insist on paying for your dinners every time you go out.  They will try to be the one who handles things, who gives expensive gifts or just does more for you financially than necessary.  It makes them happy – or so we think – when they do things for you.

The problem is that when they’re spending on you like that, you might be indebted to them. You feel like you owe them, and it’s not great having something like that hanging over your head.  I knew a person who was an Over-Giver, and this person always paid for dinner and was strongly insistent about doing so. He had all the excuses, and was quite popular for being “generous”.  I didn’t like the idea that no matter how much I wanted to pay my fair share, he always had to pay. Not just for me, but for everyone at the table.

So, with this person, there might not be direct financial debt

. But there’s some type of debt, be it time, emotion, or whatever.  It’s not worth dealing with.

This person could also be labeled “The Show-Off”

The One-Upper

This type of person was some kind of undying need to be competitive with others in terms of status symbols. This could manifest itself in terms of homes, cars, vacations, clothes – you name it. If there is something that others have done that is impressive, it eats away at them and they find a way to be better. They simply can’t accept or admit to having less than their “competition”.

The problem with such people is that they prey upon those with the propensity to try to “keep up with the Joneses”.  Sick of hearing such people brag, well-meaning folks might splurge for things out their budget. Why? Well, it might be a matter of getting lured into a competition, getting sick of being made to feel lesser, or maybe just to shut up the braggart. Whatever the case, the One-Upper is someone who can be toxic to your finances, and get you to spend much more than you might otherwise want to.

The Slacker

Truthfully, I can be very soft when it comes to helping those truly in need. I think it’s honorable to give to those genuinely needing help, particularly when we know how that the other person as few other palatable options.  Generosity can be a beautiful thing.

However, it can be important to draw the line on giving.  Some people truly need help, while others act like they need help though they really don’t need it.   These people – the ones crying wolf – are the ones that can be a challenge.  They ask for money, though they actually aren’t doing anything to try on their own. Living off others is what they would rather do, instead of taking the difficult step of trying to be self-sufficient.

Thankfully, I haven’t dealt with such a person yet. However, I know of others that have.  Apparently, it can be draining time and energy.

My Questions for You

Have you dealt with any of these 6 personalities than I described?

Which ones do you think are the most challenging to deal with?

Do you have any others to share?

Source: 6 Types of Financially Toxic People

How Credit Cards Can Make Your Household Budget Work Better

My wife and I budget a little differently than most families. We use a credit card for most of our purchases instead of cash or checks, and use that to monitor our family's monthly spending.

According to a recent Gallup poll, fewer than one-third of Americans follow a detailed written budget every month. Out of those who do, not all of them strictly follow their budgets. This may be a stark indication as to why American families are in financial trouble, with shrinking savings and increasing debt.

So why do we have such a hard time sticking to a budget? Perhaps we feel our spending is often too hard to track. If that's the case, we might need to simplify things.

Budgeting the Traditional Way With Cash and Envelopes

Many financial experts, like Dave Ramsey, recommend that families use a written monthly budget and account for every dollar they spend. Ramsey even goes so far as to suggest that families use a cash envelope system, in which there's an envelope for every category in your budgets, such as housing, entertainment, gas, or groceries. For example, if you and your family budget $100 each month for eating out, you would place $100 cash in an envelope. You spend the cash until it's gone. When an envelope is empty, your family has to stop eating out.
My wife and I found that the envelope system worked -- as long as I remembered to bring her the receipts after making a purchase. But I can't even remember to use a coupon I have in my pocket at the cash register most days, let alone track receipts. So the envelope method of budgeting just didn't work for us. That's why we switched to budgeting with America's favorite financial invention -- the credit card.

The Many Advantages of Budgeting With Credit Cards

You might not realize all the perks that come with credit card budgeting. Using a credit card for all our purchases gives us a real-time accounting of our spending. We can see exactly what we're spending and where it's going. And many credit cards will categorize your purchases on your monthly statement.

Cash, on the other hand, is a nightmare to track. It's far too easy to lose track of your cash. There's a reason people say cash burns a hole in your pocket. It's so very easy to fritter away. There's little documentation to accompany our carefree cash spending. When you use cash, you have to keep receipts and reconcile them with your written budget. But by using a credit card, you have a paper trail of your spending all in one place, either online or in your monthly statement.

Another advantage of using a credit card for budgeting is that it gives you an opportunity to accumulate reward points for your everyday purchases that you wouldn't otherwise earn. My wife and I pay our rent, utilities, cellphone, cable, and other monthly bills with our rewards credit card. We then earn an enormous amount of reward points through these purchases every month -- all while budgeting.

Consider Budgeting With a Charge Card

If you're nervous about budgeting with a credit card, consider using a charge card instead. Many people don't understand the subtle difference between the two. A credit card allows you to roll purchases over from month to month and only make a minimum payment. A charge card, on the other hand, requires you to pay off your total balance every month. Using a charge card allows you to build credit, earn reward points, and budget while not going further into debt.

As with any budgeting system, it takes effort, discipline, and consistency to make it work for you and your family. Budgeting with a credit card isn't for everyone. I understand that. My wife watches our credit card statement like a hawk every month to ensure that we're only spending the amount we've allocated. 

Another hang-up we sometimes run into is when a business doesn't accept credit cards. Believe it or not, there are still a few businesses out there that deal only in cash. For example, my wife loves to shop at our local farmers' market. This is always an interesting expense that we struggle to reconcile in our budget, but that's normal. There will be hiccups.

We budget with our American Express card every month. Some merchants still don't accept it, which makes budgeting a challenge. It's not always smooth sailing, but we do our best to make budgeting with a credit card work for our family.

No matter which system you're using, budgeting is hard work. But using a credit card for budgeting the vast majority of your purchases every month can be a great way to keep your family's finances on track.

So how do you budget? Have you ever thought about using a credit card for your family's monthly expenses? Or are you like so many Americans who are still struggling to write and follow a written budget every month?

What Are You Teaching Your Kids About Money?

How did you learn about money? Did your parents teach you how to write a check, balance a budget, and open banking and investment accounts? Or did you learn through another trusted adult, like a teacher or college professor? Or did you overdraw in your checking account, go into credit card debt, and had to spend your 20s or 30s digging yourself out? Well, you're not alone. The state of financial literacy in America is scary. According to numerous studies conducted by a variety of organizations, America needs to improve its financial literacy. Participants in a Financial Industry Regulatory Authority's Investor Education Foundation survey were asked these questions:

1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have? More than $102, exactly $102, less than $102, or don't know?
2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same, or less than today?
3. If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?
4. True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest over the life of the loan will be less.
5. True or false: Buying a single company's stock usually provides a safer return than a stock mutual fund.

Only 39 percent of participants answered four or more questions correctly. Yikes! How do we fix this? One step forward would be to have parents take a more active role in teaching kids about money and financial responsibility.

Monkey See, Monkey Do

Kids watch what their parents do and learn from what they observe. (Many children believe that money originates from the ATM since they observe parents using ATMs to withdraw cash.) Use cash whenever possible around them so they can see money being exchanged for a good or service (and they can also see when it's spent, it's gone). Hold on to receipts and explain that you need to keep a record of your purchases so you can track your spending. Share, Save, Spend has great tools for parents and kids. With older kids, encourage them to ask questions about budgeting and investing -- and give them a glimpse of how you successfully manage your own money. Show your teenagers your paycheck stub and teach them about how taxes work, what a 401(k) contribution is, and the difference between gross pay and net pay. Many people go to college without realizing how these basic money concepts work. The Jump$tart Coalition is committed to "educate and prepare our nation's youth for life-long financial success." How can you help educate the next generation?

Unlearning Credit Card Habits from Mom and Dad

Psychotherapists agree that our parents have a profound impact on the people we become. By and large, your parents probably set a wonderful example for you to follow.

But what if your parents had some less-than-ideal financial behaviors? Specifically, how should you go about unlearning your parents’ bad credit card habits? The key is to recognize where mom and dad went wrong and make a plan to do better on your own. Ready to get started? Take a look at the details below.

If your parents only paid minimums

Why it’s a problem: Your credit card company only requires you to pay a small sum every month to keep your account in good standing. But minimum payments usually only represent 1-3% of your total balance. If your parents only paid minimums each month, they were digging themselves deeper into debt.

This is problematic for two reasons. For one thing, credit card debt carries a high-interest rate. In May 2014, the average credit card interest rate hovered around 15%. If you’re not paying off your balance in full every month, you’ll end up paying way more for your purchases in the long run.

Also, carrying credit card debt is bad for your credit score. Thirty percent of your score comes from your credit utilization ratio; if your parents consistently used more than 30% of their available credit because they only made minimums, it’s likely their scores weren’t in tip-top shape. This probably made it difficult and expensive to obtain other loans.

How to do better: Make it a priority to pay your credit card bill in full each month. If this is tough for you, these tips should help:

• Make a budget – This will help you plan for your credit card spending
• Track your spending – After making a budget, you should keep tabs on how you’re doing. Use your bank’s online tools to help with this.
• Set alerts – Most credit card issuers allow you to set text or email alerts when your spending has hit a certain threshold. This will help keep you accountable.

If your parents paid their credit card bills late

Why it’s a problem: Paying credit card bills late is one of the worst things you can do for your credit score. Thirty-five percent of your score comes from your history with paying your bills on time. If your parents made a habit of paying their credit card bills late, their credit likely suffered.

Plus, paying your credit card bill late by even a day can result in a fee. Most issuers charge $25 for the first offense and $35 for subsequent late payments. This might not seem like much, but it can really add up over time.

How to do better: If you’re properly budgeting and tracking your spending (see above) you should be ready to pay your bill as soon as it comes in, so don’t delay.

Once again, setting up alerts with your credit card issuer is helpful. Arrange to get a text message or email when your bill is issued, and another in advance of your due date. If you prefer the old-fashioned route, mark your calendar. Find a method that works for you and stick to it!

If your parents were constantly shuffling credit card debt around

Why it’s a problem: Doing a balance transfer to pay off high-interest credit card debt is a good idea if you do it carefully. But if your parents were constantly charging up their plastic then shifting the balance onto 0% cards, they weren’t showing ideal credit card behavior.

First, balance transfers come at a cost. Most issuers charge a fee of 3% of the total amount you’re transferring in order to move the debt. Depending on the size of your balance, this could amount to big bucks.

But more importantly, constantly shuffling debts around is a sign that your parents weren’t managing their money well. Everyone overcharges sometimes, but if you’re spending and budgeting carefully, this should be rare.

How to do better: If you make a mistake and end up in credit card debt, finding a good balance transfer deal can help you minimize interest charges.

But be sure to take a step back and figure out why you were forced to take this route. Maybe you need to build an emergency fund to help deal with unexpected expenses, or maybe your budget needs tweaking. Either way, take a balance transfer as a sign that you need to work on your financial habits – then be sure to do so.

The bottom line: Our parents worked hard to teach us good habits, but they may not have been perfect. If you need to unlearn some bad credit card behaviors, check back often with the Nerds – we’re here to help!

Retirement saving: Size isn’t the only consideration

I recently read one of those articles debating whether a million dollars was enough to retire on these days. Mostly, the focus of the article was on the fact that a million dollars aren’t as significant as it used to be due to the impact of inflation. That’s a good point, but it also got me thinking that the size of your nest egg is just one side of the retirement equation.

First, to quickly illustrate the inflation issue, consumer prices have roughly doubled over the past 26 years. That means that a million dollars are worth about what $500,000 was in 1988. To think of this on a forward-looking basis, suppose that inflation continues at a similar rate, which has been pretty moderate compared to longer-term history. If you are around 40 years old today and think you could live on a million in today’s dollars, then you had better count on saving two million because that will have the equivalent purchasing power by the time you reach retirement.

The deceptive thing about the size of a retirement nest egg is that the numbers always sound more lavish than they actually are. Between the erosive effects of inflation and the number of years over which savings have to last, it takes a bigger nest egg than most people intuitively expect to fund a comfortable retirement. But again, as challenging as that is, the size of the nest egg is only one side of the equation.

The other side is the question of how much that nest egg will have to buy, and there are several variables that go into this side of the retirement equation:

1. Your mortgage. Your home may be your biggest single asset, but it may be offset by liability in the form of a mortgage. While some people steadily pay down that liability so it will be gone by the time they retire, others continually renew the liability by borrowing against home equity. This makes a big difference in how big a nest egg you will need. If your mortgage is paid off, you will have much lower monthly costs and an asset you can sell at some point. If you still owe on your mortgage, it will probably continue to be your largest monthly expense.
2. Other debt It’s important to think of your nest egg on a net basis, where its value is offset by whatever you owe. So, if you have accumulated a significant amount of debt, your nest egg may be smaller than it appears. If it’s credit card debt, that’s even worse than offsetting because you are probably paying more in credit-card interest than you are earning on your retirement savings.
3. Where you live. The cost of living varies widely from one part of the country to another, so if you plan to live somewhere expensive, think of this as a form of “instant inflation” that will immediately reduce the purchasing power of your nest egg.
4. Lifestyle. What kind of retirement do you envision? Is it a quiet one of reading good books and working in the garden? In that case, a million dollars could still go a long way. On the other hand, if you plan to travel extensively and live it up, you could burn through that million long before you die. Retirement planning should include some rudimentary budgeting based on the lifestyle you plan to lead so you know how far your money has to stretch.
5. Social Security projections. Unless you are one of the ever-shrinking numbers of employees who still have a defined benefit pension, Social Security may be the only regular income stream you have in retirement. The size of that income stream goes a long way to determining how quickly you will spend down your nest egg. You can get a projection of what your benefits will be from the Social Security Administration, based on how long you worked and how much you earned. Getting these projections for yourself and your spouse will help you know how much of your remaining budget your nest egg will have to cover.
6. Work prospects. More and more people are augmenting their nest eggs by continuing to work in retirement, but whether or not this is a viable option depends on your health and the marketability of your job skills.

The point is, there is no universal answer to a question like “is a million dollars enough to retire on?” A million dollars may be plenty for some people, and not close to enough for others. It’s not all a question of how rich you want to be, but also of how well you’ve contained the liabilities that are going to offset that million dollars. So, if you want to make sure your retirement savings are sufficient, don’t just go by general benchmarks. You need to do some detailed planning to determine how big a nest egg will meet your specific needs.

Source: Retirement saving: Size isn’t the only consideration

6 Credit Card Mistakes Students Make

Top Credit Card Mistakes

College students live in a sometimes-confusing world between childhood and adulthood. On one hand, young adults attending college away from home often live in supervised dormitories as they begin to take on some of the responsibilities of adulthood. On the other hand, those 18-year-olds (and older) are granted nearly all of the same rights and responsibilities of adults.

So when it comes to credit card usage,  students often make mistakes that more experienced cardholders are more likely to avoid (or at least to know better than to make). Here are six of the worst mistakes that students make when they start using credit cards.

1. Carrying a Balance 

If parents could get their college-age children to follow just one piece of financial advice, it should be to pay their credit card statement balances in full. Students may feel like they can cut their immediate expenses by paying the minimum payment, or perhaps a little more, but interest charges will accumulate very quickly on past and future charges. Unfortunately, many parents will be in a poor position to offer this advice, as about two-thirds of all credit card users carry a balance on at least one of their credit cards each month.

And don’t forget that credit card debt can have a major impact on your credit score too. If you want to see how your debt is affecting your credit scores, you can see two of them for free every month on Credit.com, and get some tips on how to build good credit.

2. Missing Payments (or Making Them Late) 

Between attending classes, studying, and all of their other activities, college students can be pulled in many different directions. Add to that their group living environment, frequent address changes, and an irregular academic calendar, and it is easy to see how students can accidentally fail to make a payment on time.

To avoid costly late fees and penalty interest statements, students can create electronic reminders of their payment due dates and log into their accounts online to view their statements. Fortunately, most card issuers now offer both email and text alerts.

3. Paying Your Tuition With a Credit Card 

It used to be that many colleges accepted tuition payments with a credit card, and savvy parents might earn rewards for paying that way. These days, many schools add a substantial processing charge when tuition and fees are paid with a credit card, typically more than the rewards are worth.

Worse, some students attempt to finance their education by charging their tuition and carrying a balance. This is a very risky strategy, as credit cards have much higher interest rates than most student loans. And unlike student loans, interest on a credit card is not tax-deductible.

4. Co-Signing for a Friend 

Before the Credit CARD Act of 2009, banks could offer credit cards to students who had no income, with the assumption that their parents would pay their bills. Now, applicants under 21 must show their own ability to pay their bills in order to be approved. In response, some students are asking their friends aged 21 and older to co-sign credit card applications.

When someone co-signs or makes a friend an authorized user, that person is putting his or her own credit at stake, as the primary account holder will be responsible for paying the bill. Those who make this mistake put not only their finances and their credit scores at risk, but their friendship as well.

5. Not Calling the Card Issuer

Students and other new credit card users can find these products confusing. When they get hit with fees and penalties after the inevitable mistake, the last thing they want to do is call someone at a big company to talk about it. Unfortunately, that would be a mistake as well. Because the credit card industry competes fiercely to attract and retain customers, card issuers can be very generous and understanding when cardholders need help. Students should be encouraged to call to ask for their interest rate to be lowered, their late fees to be forgiven, or just to learn more about their cards and their options.

6. Shirking Credit Cards Entirely

For as much trouble as students can get into when they misuse credit cards, it is almost as big of a mistake to avoid credit cards altogether. Credit cards are not just secure and convenient methods of payment, they are an invaluable way to build one’s credit score. Having a credit card account in good standing allows cardholders to begin to build a credit history. After graduation, having a strong credit history will help students when they need to rent an apartment, get a car or home loan, and purchase insurance.

Class of 2014: Here Are 4 Tips for Acing Real-World Finances

Finance

Congratulations! You have just become a college graduate. This is exciting -- and maybe scary -- time. You're probably looking to start a career, earn your first significant paycheck, take your serious relationship to the next level, find a new place to live, and accomplish a lot more fun stuff.

But you might also be staring down the barrel of a lot of heavy financial issues: paying down student loan debt, saving up for those big life changes, figuring out how to manage your own finances, and determining how soon you'll need to start thinking about retirement. (Spoiler alert: now.)

Don't worry. I'm going to give you four tips to financial success

that will make it all a lot simpler.

1. These Are Your Financial Priorities

You have a lot going on right now. The best thing to do is to take a deep breath, relax, and plan. Start by determining your financial priorities. Most people will want to focus on the following (in order of importance):

• Building up an emergency savings fund.
• Paying down your highest-interest-rate debt.
• Repaying your student loans.
• Balancing debt repayment with saving for retirement.

Wait, we're already talking about retirement? You bet.

2. Save What You Can for Retirement and Future Needs

If you're earning an income from a full-time job, it's time to start contributing to your retirement accounts and investing some of your savings. It's never too early to start making progress in this area because time is your biggest advantage as an investor.

The earlier you start, the more your nest egg will eventually be worth -- even if you don't feel like you're saving much. The secret is compound growth -- something so potent that when people claim Einstein called it one of the most powerful forces in the universe, folks believe it. 

Even if it's just $50 or $100 a month right now, contribute what you can to your retirement and major savings accounts that will help you cover future needs and expenses. And then don't touch it.

Make this easier on yourself by taking advantage of "free money" opportunities where you can. Your company benefits package is an excellent place to start.

3. Live Frugally to Aggressively Pay Down Debt

Learn this lesson as soon as possible: Material stuff doesn't make you any more of a person. Possessions are unlikely to make you genuinely happy and fulfilled. So stop wasting your money by trying to accumulate things, things, and even more things.

Instead, make sure your spending is in line with your priorities and your values. You worked hard for your money, so be mindful of what you purchase with it. Embrace living frugally -- which doesn't mean living cheap.
Being frugal means you're more resourceful and less wasteful. It means you're not pressured into buying things you don't need -- or maybe don't even want -- by your peers, family members, or a society that encourages mass consumerism.

Once you've realized you don't have to spend every cent you make on stuff that you don't really value, you should have money to allocate toward your debt. Get aggressive with your loan or credit card balance payments.

The sooner these big debts are gone, the sooner you'll be more financially stable and secure. The longer you hang on to debt, the longer you'll be unable to advance other financial goals, and the more money you'll be paying in interest.

4. Establish a Side Hustle

Feel like there's not enough money to go around each month to cover all your financial goals, expenses, and wants? You do have the power to solve this problem. It's called a side hustle. Any kind of part-time work you can do on the side will accelerate your progress as you repay debt, save for the future, and acquire the money you need to make big things happen in your newly independent, real-world adult life.