Major commodities including gold, silver and crude oil resumed their downward trend, while the U.S. gained some of its losses back from earlier this month. This week the main events will revolve around the before last FOMC meeting for the…
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The post Financial Market Forecast for October 27-31 appeared first on FX FOREX.
The recent weakness in the U.S. equities lead the news cycle as its also coincided with selloffs of U.S. dollar and recovery of precious metals. This week, several key reports will be released including: U.S. CPI, U.S. new home sales,…
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The post Financial Market Forecast for October 20-24 appeared first on FX FOREX.
Volatility, the critical ingredient investors need to trade, started to gradually creep back into financial markets late in the third quarter. That prompted idle traders worldwide to take positions once again. But is that market volatility sustainable as 2015 inches near? It depends on three market-moving factors: interest rate divergence, geopolitical events, and global growth expectations.
The U.S. Federal Reserve and the Bank of England (BoE) are the two major central banks currently sharing the lead on expected interest rate hikes. Not too long ago it was the Old Lady alone that had investors guessing as to when a rate hike would be announced. But Governor Mark Carney has turned dovish recently, influenced by global economic weakness, low inflation in the U.K., and the eurozone’s abysmal economy.
The Fed continues to confound the market as to when it will make its move. Chair Janet Yellen let it slip at her debut press conference a few months back rates could be raised six months after the end of the Fed’s bond-buying program. With the Fed’s current round of quantitative easing (QE) ending this month, the tightening cycle could begin as early as the spring of 2015. However, some Fed members have issued statements that the central bank needs to be patient and raise rates only when necessary while others are urging the central bank to start the rate hike cycle.
European, Japanese Central Banks Equally Challenged
Meanwhile, the European Central Bank (ECB) and the Bank of Japan (BoJ) are wading into unknown territory. The ECB is fighting a deflationary environment as growth proves elusive in the eurozone. If there’s to be a eurozone QE program, European leaders must agree on its necessity and that is no easy feat. Especially when the eurozone’s economic powerhouse, Germany, continues to push an austerity agenda that counters the much-needed stimulus.
The BoJ was a strong supporter of Abenomics in 2013 but this year was a different story as the central bank remained in the sidelines. An increase in stimulus is expected from the BoJ to counteract the effects of the sales tax hike Tokyo introduced last April.
In general, interest rate divergence from major economies will boost the demand for currencies from high-yielding nations. Stimulus and weaker currencies will aid the recovery of lagging economies in Europe and Japan. This of course can only happen if both camps stick to their individual policies and geopolitical or emerging market demand does not disrupt expectations as they have done in the past.
A World in Turmoil
The list of geopolitical risks continues to grow and some of the events will have a greater impact on the market than others.
From the seemingly unending military dispute between Ukraine and Russia, the Islamic State’s barbaric rampage in the Mideast, the plight of pro-democracy protestors in Hong Kong, and Catalonia’s desire to separate from Spain, to the alarming spread of the Ebola virus, there’s no shortage of event-risks for investors to bear in mind.
In terms of political upheaval within the Group of Seven, the U.K. general election next May is the most relevant to volatility as Prime Minister David Cameron’s government faces an uncertain outcome. Midterm elections in the U.S. and a general election in Canada next year are unlikely to be as stirring.
Global Growth Expectations Muted
The International Monetary Fund, the World Bank, and the Organization for Economic Cooperation and Development have all cut their growth forecasts for 2014 and 2015. Here divergence among recovering economies is clear as the U.S. and the U.K. lead the developed world with Europe and Japan at a standstill. Emerging markets continue to struggle trapped between diminishing foreign direct investment that is diverted to safe-haven assets as major central banks keep the markets on edge, and unfolding geopolitical events diminish appetites for riskier investments.
Stunted global economic growth has also reduced the demand for commodities. Base and precious metals prices have fallen as supply overshoots demand. Crude oil prices in particular have been hit hard by a sluggish Chinese economy. It remains to be seen if the Organization of the Petroleum Exporting Countries’ supply constraints will drive up the price yet again, especially after the U.S. has increased its productions due to technological advances.
The post 3 Things Driving Financial Market Volatility in 2015 appeared first on FX FOREX.
The recovery in the USD took a turn as its fell against leading currencies. The huge selloffs also led to a rally for precious metals prices. The minutes of the last FOMC meeting along with the revised down IMF economic…
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The post Financial Market Forecast for October 13 -17 appeared first on FX FOREX.
Following the better than expected NF payroll report, in which the USD rallied, while precious metals took a nose dive, this week the U.S JOLTS report will complete the NF payroll report; this report may offer another data point about…
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The post Financial Market Forecast for October 6-10 appeared first on FX FOREX.
The weakness in the bullion market and the recovery of US dollar continued last week. This week, we have a lot of news items that could push around the foreign exchange and commodities markets. In the U.S we have the…
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The post Financial Market Forecast for September 29- October 3 appeared first on FX FOREX.
Kayla writes in:
I’ve never really understood how you could suddenly make the switch from way overspending to actually living on just one of your two incomes and saving half of your income. How does that even happen?
As I thought about Kayla’s question, I started writing a list of things that I felt played a real role in this turnaround. It’s easy to point to one single thing – my “financial bottom” – but that actually only tells a little bit of the story. It wasn’t just that one painful day – it was a series of things that happened both before and after that moment. All of these things pointed my life in a different direction than before.
Let’s walk through them.
Our first child arrived in late 2005, about six months or so before our financial turnaround began in earnest. Unsurprisingly, it triggered a bunch of changes in many different aspects of our lives.
One, it became much harder to go out in the evenings. Having a child at home made having a few date nights a week much more logistically challenging. We either needed to get a babysitter – which meant preparing supplies and directions and straightening up the apartment and also spending money on that babysitter – or we could just stay at home with our new little guy. Usually, staying at home with the new little guy won out, generally because it was easier.
Two, I wanted to spend a lot of time with my son. I was now motivated to go directly home each night after work, only stopping for vital errands. I enjoyed spending time with him – holding him, reading to him, talking to him, and so on. Most days, I really looked forward to spending some time right after work with him.
Three, we started to incur child care costs. Since Sarah and I both worked during the day, we needed someone to watch our son – and we were quite picky about who we chose. We ended up using one of several centers in the area and it wasn’t cheap. This added an extra strain on our budget.
Four, we had all of the other child care costs, too. Diapers. A breast pump. Formula for emergencies. Wipes. All of that stuff really adds up.
The simple presence of this baby in our life altered our daily routines significantly and added to our expenses.
Naturally, because I wanted to spend more time at home with my son, my hobbies and free time usage began to change direction. Not getting home until six or seven no longer made sense. Instead, I wanted to get home right after work to see my son and check on his new tooth or read him a book.
Since we were now spending a lot more time at home, I wasn’t engaging in some of the hobbies I once engaged in. There was no time for poker night. I basically withdrew from going out for drinks with coworkers. We didn’t go out to eat.
Instead, I started digging into hobbies and activities that I could do at hime. For a while, I played a lot of video games, but other hobbies really began to take center stage.
More than anything, I really rediscovered my passion for reading. There were a lot of times where we wanted the apartment to be quiet so that our baby could sleep for an hour or two, so we looked for hobbies that were nice and quiet. Reading is a natural hobby in that regard.
So I started digging through the piles of books we had accumulated and started actually reading them. I had always enjoyed reading as a hobby, but I had allowed other hobbies to take front and center with my time while still buying a lot of books. This left a ton of unread books on my shelf – and I started digging in.
The most valuable part of reading is that, if you read something more challenging than a page-turner, it forces you to consider new ideas in a deep way. You really have to turn over your thoughts and feelings about various things, deciding for yourself whether your previously-held ideas make sense in the face of new information and new arguments.
So, not only was I filling my time with a new quiet hobby that was based on things already on my shelves, I was also exploring new ideas and new thoughts about my life and how the world worked. I view my reading in the winter and spring of 2006 as being invaluable in terms of priming my mind for the changes to come.
In 2005, I experienced real success with writing for the first time in my life.
Throughout that year, several exciting things happened. I had a very strong tug of interest in a novel I had been working on from a smaller publisher. I started writing a column on playing poker for an organization that was paying quite well (given that the poker boom was in full bloom at that time). After our son was born, I started a parenting blog that saw a great deal of success in the winter of 2006 (I chose to discontinue it that summer for personal reasons).
For the first time in my life, I began to actually feel as though I could make real money from my writing efforts. Because of that success, I began to devote more and more of my spare time to writing. Most evenings, I could be found with a laptop crafting words.
At the same time in 2005, I saw some success with three other side gigs, though the success wasn’t as grand as with writing.
I played a great deal of online poker and I had a wonderful winning streak in 2005 and 2006. I had “invested” some money to play with, so I took my investment back out of the account. Then, later, I took out some additional money. I was literally playing with the house’s money at that point.
In 2003, I started a home computer repair business targeting elderly people in the area where we lived. I focused on the “social” side of business, fixing their computer while engaging in conversation with them. The business mostly grew through word of mouth and I was making a couple house visits a week (almost all were within walking distance of our apartment).
I also had some success with independent web design. I created websites for three different clients in 2005 and 2006, earning some nice pocket money.
Although my earnings in each of these endeavors was small – less than $ 2,000 each – it did show me that I didn’t necessarily have to rely on my primary job to earn a living. It became clear to me that I could switch careers should I ever need to or want to. (A few years later, I did just that, spurred on by a sense of separation from my children.)
Prior to the birth of our first child, I never really considered how my personal spending choices really affected the rest of my family. Sarah and I kept our money largely separate, mostly paying bills by committee.
After our son was born, we both began to see how our individual spending choices really impacted our family. Before then, overspending just meant that we had to personally cut back on some other area for a little bit, then everything would be fine. With a child, cutting back became a lot harder.
I didn’t like it whenever I felt like I had to make a hard spending choice related to my child. I didn’t want to ever have to buy him the cheap diapers that might leak or the cheap wipes that might irritate. I didn’t want him to ever be uncomfortable or unhappy, whether it was Orajel for his emerging teeth or a teddy bear to cuddle with.
It didn’t take long before the connection between my own spending on silly things would have a direct negative impact on my ability to provide for my son. It didn’t take much more to start realizing how the same connection was true with Sarah as well. We all relied on each other. We weren’t independent.
When I made a dumb spending choice, it wasn’t just me on the line there. It was Sarah. It was our baby, too. It was also my future self – my retired self that may or may not be able to dig out of a financial hole. It was a recognition that made me start to consider the ramifications of how I spent money.
With this change in my time use – heading home quickly after work, spending a lot of time quietly at home – the time I spent with most of the people in my social circle began to change, too. I stopped going out for drinks after work other than on rare occasions. I stopped taking time to play golf. I basically dropped out of my poker group.
A few of those people understood that my life was significantly changing and maintained a friendship with me. Most of them did not and they quickly fell back to being casual acquaintances.
Within a few years, I was much more involved in community events (starting with things like coaching three and four year old soccer and local charities) which led to new friendships. We began to connect with new neighbors in our area and a pair of old friends moved back to the area.
Between 2005 and 2008, our social circle almost completely turned over. Those new people contributed new influences in our life. Many of them were parents. Almost all of them were fairly frugal. Many of them cared deeply about social causes. Naturally, those things became more pronounced in our own life.
It was hard to let go of some of those friends and some of those social connections, but I soon realized that the relationships that really mattered stuck with me. The friends that really meant something are still a part of my life because they were friends with me, not simply people enamored with whatever activity we happened to be sharing.
As I mentioned at the start of this article, I did have a “trigger moment” that pushed forward a lot of these ongoing changes.
It wasn’t just an isolated moment, though. It was just a key moment that was a part of a sea change going on in my life. That moment was vital in terms of making me consciously aware of all of these changes, but it wasn’t as if my life completely transformed in that one moment.
In other words, I don’t think “creating” a moment like that works. Instead, it was just the natural result of changing all of the other factors in my life. It was an inevitable spark.
If you want to create a “moment of change” in your life, the best thing you can do is upset your routines. Find ways to make yourself try new approaches, meet new people, learn new things, and establish new routines.
That kind of change provides a fertile field for a transformative moment to grow.
I read a ton of personal finance books during the first few months after that “moment” and most of them were useful.
Some of them really helped with figuring out what specific actions to take to really get my finances in gear. I sold off a lot of things from our closet that we weren’t using, for example, and we built a debt repayment plan.
However, the books that really stuck with me – like Your Money or Your Life – are the ones that focused on why I was making these financial changes.
It wasn’t the “how” that kept the ball rolling forward. It was the “why.” The more I understood and thought about why I was doing these things, the easier it became to stick with those changes.
Since then, I’ve been deeply attracted to books that focus on the “why” of things, much more than the “how.” A list of instructions is just a list of instructions, but knowing the reasons behind those instructions makes you understand whatever it is you’re doing in a much more intimate way. It changes the way you feel about… well, everything.
A big part of the “whys” was simply setting big, exciting goals. The thought of being free of debt seemed incredible. The thought of controlling my own professional destiny – and perhaps someday being financially independent – seemed awesome.
I wanted those things. I wanted big changes in my life.
Before that “moment of change,” those big goals were really nebulous and vague. They were something that my “future self” would do. After that “moment of change” and after a lot of time thinking about why I was doing this, I began to realize that it really was up to me – right here, right now – to make those goals happen.
The idea that I really could make those big changes happen in my life was amazing. All it required was smart use of my time and some self-discipline. I let those big goals become the clear horizon in my life and I became really excited about heading toward them.
Not only that, I did all I could to keep that excitement going. I spent a lot of time continually thinking about those big goals and how my life would be when they were achieved. Whenever I felt doubt, I brought those goals back front and center.
At the same time, I was making lots of practical changes in my life. I was experimenting with saving money and frugality and I was also experimenting with earning money, mostly through writing.
My frugality experiments showed me again and again that my life was still pretty amazing after I let go of whatever it was that I was hanging myself up on. Whenever I tried something new that was intended to spend money, I usually found that the change was not nearly as bad as I thought it would be. Sometimes, the change was actually an improvement.
I let go of old hobbies. I let go of old routines. I let go of old habits. And I found out that it didn’t really hurt. My life was just fine without them.
Prior to that, I thought that changing my spending routines and dropping my splurges would actually hurt. It would make my life un-fun somehow. I would just be unhappy with an empty life void of spontaneity and pleasure.
The opposite basically happened. Not only did I find new pleasures to fill my time – ones that didn’t involve spending money – I became much more at peace as our financial position became more stable.
For me, at least, the big lesson was that my spending habits are intimately connected to everything else going on in my life. It’s tied deeply to how I spend my days, who I spend them with, and what I’m actively thinking about.
If I spend my time with people who enjoy spending money or spend my time reading websites about the latest stuff that I might want to have or I increase my exposure to ads and product placement, I find myself with a much greater desire to spend money even if I’m conscious of the changes. It just happens.
At this point, most of my routines are pretty independent of spending desires. It’s pretty hard to build desire for spending when you’re at home alone with the internet turned off, writing my fingers off. It’s hard to want to spend money if most of your evenings involve playing games on the table or reading books I already have or are found in the library rather than digging into media forms that encourage me to buy stuff.
Can you force your life to change with these kinds of broad strokes? I’m not really sure, to be honest. For me, the ball was kicked off by the birth of my first child. It triggered a ton of changes in my life, forcing me to try new things.
There are a lot of things you can do in your own life to trigger these kinds of rippling changes. Turn off your cable subscription or your home internet subscription. Get a new job in a new place. Drop out of your usual social circles and spend your evenings trying new things. Read a book about lifestyle changes that have always been intriguing to you.
Those kinds of actions are like throwing a giant rock into a still pond. The ripples go outward, bouncing off the shore, and eventually mix together to make a completely different kind of surface.
It’s actually pretty simple. If you want change in your life, make change. Change who you spend time with. Change how you spend your time. Change where you life. Change what you do.
Then watch what happens. When you move your wheels out of the familiar ruts, interesting things happen, especially when you have a deep desire for change in your heart.
Good luck in wherever this takes you.
The post Triggering the Spark of Financial Independence and Frugality appeared first on The Simple Dollar.
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The post Triggering the Spark of Financial Independence and Frugality appeared first on FX FOREX.
Following the FOMC meeting the commodities markets took a beating as oil, gold and silver tumbled down. These losses coincided with the recovery of USD against leading currencies such as Euro and Yen and the rally of U.S equities. On…
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The post Financial Market Forecast for September 22-26 appeared first on FX FOREX.
The financial markets could stir up again this week as there are many news items on the agenda mainly the next FOMC meeting and the Scottish referendum. Last week, precious metals and oil resumed their downward trend, while the USD…
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The post Financial Market Forecast for September 15 -19 appeared first on FX FOREX.
As I sit here thinking about what I want to write, I reflect back on my journey in business and finance that has brought me to where I am today. How, in conducting business, it is results, outcomes and accountability that have always carried weight. Serving customers well and adding value – making them more […]
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Goal-setting plays a pretty major role in my life. Over the last several years, setting and sticking with goals eliminated all of our debts, bought a home, and enabled a career switch – and those are just the financial goals.
At the same time, I’ve failed at more goals than I’ve ever achieved. I’ve tried to achieve countless things over the years but found myself falling short. Exercise goals. Writing goals. Weight loss goals. Personal growth goals. All of these have fallen by the wayside over the years.
This mixture of success and failure has taught me a few things about what it takes to actually achieve a big goal, and one lesson rises above all of them.
Goals are won or lost during the “dog days.”
I’ve talked about the idea of a goal having “dog days” before. A few months ago, I wrote an article entitled The Emotional Cycle of Change that dealt with that very idea. In that article, I referred to some research that describes how our mindset changes as time passes when we’re working on a major life change:
Psychologists Don Kelley and Daryl Conner actually mapped this phenomenon out very well in a sequence that they call “The Emotional Cycle of Change.” In it, they identify five distinct phases that people go through as they implement major changes in their life:
Stage 1: Uninformed optimism.
Stage 2: Informed pessimism.
Stage 3: Hopeful realism.
Stage 4: Informed optimism.
Stage 5: Completion.
Every single time, my goals have died during the “uninformed pessimism” part of this cycle.
If you’ve ever tried to achieve a goal, you know what that part is. It’s when the “honeymoon” of making a big change starts to wear off and you’re realizing that there’s still a lot of work ahead of you. You start hearing those little whispers in your head telling you to take the easy road, to splurge, to take a break today.
That’s the point at which a goal either succeeds or fails.
I’ve tried many, many approaches for getting past that point. The only times I’ve found success is when I’ve used some combination of the approaches below. Success usually comes when you stack up these approaches, creating a wall of motivation that keeps you from making a dumb mistake and forces you to stay on the better path no matter what that little devil on your shoulder might be saying.
I have never achieved any sort of lasting success with a goal that wasn’t clearly defined.
“Getting my money into better shape” never cut it. “Paying off every debt I have within five years” was a much better goal – and one that worked (I did it from 2006 to 2011).
“Becoming a writer” never cut it. “Writing 2,000 words every single day and sharing or selling everything I complete until I can do this for a living” was a much better goal – and one that worked (I did it from 2003 to 2008 and I still keep up the writing habit).
A sensible, achievable goal has these three components.
One, it’s extremely clear in terms of what you want to achieve. There’s no grey area with a great goal. It’s either black or white. You’ve either done it or you haven’t.
Two, it sets some sort of timeline for achievement. There’s a deadline, whether it’s a short-term one or a long-term one. You need to achieve something by some time.
Three, it gives you some flexibility in terms of how to get there. The first methods you try for achieving that goal probably won’t work perfectly. You’ll refine them over time. A good goal gives you breathing room for that refinement, letting you figure out better methods for paying off debt or a better routine for getting that daily writing done.
Without those components in your goal, you’re already off to a rough start. It’s going to be hard to have that goal providing any central guidance to you along the path because it leaves you without clarity, flexibility, or a timeline. You need those things to achieve.
Your goal should set up better daily choices for you – and one of the best tactics for success is to just focus on executing those better daily choices.
A good goal requires you to make better choices on a very routine basis – usually a daily basis. That big goal makes it clear what direction those choices should be pointing compared to your normal behavior. If you’re going to pay off debt, it’s clear that your daily choices should revolve around spending less and earning more. If you’re going to switch careers, it’s clear that your daily choices should revolve around getting education and building professional contacts.
Whenever the going gets tough, stop thinking about tomorrow. Stop thinking about yesterday. Think about nothing but today.
What can you do today to bring that goal closer? Can you make good spending decisions all day? Can you put in a few hours of work on your big project? Can you hit the gym? Can you choose to eat a little better today?
A successful day that’s in line with your big goal leaves you feeling pretty good at the end of the day. Your head will hit the pillow and you’ll be proud of the fact that you stayed on track, even when it seemed tough. That experience will make the next day seem a little easier.
You are successful at your goal if you take positive action toward that goal today (without overshadowing it with negative action). Simply put, if you do that one thing over and over, you will achieve almost every well-defined goal you could possibly have.
The strategy of focusing on today is somewhat linked with strategy #4, using smaller “sub-goals.”
A “buddy” is someone who is striving to achieve a similar goal as you. That “buddy” provides several advantages
One, a “buddy” gives you someone to participate in goal-related activities with. If you have an exercise goal, a “buddy” is someone to exercise with. If it’s a cost-cutting goal, a “buddy” is someone to participate in frugal activities with. It turns achieving your goal into a social bond.
Two, a “buddy” provides inherent motivation. Knowing that a “buddy” is expecting you to exercise with him or her provides motivation to get up and actually do it. Knowing that a “buddy” is planning on making a ton of make-ahead meals with you this weekend convinces you to get it done.
Three, a “buddy” can help you through the low points. When you’re feeling low, a good “buddy” can help talk you through the challenge and help keep you focused on the big goal.
Finally, a “buddy” can help you plot strategy. When you’re struggling with a particular issue, like finding the right kind of running shoe or figuring out novel ways to cut your energy bill, your “buddy” can help. Not only that, you might also be driven to digging into information and ideas when your “buddy” needs help.
One great way of finding a “buddy” is to look for someone in your already-existing social circle that is working on a similar goal as your own. Is there someone you know working hard on paying off debt? Is there someone you know that’s taking a serious interest in investing? What about someone who’s newly committed to exercise? Talk to that person. Buddy up with that person. Make an effort to motivate that person. Find ways to share activities with that person.
You’ll both benefit.
This strategy of having a “buddy “is somewhat linked with strategy #8, restructuring your social circle.
One of the best strategies you can apply to a large goal is to break it down into a set of increasingly smaller “sub-goals.” Ideally, you’re able to break them down into goals that can be achieved in a week or two.
I like to use a jogging analogy. When I’m jogging, it’s often tempting to slow down to a very slow walk or even to completely stop. My strategy for getting past that is to set a small goal. I’ll look ahead and spot a tree or a parked car and agree that I can slow down once I’m past that. Usually, I can convince myself to repeat that “little” goal several times, finding new markers that indicate where I can slow down.
You can use that same idea for almost any goal. Instead of focusing on “paying off all of your debt in five years,” focus instead on something like “minimize food spending this week by making a meal plan and a grocery list and sticking to them.” Achieving that goal will free up money that you could then use for an extra debt payment.
I find that whenever I’m intimidated by a really big goal, breaking it down into a smaller goal like that makes it seem far less intimidating and far more approachable.
Here are three techniques for developing smaller “sub-goals.”
One, the smaller goal should be able to be finished within a week or so. It needs to be within a timeframe that you can really grasp so that you don’t feel as though it’s so far off that it doesn’t matter. Immediacy is vital.
Two, the smaller goal should directly relate to daily action. It should inform you exactly what you should and should not be doing for the next few days.
Three, the smaller goal’s result should feed directly into the big goal. If you complete this small goal, it should help the big goal in some way. It’s just like setting a short distance when jogging – when you achieve that little distance, it means you’re a little closer to that big goal.
This strategy of having smaller “sub-goals” is somewhat linked to strategy #2, focusing on today.
Our lives are filled with distractions. When we’re dieting, the food in our cupboard and our refrigerator can be a big distraction. When we’re exercising, having to find our shoes and our workout gear can be a little obstacle that can push us over the top in terms of not taking action.
The best way to make a goal keep moving forward is to minimize the resistance against it.
First, take notice of what takes you off the path. What reason do you use to not get up in the morning for exercise? What’s the logic you use when deciding to stop at a store and spend money? Spend time thinking about those reasons. If it’s an obstacle, ask yourself how you can reduce or eliminate that obstacle. If it’s a temptation or distraction, ask yourself how you can stick an obstacle in the way of that temptation.
Second, get rid of easy-to-access distractions or temptations. If you’re trying to diet, cookies and chips in the cupboard are not helping you. Give them away. If you’re trying to save money, having “one-click” access to ordering things online is not helping you. Cut your credit card info out of those websites.
Finally, plan a routine that eliminates those little obstacles. If you want to exercise in the morning, have all of your necessary gear right beside your bed before you go to sleep at night. If you want to cook every meal at home this week, have as much of the prep work done in the morning as you possibly can so you have less resistance toward making that meal for supper this evening.
Distractions and obstacles are just little things that are surprisingly effective at convincing you to take your eye off the ball. Don’t let that happen.
This strategy of minimizing and eliminating distractions is somewhat linked to strategy #8, restructuring your social circle.
This is a technique that’s helped me a lot when it comes to goals.
When I first began to turn around my finances, I took a picture of my infant son and literally wrapped up my credit card in it. I made it so that I would have to unfold that picture and look at it to gain access to my card.
On that picture, I wrote in big letters, “DOES THIS PURCHASE HELP HIM?”
Every time I pulled out the plastic, I saw that picture and that question and it made me think. It almost always pushed me to reconsider the purchase and, quite often, it convinced me to just walk away entirely.
That visual reminder did an amazing job of trimming my spending at a time when I really needed it.
You can use lots of visual reminders like this. Take a picture of you at your heaviest and put it on the refrigerator door with a slogan that says “REMEMBER THIS PICTURE WHEN YOU CHOOSE WHAT TO EAT!” Tape a picture of your dream home to your rear view mirror.
Whatever the visual indicator of your goal or your motivation is, use it. Put pictures of that motivator wherever you can. It will constantly help you make the better choice.
If you’ve chosen a goal that’s so tight that you have no room for a minor setback and no room for a mistake, you’re guaranteeing the failure of that goal. It’s as simple as that.
You’re going to sometimes have days where life interferes with your progress. You can’t go on a jog in the middle of a whiteout blizzard. You can’t make a giant debt payment when the transmission in your car suddenly fails. Bad things sometimes happen – it’s life.
A good goal pushes you but not in an unrealistic way. Here are a few ways to achieve that.
One strategy is to give yourself some off days. For example, my usual exercise routine occurs on five out of seven days of the week. I get to choose which days. If I really need to work one day or get some extra tasks done, then I can take care of things that day and simply exercise the next two or three days without letting my goal down.
Another strategy is to give yourself a small allowance. This is something I still do with my finances. I allot myself a certain amount for hobby and entertainment spending each month. Within that money, I can spend it however I want, but that’s my limit for the month. If you want to translate that to exercise, give yourself a bonus day off once a month; if you’re dieting, give yourself two meals a week to eat what you wish.
I find that goals that allow me a little bit of breathing room along my path to success tend to work better because I don’t feel that sense of complete failure if life hands me an unexpected situation. I don’t want my goal requirements to stand in the way of going out to dinner with an old friend, for example.
Jim Rohn once said, “You are the average of the five people you spend the most time with.” While that’s not wholly true, it’s a pretty accurate rule of thumb for the broad choices we make in life.
If you surround yourself with people who are dedicated to fitness, you’re more likely to add fitness to your daily routine. If you surround yourself with people who are dedicated to frugality, you’re much more likely to feel that frugal choices are normal and good.
On the other hand, it’s awfully hard to be the one person who constantly exercises in your social circle and it’s pretty hard to be a cheapskate in a group of big spenders.
If you’re trying to make a change in your life, one big step you can take is to alter your social circle a little bit. Seek out friends that are focused on the things you’re currently focused on so that your choices mutually rub off on each other. At the same time, cut back on the time spent with friends who are making choices that are in opposition to your goals. You don’t have to cut anyone out of your life; just choose carefully who you spend time with.
This can give you the opportunity to cultivate new friendships while also keeping your eye on the big goal in your life.
This strategy of restructuring your social circle is somewhat linked to strategy #3, having a “buddy”, as well as with strategy #5, minimizing distractions.
It’s really easy to blame forces outside of our control for our failure in achieving goals.
It’s “the weather” that keeps you from exercising.
It’s “your boss” that keeps you from improving your career situation.
It’s “Obama” that keeps you from saving money.
All of those things have nothing to do with the individual choices you make each day. You’re the one that decides how to spend your time. You’re the one that can make the choice to go to the gym or exercise in the basement. You’re the one that can make the choice to spend some evenings getting additional career training or working toward a certification. You’re the one who chooses whether or not to buy silly things or put that money away for the future.
Focus entirely on your own actions, not the people or things around you. If you truly want to spend less money, you can always make that choice. You can exercise any time and in almost any space.
The action you take next is entirely under your control. Why not choose an action that moves you closer to the big goal you want to achieve?
One final strategy is to use numbers to continually motivate yourself toward achieving a goal.
For example, when I first started our financial turnaround, I calculated our net worth every week. I used the change in our net worth as direct evidence that the choices we were making were actually improving our financial state.
Another example: when you’re trying to lose weight, use your waist measurement or your weight over time to show you whether or not you’re making progress. Check it regularly – say, every week – and watch the overall trend of the numbers.
While it’s unrealistic to expect improvement every single week, the average of the last few numbers should be lower than the average of the few numbers before that. I usually compare the most recent month’s average (the last four weeks) to the month before that (the average of those four weeks).
The ability to add a nice new number to your tabulation can feel incredible. When you can add a new low weight to your calculation or when you can jot down a new record high net worth, you can see right there in the numbers that all of your efforts are paying off and that you’re headed in the right direction.
For some – myself included – that can be incredibly powerful.
Goal setting and goal achievement is a major part of personal finance. Without the process of setting goals, figuring out how to work toward them, and then moving in that direction, it can be very hard to find a better way through life.
Of course, goals also usually mean life changes, and life changes can be difficult. It takes dedication to stick with a big goal.
These strategies can help with that dedication. Whether it’s altering your social circle or simply setting up a big visual reminder of your goal, giving yourself a little something extra toward achieving a goal never hurts – and sometimes it can make all the difference.
Good luck!
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Most commodities tumbled down last week, while USD recovered against leading currencies mainly against the Euro after the recent ECB rate decision. This week, in the U.S several economic reports will be released including JOLTS, retail sales, consumer sentiment, and…
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The market volatility in the markets is slowly returning as we are exiting the summer slumber and into September. We kickoff the month with rate decisions by ECB, BOJ, BOE, RBA and BOC, while in the U.S the NF payroll,…
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In an ideal world we would all be millionaires and have the spending power to enjoy all of the finest things that the world has to offer us. We would be able to live in sweeping country mansions or slick uptown apartments, drive fast cars, own our own yachts, travel the world, and look after our nearest and dearest. We see the lives that celebrities and footballers live on a daily basis and dream that one day our own lives will be as champagne laden and ‘jetset’. Unfortunately the truth is that for the majority of us this dream is just that, but whilst we can’t all be high-flying millionaires, what we can be is financially comfortable and content.
Generally speaking, the people who eventually end up settling into a life of comfort or great wealth have something in common, in that they tend to be the ones who take expert control of their finances. Very few millionaires out there made their fortunes through being wasteful and squandering their money; on the contrary they would have painstakingly turned pennies into pounds, pounds into notes, and then notes into wads of cash. And the lucky few who did make fast cash and spend it likes it is going out of fashion, such as certain A-list rockstars, footballers, actors and actresses for example, have historically all quickly run out of money once their income dried up to the point where their spending exceeded their immense earnings. If Michael Jackson with his $700 million fortune could fall into solvency, then any of us can! If you want wealth and a comfortable financial future, you need to do away with financial bad habits and silly mistakes. Here are a few bad habits to ditch unless you fancy a lifetime of poverty and hardship.
Recklessness and acts of wanton stupidity are not so much overlooked as expected of us up until our early to mid-twenties, so it is kind of excusable to be a bit rubbish and thoughtless financially during this time. However it is important to grow out of this phase and graduate from living like a paycheque to paycheque reprobate to a fully-fledged financially responsible adult by our early-thirties at the latest, because even though you might not need the money in your youth, you certainly will as your financial commitments and responsibilities continue to mount with age. Enjoy your financial freedom and live by all means but keep one eye on the future and remember that one day you will be an adult and your wants and needs will be different.
Saving a little away each month will reap incredible financial rewards over a long period of time. After all if you save £100 a month for 10 years, you will find that you one day have £12,000 in the kitty, which could be used for a house deposit or just to put towards a cash pile for later life. It is important to have a little set aside for a rainy day too so by all means go out and enjoy life but put a little aside each month first.
Spending money on cool gadgets and partying is one of the best feelings in the world but if you are doing this on credit and living beyond your means, you will pay a very high price for it further on down the road. We all have to borrow from time to time for the important stuff but don’t get into debt on a whim, you will have to pay it back with interest later on and it is much harder to pay money back than it is to borrow it!
This article has been written by our guest author Jason Scott. Jason recently published an article titled surrounding guarantor loans – check it out!
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In an ideal world we would all be millionaires and have the spending power to enjoy all of the finest things that the world has to offer us. We would be able to live in sweeping country mansions or slick uptown apartments, drive fast cars, own our own yachts, travel the world, and look after our...
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This article is from J.D. Roth, who founded Get Rich Slowly in 2006. J.D. recently appeared on the Microblogger podcast, where he talked about taking control of his financial life, moving from debt to wealth.In January, I accompanied Kim to an appointment with Paul, her investment adviser from Edward Jones. Paul’s brother was my best friend in grade school and junior high, and we have many mutual friends. I sat and listened while Kim and Paul talked about her investments and how she ought to invest for retirement. I didn’t participate much, though, because this is Kim’s money, and I didn’t feel like it was right for me to take an active role.I did ask some questions about index funds, though. Kim’s money is …
via Get Rich Slowly – Personal Finance That Makes Sense.:
This article is from J.D. Roth, who founded Get Rich Slowly in 2006. J.D. recently appeared on the Microblogger podcast, where he talked about taking control of his financial life, moving from debt to wealth.
In January, I accompanied Kim to an appointment with Paul, her investment adviser from Edward Jones. Paul’s brother was my best friend in grade school and junior high, and we have many mutual friends. I sat and listened while Kim and Paul talked about her investments and how she ought to invest for retirement. I didn’t participate much, though, because this is Kim’s money, and I didn’t feel like it was right for me to take an active role.
I did ask some questions about index funds, though. Kim’s money is entirely in individual stocks (like Apple) and expensive load-bearing funds such as VFCAX (Federated Clover Value Fund), which has an expense ratio of 1.19 percent and a sales load of 5.5 percent.
Paul argued against index funds, saying:
Afterward, I asked Kim what she thought of the meeting. She got the gist of things, but found a lot of it confusing. No surprise. I know this stuff and still found some of the presentation confusing.
“What do you think I should do?” she asked.
“Well, I still think you should be in index funds,” I said, but I didn’t push it. Again, we’ve been dating almost two years, but it’s not like we’re married. I didn’t feel comfortable making this decision for her.
Over the next few weeks, I wrote the investment chapter for my ebook. And then I rewrote the chapter. And then I rewrote it again. (This ebook will finally see the light of day at the end of April, by the way.)
As I wrote, I realized that I truly believe index funds are the right way for most people to invest. And it’s not just me. Warren Buffett believes this, as do many other well-known investors. The evidence is overwhelming. The smartest way for the average person to invest is to put all of their money in broad-based, low-cost index funds and never touch it. End of story.
Meet the new adviser — same as the old adviser
Between January and March, Kim switched jobs. Her new employer also contributes to retirement, but uses a different investment adviser. Last week, we met with the new guy, Evan. This time, I asked Kim how she viewed my role before the meeting. “I want you to speak up,” she said. “I want you to act like you’re my husband.” Well then, OK.
The meeting with Evan started very much like the meeting with Paul. Evan talked about how much Kim needs to save to meet her retirement goals (answer: a lot!). He also talked about where she should put the money. He agreed with me that it’s probably best not to shift around Kim’s existing investments (although I can’t help thinking we’re falling victim to a sunk-cost fallacy by not moving to index funds). He recommended that all of her new money should go into shiny new mutual funds that his company sells — funds that carry loads of 5.75 percent.
“How are you compensated?” I asked.
“Great question,” Evan said. “I’m paid out of the sales charge, out of the front-end load of the mutual funds. A part of that goes to me, a part of that goes to my company, and a part of that goes to the mutual fund company itself.”
After a few minutes of discussing these new funds, I decided to speak up.
“Look,” I said. “I write about money. I’m not an investment guru and I don’t have any specific training, but I’ve read and written a lot about investing over the past few years. Everything I’ve read says that the only reliable indicator of future mutual fund performance comes from a fund’s fees. The lower they are, the better the fund is likely to perform in the future.”
“That may be so,” Evan said, “but that’s only part of the story. With proper management, a traditional fund can outperform an index fund. Besides, index funds only work if you’re able to control your emotions. Studies show that most investors earn returns far below those of the market because they make poor choices under the influence of emotion.”
“Sure,” I said. “The Dalbar study shows that every year.” I cite this study over and over again in the articles and books I write. “But investor behavior is only one part of the problem. The other part is costs.”
Evan protested. I didn’t blame him. His livelihood is tied up in this. Besides, I think he truly believes in his funds.
“If Kim were to buy index funds through Vanguard or Fidelity, how would you be compensated?” I asked.
“I’d take 1 percent,” Evan said.
“One percent up front?” I asked. “Or 1 percent per year?”
“One percent per year,” he said. With the roughly 0.25 percent expense ratio for a typical index fund, that would give her a cost of 1.25 percent annually. That beats the expense ratios from the funds Evan was proposing, especially when you factor in the 5.75 percent sales load.
Following my own advice
At the end of the meeting, Kim smiled and shook Evan’s hand. “Thanks for your help,” she said. “We’ll go home and figure this out.”
We walked next door to have a glass of wine while gazing out at the stormy Willamette River. “What do you think I should do?” she asked.
“Do you want to know what I would do if this were my money?” I asked.
“Yes,” she said.
“First, I’d contribute as much to retirement as needed to get the match from your boss. I’d have that put into an index fund, and I’d pay Evan his 1 percent per year. I don’t like it, but that’s your best option to get the match from work.”
“For everything else, though, I’d invest on my own. I wouldn’t do it through Evan. I’d open an account at Vanguard or Fidelity and schedule monthly contributions. He says you need to be putting away $920 per month for the next 20 years in order to have the equivalent of $50,000 per year at retirement. Do that. To be honest, I’d rather you didn’t pay me rent or utilities. I don’t need that money. I’d rather see you put it directly into an investment account every month. It’ll still feel like you’re paying me rent, but it’ll be going to your future instead. Does that make sense?”
Kim nodded. “It does,” she said, “but I still don’t like it.” (We’re still hammering out the financial side of our relationship. She wants to pay her half of things — which I appreciate — but I don’t want to take her money. When she pays me for rent or utilities or anything else, I tuck the money into a “secret” savings account at Capital One 360. That makes both of us happy.)
Unconventional Success
After our meeting with Evan, I began to have bouts of self doubt. It’s one thing to make decisions with my own money; it’s another to make them for somebody else.
To boost my confidence, I turned to books. I re-read the rationale behind investing in index funds. In particular, I turned to David Swensen’s Unconventional Success . During our meeting, Evan had pointed to the Yale University endowment as an example of investing success. Swensen is the mastermind behind that endowment. He’s also a passionate supporter of passive investing.
Unconventional Success contains nearly 400 pages laying out the arguments for index funds as “a fundamental approach to personal investment.” It explores asset allocation, market timing, and security selection before ultimately concluding that “overwhelming evidence proves the failure of the for-profit mutual-fund industry.”
Refreshing myself about the evidence in favor of index funds allowed me feel much better about our second meeting with Evan. On Monday night, we returned to his office to explain our decision. In short, we wanted to put all of Kim’s future funds into the following asset allocation using Vanguard index funds:
“That’s great,” Evan told us. “We can do that. But there’s just one problem. Our investment platform requires a $25,000 minimum in order to make this happen. Otherwise, it’s not worth our time.”
At first, I thought this was a barrier. Kim doesn’t have $25,000 in new money to invest. But then I hit upon a couple of solutions.
First, we could move our shared “dream fund” from the Capital One 360 savings account where it currently resides. Instead, we could place it in index funds. Sure, this would introduce greater risk, but I’m OK with that. By the time we’re ready to tap this fund, the stock market should be higher than it is today — and it should outperform savings accounts in the meantime.
Second, we could liquidate Kim’s existing mutual funds and move the money to Vanguard funds instead. That’s probably the smartest move anyhow. We had planned to leave her existing accounts at Edwards Jones, but this makes more sense.
In the end, Kim came up with a fun plan. Here’s what we’re going to do:
This process illustrated some of the problems the typical investor faces. First, she receives self-serving advice from advisers (even when they don’t intend to be self-serving). Second, even when she knows the right thing to do, it can be tough to stick to her guns in the face of trained expertise. Third, there can be barriers to making smart choices, barriers like high minimums and additional fees.
In the end, it’s important to make your own informed investment decisions. Remember: Nobody cares more about your money than you do. If you don’t take the time to educate yourself, you can’t expect anyone else to make the right decisions for you.
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For more info: Professional investment advice (and why you should ignore it)
Get Rich Slowly – Personal Finance That Makes Sense.
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Education Secretary Arne DuncanAlbert H. Teich / Shutterstock.comThis week, the Obama administration moved aggressively to crack down on for-profit career training colleges that charge high rates of tuition but offer little in the way of job placement. Using an executive order and the U.S. Dept. of Education’s rule-making authority, the President proposed a regulatory regimen that could shutter hundreds of degree-granting schools — that enroll a million or more students in fields that range from accounting to air-conditioning repair for the schools’ failure to place graduates in well-paying jobs.The administration framed the move as a bold step to protect Americans from predatory institutions that leave students with high debt and few marketable skills. According to POLITICO, the for-profit colleges …
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Education Secretary Arne Duncan
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This week, the Obama administration moved aggressively to crack down on for-profit career training colleges that charge high rates of tuition but offer little in the way of job placement. Using an executive order and the U.S. Dept. of Education’s rule-making authority, the President proposed a regulatory regimen that could shutter hundreds of degree-granting schools — that enroll a million or more students in fields that range from accounting to air-conditioning repair for the schools’ failure to place graduates in well-paying jobs.
The administration framed the move as a bold step to protect Americans from predatory institutions that leave students with high debt and few marketable skills. According to POLITICO, the for-profit colleges rejected the regulation as an unacceptable — and possibly illegal — federal intrusion into the private sector. Some Republicans in Congress weren’t happy, either.
James Kvaal, deputy director of the Domestic Policy Council at the White House, described the regulation as part of President Barack Obama’s campaign to make 2014 “a year of action,” with or without congressional support.
In fact, the administration has been working on the rule, known as the “gainful employment” regulation, for five years. A previous version was blocked by the courts. Analysts who have been tracking the issue closely said another lawsuit over the latest draft is all but inevitable. And the latest draft contains a clause that indicates the administration is anticipating legal complications.
Education Secretary Arne Duncan said the complex regulation has a simple goal: “We want to protect students from enrolling in poorly performing programs that leave them with debt they cannot pay and a degree they cannot use.”
Duncan noted that most of the programs in question receive nearly all their revenue from the public treasury, in the form of federal loans and grants that students use to pay tuition. The colleges, he said, are therefore “failing both students and taxpayers.”
But Steve Gunderson, president of the Association of Private Sector Colleges and Universities, warned that the regulation would deny millions of students the chance to enroll in career training programs of their choice. “The government should be in the business of protecting opportunity, not restricting it,” he said. Even before the draft was released, Gunderson made clear he would fight back. He sent Duncan a five-page letter outlining his concerns — and copied in two top presidential advisers, Valerie Jarrett and John Podesta.
The regulation would apply to about 8,000 career training programs at all types of institutions — community colleges, state universities and for-profit colleges. But for-profit colleges would bear the brunt of the sanctions because they offer the vast majority of the degree programs that would be rated as poor-performing under the administration’s formula. The federal government annually extends about $22 billion in federal loans and $7 billion in grants to students attending those programs.
The for-profit industry includes giants such as the University of Phoenix, DeVry University, Corinthian Colleges and Education Management Corporation. Their programs, offered both online and in-person, train students for a wide range of careers, including crime-scene investigator, graphic artist, physician’s assistant, IT specialist, business administrator, hair stylist and many more.
The draft rule ties data to specific programs. For example, the Los Angeles Film School’s certification in film and video has the worst debt to earnings ratio in the country at almost 55 percent of $17,411.
The Senate Committee on Health, Education, Labor and Pensions spent two years investigating the industry and released a scathing report in 2012 that concluded taxpayers were wasting tens of billions annually because so many students took out huge loans through federal aid programs, yet failed to earn degrees. The investigation, spearheaded by Sen. Tom Harkin (D-Iowa), found that the schools spent millions on marketing and employed armies of recruiters, yet had few support staff to help students stay in school; many who enrolled left after just a few months.
Harkin said he would review the new regulation closely, but based on an initial review, he expressed “serious concerns with this proposed rule’s ability to protect students and taxpayers from costly programs that consistently overpromise and underdeliver.” He called for strengthening the regulation before it is finalized.
Ben Miller, senior policy analyst at the New America Foundation, said the removal of two provisions might weaken the rule.
For programs that lose their eligibility for financial aid under the administration’s proposal, a provision that would have required those programs to repay students is now gone. The administration’s new rule essentially says it’s open to ideas on that front. And a previous section that required capping growth of programs that were about to fail is gone, too.
Overseeing and enforcing this version of the rule will pose a challenge, Miller said, particularly in discerning whether senior officials at institutions are telling the truth about their program certifications.
The new regulation, which would take effect in 2016, would flag programs as weak if their graduates’ average loan payments ate up 8 percent or more of their total earnings or 20 percent or more of their discretionary earnings. They would also be flagged if the default rate for former students exceeded 30 percent.
Any program that failed those tests two out of three consecutive years would face a crippling penalty: The Education Department would refuse to extend financial aid to its students. That would choke off the colleges’ primary source of revenue — and effectively force them to close the targeted programs. Duncan stressed that programs would have a few years to improve before facing sanctions. “The goal is not program elimination,” he said. “The goal is program improvement.”
But the administration has shown little patience with programs it regards as bad actors. Obama’s new Consumer Financial Protection Bureau is suing one for-profit institution, ITT Education Services, for predatory lending practices.
The administration claims authority to regulate for-profit universities based on a line in the 846-page Higher Education Act of 1965. It permits the federal government to extend financial aid to students attending post-secondary programs that “lead to gainful employment in a recognized occupation.”
Shortly after Obama took office, the Education Department decided it was high time to define the term “gainful employment.” Doing so through the regulatory process allowed the administration to circumvent Congress. That has infuriated some members.
“Once again, the Obama administration is making substantive changes in law without consulting Congress,” said Rep. Virginia Foxx (R-N.C.). “We all agree that substandard schools, whether public, private or for-profit, should face consequences if they fail to provide the education and opportunities they promise, but we are in the middle of re-authorizing the Higher Education Act, and this is a perfect opportunity for the president to work with Congress to find a solution on this complex issue.”
The courts rejected the Education Department’s first gainful employment regulation, finalized in 2011, on the grounds that one of the metrics used to assess the vocational programs was too arbitrary.
Administration officials and attorneys have been working ever since to craft a replacement. They spent months in negotiations with key stakeholders, trying to come up with a regulation that everyone could accept. But those negotiations failed late last year, freeing the department to go its own way. In recent weeks, the Office of Management and Budget has held a fresh round of meetings with interested parties, seeking to answer questions and anticipate concerns. In the end, however, the administration did not change much from the drafts it circulated during the negotiations.
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arindambanerjee / Shutterstock.com Students in the most populous U.S. state, which has long had a reputation for taking care of its college-bound residents, are asking for assistance at record levels. After years of rising tuition and pressure on household budgets, a record number of students across California are applying for college financial aid, the Sacramento Bee reports. Over the last six school years, the number of California residents filing the federal financial aid application jumped nearly 74 percent, according to the U.S. Department of Education. Some local colleges saw even higher increases, such as an 81 percent rise among California State University, Sacramento, applicants. Itâ��s the latest sign that college families have grown akin to mall shoppers when it comes to price: fewer and fewer expect…
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Students in the most populous U.S. state, which has long had a reputation for taking care of its college-bound residents, are asking for assistance at record levels. After years of rising tuition and pressure on household budgets, a record number of students across California are applying for college financial aid, the Sacramento Bee reports.
Over the last six school years, the number of California residents filing the federal financial aid application jumped nearly 74 percent, according to the U.S. Department of Education. Some local colleges saw even higher increases, such as an 81 percent rise among California State University, Sacramento, applicants.
It’s the latest sign that college families have grown akin to mall shoppers when it comes to price: fewer and fewer expect to pay sticker price.
While tuition soared at California State University and University of California campuses during the recession, schools simultaneously provided more grants and scholarships to blunt the impact. The state also continued providing Cal Grants to cover rising costs for lower-income families.
The percentage of UC and CSU freshmen receiving financial aid increased from 57 percent in 2006-07 to 72 percent in 2011-12, according to federal data.
“California did a better job than many states in having our state financial aid programs keep pace with the tuition increases,” said Judy Heiman, who tracks financial aid at the LAO.
In order to receive the financial aid, eligible students have to file the Free Application for Federal Student Aid. The FAFSA collects data on family income and assets to help colleges determine how much aid students qualify for.
Education counselors are encouraging as many families as possible to submit the application form by the March 2 deadline not only to ensure that they can access long-standing aid programs, but also because the state has devoted $107 million toward a new “middle-class scholarship” for households earning up to $150,000.
The Cal-SOAP Consortium, one of more than a dozen organizations around the state that hold “Cash for College” workshops to provide FAFSA filing help, is offering free help to students who need it.
The FAFSA asks applicants for a host of details, including income, assets and family size. That data is used to calculate how much a family is expected to contribute out-of-pocket and passed on to campuses to determine eligibility for federal, state and campus aid. In the 2012-13 academic year, 2.65 million graduate and undergraduate students based in California filed FAFSA applications, according to the U.S. Department of Education.
Starting last year, California began offering a similar Dream Act application for undocumented students who attended California high schools. State leaders in 2011 enacted legislation giving such students access to financial aid.
Universities have expanded the eligible population by providing aid to families earning higher incomes. UC institutions provide scholarships and grants to cover tuition and fees for students whose families earn $80,000 or less.
UC Davis in 2013 created its own Aggie Grant Plan to undergraduates whose families earn from $80,000 to $120,000. Starting last school year, UC Berkeley extended financial aid to families earning up to $140,000.
In some cases, students rely on additional aid for living costs. For instance, CSU tries to use Cal Grants to cover tuition and fees where possible, leaving federal Pell Grants to help pay for housing and food.
Aid packages typically include several layers of financial help. Grants and scholarships require no repayment. Schools may ask students to find a campus job to take advantage of federal work-study funding. To bridge any further gap, students and their parents may have to take out federal or private loans.
After California voters approved tax hikes in 2012 and state coffers benefited from capital gains growth, tuition has remained flat for two school years at UC and CSU. Gov. Jerry Brown has asked the systems to keep tuition flat for a third straight year.
The percentage of California university students receiving financial aid should climb higher under the “Middle Class Scholarship” approved last year by state leaders. The plan, initiated by Assembly Speaker John A. Perez, D-Los Angeles, aids families earning up to $150,000 with children attending UC or CSU. The state is phasing in the scholarship program over the next three school years.
Given that most families qualify for some level of financial aid, high school counselors and California Student Aid Commission officials are trying to ensure families file their FAFSAs this month.
The Cal-SOAP Consortium, a program of the Sacramento County Office of Education and CSAC, is planning another half-dozen “Cash for College” workshops through Feb. 25. All told, organizations statewide hold about 800 “Cash for College” workshops. .
And individual schools are getting into the act. At Laguna Creek High, for example, prizes from tickets to the senior ball and a free yearbook are planned for filling out FAFSAs, said Alycia Sato, one of two head counselors at Laguna Creek High School in Elk Grove.
“We are really trying to get them to do it,” Sato said. “Because if they don’t, they miss out on so much.”
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