Defynance - Blog #Finance

3 Best Personal Finance Books Not About Personal Finance

Sat, 24 Feb 2024 17:48:30 +0000

There are probably few people that would say dealing with financial insecurity is fun. Indeed, financial insecurity, especially in its most dangerous forms such as housing and food insecurity, can lead individuals into a downward spiral of stress and chaos. Finding yourself in a vortex of increasing debt and other personal expenses can certainly lead one to feel helpless – or even hopeless.

Since personal finance and personal mental health are “connected at the hip”, then it follows that the first step in getting your financial house in order may not be by picking up a book about personal finance! Perhaps you need to first recognize a deeper root issue and deal with that first.

With that in mind, we have chosen three books about personal finance that are not about personal finance. These books are resources to help you make the changes in your mental state that will empower you to take control of your personal finances.

The Road Less Traveled by M. Scott Peck

This is an undisputed classic! There are four broad principles: delaying gratification, acceptance of responsibility, dedication to truth, and balancing. This might sound a little “preachy,” but it is not. Clearly delaying gratification can translate to a healthier financial life – but more importantly, there is acceptance of responsibility. This is not something your parents used to say, and you swore you would never say it when you were an adult. Instead, it is an empowering principle that teaches you that accepting responsibility means you can control your own fate! It is particularly important when financial burdens seem to control your life.

7 Habits of Highly Effective People by Stephen R. Covey

Another timeless classic! Once you have accepted responsibility, you need to take one more step deeper into formulating a detailed plan to manage your financial life. These seven habits annunciate clear steps to making specific changes to your inner self that will put your head in a place ready to tackle your finances. For example, the first book teaches you about accepting responsibility – but then this book takes one more step to show you how to pick and choose your battles and even when, to be honest, and admit the problem is with you and not external to you.

Getting Things Done by David Allen

The third classic in a row! This is the most detailed resource in your readiness toolbox. Whereas the first two deal with certain issues at a high level, Allen’s book then takes it to the fine-grained details. Are you putting off dealing with something that makes you uncomfortable? Putting it off will not help – it will make your state worse since even though you may think you have forgotten it; it will gnaw away at you silently in the background. So, get it done! One great gem: if you have a list of to-dos, immediately tackle anything that will take you two minutes or less to accomplish! From personal experience, it is liberating!

We’ve highlighted these books because they align so well with our own philosophy here at Defynance – personal financial empowerment. We believe that taking control of your personal finances is the key to a successful and happy life. This is why we created ROEP (pronounced ‘rope’), which stands for Resources Optimizing Earning Potential. It is where you can find a career- and finance-related resources such as career counseling, upskill resources, job boards, and more. New resources are being added all the time, so check them out!

4 Finance Tips Everyone Should Know

Sat, 24 Feb 2024 17:48:19 +0000

As the old saying goes “money makes the world go round.” And while that’s still the case, you should set yourself up in the best position to manage your finances. In a time where most Americans can’t even cover $1,000 of expenses, financial literacy can be necessary. We know that many people are struggling financially at the moment and not all of this advice will be useful to everyone, but we hope that you can take something from it.

Have an Emergency Fund

We can’t stress this enough, create an emergency fund. Seriously, you may not realize how important it is, but it can be a lifesaver. 77% of Americans are stressed about their financial situation. That’s not good for anyone, but an emergency fund can help relieve some of that stress. And an emergency fund can be easy to create too, just start by putting away a little extra money each month. Eventually it’ll add up and you’ll have a good enough fund for anything that life throws at you. As a good rule of thumb, you want enough in your fund to finance six months of expenses.

Create a Budget to Manage Your Finances

I think we may run this advice into the ground, but that’s because it’s pretty important. You should have a budget, so if you don’t, make one. It should be pretty quick and easy to create, especially if you start simple. You can always expand your budget in the future. Just make sure you look at your current spending habits and expenses, such as bills, to see where you need to put money first. Afterwards, you can put extra money towards entertainment and fun or something else, like investing.

Creating a budget can also help you figure out what your six months of expenses are for your emergency fund. Or better yet, find out where you can put money towards your emergency fund. Always leave a little bit of wiggle room in your budget for unexpected expenses, because they’re bound to happen. And anything left over can go towards an emergency or rainy day fund.

Take advantage of tax-advantaged investments

Use a tax-advantaged investment vehicle, like an IRA, to lower your tax hit. Sure, you can’t take the money out penalty-free until you reach a certain age, but it allows you to invest and save for retirement. An IRA can help you increase your overall return on those funds.

For a traditional IRA, you won’t be taxed on any funds added to the IRA, which effectively lowers your taxable income at the end of the year. If you choose to use a Roth IRA, qualified distributions will be tax free. So with a Roth IRA, while you’re still taxed on the income, you can avoid taxes on returns later in life. For 2020, if you are under 50, you can only put $6,000 total into your IRA accounts. You can look at further restrictions around IRAs to see if it’s a good option for you.

Use Free Resources to Help with Finances

Tools are great and can help make financial goals easier to achieve. Mint alone can tell you where your money is going and help you make a budget easily. It can also help you set important financial goals, like making an emergency fund. There’s software to make all these financial issues just a bit easier for you.

Defynance has even made it easier for you to find all of these tools. With our ROEP Marketplace, you can find a whole slew of companies dedicated to helping you advance your career, finances, or even wellness. You may discover some resources for you that you never even thought of before. And accessing it is as simple as clicking here and making an account.

How To Be Prepared For The Upcoming Recession?

Sat, 24 Feb 2024 17:47:15 +0000

Rising interest rates, skyrocketing gas prices, turbulent markets, and inflation at a 40-year high are multiple key indicators foreshadowing a potential recession. Some are going further by stating, “There’s no question in my mind that we’re in a recession. Maybe the economic and technical definitions of a recession haven’t hit yet but we’re there” says Howard Dvorkin, Chairman of Debt.com and personal finance guide.

Whether we are in a recession, or it is impending, or perhaps, we avoid it altogether, it is always prudent to plan for the worst and hope for the best. Let’s discuss how to plan a budget for any economic condition. Increasing your savings, re-evaluating investments, and managing debts are key opportunities to get ahead of any unexpected events. However, it is also important to avoid making decisions based on recessionary fears which can worsen your financial standing in the long run. Here are a few tips you can consider to hopefully minimize the impact of a recession:

Save More

As a rule of thumb, a percentage of your paycheck should go towards your savings. But now is the time to increase this percentage by cutting down on unnecessary expenses. You may want to delay that vacation you were planning or keep those home renovations on hold until absolutely necessary. Also, make sure that these savings are liquid and can be accessed in a time of need. Which means don’t invest or hold these funds in a way where access to them is restricted, like in a CD (Certificate of Deposit), for example.

Pay Off Debt

With rising interest rates, make it a priority to get rid of non-mortgage debt, with a special emphasis on debt with variable interstate rates that are likely to rise as the Fed continues raising interest rates. Focus on contributing more of your income to debt that holds the highest interest rates. For example, credit cards already have notoriously high-interest rates, but as the Federal Reserve continues to raise rates, carrying a balance will become even more costly. Another point to remember is that you should consider paying off debt that has tax-deductible benefits, like educational loans. For other debt reduction strategies, see our previous blog titled, How To Tackle Debt Effectively.

Emergency Fund

Apart from savings, build your emergency fund for a rainy recession day. Ideally, 20 percent of your income should go to your savings, and 30 percent to extra expenses like your subscriptions and memberships. After slimming down your extra expenses, set up higher automatic payments to your emergency fund. This fund can also come in handy in case of job loss with a goal to keep you going for at least 6 months without a paycheck.

Become the Employee Your Next Job Needs

If you start seeing a wave of layoffs in the news and get a sense that they may soon be coming to your company, get a step ahead by upskilling and updating your resume. Remember that individuals with higher experience drawing handsome salaries are more under threat than their younger counterparts who represent lower overhead for the company. There is a wide variety of upskilling resources available on the Internet. Here are some examples of resources you can investigate. But whatever you choose, start as soon as possible.

Reassess Your Investment Portfolio

Considering the volatility of the current stock market, you may want to consider diverting more of your funds towards investments with the least risk despite a lower rate of return. If you have enough cash on hand to cover six months or more, start looking further into the future and use today’s economic conditions to your long-term advantage. It might be time to consider investing at a discount today since markets are coming down.

Another strategy is to invest in passive income, which can be used to augment savings, as a rainy-day fund, and for long-term retirement income. Here at Defynance, we have launched a passive income fund that is projected to offer low volatility, like fixed income but with higher returns like with equities. Learn more at our Fund website.

While no one can accurately predict how future economic events unfold, the above strategies can certainly give you a fighting chance to face and overcome the approaching recession.

Is Home Ownership Affordable For Student Loan Holders?

Sat, 24 Feb 2024 17:47:04 +0000

The benefits of homeownership in the US cannot be overstated. From reducing housing costs, improving credit scores to the accumulation of wealth, homeownership is at the heart of the American dream. Millennials though are struggling to live their homeownership dream due to student loans. A recent report released by the National Association of Realtors states that 51% of all student loan holders say their debt delayed them from purchasing a home.

Student loans represent substantial hurdles to homeownership. These include:

Overbearing burden of an existing student loan creates a mental block for taking on even more debt.
Monthly student loan payments leave little room to save up for a down payment on a home.
The presence of student loans contribute to potentially lowering credit scores and missing student loan payments further damaging the credit scores.
Student loans can increase the debt-to-income ratio, making home mortgage approval more difficult.

Though it is possible to refinance a student loan to lower the interest rate and monthly payments, there could be a better option that actually eliminates student loans and the associated challenges to homeownership.

Defynance has developed a solution to replace a student loan with an income share agreement or ISA. An ISA offers all the benefits of an income-based repayment plan without the shackles of student debt.

Benefits of the Defynance ISA:

The Defynance ISA is designed to keep the payments pegged to income which makes them affordable.

Recognizing that credit scores are not an accurate reflection of our potential customers ability to make payments, Defynance does not make underwriting decisions based on credit scores.

Payments are pauseed if income falls below a minimum amount. Contrary to loans, ISAs are interest free.There isn’t an outstanding balance with an ISA so you’re always protected on the downside.

Refinancing with a Defynance ISA should improve your credit and help lower your debt-to-income ratio making it less likely that you will need a co-signer for your mortgage.

The Defynance ISA does not have a balance to be repaid nor is there any interest. Your mental stress will be greatly reduced knowing that you are protected during financial hardship and always have an affordable payment.

Why Defynance Stands Out

In summary, Defynance recognizes the challenges that having student loans presents to buying a house. The design of the ISA generally eliminates these challenges by making payments affordable, improving credit, and eliminating the need for a co-signer, if necessary.

If you are looking to buy a house, you should first consider if paying off student loans is possible. If not, replacing your student loan with a Defynance ISA may be a better option than simply refinancing with another student loan. Reduce your mental stress and become financially empowered with us. Visit Defynance to learn more and apply for a Defynance ISA.

How to Budget for Big Expenses

Sat, 24 Feb 2024 17:46:52 +0000

Shopping as an activity is relaxing for some while stressing for some others. The deciding factor for this difference in experience? A shopping budget!

On a serious note, buying capacity of an individual has a strong and direct influence on the lifestyle adopted by that person. That being said, there are several big-ticket items necessary to maintain a basic but decent lifestyle. For example, kitchen appliances like refrigerator, cooking range, blender, etc. household items like furniture, vacuum cleaner, or even a personal laptop or phone can take a huge cut from your paycheck (at times 2 paychecks!).

On a larger scale, it could be wedding expenses, buying a house, or sending your kid to college and the possibility of medical expenses cannot be ignored. So let’s take one step at a time. There isn’t any formula that will keep a step forward when hit by these expenses. But planning your finances in the right manner can help you survive the blow.

Analyzing Your Needs

“Do I really need to buy it?”

Your purchase journey should begin only if the answer to this question is positive. Often the urge to buy something is stronger than the actual need for it. We can convince ourselves that we deserve the expense, or that we can immensely afford it, and learn not to be guilty about it. Hence, we need to stop ourselves and ask if the said purchase is utterly essential. This simple question might save you from committing an unnecessary expense. Analyze cost against a benefit or are you already in possession of something that can be used as a substitute? It would not be wise to overburden your wallet just for a shopping experience.

Expense Fund

In case you are aware of an upcoming expense that is going to take on your savings, you can start by keeping aside some extra savings from your paycheck dedicated wholly to this expense. An expense fund could protect your savings account to be used for some better purpose in the future and your investments too can remain untouched.

Time your Expenses

Black Friday Sale just walked past us with great deals all around. Big-ticket household items or kitchen appliances can get tagged with huge discounts which can save you a lot. You can stall buying these items till the sale season arrives depending upon the urgency. A $50-$100 discount behind every product can certainly have an evident impact on your wallet.

Emergency Fund

Medical expenses, car repairs, and home repairs can burn a hole through your savings unless you have a sturdy insurance plan to back you. Even so, out-of-pocket expenses could raise concerns for many individuals. For times like such, a percentage of your paycheck could go to emergency funds. Keeping in mind the medical and ancillary expenses, these funds could prove to be a savior from filing for bankruptcy.

Home & Education

These are the most critical and hence can be categorized as life-turning events. Buying a home can be your dream expense and requires a whole lot of planning as you invest your funds and borrow a loan to finance the gap. This could be extremely tricky as a home loan costs you interest and generally is long-term debt. If you are thinking about buying a house, you will want to take a careful look at your finances to make sure you are ready for this new commitment.

Similarly, education comes at a huge cost, and hence student debt is an entangled issue country-wide. It is recommended to seek financial advice from an expert who understands the industry norms and conjugates them according to your requirements and ability. To view some effective tips for financing your education, please click here.

Expenses cannot always be avoided and hence planning your finances in the right manner can let you cherish your money’s worth instead of stressing over the bill amount. The primary motivation for earning money is ultimately linked to the need for a comfortable and joyous lifestyle. Let us know your views on managing expenses efficiently in the comments section below. Also, if you’re looking for help on how to manage your finances, be sure to check out our resources page for more information.

3 things to know before Investing

Mon, 12 Jul 2021 19:18:43 +0000

In the words of Warren Buffet: "Investing is often described as the process of laying out money now in the expectation of receiving more money in the future (…) forgoing consumption now in order to have the ability to consume more at a later date."

Investing must be one of your top priorities as soon as you start earning money, it is important to start thinking of your future self and setting some money aside. You work hard every day to earn money so let's make that money work for you. But before starting this exciting journey there are some things you must know/ do first.

1. Pay high interest debt first

Usually, when deciding what to do with extra cash the normal advice would be that if you can earn more interest on your money by investing it than your debts are costing you, then it makes sense to invest. But, having in mind that investments can be volatile, it is generally better to start paying off at least the high-interest debt first before you start investing. After having this high-interest-bearing debt paid off, the best is to prioritize paying down debt while making small contributions to your savings.

2. Have an emergency fund

It is important to know an investment account is not a checking account, the money you set aside toward investing must be money you won't need in the short term. So before starting you should have your basic payments covered and an emergency fund, because sometimes life just happens and you can't afford to take a chance on having to realize losses because an emergency happens at a bad time, forcing you to sell when it does not make sense to. The average amount to have in your emergency fund must be from 3 to 6 months of living expenses such as rent, food and groceries, healthcare, transportation, and others specific to you.

3. Determine your objectives and risk tolerance

If you have got covered steps 1 and 2 then you are almost ready to start. The last thing you have to think of is what are your investment objectives and risk tolerance. In other words, what are you looking for by investing, do you want long-term growth, current income, preservation of capital, and the amount of loss you are prepared to handle while making an investment. Other things to keep in mind when investing are your future liquidity needs if you are planning on buying a house, paying for education.

When investing you can choose to hire an advisor or invest by yourself, either way, the best thing to do is educate yourself and read as much as you can about investment objectives, the risks of investing, strategies, types of assets, and any other topic you don't know about.

Remember the best time to start paving the way for your financial freedom is now, you don't need to have a lot of money to start, small steps in the right direction can lead you to success, your future self will thank you!