9 STEPS TO FINANCIAL ADULTING - Free E-Book

THEY NEVER TOLD YOU THIS

Circle-up SHARKS, it’s time for a quick-hitter on personal finances. Buying up stocks and trading cryptos is all well and good, but if our financial house is not in order, it can be a real nightmare when the waves get choppy. Here are the brutal facts:

❑ 53% of adults are financially anxious

❑ 66% of American families have NO EMERGENCY FUND

❑ 80% American adults live PAYCHECK to PAYCHECK

❑ 60% of American adults have NO BUDGET

❑ 80% of American youths FAILED the Financial Literacy Quiz

❑ 60%+ of American adults have had Credit Card debt in the past 12 months

❑ 55% of millennials are stressed about their student loans and have no plan to repay them

Checking these off before you’re dealing with a financial emergency is absolutely essential for SHARK INVESTORS. Not to worry, we’ve laid it all out in this handy guide. Let’s DIVE-IN!

MOST ADULTS ARE FINANCIALLY ILLITERATE https://www.opploans.com/oppu/articles/statistics-financial-literacy/ Drew@SharkInvest

1. GET A CREDIT REPORT

Looking to secure a loan to start a business? Financing a new vehicle? Renting an apartment? Your credit score MATTERS. Your credit report is a record that details your current and past debt and assigns you a rating based on your history of paying these debts. Lenders, landlords, and even employers can request this report and use it to make judgments about your financial stability.

Waiting until your loan request is denied to check up on your credit rating is not the way to get things done. Be proactive and avoid this frustrating and costly scenario. What’s in a credit report? This report will contain information on the accounts, credit cards, and loans your hold, when they were established, and your payment history (including late and missed payments).

Who creates this report?

In the USA, companies such as Equifax, Experian, and TransUnion are licensed as credit bureaus or credit reporting agencies. All of the major banks, creditors, credit card companies, and licensed money lenders must register with one or all of these bureaus and submit statements on their clients, generally on a monthly basis – do NOT miss payments to these types of lenders. Other companies who report into the credit bureaus are utilities, hospitals, and other service providers. They generally report less frequently and there may be some slack here on late payments before they rat you out to the credit bureau. However, if you become seriously delinquent, they won’t hesitate to harpoon you with a bad credit rating.

How do I maintain a solid credit rating?

First, and most importantly – pay your bills on time. If you must miss a payment for any reason, contact the creditor and see if they can grant you an extension. This honestly worth a shot. If the creditor is aware you will be deferring or missing a payment, they may note this on your account and hold off on reporting it to the bureau. This can be a reasonable emergency measure, but don’t make a habit of it. Creditors expect to be paid in a timely and reliable manner and they will use tools like collection agencies if they feel the debt is at risk.

Second, order and review your credit report on an annual basis. If there are inaccuracies on your report, they may affect your credit rating. You may decide to call the credit agencies and/or creditor to correct errors – especially if you have a significant purchase coming up or are applying for a loan. If you need to check your report more frequently, be aware that simply requesting your credit report may affect your rating negatively. Annually is fine but be conservative in requesting it more frequently.

Third, if you have a poor credit rating, there are many tools to help you get back on track. Check out these books on repairing your damaged credit:

How to get your Credit Report:

The big three credit bureaus are required to provide citizens with a FREE ANNUAL REPORT. However, you must request this from them directly. Each bureau may have different information about your credit history, depending on the submissions of your creditors, so best to order a report from several of them.

CANADA: CRA Credit Report Ordering

There may be convenience fees for ordering online, so consider the telephone and by-mail options.

There are also many companies online who offer credit monitoring services that may be worth considering if you have complex personal finances or a business. They also offer the convenience of ordering your reports for you and sending them out annually (or more frequently as needed). For general personal purposes, the free reports should be sufficient as a starting point.

Finally, your credit report is not the same as your CREDIT SCORE. The report will show your history and help you find any issues you need to address. Credit score reports are generally not free.

2. ORGANIZE YOUR PAPERWORK

In every cluttered home office or family kitchen you’ve got a good chance of finding a bottom drawer crammed to the gills with ‘important papers.’ Let’s start here.

Organizing your personal paperwork doesn’t have to be difficult. It can be fun… lol… probably not, but we love when books spout that kind of garbage. Paperwork sucks, but it sucks more when you are in a crisis and can’t find the information you need.

Everyone needs a filing system – period. There are all kinds, from the very simple to the ‘Beautiful Mind’ level. Whatever you use, make life easy on yourself (and anyone else who may need to go digging if you are unable to).

Here are some tools for organizing your personal paperwork.

At the bare minimum, consider picking up a classic accordion folio and use it to keep sorted documents from credit cards, car loans, phone and utility companies, bank statements, insurance policies, mortgage statements, and anything from the government.

It is also a good plan to keep a “VERY IMPORTANT DOCUMENTS” folder with things like W-2s, T4s, notices of assessment, and annual reports from the above creditors and services. These are most handy at tax time and will make your returns a breeze.

Should I go paperless?

If you have trouble managing your finances, I would suggest avoiding paperless statements – just make sure you have a FILING SYSTEM as previously discussed. Having a physical copy can be very helpful in visualizing your spend and organizing your finances. You can always use your phone to snap a photo of any “important papers” and store these in a secure folder. However, if you are more comfortable managing your statements digitally, there can be cost savings in going to digital-only. Some banks for example will incentivise this by charging a fee for paper statements or offering a credit for going paperless. Do so at your own risk and ensure that you are backing up your digital documents regularly.

How long do I keep these files?

Short answer – at least three years. Better yet, seven. The IRS can request receipts and documents for up to three years after your filing, but there are cases in which they can go back as far as seven years. If everything for the tax year is contained in a handy, organized folio, you should have no problems.

3. ENSURE YOU ARE INSURED

When SHTF, you’ll be glad you took the time to cover this step. Floods, fires, hurricanes, plagues, radioactive monster attacks – they happen. Keep your policies current and make sure they have the right coverage for your needs. This is a great book about insurance that has saved our bacon more than once:

What is the minimum?

Depending on your situation, you’re insurance needs can vary. Here are the essentials:

▪ Home Insurance: It’s not required by law most areas, but may required by your lender if you purchase your home with a mortgage. The amount and type of coverage however will be different depending on the value of the home and its geographic location. Call a broker in your area and ask for a free consult.

▪ Vehicle Insurance: again, not all states require it, but there are serious advantages to having it. There are plenty of options to wade through, but you’ll want to determine your minimum liability and collision levels, as well as the deductible for claims. Other coverage such as theft may be optional.

Worth considering:

Renter’s Insurance: Yup, you can insure a property that you are renting. This will offer options for replacing contents in the event of damage or theft. It’s usually pretty affordable and depending on where you live, may be well worth the investment.

Life Insurance: Nothing says “I’m a grown up” quite like confronting your own fragile mortality. Despite what you may think in your 20’s, life insurance is not just for ‘old people.’ Death comes for us all, and half the commercials during Wheel of Fortune will tell you that your loved ones will thank you for locking in some life insurance. If you are a younger person and still feel untethered from your eventual departure form this mortal coil, ask the HR department at your employer if they have affordable basic coverage for things like your awesome funeral if you should perish while ripping sweet flips on your motorbike. There also benefits to getting insurance while you are young and free of health issues, such as locked in premiums and no medical exams.

4. YOU MUST HAVE A LEGAL WILL

Again, sorry to get dark here, but an adult thinks about other people nearly as much as they think about themselves. We’ve already covered one of life’s inevitabilities in the tax discussion, now let’s talk about death.

A legal will isn’t just for stodgy old estate owners. It’s for everyone. A legal will is not for you – sadly, you won’t be there to use it when the time comes. It’s the place to outline your wishes for your children, assets, and treasures. If you don’t have a will, it can be a real nightmare for your loved ones to sort out your life when you’re gone. Save them the aggravation and make things legal and clear.

Here is a kit you can use to knock this one out and feel like a real GROWN-UP when you tell your friends that you have a LEGAL WILL. Wow. That’s serious adulting!

5. IMPORTANT DOCUMENTS

Now that you’ve got all of these items sorted out, it’s time to make sure your important work is SAFE and accessible when needed! There are lots of ways to safeguard critical documents, including; safe-deposit boxes, home safes, family members, and 3 rd party trustees.

Safe Deposit Box

▪ Advantage: separate protected location for your important items and documents.

▪ Disadvantage: only available during bank hours and may be inaccessible in emergencies like floods and over the holidays. These boxes can also be costly to rent and space may be limited.

▪ This option may be appropriate for high-value items that you don’t need quick and easy access to such as bond certificates, inherited jewellery, birth certificates, legal wills, 401Ks, tax returns, mortgage documents, etc.

▪ There plenty of options for deposit boxes from banks, to storage locker companies, to shady pawn-shops. Chose wisely and ensure that you are confident that you are receiving the level of security you are paying for.

Home Safe

▪ Not only for the uber-rich who want to keep a few hundred grand in cash around, a small home safe has a few key advantages. Your documents are accessible any time and you can select the appropriately sized safe for your needs. 3 rd Party Safe-Keeping

▪ You could decide to keep copies of highly critical documents in a home safe and trust copies or originals to your attorney or family member. Wherever you chose to store your documents and valuables, it is important that you keep original documents safe and secure. It is also a good plan to photocopy items in your daily carry such as your driver’s license, health plan card, and credit cards. This will be a good resource if you happen to misplace one or all of these items and need to secure replacements. And please, do not put your important documents at risk by, for example, carrying your birth certificate in your wallet or purse. This is not a critical daily carry and can be taken out of safe storage on the rare occasion that it is needed.

▪ Here is what we use. It is large enough for all of our critical documents and treasures, as well as being fire and water resistant. We keep it in a place that can easily be located if your home were destroyed, but that is hidden well enough that someone wouldn’t find it if they were robbing us blind:

6. MAKE A BUDGET

This can be as simple or as complex as you want it to be. The important part is that creating a budget will facilitate building financial discipline by formalizing your goals and showing you what you need to do to reach them.

Download a template (no need to reinvent the wheel) and refine it for your needs. Plenty of apps and spreadsheets are available to support this important activity. You can also read up on personal budgeting with some of these great resources:

At its core, a budget will record and tabulate income and expenses. If your income matches or exceeds your expenses, you’ve got a good starting point for a balanced personal budget. What you do with your excess income is up to you and your budget will help formalize your goals for savings, investing, and FUN.

We have covered this in-depth in another eBook if you want to rein in your spending and build some investment capital!

7. DEBT – YAY OR NAY?

Debt is not a curse word. We can say it aloud and we can discuss it. Carrying some debt is okay. And if used properly, it can be a useful financial tool for growing your empire. Examples are low-interest mortgages and justified business loans. These must be managed and acquired strategically to be useful as runaway debt will sink even the strongest swimmer.

What we really need to focus on is reducing frivolous high interest debt. Credit cards, payday-loans, reverse mortgages, margin accounts – all of these should be on your hit list for paying off as soon as possible. They generally carry high interest rates and if you miss payments, you can say goodbye to your sterling credit score.

Prioritize paying down this debt in your budget, and avoid going deeper by consolidating into lower interest loans with more forgiving payment terms if you are in real trouble. We also cover this in depth in STOP SPENDING, START INVESTING eBook available for FREE in the SHARK DEN.

8. EMERGENCY FUND

Have you ever noticed that your ‘problems’ have gotten more expensive as you have grown up? In your teens, there were all sorts of problems that could be solved with $20. “I need money for the movies. I need cash a 6-pack and some chips.”

In our 20’s we meet a new friend, the $100 problem. “I need a bus pass to get to college. My motorbike has as a flat. My boyfriend got a speeding ticket and needs cash.” When we’re just starting out, our problems are less expensive because our empire is quite small.

Welcome to your 30’s, may I introduce you to the THOUSAND DOLLAR PROBLEM? “The dog is sick. Need to re-pave the driveway. Car needs a new set of tires. Grandma is visiting and we need a pull-out sofa. Buying a house – why do I need to pay a lawyer?!” Yup. These are going to stack up as part of your daily adult life and many of them will come out of left field.

Let’s be clear: THE VAST MAJORITY OF PROBLEMS ARE NOT EMERGENCIES. Make a list for yourself of things you consider to be emergencies and earmark this money for those ONLY. Replacing a broken snowblower is only an emergency if you don’t own a shovel (Go Canada!).

Here are some ideas on preparing for these little lovelies.

▪ Open a second savings account at your bank and set an automatic deposit from every paycheck. Lock up the card and never think about it again.

▪ Open a savings account for specific purpose expenses that may arise unexpectedly – example: pet healthcare. Determine the maximum possible amount for this (I’d say start with $5,000) and make sure you’ve got it for when you need it.

▪ Save all of your petty cash (make a game out of it – call it “FiverSurvivor” and see who can go the longest without spending a $5 bill)

Emergency funds are different than saving for retirement or putting away money for your kid’s schooling. This must be a separate pot of money that you actively avoid spending. Make it easy to add to and difficult to spend

Lots of financial gurus suggest squirrelling away a minimum of 2-3 months’ expenses in the event you find yourself out of work or faced with a significant health emergency. More is better – shop around for a high-interest savings account that allows your money to earn interest, but keeps it relatively liquid for the previously described circumstances

Learning how to handle an emergency without throwing money at it is a valuable skill. Getting a flat-tire on the side of the road can be solved in a variety of ways – and for a wide range of costs. Learn some essential skills such as fixing a flat, shutting off your water / hydro, unclogging a drain, and treating basic medical issues. You’d be surprised at how quickly you can deescalate an emergency and give yourself time to find a less costly solution. The faster you need something and the more desperate you are, the more it’s going to cost you!

9. WHAT’S NEXT?

If you’ve made it this far, you are well on your way to Financial Adulting! Congrats!

The mere fact that you are actively researching these important steps is a testament to your commitment to Financial Adulting. You are well on your way!

Thanks for reading the ebook from SHARK INVEST! It is our pleasure to support our community as they strive for financial freedom and success! Hey – while you’re here, why not check out our other resources?