The Difference

For each attitude or behavior listed below indicate whether it describes you Very Well, Well, Slightly or Not at All.

Very Well Well Slightly Not at All
I feel stocks are worth the risk.
I devote money to personal savings each month.
I save regularly for emergencies.
I have invested for retirement.
I am significantly reducing or I have eliminated outstanding debt.
I have a goal to be financially comfortable during my working years.
I have a goal to retire comfortably.
I know what I want to do for a career and I am actively pursuing it.
I have a goal to accumulate $1 million.
I own a home (or plan to).
I am confident.
I am optimistic.
I am happy.
I am competitive.
I am a leader.
I have a college degree or I am actively working on getting one.
I socialize with friends at least once a week.
I exercise at least 2-3 times per week.
I read newspapers (or online news) regularly.
I am married (or plan to be married).

According to research conducted by Merrill Lynch, Harris Interactive and Jean Chatzky, these twenty attitudes and behaviors were the most critical in determining individuals varying levels of wealth.[1]

The initial question asked by Chatzky was, “Why do some people seem to move relatively easily from a paycheck-to-paycheck existence into comfort or wealth, while others get stuck or – worse – fall back?”

The study, which included hundreds of questions and was administered to more than five thousand individuals, identifies four levels of wealth, along with what percentage of the population falls into each category:

  • The wealthy – 3%
  • The financially comfortable – 27%
  • The paycheck-to-paycheck – 54%
  • The further-in-debtors – 15%

Chatzky and her team found that the wealthy can select at least twelve of the twenty attitudes and behaviors listed above as describing them “very well”, the financially comfortable have at least ten, while only half of those in the paycheck-to-paycheck group or further-in-debtors have more than three that describe them “very well”. In her book, The Difference, Chatzky stresses that most of the above factors are things that can be learned, and that moving up is not only possible, but inevitable if you focus on the right things.

There are, of course, other important factors. While these were identified as the top 20, Chatzky also discusses gratitude, giving, hard work, long-term thinking and others.

Here is Chatzky’s description of those who understand the difference their attitudes and behaviors make and have achieved success in life:

“They knew what they wanted, they plotted a course, and they arrived. They’re not stagnant. That wouldn’t do. Every day, they think about what’s next and set about achieving it with intention and purpose. And today, as a result, they are surrounded by people they care deeply about – and who return the favor. They wake up happy and go to sleep fulfilled. And they don’t lose sleep at night worrying about paying that next bill or any other financial matter.”[2]

It does take time, after developing the attitudes and behaviors listed above, to move from one group to the next. On average, it takes about seven to eight years to move from paycheck-to-paycheck to financially comfortable, and an additional eight to move to a life of wealth. In can be done faster – in fact there were some people that moved from paycheck-to-paycheck to wealth in a total of about ten years. The research also showed the number one reason people slipped from financial security to living paycheck-to-paycheck is overspending.

So where does all of this data leave us? First, Chatzky says, is that you need to make a decision that you want to change and achieve higher levels of wealth. “You choose The Difference,” Chatzky says, “it does not choose you.” Second, you have to take action. Look through the list above and select some things you can begin to work on. Maybe you can start building up your emergency fund, or start exercising more, or focus on your career goals. Any step in the right direction is a good step to take.

For further discussion on this topic, I encourage you to read Jean Chatzky’s book The Difference.

Ryan H. Law, M.S., CFP®, AFC®

[1] The study and findings are discussed in detail in Jean Chatzky’s book “The Difference”  ISBN: 978-0-307-40714-6
[2] Chatzky The Difference pp. 2



For a printable version of this article go to: www.ryanhlaw.com/The_Difference.pdf


      Meeting Jean Chatzky at a conference

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Safe Holiday Shopping Online

Black Friday and Cyber Monday have come and gone and according to the stats, it appears it was (another) record-breaking weekend:

  • The National Retail Federation reports that we spend about $52 billion on Black Friday. [i]
  • IBM, who tracks online transaction sales, reported that we spend between $1.5 and $2 billion on Cyber Monday.[ii]

I personally am not a big fan of Black Friday, especially now that it is creeping onto Thanksgiving. It seems more and more companies put their sub-par products on sale for the weekend. I am also not a fan of standing in line for hours in the cold or being trampled or assaulted by people fighting over a phone or yoga pants, but that’s beside the point.

Today’s Tip is about the remaining shopping that you will be doing. A lot of people will shop online for gifts, and I want to make sure you do so safely.

Here are five tips for sale holiday online shopping:

  1. Be sure the website’s purchase page is secure. It doesn’t matter if the rest of the site is secure or not, but be sure the page where you enter your credit card is secure. Here’s how you can tell – the browser should say https instead of http, and you should see a lock icon somewhere on the page. Here is what the Amazon.com sales page looks like:amazonScreen
    You can see both the https and the lock icon, which means it is a secure page.
  2. Don’t purchase items from e-mails unless you can verify where they came from. I get deals in my inbox from Walmart, Target, Amazon and many other reputable companies. E-mail marketing is cheap and effective. However, I also get deals like this one:“Get the New 32GB iPad Sold for $31.08!”This is from an e-mail send by “Adison Greg” from some website that no one has ever heard of. When you get those emails don’t click any links in them, including the “unsubscribe” link. Delete them immediately! They are Spam and many have some kind of virus. If you don’t click on them you will be safe.
  3. Use your credit card to purchase online. Never trust a website that doesn’t accept credit cards, or that encourages you to pay using Western Union or something like that. Your credit card has protection built in, as do websites like PayPal. If you never receive the item, you can file a dispute and your credit card company won’t charge you for the item.
  4. This is a tip I almost learned the hard way – I got an email saying that my purchase of 2 Nexus 7 tablets being sent to California from Walmart had been cancelled because they couldn’t verify the shipping address.  Concerned, I logged into my Walmart account and sure enough, there was an order for two Nexus 7 tablets that were scheduled to be sent to some random address in California. After doing some research I found that this isn’t uncommon – hackers get into the databases of these websites and can try to order things using your account. This only works if your credit card is stored on the website. Walmart.com, for example, stores your card without asking if you want it stored – they do it automatically. I immediately changed my password and deleted my credit card from their system. I no longer store credit cards on any websites – it only takes a minute to enter the card number and I feel more secure that way. Each time I purchase on Walmart.com now I immediately go to my account and delete the credit card number.
  5. Consider purchasing pre-paid shopping cards to purchase online. I know some people don’t like to use their personal credit card online, so they purchase pre-paid shopping cards and use that for all their Holiday shopping. A bonus is that you can set your limit and not spend any more than that.

Like many of you I do quite a bit of online shopping and will continue to do so. If you will follow today’s tips (especially tips 1-4) you can shop online with confidence.

 

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Revolving Savings

As Christmas approaches and the stores get more and more aggressive with their sales, far too many people are buying on credit without thinking about how much they are spending and the consequences of paying the minimum payment.

A 2013 survey from Credit Donkey (www.creditdonkey.com) showed the following stats for those who charge Christmas on their credit cards:

  • 52% will pay it off in full in January
  • 23% will pay by the end of tax season
  • 13% will pay if off by the end of the summer
  • 6% by the beginning of the next holiday season and
  • 6% past the end of the next holiday season

There’s a better way to do it. In fact, it will help you will all of your known, but irregular expenses. I call it my Revolving Savings account. It’s a simple concept, but it works!

First, let’s identify what some of those known but irregular expenses are:

  • Holidays
  • Birthdays
  • Car Registration
  • Car Insurance (unless paid monthly)
  • Life Insurance (unless paid monthly)
  • Tuition and books
  • Vacations

Those are the most common ones that I see, but you may have a few other things that would fit in there as well.

The next step is to make a list of each month, then go through and plug all your known, but irregular expenses in there along with how much you are going to spend. Your calendar might look like this.

JANUARY FEBRUARY MARCH APRIL
Books: $300 Spring Break: $200
MAY JUNE JULY AUGUST
Dad Birthday: $20 Mom Birthday: $30
Books: $300
SEPTEMBER OCTOBER NOVEMBER DECEMBER
Car Registration: $85 Christmas: $200

The next step is to add up the total – in this case the total is $1,135. You then take that $1,135, divide by 12, and you get how much you need to save up each month ($95). If that amount seems too high, you have a couple of options:

  1. Reduce how much you are spending on these categories, or
  2. Figure out a different way to fund some of the items

As an example of the second option you may consider times when you get extra money, such as a tax refund, to fund some items such as your Spring Break trip and Car Registration.

You then put that $95 in a separate account (I call this my Revolving Savings account) that you only use to pay for these expenses.

Each December my wife and I sit down and review the previous calendar and draw up a calendar for the next year. Not only does this make it less stressful as you approach each of these events, but you can actually save money by buying things when they are on sale.

If you have major expenses that come up early in the year you may want to run your Revolving Savings calendar on a different schedule (i.e. July-June of each year instead of January-December). In the calendar above the person is going to need $300 in January, but only have $95 if they run their Revolving calendar from January-December.  If they ran their calendar April-March they would have enough money by the time they hit each expense.

As I said above, this is a simple concept, but it works!

Ryan H. Law, M.S., CFP®, AFC®

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