Saturday, October 8, 2016

Six Simple Skills Everyone Can Learn to Improve Their Earnings Potential at Work

The core message behind The Simple Dollar can be boiled down to five simple words, words that have been repeated many times on this site.

Spend less than you earn.

Often, the focus is on the “spend less” part of the equation. It’s a good part to talk about because it provides immediate financial results, it gives people tangible projects to work on and think about, and the strategies apply to almost everyone.

Still, it’s only part of the equation. The other part is all about the money you earn.

A large majority of Americans are employed in some fashion, whether working at a traditional job, working as a freelancer, or building their own business. The wide variety of things that people do to earn money might seem as radically different from each other as different colors in the rainbow, but the truth is that there are a ton of similarities between them.

In fact, there are six skills that pretty much anyone can use to improve their earnings potential at work. No matter what your job is, if you apply these six skills in the workplace, you’re setting yourself up for better pay in the future.

Negotiation Skills

A person with good negotiating skills is capable of simply going to their boss (or their clients), presenting their work in a positive way, and effectively asking for a promotion or a higher rate of pay (or other benefits).

Many people don’t do this, for quite a few reasons. One, they’re afraid of the conversation. Talking to their boss in such a way seems intimidating and they visualize unrealistic negative outcomes. No boss is going to fire you because you ask for a raise; they might say “no,” but no one is getting fired or getting reprimanded for making their case. Two, if they do have the courage to do it, they don’t present their case well. They simply don’t provide any good reasons for getting a raise, which would mean they have some attributes that differentiate them from a random new hire. Three, they easily accept “no” for an answer and don’t negotiate. Often, “no” is just a starting point.

Building this skill is going to help you get more pay for the job you do now and earn better starting pay for the next job that you have. You can start building it by reading a few key books on negotiation – I recommend Pre-Suasion by Robert Cialdini and Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher and William Ury.

Then, practice using those skills in less important situations. Look for any and all situations in your life where you’re negotiating with someone or trying to convince someone to do something and then use the techniques from this book. When you’re a bit practiced, then use them at the negotiating table for your salary.

Courage to Speak Up

In many, many work situations, the prevailing response among employees is to simply say nothing at all about workplace inefficiencies and challenges. Just keep your nose down, do your job, don’t talk about the problems, and most of all, don’t volunteer for anything.

Believe it or not, that’s actually the perfect way to make sure that you never earn another dime and never get a promotion. It makes sure that you stay unnoticed, and the unnoticed person doesn’t get raises. They don’t get promotions. They often lose out when it comes to hours.

Even at the most entry level of jobs, the courage to speak up is vital, and it only gets more vital as you move up the chain.

Be aware, of course, that there’s a difference between speaking up and constantly complaining. Here’s a simple way to tell the difference. Complaining has the focus on benefiting you – it is a complaint about a situation that makes your situation a little more difficult, but may be beneficial to others. Speaking up has the focus on benefiting the business – it is an observation about a situation that may be costing the business money or may be able to improve the efficiency of the business. Complain only when it is extreme; speak up only when it is clearly useful.

It takes courage to speak up, especially when it might mean more work for you in the short run, but it is that very courage to speak up that drastically increases your value as an employee.

Time Management

No matter what your job is, there are aspects of time management involved. Knowing how to use your time smartly to get all of your required tasks done well in the time allotted to you is something that’s useful no matter what your job is.

Time management allows you to get all of your stuff done without having to work extra (often unpaid time). Time management allows you to do a little extra in order to stand out (or to build good relationships with coworkers). Good time management cuts directly into the stress of working, allowing you to focus better and also feel more calm and in control.

There are lots of simple systems for time management. Most of them tend to be variations on the standard to-do list, where you simply write down the tasks that need to be done, add new ones as they come into your mind or are given to you, and then just focus on the top task on the list and get it done as efficiently as possible. For people with lots of scheduled meetings and the like, a combination of a calendar and a to-do list works best, with the items on the to-do list filling in the gaps between the calendar events. A pocket notebook and a pen handles this very well for most entry-level jobs.

As your job becomes more demanding with a greater variety of tasks, a good to-do list app for your phone that syncs with your computer can be really useful. I really like Todoist in terms of a “bang for the buck” to-do list app (I use Omnifocus, but I don’t think the price difference is worth it – OmniFocus is better, but not that much better), and I absolutely love Google Calendar.

In terms of books well worth reading on time management, I really recommend Getting Things Done by David Allen (which I’ve reviewed in great detail) as well as Deep Work by Cal Newport.

Work Ethic

Even if you have the best time management skills in the world, you still have to pair that with the ability to actually get things done. That means you have to be able to just turn to the task at hand and take care of it, then do that over and over and over again. That’s work ethic and it’s probably the most valuable thing you can have in the workplace. It will make you very valuable as an employee (making it much easier to negotiate a raise or a promotion) and it’s also what you need to be able to take on more challenging opportunities.

How do you build work ethic? I think, for many people, one key ingredient that ties into work ethic is focus (I think most people with deeper work ethic issues are probably not reading something called “The Simple Dollar” to improve their finances or career). Most people are willing to work, but many people have difficulty maintaining focus on their task. They get distracted by everything from their phone to their coworkers to a conversation to their daydreams to whatever happens to be going on outside at the moment.

So, then, how does one improve focus? The most effective strategy is to minimize distractions. Close your door and put up a “do not disturb” sign sometimes. Turn off your cell phone and close your web browser and email program. Close the blinds if at all possible. Make it so that there’s almost nothing in your area but you and your task.

Another thing I find incredibly useful when it comes to focus is mindful meditation. It’s basically the equivalent of going to the gym, except that you’re exercising your mental muscle that you use when you’re focusing. It’s really easy to do and it takes just five minutes, though the benefits really only start to appear if you do it daily (or multiple times a day). Just sit in a comfortable place, close your eyes, and focus on your breathing. Breathe in, breathe out. Breathe in, breathe out. Your mind is flat-out going to wander when you do this, and that’s fine. Just notice your mind wandering and then bring it back to your breath. Every time you notice it and bring attention back to your breath, you’re basically flexing your mental focusing “muscle,” and it works like a champ. It helps me with being calm, it helps me with staying focused on the task at hand, and it helps me with dealing with a sense of being overwhelmed. I can’t recommend doing this highly enough.

Another key aspect of work ethic is simple commitment to the job. The key thing to always remember is that someone is paying you for the work you produce and if you wish to be paid more for that work, you’ve got to produce more than the other guy. You’ve got to produce more than someone off the street. Because, like it or not, that’s how your employer views you on some level. You’re an exchange of money for some type of production, and if someone else can produce as much for less money or can produce more for the same money, it’s hard to make a case for you. Put yourself in their shoes – would you rather hire the guy that can produce three things a day for $100 in pay or the guy that can produce four? If you want that raise, you’ve got to work for it. Don’t slack off at work. Prepare your mind to focus on the task at hand. Get down to business.

Positive Networking

By positive networking, I simply mean establishing relationships with other workers that are purely positive in nature, meaning that they don’t revolve around building negative feelings or negative relationships with others.

The truth is that, no matter what you do, you’re never going to be universally liked and you’re never going to universally like everyone. That’s just the reality of life. The question isn’t how you feel or how others feel about you, but about how you present those feelings.

The reality is that very few people want relationships with people who consistently express negativity. In some workplaces, you might find a person or two with a big chip on their shoulder. You may even find that those people have a close circle around them, a few sycophants who agree and support the negative person. In reality, though? You don’t want them around. Others don’t want them around. Often, unless they have some sort of special claim to power, their days are numbered.

Instead, the person that most people want to work with is the person that is friendly and positive to everyone. That doesn’t mean excessive cheeriness; it means acknowledging others, listening to others, offering useful ideas and feedback when asked, participating in conversations, and never offering up negative criticism unless it’s privately given.

I’ll give you an example. I once worked with a person who would never, ever say a negative word about you around anyone else. You would never hear him speak negatively about another person, whether that person was present or not. The only time he ever uttered anything that was critical would be in a one-on-one situation or by email, and it was usually delivered side by side with positive things and in a way that was obviously intended to make you better off.

That guy was a very ordinary looking guy. He didn’t always speak well. He was a bit overweight and had some seriously nerdy interests. But everyone loved him. Everyone valued his advice. He basically had a job for life and was often rewarded with raises and no one minded in the least.

It was because he was incredibly good at positive networking. He made an effort to build a positive back-and-forth relationship with everyone in the office and he simply avoided criticism. If someone came to him and was critical about someone else, he usually would just say nothing at all or he’d gently point out something positive about the person or he’d redirect the complaint to an actual supervisor. If you wanted to just have a conversation about anything, he was almost always open for it. If you asked for feedback on something, he’d dig deep to find some positive things to say to pair with the criticism if he felt the need to criticize.

I have occasionally worked with people who behaved like this at work and every single time it was a genuine pleasure to work with them. Every single time, those people were rewarded with sustained employment, raises, and promotions.

Be that person. Don’t engage in negativity in the workplace, ever. If you have to criticize someone, do it privately and couch it in the things they do well. Make an effort to establish a positive relationship with everyone. If someone else is negative in a conversation, don’t participate in the negativity.


This is the final skill you can practice in the workplace that will help you improve your income and it’s perhaps the most important of all of them. Leadership simply means being the person that steps up when something is needed by a group of people. It means being the person willing to come up with a plan or to take action on behalf of a team of people.

It doesn’t mean being the manager. In fact, quite often, the best kind of leadership doesn’t come from a manager.

Think about your workplace. Think about the person there you go to when there’s a problem or a challenge or you need help figuring out a plan. Think about the person everyone looks at when there’s a workplace challenge or a big project. That person is the leader. Why is that person the leader? That person is the one who comes up with a plan. That person is the one who goes around, figures out the consensus, and says it.

In a nutshell, being a leader is basically a combination of the other skills presented here. A good leader is a positive networker, with good relationships with everyone. A good leader isn’t afraid to speak up. A good leader is good at managing their time. A good leader has a good work ethic. A good leader can negotiate. If you combine all of those traits into one person, you add up to someone who is naturally going to become a leader.

If you’d like to get started trying to wrap your hands and your mind around leadership, I suggest starting with the book Start With Why by Simon Sinek, which is itself based on Sinek’s amazing TED talk based on that same topic which you can watch for free.

Final Thoughts

As I said in the section on leadership, these elements are all rather interconnected. All six of these behaviors tend to reinforce each other. Time management reinforces a good work ethic, and vice versa. Positive networking tends to feed right into leadership. Negotiation skills tend to lend themselves directly to the courage to speak up, as you’re burning your fear of hearing “no.” These skills all help each other.

More importantly, though, they all collectively boost you. They make you into a better liked and more valuable employee no matter where you’re working. They make you into a person that is not only more personally productive, but boosts the productivity of others. They make you into a person who leans into challenges rather than leaning away from them.

Those are the traits that every company in the world is looking for and they will pay for them. Practice these skills and build them. Make them part of how you naturally behave in the workplace. Rewards will follow, no matter what your job is.

Good luck!

The post Six Simple Skills Everyone Can Learn to Improve Their Earnings Potential at Work appeared first on The Simple Dollar.

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Does Health Insurance Cover Therapy and Other Mental Health Treatments?

Nearly one in 25 adults experiences a serious mental illness that interferes with major life activities each year, according to the National Alliance on Mental Illness. If you’re among them, you might be worried about whether health insurance covers therapy or other treatments. Gratefully, health insurance increasingly covers mental health as well, which, according to MentalHealth.gov, includes psychological, social, and emotional well-being at all stages of life. Recognizing that good mental health is as important as physical wellness, federal law has greatly expanded insurance coverage for mental illnesses.

Mental disorders can lead to poor decisions that cause physical health problems, such as obesity or drug-use disorders, says Sabra Matovsky, executive vice president of Integrated Health Partners, a nonprofit organization that represents community-based medical centers.

“There are a lot of people who die in this country from behavioral choices: eating, drugs, lack of exercise,” Matovsky says. “Mental health treatment can help people make better choices.”

Rachel Kazez, a clinical social worker and therapist based in Chicago, agrees. “Our mental health impacts how we care for ourselves physically, from our motivation to stay clean and active to the unhealthy physical behaviors we use to cope with our emotions or thoughts,” Kazez says.

The 2008 Mental Health Parity and Addiction Equity Act states that if mental health insurance benefits are offered by employers, they can’t have more restrictive requirements than those that apply to physical health benefits. That means that if your insurance requires a $20 co-pay for most doctor’s visits, you’d owe a similar co-pay when seeing a psychologist.

According to the American Psychological Association (APA), the majority of large group health insurance plans provided mental health benefits before the parity law took effect.

Under the Affordable Care Act, which was approved in 2010, all health plans sold on insurance marketplaces must cover mental health and substance abuse services as essential health benefits. According to HealthCare.gov, these plans must cover:

  • Behavioral treatments, such as psychotherapy and counseling
  • Inpatient services for mental and behavioral health issues
  • The treatment of substance use disorders

The trend of offering mental health benefits to the insured extends to most employer-provided plans, which don’t have these federal requirements. In a 2015 study, the Society for Human Resource Management found that only 9% of employer health plans in the U.S. don’t extend mental health treatment benefits to workers. There are some plans that are exempt from the parity rule, however.

According to the APA, companies with fewer than 50 employees don’t have to follow the parity rule. Medicare isn’t subject to the federal parity law. Also, some state government employee plans, including those that cover state university workers and teachers, may opt out of parity requirements.

Learn How Your Insurance Applies to Mental Health

According to HealthCare.gov, you have the right to an easily understood summary of your health coverage. Insurance companies and job-based health plans must provide you with a short, plain-language summary of benefits and coverage. They also must provide a glossary of health insurance terms to help you understand your coverage.

To learn how your health insurance coverage applies to mental health treatment, read the summary of your policy. The APA says the description of benefits should include information on behavioral health services or coverage for mental health and substance-use disorders.

If it doesn’t appear that you are covered for mental health issues, contact your insurer to be certain.

Finding Alternatives for Mental Health Care

Kazez notes that people without insurance coverage for mental disorders still have a variety of options for access to care.

According to the nonprofit Mental Health America, 18.5% of U.S. adults with a mental illness were uninsured in 2012-2013. If you aren’t insured for mental health disorders, there are a variety of treatment alternatives available. They include:

  • The U.S. Department of Veterans Affairs. Eligible veterans can call 1-877-222-8387 or go online to www.va.gov/health.
  • Affordable mental health services can be found through the Substance Abuse and Mental Health Services Administration. You can visit their website or call 1-800-662-HELP.
  • Local health departments have mental health divisions or community mental health centers. Typically, they offer free or reduced-cost treatment and services.
  • The National Mental Health Consumers’ Self-Help Group Clearinghouse maintains an online Directory of Consumer-Driven Services.

It can take time and effort to find local mental health services for the uninsured, but there are programs available, says Stacy Haynes, a counseling psychologist in Turnersville, N.J.

“It’s a matter of finding these services and then being patient if there is a wait list,” she says. “Emergency and crisis care is always available through hospital emergency rooms.”

Related Articles:

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Friday, October 7, 2016

Filling the Empty Spaces

See if this sounds familiar to you…

You’re sitting there waiting for something to happen. Maybe you’re in a doctor’s office waiting room. Maybe you’re on the couch waiting for your wife to come home. Maybe you’re just feeling directionless at the moment.

Whatever it is, you feel as if you don’t know what to do with yourself right now. You grab a magazine and flip through it but don’t really engage with any of the articles. You pick up your phone, browse through a few meaningless social media posts, put it down, then pick it up again a moment later and do the same thing. Maybe you play a really dumb smartphone game for a minute or two. You fidget. You look around. You feel like you need something to fill that empty space.

Or how about this…

You have this vague idea in the back of your head that you need to get into better shape physically and maybe mentally and emotionally and spiritually, too. It’s a nagging voice in the back of your head.

Both of those things are what I like to call the “empty spaces” in our lives. They’re moments or events or aspects of our lives that feel empty when we don’t want them to be empty.

Maybe we just want something to engage and entertain us. Maybe we feel like there’s something missing in our lives. Whatever it is, there’s something missing.

It’s those empty spaces – and especially our barely-conscious awareness of those empty spaces – that provide a gigantic window for some of our worst money mistakes.

Take that fidgety state when you’re waiting for someone or something. In that moment, it becomes very tempting to stroll over to a vending machine and buy a treat or to buy and download a new smartphone app. When you do those things, you gain this false sense of fulfillment, as though you’re actually doing something to genuinely fill that time when you’re not actually filling it in any meaningful way. It’s just another form of fidgeting, except now you’re paying for it.

What about that sense of something missing in your life? If it’s left in the background of your mind, it creates a big empty space, too, a space that’s just waiting to be filled by something. Often, that something is a product, something that we can buy that gives the illusion of filling that empty space. For example, you might buy a yoga mat or a workout video to give a sense of filling that empty space, but it’s not really filled. You don’t permanently get rid of a sense of lacking spiritual or physical fulfillment by buying a workout video, though you may temporarily abate it.

What these two scenarios – and the many, many similar ones that you can probably envision in your own life – have in common is that we often find ourselves with some aspect of our life that we feel is lacking and it is extremely convenient to gain a short-term sense of “fulfilling” that lacking part of our life by buying something. The treat from the vending machine seems to “fill” that waiting time. That new jump rope seems to “fill” that sense of needing to exercise. You get the idea.

The thing is, purchases never, ever fill holes in our lives; it’s doing things that actually fills the hole. Buying that new game for your smartphone (or making an optional purchase within the game) might feel good in the moment and make that specific instance of something lacking pass out of your life, but it won’t get rid of those moments. They will come back. Similarly, buying a barbell set might get rid of that sense of needing to work out more for the moment, but it won’t eliminate that sense. It will come back.

If you want to stop fidgeting and (often) spending money during those moments of waiting and downtime, you have to address it in a bigger way. The same goes for that hidden sense of needing physical and mental fulfillment. You have to address it in a bigger way. The goal with both is to get rid of the core reason why those gaps appear in your life, and the way to do that is through changing the things you do, not temporarily filling that sense of emptiness with stuff.

In both cases, the same thing is happening. You’re feeling some level of dissatisfaction or discomfort with some part of your life, you don’t like that feeling, so you do something immediate and impulsive to get rid of that sense of discomfort. The problem is that you’re addressing the immediate discomfort and not the reason for that sense of dissatisfaction or discomfort.

It’s like when you’re facing a medical condition and you take medications to treat the symptom while the cause for those symptoms go unchecked. It might make you feel better for the moment, but that sense of feeling bad is just going to come right back. The best way to handle that situation is to treat the cause, not the symptoms. Sure, the treatment for the cause might be hard and it might be painful, but if you actually do that, you won’t have the symptoms any more.

So, let’s look at those two situations.

What about the situation where you’re fidgeting while waiting on something to happen? That fidgeting occurs because you’re caught in a situation without anything meaningful to do, and the answer to that is to have a toolkit of meaningful things to do in such situations.

For me, that toolkit starts with a book. I almost always have a book with me, and even if I don’t have a physical book, I’m usually in the midst of a book on my Kindle, which I can access from my phone, which is always with me. I’ll just read a chapter of a book.

I also have a pocket notebook with me at all times, which is perfect if I’m in more of a brainstorming mood. If my mind is flashing with ideas, I’ll pull out that notebook and pen and write tons of them down.

A final thing that I always have with me is… me. There’s almost never a situation in which I can’t take five or ten minutes to meditate or pray (I think of these as nearly functionally identical activities, merely with different focus). It’s a simple act that goes a long way toward making me feel calm and improving my overall ability to focus, deal with stress, and handle life’s challenges. Here’s what I often do: I just close my eyes and focus on my breathing. Breathe in, breathe out. If my attention wanders away, I notice that my attention has wandered and bring it back to my breathing. I do it for five or ten minutes and I almost always feel immediately refreshed and mentally ready for anything (and I’m firmly convinced it helps long term with focusing and handling stress).

Instead of feeling a sense of discomfort because I don’t have anything meaningful to do – and then sometimes filling it with a purchase – I instead dive right into doing something meaningful. That keeps my money in my pocket and makes me feel more genuinely fulfilled to boot, both in terms of the moment and in terms of my broader life.

What about the other situation? The one where you feel discomfort because you’re reminded of some area of your life that you should be taking care of… but you’re not?

The solution for challenges like those is to focus on finding time, not buying stuff. If you find yourself thinking that some area in your life is being overlooked, that’s your mind telling you that you’re not spending enough time on something, not money.

This comes down to the age-old question of how to find time in a busy life. My most powerful strategies for doing this involve maintaining a thorough to-do list and constantly adding to it when things come into my mind (so I can focus on tasks at hand without having to remember all of the stuff I ought to be doing) and then working through that list as efficiently as possible, and then having “focused” days and “unfocused” days.

Focused days are ones where I jam every possible second full of the things that I have to do and that I’m responsible for. I basically give myself virtually no downtime on focused days – I’m always working or cleaning the house or paying bills or running errands or something like that on focused days, from the moment I get up until I go to bed. I don’t stop to watch television for a couple of hours. I don’t stop to read a book. I don’t stop to fidget on my smartphone. I get things done in the most compressed way possible.

Having focused days gives way to other days which are “unfocused,” where I can actually wall off big blocks of time to do the things I want to do. I can spend an afternoon going on a hike. I can spend an evening going to a community event. You might want to find a way to block off an hour three days a week for exercise.

The goal here is to respond to that sense of mild discomfort by finding time to address that discomfort with activity instead of just buying something to postpone that sense of discomfort. In other words, you’re addressing the disease with time rather than addressing the symptom with money.

Following just these steps will go a long way toward genuinely filling the empty spaces in your life and deleting those moments of discomfort instead of just postponing them.

Good luck!

Related Articles:

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Applying for a Credit Limit Increase: What You Should Know

When a credit card issuer extends you a line of credit, they usually place a limit on the amount of money you can borrow at once. Called a “credit limit,” this numeric figure represents the total balance you can carry on your card at any given time. If you should happen to try to spend more than your credit limit, you could face a denial at the register or incur a fee called an “over-the-limit fee.”

If your credit limit is lower than you wish it was, you may want to consider asking your card issuer for a credit limit increase. With a reasonable increase, you may be able to spend more and make larger purchases without worry of reaching your limit – or going over.

Likewise, some people ask for a credit limit increase just to lower their credit utilization rate – or the portion of their credit limit they’ve used on purchases – because it can impact their credit score. If you owe $3,000 on a credit card with a $10,000 credit limit, for example, your utilization rate is 30%. But if your credit limit is raised to $15,000, your utilization immediately goes down to 20%. In most cases, a lower credit utilization rate can help boost your credit score — and quickly.

When to Ask for a Credit Limit Increase – and When Not To

But, how do you know it’s time to ask for an increase in your credit card limit? Here are three signs you’re ready… and a few signs you’re not.

You’re ready to ask for a credit limit increase if…

  • You have a solid history of repayment. While banks are sometimes hesitant to offer additional credit to newbies, having a solid history of repayment can help tip the scales in your favor. If you’ve been making on-time payments religiously for twelve months or longer, you may have proved yourself enough to get the credit limit increase you deserve.
  • Your income has increased. If your income has increased since you first applied for your card, you have a solid case for asking for a credit limit increase. With more money coming in, you can afford to make a larger payment if necessary. You may need to provide proof of your larger income to your card issuer, but you’ll likely get a credit line increase if your new income is high enough.
  • Your credit score has improved. When you use credit responsibly for a long stretch of time, it’s possible to improve your score. If your credit score has improved since you first applied for your credit card, your card issuer may approve a credit line increase if you ask them. With a higher credit score, you’re seen as more trustworthy and capable of repayment.

Asking for a credit limit increase may be a bad idea if…

  • Your credit score has dropped recently. If your credit score has been on a downward slide, you should probably wait to ask for a credit limit increase. Most card issuers will see your bad credit as a sign of increased risk and decline anyway. The best thing you can do is take steps to improve your credit for now. Once you’re back in good standing, you can ask at that time.
  • You’re in between jobs. If you don’t have a job, it’s unlikely you’ll qualify for a credit limit increase. Most card issuers will ask your current income before processing your request, and an income of zero won’t help you get the credit limit increase you want. If you’re in between jobs, it’s best to wait until you’re earning again to ask.
  • Your credit utilization is especially high. When your credit utilization is especially high, card issuers may see that as a sign of distress. As a result, they might be hesitant to give you more available credit.
  • You have a bunch of new credit already. Since “new credit” makes up 10% of your FICO score, opening several new cards can ding your score temporarily. And when you have several new lines of credit open, your card issuers might be hesitant to increase limits on any of them.

If you’re not worried and feel you’re ready, asking your card issuer for a credit line increase is the only way to find out if you qualify. Most of the time, you can reach the appropriate department by calling the number on the back of your card and following the prompts until you reach a customer service representative. Once you tell them what you’re after, they can connect you to the right place.

Final Thoughts

If you’re in the mood for a credit limit increase, it’s important to ask yourself why. Do you really need more credit? Or, should you try to be more disciplined with the credit you already have? Only you can answer those questions.

At the end of the day, a credit limit increase might make your life easier in some ways. But, if you use it to get deeper into debt, you may regret asking for a credit limit increase in the first place.

It’s also important to know that, in certain cases, receiving a credit limit increase comes at the cost of a hard inquiry on your credit report. If you have too many hard inquiries, your credit score may lose a few points temporarily. So before you ask for a credit limit increase, ask your card issuer if a “hard inquiry” or a “soft pull” on will result. If a hard inquiry is the answer, consider whether it’s worth that temporary ding on your credit score — especially if you’re about to apply for a mortgage or car loan.

Have you ever asked for a credit limit increase? Why or why not?

Related Articles:

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Thursday, October 6, 2016

31 Days to Financial Independence (Day 8): Trimming Your Spending – Housing

“31 Days to Financial Independence” is an ongoing series that appears every Thursday on The Simple Dollar. You might want to start this series from the beginning!

During the first week of this series, we established a strong foundation for personal finance success. True personal finance success revolves around deeply understanding why you’re making those decisions, because without that central motivating why, pretty much everyone is going to make decisions that aren’t financially smart.

The reason is quite simple: unless you have a strong grasp on the long term direction of your life and what you really want out of it, it’s going to be incredibly hard for that long term direction to win out over the desire for shorter-term pleasure. You’ve got to know where you’re headed and that direction has to drive right at the center of your life.

Part of that process has revolved around differentiating between what I call the “shallows” and the “deep” in our lives. To put it simply, the “deep” areas of our life are the small handful of areas that are most meaningful to us. Those are the areas where we should be devoting time and energy and passion and, yes, money. The “shallows” are all of the other areas. Those are the areas where we should be spending the absolute minimum amount of time and energy and passion and money.

To summarize, you should be devoting all of your time and energy and passion and, yes, money to the “deep” areas of your life and to the areas that directly support those “deep” areas (like your job performance). The other areas of your life should be as shallow as possible.

The reality is that most people don’t do this. They don’t go “shallow” in the less important areas of their life, especially in terms of spending. They spend money on things that are almost purely forgettable for a variety of reasons – marketing, keeping up with the Joneses, a sense that this should be important, and so on.

Quite often, when you look close at your spending choices and really think about those individual purchases for a while, many of them begin to look like missteps. They don’t provide any real lasting joy (although you might want to believe it does because you invested the money in something expensive). They also take money away from the “deep” areas in your life.

For the next several entries in this series, we’re going to look at each area in the typical American budget and spend some time looking at whether or not many common individual purchases and expenses in those areas can be cut back or eliminated. There are two key things to remember here.

First, if cutting a particular expense causes significant distress in your life, don’t cut that expense. Many, many people equate financial cutbacks to some kind of life distress where they’re heading for misery. The reason for that is that people visualize financial cuts as being cutbacks on the handful of things they care most about. Don’t cut those things! The truth is that you spend a ton of money each month on things you really don’t care that much about, and your goal should be to trim those expenses first.

Having said that, it’s always worth spending time reflecting on particular expenses and asking whether they’re really that big of a deal. We often fall into psychological traps when we casually think about our own purchases. For instance, it’s extremely common to believe that if you’ve already sunk a bunch of money into something, you must like it and value it. People do this all the time with things like cars. Instead, you should forget the past and ask yourself whether that thing is giving you enough value going forward to match what you could get if you sell it (and also get rid of any ongoing expenses). We’re going to touch on that kind of fallacy (and many others) quite often in the next several entries in this series.

Before we begin, let’s take a quick look at the average annual American family budget. It looks something like this:

Housing – $10,080
Transportation – $9,004
Taxes – $7,432
Utilities – $7,068
Food – $6,602
Insurance (including things like pensions) – $5,528
Debt Payments – $5,252
Healthcare – $3,631
Entertainment – $2,564
Cash Contributions – $1,834
Apparel and Services – $1,604
Education – $1,138
Vices – $775
Miscellaneous – $664
Personal Care – $608
TOTAL – $63,784

We’re going to focus on the areas where you have a great deal of control right now over that budget line, and we’re going to move from the top to the bottom over the next several entries. That means that today we’re going to talk about housing.

According to the Community Preference Survey of the National Association of Realtors, if you’re an average American reading this article right now, there’s a 70% chance you live in a single family home and a 17% chance you live in an apartment (the remaining 13% live in a wide variety of situations, including multi-family homes or without a permanent residence).

This means that at least 87% of you live in a situation where you’ve either purchased a place to live for yourself or you’re paying rent on a place to live. Many of the people who have purchased a home had to borrow money to do so, meaning they’re paying a monthly mortgage bill that comes with interest.

To sum it up, most people have some sort of monthly housing payment, whether it’s rent on an apartment or payments on a home or something else entirely. Often, those payments add up to a significant portion of one’s annual budget – about 17%, on average, and that includes people who have paid off their homes or live in other situations. Exclude them and housing quickly jumps to over 20% of a person’s annual spending.

But what can you really do about it? How can an average person actually cut their spending in any noteworthy way? It’s time to take a serious look at housing costs and what you can realistically do to cut those costs.

Exercise #8 – Re-evaluating Your Housing Spending

No matter where you live, there are a number of steps you can take to trim your housing expenses. What follows are some real suggestions on how to trim those housing costs. As was discussed above, it is absolutely vital that you don’t just reflexively discard ideas because they initially seem to cut back on something you deeply value. Is it really something you deeply value, or is that just an easy response? The best route to financial independence is through introspection – thinking about what you truly value and then cutting the lesser things.

Can you live in a different place in the same area? Unless you live in the place with the lowest housing costs within, say, half an hour of where you live and you don’t have a commute, this question applies to you. There’s almost always a town or a neighborhood that’s less expensive than the one you currently live in. Why aren’t you living there?

Don’t get me wrong, there are real reasons for staying put. It can definitely be worth it to live in a place with a lower crime rate, but you should make sure that the difference in the crime rate is actually worth the difference in cost. The same thing is true for the quality of public education – yes, some districts are better than others, but you’re paying for that difference. Is there really a big difference between one district than another?

The answer to those questions doesn’t come from hearsay or casual chats with friends. It comes from actual data on things like crime rates, school quality and so on. Do the homework and see how the various areas compare. What you should be looking for is the best “bang for the buck” area around you in terms of keeping housing costs and commuting costs low while still having access to decent quality services.

Can you move to another area? This often has to do with career choices. Many people live where they do because of their career. They found a job in a particular area and moved there because of the job.

The thing is, if you’re a good performer at work, you can often find similar work in other areas, either with the same organization or with a different one. This enables you to start considering the cost of housing in other areas of the country, perhaps in places with lower housing costs, but also with things like a shorter or simpler commute or with proximity to family (which is a big money saver if you have a good relationship).

Where else could you live in the United States? What other cities or rural areas might be appealing to you? Some people might have cultural desires for where they choose to live, but how important are those desires? Maybe you’ll find that the reality of different areas is actually different than what you expect them to be once you do some homework on those areas. If you can find employment at a similar salary in another part of the country with lower cost of living and lower housing costs that has much of what you look for in a place to live, why not move there?

(I’d start evangelizing about Des Moines and central Iowa because I love the area and I think it’s often woefully overlooked by people in other parts of the country, but to each his own. Some of the neighborhoods and towns in this area are amazing in terms of culture and crime rate and school quality for the cost of housing around here.)

Can you live in a smaller place? The question is simple: do you need all of the space that you currently use? Is there space in your home that’s empty or perhaps just filled with clutter that you really don’t need? Do you have space for entertaining guests but basically never have guests in your home or apartment?

If you’re nodding your head yes at any of those questions – or having this sinking feeling in your gut when you realize that the answer is yes when you didn’t expect it to be – you’re probably in prime position for downsizing your living space. You might move from a large apartment to a smaller one, from a rental home to an apartment, or sell your current home to buy a smaller one.

For many Americans, such a move seems a bit against the grain. There’s this constant sense that people should always be working for bigger and better things. However, many people are starting to reject that claim. You can see examples of it in things like the tiny house movement and the fact that McMansions are proving to be a terrible investment because people don’t want to buy them. It’s not a “weird” thing to move into a smaller home, not in the least.

That’s especially true when you consider the huge financial benefits of downsizing your home that go beyond the rent and the mortgage. A smaller home has lower property taxes. A smaller home has lower insurance rates. A smaller home is less likely to have homeowner association costs. A smaller home has lower utilities, meaning your energy bill will drop. All of those bills will drop, and all of those lower bills will help with your long term financial plans.

It is my belief that, for many Americans, this is probably the most sensible choice for cutting back on housing costs. Many people have substantially more housing space than they need and can actually use for anything beyond storage space, and, as we discussed earlier in this series, much of the stuff in storage space is actually stuff that can easily be sold off, which means that you don’t really need that much space.

Can you refinance your current place? If you’re currently paying off a mortgage, can you refinance that mortgage to reduce your overall interest rate? Most likely, doing so will either reduce the length of your mortgage (perhaps by switching to a 15 year mortgage) or reduce your monthly payments as well.

Your lender will probably work with you when it comes to refinancing if you’ve been consistent with your payments. If they’re not interested in refinancing, then it doesn’t hurt to shop around a little. I’d start with the credit union in your area.

Your main goal with refinancing should be to reduce the overall amount you’re going to pay to the bank over the life of the loan. You can figure that out by taking the monthly payment and multiplying that by the number of months of the mortgage. You’ll also want to add on any additional costs for refinancing. You want that number to be as low as possible, and lower than your current mortgage going forward.

Most of the time – but not always – that means a lower monthly payment, which will help with your monthly budget right away. On occasion, it will mean a slightly higher monthly payment, but that usually means you’ll pay off the debt much, much faster.

Can you share housing with other people to reduce costs? In other words, can you take on a roommate? Or, perhaps, can you move out of your current home or apartment and share a home or apartment with someone else?

In both of those cases, you immediately have a situation where you’re sharing housing costs with someone else. You might split the rent with someone or perhaps have someone pay rent to you that you can use to cover part of your housing payment. Those situations are going to directly cut your housing costs, no matter how you slice them.

Now, the question becomes whether or not the savings you get from this decision is going to be worth the actual reality of having a roommate.

In my experience with a rather large number of roommates over the years, I honestly think that the number of interactions with roommates that I’ve had was pretty low. When I shared an apartment with different people (aside from my wife-to-be and one guy who became a lifelong friend), we mostly just did our own things and avoided each other. We came up with some lists of shared chores, made it clear what everyone needed to do and what bills needed to be paid when, and then basically moved forward with it. Honestly, I’ve mostly treated situations with roommates as periods in my life where I mostly treated our shared living place as a place to sleep, a place to prepare basic foods, and a place to store some stuff. I rarely interacted with my roommates much at all – we just all saved money because of it. I would happily go through that experience again, even at this later stage in my life.

Other people have had worse experience with roommates, and there is much advice out there about finding a good roommate and a good renter. My only advice is to be very clear on what each person is expected to do and to provide from the very start and don’t just assume that the other person knows what your “reasonable” expectations are.

In the end, though, the benefits of having a roommate – the reduced costs – may or may not be worth the drawbacks – having another person (or people) sharing living quarters with you, but it’s a question well worth considering.

Give these questions real consideration and see whether or not you can take real action on at least one of them. If you can trim even 10% off of your housing cost and you have the average American budget, it will end up saving you more than a thousand dollars a year. That’s several car payments or a big boost toward paying off debt or achieving savings goals.

The post 31 Days to Financial Independence (Day 8): Trimming Your Spending – Housing appeared first on The Simple Dollar.

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Lying on Your Resume Is a Terrible Idea – Here’s What to Do Instead

If you’ve ever read any career advice or spoken with a career counselor for more than a minute, you know that there’s one big job-seeking no-no: lying on your resume. And yet, people are still doing it. It seems like once a year, we read a story about a CEO whose resume fibs caught up with him, costing him his job and reputation. Closer to home, you’ve almost certainly had friends assure you that everyone lies on their resume, and that it’s not a big deal.

Make no mistake: Lying on your resume is a big deal, and the odds are that you’ll get caught. As Mark Twain once said, “If you tell the truth, you don’t have to remember anything.”

If you’ve been tempted to give yourself a more impressive job title, stretch your dates of employment, or claim expert-level skills with a tool you’d barely recognize in the wild, don’t beat yourself up. It’s a competitive market out there, even if the economic tides (finally) seem to be turning in our favor, and it’s not strange that you’d want to make yourself appear like the best possible candidate for the job.

The good news is that you can do that without lying. Here are three strategies to try:

Put your biggest accomplishments first.

Is your resume still a timeline of your job history? It might be time to change that. While many recruiters do like to see a work history with few gaps or abrupt job changes, there’s no need for your resume to read like the outline of your autobiography.

Recruiters and hiring managers spend mere seconds reading your resume, and you need to make them count. Your best option is to put your most impressive skills and accomplishments first, where HR can’t miss them.

To do this, you might consider moving from a chronological to a functional resume; this format puts your best foot forward, without stretching the truth. If your work history is pretty consistent, and you want to highlight that as well, consider a combined format that allows you lead with your accomplishments.

Perfect your story.

Most people who lie on their resume probably aren’t trying to put one over on a board of directors: they’re just trying to get past the Applicant Tracking System and into the “maybe” pile on a recruiter’s desk. Changing your job title, for example, can seem like a good way to do that. After all, if you’ve stayed at the same place for a number of years, and your employer isn’t great at promoting from within, chances are that you’re doing way more than your business card indicates.

Resist the temptation. Job titles are one of the easiest things for a recruiter to verify. In fact, many companies have HR policies that restrict human resources departments from confirming much more than a) the fact that you worked at a company, b) when you were employed there, and… c) your job title. Lie about that, and you could wind up with a rescinded job offer.

A better option: Use your actual job title, and hone the description of your duties so that it reflects your actual role, with the appropriate keywords if possible. So, if you were a marketing associate in title, but a junior content strategist in practice, make sure that your job description on your CV matches what you did all day (and incorporate the term “content strategy” somewhere in there, as well).

Getting your story down is especially important once you’ve made it to the interview stage. Remember that your goal is always to help the hiring manager see how you’ll solve the company’s problems and increase their profitability, so truthfully tailor your description of your work history and accomplishments toward that.

Add new skills in a hurry.

Finally, if you look at your resume and see an obvious hole — skills that someone with your job title, or the next on the ladder, absolutely should have — the best answer is to fill the gap. Most of the time, this doesn’t require a huge time commitment or a lot of money unless you’re contemplating a major career change.

If you’ve got a skill but haven’t had a chance to demonstrate it, volunteer to take on new responsibilities at your current job that will build your experience. You can also see if your current workplace offers paid training sessions or tuition reimbursement.

And while most metro areas have community colleges that offer lower-cost courses, you can often expand your skill set and career horizons without spending a dime or leaving your home, thanks to online learning. The Muse has a roundup of free online courses from sources like Coursera and Codeacademy that are worth checking out, and Trent recently explained how to acquire the 10 most valuable career skills in your free time as well as how to use free resources to learn just about anything.

Related Articles:

The post Lying on Your Resume Is a Terrible Idea – Here’s What to Do Instead appeared first on The Simple Dollar.

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Benedict Cumberbatch Recalls How He Got Lost In Nepal And Survived, Bear Grylls-Style

Benedict Cumberbatch’s ‘Doctor Strange’ is one of the most anticipated films of the year. Marvel’s $165 million fantasy film directed by Stock Derrickson is scheduled to hit the theaters on November 4th. Some of the major parts of the movie were also filmed in Nepal last year. Cumberbatch recently recalled the incident from 21 years ago when he along with his friends got lost in the Himalayas and survived how we see in Bear Grylls’ shows.

In the cover story titled “The Mind-Bending Benedict Cumberbatch‘ published on Vanity Fair magazine’s latest issue, the ‘Sherlock’ actor talked about his gap year in mid 90s. At 19, he took a year off from his studies and went to India and started teaching English to monks in Darjeeling. He along with three of his friends then went on a trip to Nepal. After reaching Kathmandu, they took a bus as they wanted to explore the Himalayas. As they were students and could not afford to hire Sherpas, they decided to go on their own. But to their shock, altitude sickness started derailing them one by one and soon the group of four became a group of three and then a group of two. By the third night of the trip, Cumberbatch recalls, “I started to have really weird, fucked-up dreams, and felt things were happening in my sleep. I wasn’t sure if I was conscious or awake.”

Continuing the trip, he and his friend reached a spiritual fork in the road and got confused if to go up or down. They chose up and that’s when they got bewilderingly lost. They ran out of biscuits and had to drink rainwater squeezed out of moss, because they had read it was safer than river water. The next morning, they followed the river in hope it would lead to civilization. Both of them had nearly broken their necks slipping down moss-covered boulders. As they continued to trek, leeches stuck to their ankles. They found a path with fresh yak droppings which was a good sign. Finally, the trees thinned and they came to a clearing of terraced pastures and log cabins. They were served the “best-tasting meal” as Cumberbatch recalls, by the inhabitants. The meal that consisted of unwashed greens and a bowl of eggs had him immediately suffer from dysentery.

Well, that’s one heck of an adventure that Cumberbatch still has fresh memories of even after over two decades. Here’s the trailer of his upcoming superhero flick. The world is eagerly waiting for its release, are you?

Cover Picture: Marvel

The post Benedict Cumberbatch Recalls How He Got Lost In Nepal And Survived, Bear Grylls-Style appeared first on NeoStuffs.

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Fresh Tunes: Jyovan Bhuju Beautifully Covers Nusrat Fateh Ali Khan’s ‘Piya Re Piya Re’

Pakistani legendary singer Nusrat Fateh Ali Khan was not only a gem in Pakistani or South Asian music but on a global scale. Born in Faisalabad to a Punjabi Muslim couple in 1948, the sufi maestro is also known as ‘Shahenshah-e-Qawwali’ (The King of Qawwali). He not only introduced Qawwali to the international audiences but also collaborated with some of the most renowned international artistes from around the world. Before his death in 1997, he had toured over forty countries to perform at some of the grandest venues around the world.

Not many artistes would dare to cover any of his songs but a Kathmandu based singer recently did and to our surprise, he has done quite a good job. Jyovan Bhuju has so far released some original and some cover songs. To be honest, we were a little doubtful before we listened to him singing ‘Piya Re Piya Re’ but after we did, we were astonished. He has a stable voice and can control high and low notes beautifully. We pretty much loved his cover.

Listen to it here and let us know what you think of it.


The post Fresh Tunes: Jyovan Bhuju Beautifully Covers Nusrat Fateh Ali Khan’s ‘Piya Re Piya Re’ appeared first on NeoStuffs.

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Wednesday, October 5, 2016

Six Cheap and Memorable Dates

It’s been more than twenty years since my now-wife and I started dating. Along the way, we’ve been on countless “dates” – nights where we’ve chosen some kind of activity and done it together. Some were memorable, some were not.

Whenever a date was particularly memorable for some reason – and there were memorable ones very early in our relationship and memorable ones in the last few months, too – I would write about it in my personal journal. Personal journaling – writing down the events of the day and, more importantly, reflecting on them and reflecting on the things that happen to be on my mind at the time – is something I’ve been actively doing almost every day for the last … 25 years. (Yep, I got my first “journal” and a basic guide to journaling as a Christmas gift from my grandmother in 1991.)

I actually really enjoy looking at my old journal entries. In about 2008 or so, I digitized all of them, but I still handwrite new entries (and scan them all into my computer every once in a while). This means I can easily search them for words like “date” and “Sarah” and see what comes up.

Recently, I was thinking about frugal dating. Dating is often seen as a pretty expensive thing to do – the expense of a nice dinner and other date activities can be really costly, especially on a limited budget. Yet, when I thought about it for a moment, I recognized that a lot of the memorable dates with Sarah that came into my mind were actually pretty cheap.

Here, I’m going to talk about six memorable dates that Sarah and I shared that were incredibly inexpensive. Many of these were basically free; I don’t think any of them involved spending more than $5 plus the cost of a few inexpensive food items that add up to maybe another $5 or $10.

It’s worth noting here that some of these date ideas won’t be impressive. If you’re trying to impress a potential partner with an inflated idea of your financial largesse, these ideas won’t help. However, I will say this: unless you want a relationship that’s fueled by constant spending, you shouldn’t be trying to impress with constant expensive dates. Sure, an occasional expensive dinner is fine, but if that’s your routine, it’s a routine that’s going to leave you cash strapped for life and stuck with a partner that expects that kind of constant spending.

Anyway, here are six memorable and very low-cost dates I had with my wife.

Public Concert and a Picnic

A local band of some renown at the time gave a free concert in the largest park in the city where we lived. Your “price of admission” was a donation of an item for the local food pantry.

We went to this concert, taking along a few items from my pantry to pay for the admission. I took a backpack with me, which contained a blanket and a simple picnic dinner. During the opening act, we spread out in a far corner of the park where we could still hear the music and enjoyed a simple meal together – nothing fancy.

Our plan was to eventually pack up the bag and get close to the stage for the main concert, but as the evening wore on and the sunshine gave way to the stars, we realized our blanket was pretty comfortable, so we just stretched out there, side by side, listening to the live music and looking up at the stars for hours.

Pizza, Movie, and a Blanket

I spent an entire day working in a cornfield, while Sarah spent that whole day working concessions at a country music festival (the 1999 George Strait festival, to be exact). It was about 11 o’clock at night, but we were both still awake and energetic and wanted to spend a few hours together doing something. We met up outside of the concert venue and walked home together, right by a grocery store.

On the spur of the moment, we stopped in that grocery store, bought a $3 frozen pizza and a $2.50 tub of ice cream of a flavor we both liked (peanut butter cup), and then we stopped by her apartment. Her roommates were out of town, so we both took showers while the pizza was cooking, snuggled up under a blanket with slices of pizza and that ice cream tub and two spoons, and watched Starship Troopers (which has long been our favorite “popcorn” movie). We both fell asleep under the blanket while the movie was still running.

It was so simple and ordinary, but yet that night sticks in my mind like few others.

A Borrowed Tent

While we are avid campers these days, it wasn’t all that long ago that we didn’t even own a tent. Our first real weekend together, in fact, involved a night of camping at a beautiful campsite – the Lake Red Rock Recreational Area in Marion County, Iowa.

We borrowed a tent and two sleeping bags from a friend, grabbed our pillows and a few random food items from around the apartment we shared, and drove the relatively short distance to go there. We reserved a campsite for the night for $8, found some firewood that had been abandoned, and started a cozy fire in the evening.

There are few things more romantic than just sitting together around a campfire on a night with just a bit of chill in the air, a clear night with a new moon in the country where you can see thousands upon thousands of stars. That was our night at Lake Red Rock. We sat out there next to the low fire until dawn, and it was that night that I became convinced I wanted to marry her.

Picnic and Wine on the Hilltop

Shortly after we were married, we decided to go on a long hike at Ledges State Park here in central Iowa. For those who may perceive of Iowa as a flat stretch of cornfield, Ledges would completely shatter that myth for you as it’s loaded with tall hills, sheer ledges, and a narrow valley in the middle. If you like to go on trails with lots of inclines and gorgeous views, Ledges is a great place to go in Iowa.

Anyway, Sarah and I decided to pack a few sandwiches and some cold drinks for lunch in a quiet backcountry area of the park, and that’s what we did, except that I packed an additional small surprise. Wrapped in the middle of the picnic blanket was a bottle of $2 Charles Shaw wine (some semi-sweet white variety) and two plastic wine glasses.

We hiked on the trails throughout the morning, taking pictures of the natural beauty and of each other (we both like unposed photographs of people). We eventually found this amazing lookout point over a small river, so we spread our blanket, ate our sandwiches, and sat there for a little while, just gazing out at the river. I then opened the wine bottle, poured both of us a glass, and she rested her head on my shoulder.

Eventually, we found our way back down off of the hill with hundreds of wonderful pictures taken and some warm memories of the day, and it cost about $3 for the sandwiches and $2 for the bottle of wine.


Sarah and I had made arrangements to go out to eat at a really nice restaurant in Des Moines. We had reservations and dressed up nicely and headed out on the town.

Yet, when we got to where the restaurant was, we discovered that it had gone out of business sometime in the previous few weeks. We talked about just getting back in the car and going home, but we decided to just wander around in the area on foot.

We got lost in conversation. We bought something from a food truck for dinner for $5 or $6 and split it. We walked through a park and watched some people setting up an art installation. We talked. We held hands. We laughed.

Eventually, we realized we were completely lost. We didn’t know where to go to find where we had parked our car. We ended up wandering around a several block radius, trying to figure out where we had parked and laughing at this misadventure.

We walked by three or four places with live music and stopped a bit to enjoy it and ask where the restaurant was. Eventually, someone kindly pointed us in the right direction.

The funny thing was, we got to see and explore a lot of things that we would have never seen if we just went to that restaurant. We thoroughly enjoyed each other’s company for several hours. It only cost us about $5 for that item from the food truck.

Getting lost turned out to be a really great date night.

Planned by Children

Last year, on our anniversary, we told our children that Sarah and I wanted to have a date night… but we wanted the children to plan it using what they could find around the house. We gave them very little guidance in the matter and, while they planned things out, we spent a few hours outside working in the garden and doing other such chores.

The children planned a charming little candlelight dinner for us with salad and soup and sandwiches and cake. They picked out a movie for us to watch, made us sit next to each other, covered us up with a blanket, and turned off the lights. They brought us some popcorn and then a bowl of ice cream. After the movie, they played some songs for us and insisted that we dance together to those songs, then they chanted for us to kiss each other.

It cost us nothing, but I have never, ever felt an evening that was so full of love, both in the love Sarah and I share, but also in the mutual love that we have for our children and that they have for us.

Final Thoughts

All of these dates have a few key things in common.

First, the dates were memorable because they were more about Sarah than they were about the activity we were doing. The activities, while fun, became backdrops; the memorable part was being with her. I find that, on many expensive dates, the activity becomes the focus and not the other person and that’s a shame. If there’s real love there, the best dates are all about the other person.

Second, the dates were memorable because of the variety. Some took place in nature. Others in large cities. Some were planned. Others were complete happenstance. One even involved our children. The theme here is simple: try lots of stuff. Sure, some will be disastrous, but even those often turn out to be great (like getting lost after finding out that the restaurant you wanted to go to was out of business).

Third, the dates were memorable because they weren’t pressured. All of these dates weren’t highly scheduled. They were very much in a “go with the flow” mode, where we had maybe one single thing in mind to do together and the amount of time it took was quite variable and unpressured. We had time to let serendipity strike.

So, if you want a frugal and memorable date, try to do something different than the norm (look at the community calendars and to the services nearby for a good place to start), give it plenty of breathing room without strong time demands, and give your focus to the person and not the activity. If you enjoy the other person’s company, something enjoyable will always spring forth, even if you don’t spend a dime.

Good luck!

The post Six Cheap and Memorable Dates appeared first on The Simple Dollar.

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What Is Umbrella Insurance – and Do I Need It?

Like an umbrella that protects you from the elements on a rainy day, an umbrella insurance policy can shield your personal assets from large liability claims.

Umbrella excess liability protection can help you avoid financial ruin if you’re found to be responsible for legal damages that exceed the limits of your homeowner or auto insurance policies.

“We live in a litigious society,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “It’s added protection to have peace of mind, knowing that your personal assets aren’t at risk.”

Umbrella coverage takes effect only after the limits of your underlying homeowner or auto policy has been reached. For example, if you have a homeowner policy with a limit of $500,000, you can purchase an umbrella policy that will pay claims greater than $500,000 and up to a limit you choose, such as $1 million.

This protection covers legal defense costs as well as claims against you. According to a report in USA Today, umbrella policies have a broader range of coverage than homeowner and auto policies. They include claims for such issues as libel, slander, and defamation of character.

Who Should Buy an Umbrella Insurance Policy?

Anyone who has accumulated personal wealth, such as a home, property, or an investment portfolio, can benefit from an umbrella policy. The more you own, the more you have to lose, says Walker.

Umbrella policies also protect people whose personal circumstances make them targets for lawsuits. This may include people who:

  • Own large-breed dogs
  • Have swimming pools
  • Participate in sports or hobbies that could lead them to unintentionally cause harm to others, such hunting or auto racing

People who have a low tolerance for risk often are attracted to umbrella policies, says Amy Bach, executive director of the United Policyholders consumer group in California.

“If you have a lot of lose, you want to protect it,” she explains.

The Pros of Umbrella Insurance

Here are some of the advantages of having an umbrella insurance policy:

  • Peace of mind. You’ll know that liability claims that exceed your auto and homeowner policy limits won’t cost you your savings.
  • Your family and pets are covered. You can’t always control the actions of others. An umbrella policy will cover claims for damages caused by yourself, other family members, or pets.
  • Your retirement nest egg is secure. An unexpected liability lawsuit could delay your retirement by draining your savings. An umbrella policy make that less likely to happen.
  • It’s relatively inexpensive. Because an umbrella policy won’t take effect until the limits of your primary homeowner and auto policies are reached, rates are typically inexpensive. The Insurance Information Institute (III) says that a $1 million personal umbrella policy typically costs between $150 and $300 per year.

The Cons of Umbrella Insurance

Umbrella coverage has some disadvantages. Here are several:

  • Insurers may impose coverage requirements. According to the III, most insurers want you to have about $250,000 in liability insurance on your auto policy and $300,000 in liability insurance on your homeowners policy before selling you a $1 million umbrella policy.
  • There are limits to what is covered. Umbrella polices don’t cover intentional acts of wrongdoing. That means if you’re convicted of a crime, an umbrella policy won’t protect you from punitive damages or court-ordered restitutions.
  • You’ll need a separate business policy. If you have a business, you likely will need a separate policy to insure you against liability claims that stem from its operation.
  • Your own property isn’t covered. You can collect on your umbrella policy only if you are found responsible for causing damages to someone else.

You Don’t Have to Be Rich to Need Umbrella Coverage

Although umbrella liability coverage often is considered to be a tool for the rich, you don’t need to be wealthy to benefit from asset protection, says Jim Armitage, an insurance agent in Arcadia, Calif.

These policies are designed for anyone who owns their own home or has substantial financial investments, he says.

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The post What Is Umbrella Insurance – and Do I Need It? appeared first on The Simple Dollar.

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Tuesday, October 4, 2016

Personal Finance and Magical Thinking

Like most people, I like to daydream about a stage later in my life where all of my financial worries are taken care of and I can pretty much do anything I want with my time. I spend my days going on hiking trails, doing some volunteer work, writing a novel, doing a little bit of travel with my wife, visiting my children in college or in their adult lives, organizing community events, playing lots of board games with friends, reading… things I’d love to be doing with my time in retirement.

It’s a very joyful picture for me, but there’s one big problem with it. That daydream completely glosses over what I had to do to get there. It overlooks the many, many years of work and savings that it would take to achieve that goal.

Without a ton of hard work, that wonderful vision is not a realistic outcome. It’s magical thinking.

So what exactly is magical thinking? I like Wikipedia’s explanation:

Magical thinking is the attribution of causal or synchronistic relationships between actions and events which seemingly cannot be justified by reason and observation. In religion, folk religion, and superstitious beliefs, the posited correlation is often between religious ritual, prayer, sacrifice, or the observance of a taboo, and an expected benefit or recompense. In clinical psychology, magical thinking can cause a patient to experience fear of performing certain acts or having certain thoughts because of an assumed correlation between doing so and threatening calamities. Magical thinking may lead people to believe that their thoughts by themselves can bring about effects in the world or that thinking something corresponds with doing it. It is a type of causal reasoning or causal fallacy that looks for meaningful relationships of grouped phenomena (coincidence) between acts and events.

One great example of magical thinking when it comes to money is in the realm of lottery tickets. People who regularly play the lottery vastly prefer to pick their own numbers, even though the outcome of the lottery is random. People even buy and sell books on this subject, books which amount to little more than pointing out the boundaries within which lottery numbers are drawn and then using a mix of bad math and magical thinking to come up with useless “practices” for picking lottery numbers.

While that’s a fun example, magical thinking shows up all the time in people’s financial planning, causing them to make some enormous foolish mistakes.

For example, far more people believe that they will receive retirement benefits than there are people who actually have such benefits at work. According to this study from the Employee Benefit Research Institute, “[o]nly 40 percent of workers indicate they or their spouse currently have a defined benefit plan, yet 61 percent say they are expecting to receive income from such a plan in retirement.” Even stranger, 40% of people who have saved nothing for retirement believe they have adequate retirement savings already in place.

Magical thinking occurs in personal finance every time we overestimate the likelihood of a particular positive outcome far beyond what’s realistic in our current lives, and it becomes dangerous when we act based on that overestimation. In that retirement example above, such thinking can easily cause people to not invest in a Roth IRA or 401(k) plan when they should be doing so, but they’re choosing to not do so due to magical thinking and the resulting overly positive picture of the future.

Examples of Magical Thinking and Money

Here are a few powerful examples of how people use “magical thinking” to make huge financial mistakes.

The Overly Optimistic “Future Self”

Many, many people fall into the financial trap of believing that their “future self” will pay for their current financial mistakes. For example, many people at lower rungs on the employment ladder will spend more than their salary and rack up debts because they believe their “future self” – who will have risen up the employment ladder and be earning more money – will pay for these expenses.

Why not travel now if that magical “future self” will foot the bill?

In our non-magical reality, while there is a chance that your future self will rise up the ladder and earn more, there’s also a good chance that your future self won’t rise at all or that your future self might become disillusioned and switch careers entirely.

If you make today’s financial plans based on a massively inflated likelihood of a bigger salary down the road, you’re falling prey to magical thinking. You have a very good chance of digging yourself a deep financial hole that will take you a very long time to dig out of if you don’t happen to hit that optimistic future.

The “Prosperity Gospel”

Many people tend to believe that if they look for direct intervention from a higher power, that the higher power will enter into their lives and create a better outcome for them.

This type of magical thinking underlines things like the prosperity gospel, which I described in an earlier article:

To put it simply, the prosperity gospel focuses on the idea that God provides material prosperity for those he favors. The idea goes both ways: materially successful people achieve such success because they’re favored by God and, at the same time, people who are favored by God will eventually be materially successful. In other words, godliness causes material prosperity.

This type of perspective turns one’s faith into a transaction-based system. If I act in a particular godly way (usually as prescribed by the person preaching the prosperity gospel), then God will reward me with material things.

While I think that prayer has many benefits, it, too, can follow similar logic. If I ask for divine intervention in this event, then there will be a greater likelihood of the outcome I desire from this event. Again, this makes faith into a transaction-based system.

The problem with faith as a transaction-based system is that it really doesn’t work that way. For example, charitable giving is highest among lower-income households and is lowest among wealthy households, which is exactly the opposite of what you would expect if the prosperity gospel were true.

I don’t know of any reasonable theology in which you can treat God as a personal ATM for the things that you want. Instead, prayer and charitable giving tend to have the best impact in terms of being tools to help you grow as a person internally, not as a source for physical rewards.

“My Ship Will Come In”

Many people buy into the idea that some great unknown future event is going to solve all of their worldly problems. That vision takes a lot of different forms – the wealthy ancestor leaving behind some money is one flavor, winning the lottery is another flavor. I once worked with a person who basically thought that they would eventually be wronged in the workplace and could then sue the workplace for big bucks. That person claimed to document every possible slight and negative event in the workplace. (Needless to say, I did my absolute best to avoid workplace interactions with that person.)

The truth is that while random events do happen and bring unearned wealth into people’s lives, the likelihood of such events is incredibly small. There are very, very few life-changing lottery winners. There are very, very few real-world examples of massive unexpected inheritances. These things just don’t happen very often at all. People constantly overestimate their likelihood and people sometimes even plan their lives assuming such a thing will happen, which is a big part of the reason why a majority of Americans simply don’t save for retirement at all. They believe their ship will come in.

How to Avoid Magical Thinking and Make Better Plans

The overall picture is clear: magical thinking results in an unfounded optimism about the future and thus causes people to make poor choices today because of that unfounded optimism. While it’s fine to have positive visions about the future, it’s incredibly dangerous to take actions in your life under the assumption that those positive visions are a foregone conclusion.

How can you avoid magical thinking in your life? Here are five strategies that really help.

Strategy #1 – Assume unlikely positive events have zero chance of happening.

If you find yourself daydreaming about your “ship coming in” – you win the lottery or you get a big batch of cash from an unexpected source or something akin to that – never, ever assume that there is any likelihood of that happening. Treat the chances of that event happening as zero, even if the odds are better than zero.

Any time you start to treat a highly unlikely event as having greater odds of occurring than it actually has, you begin to make poor life choices. If you believe that a big bunch of cash is about to fall in your lap without any direct evidence of it and then you begin to spend accordingly, you’re digging yourself a hole that you’re unlikely to dig yourself out of.

Money is not going to fall out of the sky and land on your lap. Don’t behave as though such a thing is going to happen.

Strategy #2 – Assume your future self is going to be worse off than you are right now.

In terms of making financial plans for the future, you should never assume that you’ll be earning more in the future. Instead, you should be assuming the opposite – you’ll be making less in the future.

Why on earth would you do that? If you operate under the assumption that your future self is going to earn less, you’re not going to willingly dig yourself into a financial hole that’s going to be difficult to dig out of. You’re not going to buy a car with huge payments. You’re not going to saddle yourself with a giant house payment. You’re going to avoid credit card debt.

Let’s say, then, that you do happen to earn more in the future. That’s great! Now you can actually afford that nicer stuff without digging a giant hole for yourself! Go for it!

However, most of the time you won’t end up earning a substantially larger amount in the future, and if you chose to go into debt now, your future self is going to be digging out of that debt in the future without any real additional income. In other words, your future life is going to be rather miserable, even if you maintain your current income.

If your income drops due to a job loss or something like that? It’s going to be very, very bad.

When you’re trying to decide whether to take on a debt or another big expense, ask yourself what happens if your salary stays unchanged for the next, say, ten years. Now, what happens if you lose your job and have to take one that pays 25% less. What does your life look like under those scenarios with that big debt weighing you down? If that’s going to make for a very miserable and very tight life, then don’t take on that debt today. Instead, run the other way.

Strategy #3 – If you want something in your future, take action to get it or it won’t happen, and accept that even with action it might take a while and still might not happen.

If you don’t work for something, it’s basically never going to be handed to you. Rewards aren’t just handed out for free. It’s a lesson that people theoretically should learn as children, but adults often act as though they should rewarded for just being there.

The truth is that if you want that promotion, you need to work for it. If you want a successful small business, you need to work for it. If you want a raise, you need to work for it. It’s not going to be handed to you. You have to show that the additional money you’re receiving is justified, or other people are going to justify NOT giving it to you.

You think you’re in line for a raise at work. Why? Are you doing something exceptional that makes you worth a higher rate of pay than other people doing your job? If you are, is it something that equates to results that your boss can actually see in some fashion? Is this something that is true consistently, day in and day out?

You think you’re in line for a promotion. Why? Are you doing something that demonstrates that you have the skills and communication abilities and leadership necessary to pull off the next rung on the ladder? If you think so, are you doing things that demonstrate those skills to your boss in a way that he or she can actually see? Are you doing that consistently?

You think you’re ready to get a better job. Why? Does your resume actually include all of the skills that employers are looking for in your position? Do you have extra things on there that supplement your case and really show off how you have all of those skills and can put them to work? Do you have solid references? Do you have current skills and some evidence of those skills? Are you selling those things to potential employers?

You think you’re ready to start a business. Why? What does your business plan look like? What evidence do you have that your business will click in the community it’s serving? Can you or will you put in the work needed to make this business a success?

What’s the common theme here? Hard work. Whenever you want to move up in life, it takes work. Even if you think it’s all about the people you know – and that’s something I don’t believe at all but I do believe it helps a little – it still takes a lot of effort to build a good professional network. If you want something, you have to work for it. It will never, ever be handed to you.

Strategy #4 – Save for retirement. If you’re already saving, save more.

You can never be saving “enough” for retirement. Even if you somehow manage to reach a magic number that will cover everything you could ever want in retirement, more money simply means more security within retirement or the possibility of retiring earlier, both of which are positives.

You can never put enough into your Roth IRA. You can never put enough into your 401(k). If you ever believe that you’ll have plenty for retirement, the truth is that you do not. If you are ever thinking about whether you should be putting more into retirement savings, the answer is that you should (unless you’re overlooking high interest – anything above about 6% – debt).

Many people resist this for two reasons. One is pure magical thinking – their ship will come in before retirement so they won’t have to worry about it. That’s not going to happen.

The other is that they envision that they’re going to lose a lot of joy from their life if they increase their retirement savings by 1% or 2% of their salary. That’s not going to happen, either. The truth is that the things you lose from contributing more are the least important 1% or 2% of your spending. It’s the stupidest, most forgettable elements of your spending. It’s the item from the convenience store that you drink and forget about. It’s the album you bought from the iTunes store and listened to once and forgot about. It’s not the things that really matter.

When you combine magical thinking with an unrealistic fear about your lifestyle, it’s completely understandable why people talk themselves out of retirement savings. Don’t. Both elements are myths. You need to be saving as much as you realistically can.

Strategy #5 – Build an emergency fund.

This goes back to that rosy view of the future that many people hold. When most people think about their future, especially the near future, they tend to mostly think about the positives. Unless their car is rattling a lot, they don’t think about their car breaking down. They don’t think about losing their job (unless paranoia is rampant at work). They don’t think about a child being sick and the cost of emergency child care. They don’t think about losing their wallet or having their credit card number stolen.

The truth is that those things happen. Thinking about a near future where nothing like this happens is a flavor of magical thinking, and if you act in full accordance with that kind of magical thinking, you end up in a financially rough spot, facing down bills and (likely) credit card debts that you just won’t want to face at all.

The best solution for these situations is to have cash in hand in case something goes wrong. Cash is king. Cash solves problems that credit cards cannot. You want cash for the widest breadth of emergencies life can throw at you.

How do you ensure you always have some cash for emergencies? An emergency fund is the answer, of course. You can set one up by opening a savings account at a local bank and setting up an automatic transfer to move a little money once a week out of your checking account – just $10 or $20 will do if you’re tight. If you automatically transfer $20 a week, you’ll put more than $1,000 a year into your emergency fund!

Never, ever turn off the automatic transfer unless a change in income absolutely forces you to do so. Even if there’s plenty in your emergency fund, ignore it. Wait until an emergency hits. You will be so glad you have that money.

Final Thoughts

Magical thinking is a huge financial trap. It causes you to ignore risks going forward. It causes you to avoid taking necessary financial steps to protect your future. It causes you to make giant spending mistakes in the here and now, ones that you’ll suffer the consequences of for many years.

Do all you can to drop the magical thinking and stick to reality. Your actual, real life will be far better off.

Good luck!

The post Personal Finance and Magical Thinking appeared first on The Simple Dollar.

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