Earlier this year I did a post on my financial goals for the future. I wanted to follow up on that post since we are just about seven months into the year! I tapped CPA Krystal Todd, The Cash Compass, for some real solid advice.
I have known Krystal since she was a young lady and wanted to collaborate with her so our audiences can achieve financial freedom and literacy! She has always been passionate about finances and has been preaching about it since she can remember. She majored in accounting in college and took plenty of finance classes, which further sparked her interest in working with numbers. After college, Krystal continued educating herself on personal finances through courses, memberships in investing groups, and research above all.
When asked about credit cards, she says it’s SO important to have a credit card, not only for building your credit score. There are plenty of perks including points, mileage, cash back, extended warranties, extended returns on purchases and much more. A caveat is to use it responsibly. It’s kind of like having a drink if you aren’t responsible, it can get you in a lot of trouble! Always pay the balance off in full, don’t max out your cards, and don’t close out old cards. Practicing these rules at a minimum will allow you to maximize the benefits of your credit card.
I asked Krystal for her top 3 budgeting tips. Here’s what she advises: 1. Establish a budget! Have a full understanding of your expenses. How much do you bring in a month? How much do you spend? How much debt do you have? How long will it take to pay these things off? If you can’t answer these questions immediately and confidently then you haven’t budgeted yet! Take time to assess your financial picture so you can develop a strategy.
2. PAY YOURSELF FIRST. Don’t pay rent first, don’t pay Verizon first, and damn sure don’t pay your cable bill first, be sure to line your own pockets FIRST AND ALWAYS. Now, this doesn’t mean go past due on your bills, it means to understand that you and your family are more important than anything. Put money aside so that you can establish a life of freedom and the ability to make whatever choices you want because you won’t be shackled by your debt. Automate your savings and if you see that you are spending more than you make you need to start cutting expenses, but never cut your savings. You can do without cable for reality tv, but not having money to take care of yourself is criminal.
3. Monitor your budget and net worth frequently. It’s not enough to establish a budget and never look at it again. She personally manages her budget at least three times a week, to make sure she hasn’t overspent. By keeping track multiple times during the week, you will have a constant reminder of your goals and will be more mindful of your purchases.
Here are 3 tips in case any of you are interested in investing. Research is the most important thing when investing. You do not want to blindly throw money into anything without getting a full understanding.
1. Get comfortable with what you’re investing in. Whether you choose stocks, bonds, real estate, your own business, commodities, precious metals, etc. Be sure to understand what it is you’re getting yourself into.
2. Do not “set it and forget it”. If the extent of your investing is putting money into a 401k, you are doing yourself a GREAT disservice. Be extremely active with your investing, after all this will determine your quality of life not only now, but in your golden years. You have to constantly assess where your money is at and if that is the best use for it
3. Evaluate your returns! This really applies to any money you spend but keep in mind you invest to get a return. At least quarterly see how your investments are performing and if it makes the most financial sense. This applies with education too. If you are spending thousands on your education will that generate a much larger salary? If not you should definitely consider all your options.
Since we are in such a digital era, I wanted to tap into any app recommendations to get us on the right track. As far as financial literacy she doesn’t have any apps but she strongly recommends doing your own research online for certain topics. Please check out her YouTube channel, The Cash Compass, for videos walking you through personal finance as well as investing. For budgeting, she loves the “mint” app. It allows you to create savings goals, establish budgets for certain categories, track your net worth, and so much more. It also alerts you when you have spent over your budgeted amount for the categories. It takes maybe an hour or so to set up all your accounts and get acquainted with it, but it’s a great tool to use so definitely worth it.
For those of you who may need to improve your credit score, we spoke on ways to improve it. Krystal advises making payments on time every time, this makes up 35% of your credit score. Paying on time makes the biggest impact on your credit score. Next would be to maintain low (or no) balance on your card as this makes up 30%. Generally, you should keep a balance below 30% to keep your credit score high. She breaks down all the components of your credit score in a video, I’ve linked it here,
If you didn’t know, I’m old. Things like retirement are popping up in my head. So I wanted to know when is best to prepare for it. I am late to the party, as she said I need to start prepping for it RIGHT NOW! The concept of compound interest is powerful and works for you every single day. The longer you wait, the bigger the difference it could make in your total amount when it’s time to retire. For example, if you started working towards your retirement at 20 years old vs at 30 years old, that could make a difference of one million dollars! So get started ASAP.
How many of you have a financial advisor or accountant? I wanted to know if that is a service we all should have. Here’s what Krystal said: Absolutely not! In fact, even if you have an accountant or financial advisor, you should still be fully involved in your finances. Accountants and financials advisors are doing a job and selling a service. While they will care about your finances, their main concern is getting food on their plate. It’s up to you to take control of your financial situation and focus on how you can build your portfolio. A lot of times they will offer you only paper assets. Keep in mind that having a “diversified portfolio” doesn’t only consist of stocks and bonds, as those are all paper assets and that’s what financial advisors sell you the most. Learn what your options are, then move accordingly.
The Cash Compass can lend us some direction on whether there is a recession coming or not. Here’s what she thinks about that: It’s hard to say because no one can time the market, but I would assume within the next 6-24 months. There is already talk about lowering the interest rate in July, which may sound great, but it’s an indication of a weakening market. Think about it, if you had a business, would you lower your costs while business is booming? Absolutely not, like sales, a lower interest rate is to generate more activity from businesses and individuals. The federal reserve typically lowers rates only to stimulate the economy, so I would imagine they would announce a recession within the time frame mentioned above. Remember, a good stock market is not indicative of a good economy. Pay attention to what they don’t say! How can we prepare?
1. Pay off high-interest debt as much as you can
2. If you are invested in stocks PLEASE make sure you have an understanding of what you’re invested in, and reallocate your money if necessary because I believe those will get hit the hardest.
3. Try not to bounce around from job to job right now. In the event of a recession, companies will likely keep their employees with more seniority longer than a new hire.
4. Keep cash on hand for emergencies and investing. The rich see recessions as a big sale. Sounds awful but it’s the truth. Depending on what kind of recession it is, they benefit because they buy stocks and real estate at a “discount.” Save your money so you can do the same.
The information she wants to emphasize to us: “PAY YOURSELF FIRST,” this will lead to financial independence as well as financial freedom. Unlearn the myths that you have been told. Credit cards aren’t “bad” when used correctly. You do not need to keep a balance to build your credit. Savings are for losers!! You must invest responsibly for a good return. These are things we are not taught in school, but we absolutely need these tools if we want our family to live a life free from financial shackles. Your money and net worth won’t grow overnight. It’s a lifelong journey that is full of benefits as long as you stick to it. Once your debt is no longer a factor in your life things will change dramatically and the idea of financial freedom will become a reality.
I know we all love to discuss fashion and lighter topics. But, above all, I would love for 3TheChicWay to be a great resource of knowledge and inspiration. I hope this post taught you something, and you are inspired to get your finances in order. I want all my ladies to get in formation to financial freedom. If you have any other questions for Krystal to answer, please drop them below. May our bank accounts be as chic as our closets!