Why Sticking to a Plan is So Hard and How to Make it Easier

Sticking to a budget, like sticking to a diet is almost impossible because in both scenarios we set ourselves up for failure. We say that we’ll NEVER eat sugar again or that we’ll NEVER go shopping or NEVER buy that amazing smelling $30 candle at the farmer’s market (true story). Who can possibly live up to those expectations?! Certainly not me.

That’s not to say that following financial rules isn’t important, the rules just need to be ones that you believe in and are manageable. Which do you think would work best for you? I’d love to know!

1.    Limited Cold Turkey – once I’m really entrenched in a habit (i.e. buying my lunch instead of making it, online shopping all day long, going to the more expensive grocery store) it can be really hard to break it, even if I’m really motivated. This is when I use my limited cold turkey system. I pick an amount of time – usually one month, but sometimes slightly more or less depending on my goals – and commit to a NEW habit that will replace my old one. For example, I had gotten into a pretty dangerous online shopping habit recently and realized that not only was I spending money that I wanted to use for other goals, I wasn’t actually buying things I was excited about (double whammy!). The real reason I online shop is because I need a break from whatever else I’m doing and love looking at pretty things. So for my new habit, I committed to spending time researching art museums that I want to visit -- who has the collections I’m most excited about? Why? Is it the color? The scale? Whatever it is, it is better than buying a cropped cardigan I’m going to regret owning tomorrow. I mean, really, why did I cut the tag?!?

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2.    Gradual Shift - This is my go-to when I know that moving too quickly will put me right back where I started, pronto. I especially love this for reaching savings goals -- slow and steady wins the race, friends! I also use this for completely non-financial habits. For example, I used to be a pretty intense morning person. I would happily get up at 5am, go for a run, shower, eat a sit-down breakfast and read the news all before heading off to work at 7:30am. This system worked wonders for me for YEARS. Then I started living in two time zones and it all went to hell in a handbasket (pause -- can we talk about how incredible that saying is?!). I now live mostly on the West Coast and work with clients who live on Central, Eastern and Pacific Time. My husband works in film and tends to have more late nights than early mornings. Since I love him and would like to see him ever so often, I gradually shifted my sleep schedule to be more aligned with West Coast norms. I now usually get up between 6:45 - 7:45am and workout in the evenings. To make this shift I worked in 10 minute increments -- going to bed 10 minutes later, waking up 10 minutes later until I got to a better place. WARNING: to do this without killing yourself you need to be willing to take it SLOW, so this only works with something you feel really committed to.

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3.    Pick-a-Day - I have found loads of success with this system, especially when I’m trying to do something that is time consuming, like researching investment options, rolling over retirement accounts or finding the perfect life insurance. When it came time to rollover old 401(k)s and 403(b)s a couple years ago, this system was my lifesaver. Instead of pretending that I was going to spend time on it 5 times a week (I wouldn’t and won’t) I committed to one hour per week. One hour per week. Think of the long term task you’ve been avoiding tackling -- you can absolutely commit to doing it for one hour a week and it will seem a lot less daunting this way. If I had a more regular schedule, I would have picked one day and time and kept it the same each week. That doesn’t work for me, so instead each Sunday I look at the coming week and schedule it where it makes the most sense (NOTE: I put it on my calendar with an alarm and do NOT move it/delete it/ignore it).

What works for you?!

Politics 2020: The Money Side of Things Post #2: Elizabeth Warren’s Money POV

This post is part of a larger series on the 2020 Presidential Race and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas. I will be interjecting regularly scheduled money posts with a political post once a month.

Welcome to Verdi’s first deep dive into a Democratic Presidential candidate! Each of these posts will include the following: 1) a quick and dirty fact list about the candidate, 2) an analysis on the candidate’s views on key money related issues and, 3) the Verdi Advising opinion on the candidate. 

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Elizabeth Warren Facts:

  • From Oklahoma

  • Background in Education & Law 

  • Law professor for more than 30 years at:

    • Rutgers University

    • University of Texas-Austin

    • University of Michigan

    • University of Pennsylvania

    • Harvard University

  • Massachusetts Senator since 2013

  • As a Senator, she has focused on child care, health care, improving the functioning of the finance industry and fighting corruption.

  • Has two adult children & three grandchildren

  • Married to Harvard Law School Professor Bruce Mann for 38 years 

  • Has a golden retriever (so American!) 

Elizabeth Warren is a wonk in every way. As such her plans are extensive and numerous! You can check them all out here. Since we’re pretty sure you don’t want to read a thousand page dissertation on all of her beliefs (and we don’t want to write one), we’re only going to dive into a few of her most key financial plans. 

Where She Stands On Taxes

The short answer? She wants to tax the wealthy more. The details: 

  • Estate Tax: decrease the size of inherited estates that get taxed from $22 million to $7 million

  • Ultra-Millionaire Tax: households with a net worth of $50 million or more would pay an annual 2% tax on every dollar of net worth (not income!) over $50 million and a 3% tax on every dollar of net worth over $1 billion. 

    • This change will result in $2.75 trillion in tax revenue over a 10 year period 

    • This will only affect the top 0.1% wealthiest of Americans

The Verdi Vote: 👍 (Decreasing the wealth gap in this country is necessary in order for us all to have financial security)

Where She Stands On The Economy

Warren is nervous about our economy. She sees particular weak spots in: household debt, corporate debt & the manufacturing sector. She recommends that we fix these weak spots and therefore avoid another financial downturn by: 

  • Increasing the minimum wage 

  • Cancelling (a lot of) student loan debt

  • Lowering rent costs (see more on that below!)

  • Lowering child care costs (see more of that below!)

  • Enforce lending guidelines for corporations 

  • Strengthen the manufacturing sector by implementing Warren’s Green Manufacturing Plan 

The Verdi Vote: 👍 (we agree with her on the weak spots of our economy and like her proactive approach to fixing the issues)

Where She Stands On The Cost of Living

SOCIAL SECURITY

Warren recognizes that most people (50% of married seniors & >70% of unmarried seniors) rely on social security, yet the benefits are often much too low to cover basic needs. Additionally, (sorry fellow Millennials), the account that funds Social Security benefits is in trouble and unless big things change, we will not receive even close to the benefits needed to cover our costs. Based on this disparity, Warren proposes that we immediately and aggressively expand Social Security benefits. We’ll pay for that expansion by levying additional taxes to the richest 2% of Americans. 

The Verdi Vote: 👍 (we’ve paid into Social Security and want to see that return!)

HEALTH CARE

Warren supports Medicare for All, which basically means that we’d all have health insurance through the Federal government instead of through private insurance companies. She has not explained how she proposes to pay for this change. 

The Verdi Vote: 🤷‍♀️ (we need to see the #s)

UNIVERSAL CHILD CARE

As I’m sure no one reading this will be surprised by, child care is expensive! The national average cost is $1,230/month. Yipes Stripes indeed. 

Warren proposes a universal plan in which the federal government partners with local providers to create a network where families can find the right kind of child care for them (we’re envisioning that this will look similar to the Affordable Care Act website, but that’s total conjecture). The child care will be free for families that make less than 200% of the federal poverty line (i.e. if you’re a family of two and make less than $33,820 it’ll be free). The cost will stair-step up from there based on your family’s income. 

The cost of this new program will be covered by Warren’s Ultra-Millionaire Tax. 

The Verdi Vote: 👍 (we’d love to make baby decisions without focusing solely on the $$ implications)

AFFORDABLE HOUSING 

Warren proposes to reduce rental costs by increasing the supply of affordable housing. Based on her plan, the Federal government would invest $500 billion over the next decade to build and improve housing units. She projects that the program will result in a 10% decrease of rental costs across the board. 

Warren says that she’ll pay for this investment by changing our estate tax law. Currently, heirs don’t pay estate taxes unless they inherit more than $22 million. Warren’s proposal would lower than number to where it was when George W. Bush left office - $7 million. 

The Verdi Vote: 👍 (rent is bonkers!)

Where Verdi Stands on Warren

Overall, we like Elizabeth Warren and her policies, but recognize that her views are not likely to come into fruition, or at least not many of them. Presidents often only have one or two big policies that they are able to move through legislation (think: the Affordable Care Act for Obama). We love that, except for Medicare for All, she has clear plans and transparent proposals for how to pay for the additional costs associated with those plans. 


Want to give to the Warren campaign? Click here.

Politics 2020: The Money Side of Things // Post #1 Inundated

This post is part of a larger series on the 2020 Presidential Race and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas. I will be interjecting regularly scheduled money posts with a political post once a month.

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In a lot of ways I’m a recovering political junkie. I used to teach Civics and AP Government, was an avid NPR listener, and read at least a few articles in the NY Times, The Washington Post, or The Guardian a day. I’ve cut back a lot since Trump won the presidency. I still listen to NPR and I read political articles regularly, but if I read more than a few a week I tend to get overwhelmed and it’s no wonder: As I write this there are 21 Democrats and 3 Republicans running for the 2020 Presidential race and there are still 15 months until the election!

Politics and money are inevitably intertwined:

  • Running a successful campaign (think TV ads, social media campaigns, personalized buses, and oh so many suits) costs millions of dollars, in fact the 2016 Clinton and Trump campaigns combined cost $1.16 BILLION dollars. Some of the $1.16 billion is from the candidates themselves, but a lot of it is from individual, corporate and organizational donations.

  • Because of a 2010 Supreme Court ruling there are ways to fund campaigns at a much higher level (anyone heard of Super PACs? They’re these pesky organizations that spend gobs of money trying to get specific candidates elected).

  • Super PACs make it possible for big corporations to give unlimited amounts of money (indirectly) to candidate campaigns. That’s why the 2016 campaigns cost well over a billion dollars and only $550 million in 1992.

  • Once candidates are elected - either to the Legislative or Executive branch, they wield immense power on the day-to-day financial reality of American citizens. They help craft tax laws, create and enforce trade regulations (anyone else notice that goods from China are getting way more expensive?), and impact the country’s financial climate (which is all based on how we feel about money).

While the money involved in itself fascinates me, I think the important thing for us to do as voters in the upcoming election is:

  1. Understand what each candidate believes and proposes financially (i.e. tax policy, trade regulations, paid family leave, health care coverage)

  2. Know how we can monetarily impact the political outcomes of the upcoming election (and all elections!).

Over the next several months I will be sharing posts on each of the candidates’ financial views (let’s hope a few drop out so I don’t have to do 24!) as well as information on how you can best get involved.

Curious about a specific candidate or specific financial issue? Never want me to write about politics again?! Email me.



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White Picket Fences: Is the American Dream Dead? // Post #3: Buying Nuts & Bolts

This post is part of a larger series on buying a home and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

Okay, so you want to buy a home. Yay! As important as making that decision is, it is unfortunately a pretty small hurdle in the grand scheme of things. Below, I break down the hit list of top financial terms and decisions you’ll be faced with. Don’t worry, it isn’t as scary as it seems!

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Down Payment: The amount of money you give the lender so that they will give you your home loan 

  1. The math: you buy a home for $800,000 and you give the lender $160,000 upfront. You now owe $640,000 plus interest.

  2. You may have heard that a down payment of 20% is ideal, and that’s true! If you are able to put down 20% you show the lender that you are more likely to be able to pay off the loan as agreed and, therefore, aren’t required to pay for Private Mortgage Insurance (PMI).

  3. Getting to that 20% number can be incredibly daunting, especially if you don’t have outside help. If you’re having a hard time getting there and want help, let me know! 

2. Interest Rate: The fee that you have to pay the lender for letting you borrow the money to buy your house. 

  • The lower the better! The current average is hovering just under 4%. If you have a strong credit score and down payment you’ll likely get quoted something similar to that. 

  • Your interest rate will be based on national interest rates at the time of your purchase (which, unfortunately, you and I can’t change) and your credit score (which you can change!)

  • If your credit score isn’t as stellar as you’d like it to be, it is important to start working on improving it before you apply for a home loan. Having a low credit score can make it hard to find a loan, or find a loan with a reasonable interest rate. Even a small improvement on a mortgage interest rate can save you thousands (or more) dollars!

3. Mortgage Payments: The monthly amount you pay back to your lender.

  1. Mortgage payments are made up of interest (fees), principal (the original amount you borrowed) and, potentially escrow (see below). 

  2. When you first start paying back your mortgage you will actually mostly be paying interest (!), but over time the breakdown between how much of your payment goes to principal vs. interest improves. 

  3. If you are able to pay more towards your mortgage each month, that is wonderful! Make sure to pay towards the principal so that you are paying off the original amount and not just paying fees to the bank. 

4. Escrow: The lender pays your taxes and insurance on your behalf and adds this amount to your loan

  1. You don’t have to do this, but for folks who aren’t great at saving up to pay large lump sums to the city, state or insurance companies every year, this can be very helpful. 

  2. Escrow doesn’t cost more than paying these costs directly, but it does mean that you don’t have that money sitting aside and potentially earning interest in a savings or investment account. Instead your lender has the money and pays the costs on your behalf. 

5. Closing Costs: The pesky extra costs for closing on a house that seem low in comparison to the cost of the home, but high in comparison to everything else. This is in addition to what the realtors make (although what they make is just part of the overall cost of the home, not something you need to pay separately.

  1. Make sure to save up a few extra thousand for these babies. They are usually 2-5% of the home price. 

  2. Sometimes you can get the seller to cover the closing costs (yay!). It is always worth getting your realtor to give it a shot. 

Phew. That was a lot of information all at once. If you’re still anxious, confused or just want to talk out your decision making process, let me know!

White Picket Fences: Is the American Dream Dead? // Post #2: Finding Your True (Home-Buying) Purpose

This post is part of a larger series on buying a home and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

People buy homes for two reasons: either they want to live in the home or they want to make money on the home. Interestingly, most people who want to live in their home also hope to make some money on it in the future, which is completely legitimate. However, it is important to go into the home buying process knowing which of the reasons is more important to you. The way you buy the home and your decisions on how to handle the home will be different depending on your end goal. There has been a recent trend of buying for the sole purpose of renting the home on VRBO or Airbnb (or any other short-term rental site). That can be a great way to make money, but it comes with its own risks and challenges. The laws regulating those sites are constantly changing, making it impossible to use them for this purpose in many cities and being an “Airbnb landlord” can often feel like a time consuming part-time job.

If you’re not sure where you stand, take a few minutes to take the home buying quiz below. (If you’re still not sure, but you know you want to buy a home, I can help -- email me!

HOME BUYING QUIZ

  1. If you never made a profit on the home, but you really loved it, would that be okay?

  2. If you knew you’d be able to rent a home for more in an area you don’t want to live in, would you go ahead with the purchase?

  3. You hate the downstairs bathroom, but you know renovating won’t change the rental or selling price. Do you renovate?

  4. The market is hot! Do you sell now or wait to pass the home down to your children?

  5. The idea of being a landlord gives you the anxious sweats.

Time to score yourself!

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If you scored 3 or higher you want to be a live-in owner!

If you scored less than three you want to make that money, honey!

Now that you’ve decided on your reason for home ownership, go back to that pro con list from last week (below!) and review. Does knowing your reason change whether or not you want to buy? Does it change how quickly you want to move forward?

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Next week we’ll dive into the nuts and bolts of buying property. This week I recommend spending your free time on Pinterest creating mood boards of the gorgeous kitchen you’ll have or the great rental spot you’ll own.

White Picket Fences: Is the American Dream Dead? // Post #1 Is it Your Dream?

This post is part of a larger series on buying a home and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

What’s the first thing that you think of when you hear the term, the American Dream?

White picket fences? 2.5 kids? A house in the suburbs?

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Americans grow up believing this dream and, regardless of whether or not we want it for ourselves, we assume it is achievable. I’ve got some bad news: In the 1940s the American Dream wasn’t as achievable as our cultural norms would have had us believe, but it is even less likely now. The average home in the U.S. costs $200,000 and significantly more in large cities. The average price in Los Angeles is $849,500 and in New York it’s $916,000. Compare that to 1940, when the average home cost $30,600 (taking into account inflation!). Can you imagine how great it would be if you could buy a home with a deposit of $6,120?!

One of the most frequent things I hear from clients is that they feel like they should be buying a home, but can’t figure out how to do it financially. My next question is always, “why?” Not why can’t you figure it out (that’s totally fair and where I come in), but why do you feel like you should buy a home? If it is because you want the independence, the ability to make significant changes to your living space or want to get a return on your investment, then buying a home could make sense. But if the reason is that it just seems like the right thing to do at this stage of your life, then that is a terrible reason to move forward with this kind of purchase.

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Owning a home is a lot of responsibility. It is expensive, and for some (most) people, stressful. So step #1 is always to figure out if you really want to be a homeowner in the first place.

I never make decisions solely on the basis of a pro-con list, but they can be very helpful when trying to think through a big decision.

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If you fall fully on the pro side, that’s great! The next step is figuring out why you want to own a home and how to make that happen (we’ll dive farther into that next week!). If you fall on the con side, that’s okay too! You are not required to own a home. And that old adage about paying rent = throwing away money? Not totally true. Although you can eventually own a home outright and not have to pay mortgage payments, you will always have to pay maintenance costs (which can be steep!) and taxes. And that other old adage about always being able to sell a home and make money off it? Also not totally true. That really depends on the market and your timing. Owning a home does not = living the American Dream. Bonus: think of what all you can do if you save up the amount you would have used for a deposit!

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Credit Cards: A Love Hate Relationship//Post #4: Why Credit Cards CAN Be Awesome

This post is part of a credit card series & I want your input!

Click the button at the end of the post to ask me all your burning credit questions.

For those of us with a bad history of abusing credit cards (cough, cough, ME), it can sometimes feel easier to just pay for everything via debit or cash. Paying with a debit card is safe. You know exactly how much money you have and you know how much you’ve spent because it is simply not there anymore. When I finally ended my rollercoaster relationship with credit card debt a few years ago, I was determined to never let it happen again. In my mind, the best way to do that was to avoid credit cards like the plague. So, for the last several years I have primarily used debit cards for this very reason. I had exceptions to my rule -- flights always go on my Southwest card, for example -- but for the most part, I only used debit. 

After several years, I feel mostly healed from my toxic relationship with plastic and ready to dive back into the wonderful world of credit cards and, let me tell you, it FEELS GREAT. 

Credit Cards are Wonderful Because:

  • The rewards (can be) real! I earn cash back or miles on every purchase I make with a credit card

  • You can time out purchases better. I own a home in New Orleans and have rent to pay in L.A.. That means that on the 1st of every month, a whole bunch of cash leaves my account. I also always have incoming money that hits my account just a few days later. Using credit cards until that money comes in relieves my stress from seeing shrinking checking accounts. (P.S. I sometimes still pull from savings for a few days just to relieve my stress)

  • Credit cards have better consumer protection regulations, which means that you are protected if someone makes fraudulent purchases on your card 

  • When you use credit cards well, your credit score goes up, making it easier to get loans in the future

I’m still me though and I know that I have a tendency to live big in the moment.

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That means that I have lots of systems in place to make sure I don’t get myself into a pickle again. 

My tried & true systems that you should steal: 

  • Set auto payments for at least the minimum amount. This way, even if something goes wrong and you can’t pay the balance, you won’t get dinged for missing a payment.

  • Pay off your weekly spending on credit cards every Friday

  • Set reminders to pay off your statement balances before the due date

  • TRACK YOUR SPENDING! It is really easy to overspend on credit cards if you don’t know how you typically spend money

Credit Cards: A Love Hate Relationship//Post #3: Your Questions Answered!

This post is part of a credit card series & I want your input!

Click the button at the end of the post to ask me all your burning credit questions.

Last week I asked the Verdi insta & newsletter family for their input on this series. The questions below all come from you! Have more questions? Click the button below to email me. 

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Does it hurt your credit score to cancel cards you don’t want anymore? (This question wins for being asked the most times!)

I hate this answer, but yes. A few of the factors that impact your score are hurt by closing cards: 1. Closing a card lowers the amount of credit you have available to you, making it look like you’re using more of your credit than you did before closing the card. 

The math =  You used to have 3 cards with the following credit limits: $5,000, $2,000 and $10,000. Your total available credit was $17,000 and you had a $2,000 balance. $2,000/$17,000 = 11% use of your cards.

Now you have 2 cards with the following credit limits: $2,000 and $10,000. Your total available credit was $12,000 and you had a $2,000 balance. $2,000/$12,000 = 17% use of your cards. Using 17% of your credit is “worse” than using 11% of it

2. Closing cards can lower your credit “diversity” and therefore lower your score.

However, hat doesn’t necessarily mean you shouldn’t close the card! There are ways to do this well, I can help.

Is it better to not have credit cards?

I know plenty of credit card-less people who are thrilled to be that way. They tend to either be independently wealthy, living off the grid, or cast members on Breaking Amish

If you want to make big purchases that you don’t have the funds to pay for all at once (or move to a new apartment) it is really important to build a good credit score and the easiest way to do that is to use credit cards responsibly. 

What is an average score? 

The national average is about 700. That is a pretty good score that will get you decent loan and credit card offerings. To get the best offerings you need to score over 800, but honestly the offerings for 740+ are pretty darn close to 800+. 

What is the ideal way to regularly pay off my cards? 

Note: I’m answering this from the perspective of paying off your cards regularly, not if you are working on paying down balances that have been on your card for more than a month! I’ll get to that doozy next week :) 

The only way to avoid interest is to make sure that your statement balance is $0 before the due date! There are a few ways to do this well. I recommend starting out with whichever option feels best for you and then checking in with yourself after a month or two. If it doesn’t actually feel good, try another option!

  • Pay your card balance after every purchase. This option can feel overwhelming for a lot of people, but if you’re particularly worried about getting into debt or have experienced debt in the past it just may feel right.

  • Pay off your balance on the same day every week. I love doing this on Fridays so you can go into the weekend feeling like a money badass! 

  • Pay off your “statement balance” before the due date. You can either set this up as an auto pay or set up a recurring reminder for yourself to pop in and manually do it. 

Is my score hurt if I get rejected for a card? What should I do next? 

Sort of. Your score isn’t affected by the rejection, but it is affected by the lender doing a “hard check” on your credit history, so your score is getting hurt whether you get approved or not. 

If you do get rejected, it is important to go through the following steps:

  1. Do you need a new card right now? If not then hold off for at least 3 months while your score improves.

If you do need a new card it is important to apply for one that you are more likely to get approved for. Credit Karma has good recommendations based on your score and your bank can likely give you a good estimate of whether or not you’d be approved, but there are no sure fire bets. If you want help figuring out how to determine the right card for you, let me know!

Credit Cards: A Love Hate Relationship// Post #2: Fix Your Score

This post is part of a credit card series & I want your input!

Click the button at the end of the post to ask me all your burning credit questions.

Last week I started a series on credit cards and dove into my personal not-so-rosy history with them. Sharing my dirty laundry is cathartic, but beyond that I hope it helps my community (you!) feel better about their own personal experiences. 

One of the most valuable things I did at the start of my money journey was get serious about learning. I started my career as a high school social studies teacher and when I was asked to teach my high school students a course on financial literacy in 2010, I did what any good employee would do and claimed complete confidence in my expertise on the subject. I then went home and freaked out. I knew NOTHING about financial literacy. I knew a bit about economics, but that really wasn’t the same thing. Instead of ignoring the problem as I was tempted to do, I decided that this was a sign from the universe that I needed to get my own money situation in order. I needed to school myself.

So I read. And I read. And I read. I consumed every piece of information I could find on personal finances. I read extreme blogs from people who absolutely didn’t know what they were talking about. I read super dry articles from business publications. I watched videos of screaming financial gurus (a la Suze Orman, Dave Ramsey & Jim Cramer) that just made me master the art of crawling into the fetal position. 

In between the extreme and the boring, I was able to start putting together a solid foundation of financial knowledge. One of the things that fascinated me most was how credit scores were determined. Until then, I assumed that the system made sense and that I just didn’t understand it. I mean we were all buying into it, right? So how could it be wrong? I quickly discovered that the whole system was bonkers. Credit score agencies encourage people to use credit and use it frequently. The scores favor those with more accounts and those that have huge lines of credit (amount lenders are willing to give you). Paying in cash was actually going to hurt your chance of earning a badass score. The real kicker in all of this is that you need a badass score if you want to buy a home, a car, a boat or anything else that you won’t be able to pay for in cash (unless you’ve got a yacht fund you set aside for a rainy day)). It’s a total sham, y’all. 

The comforting part of all of this is that once I started understanding the crazy system, I started feeling more and more confident in my own abilities to manage my money. I was slowly becoming that expert that I claimed to be from the get go! And now you can become that expert too. 

Credit Scores Explained: Two Ways

Credit scores range from 300-850 and the higher you are the better. Next week we’ll dive in deeper to what those score ranges mean and how they impact our lives (getting a lease, financing a car, getting approved for a great mortgage), but today we’re going to start with breaking down how the number is determined in the first place. 

1 - Credit Score Breakdown video

2 - If you don’t want to watch a video of me…

Credit Scores are determined using the following data points. Financial institutions track your history in each area and then share that information with the credit agencies (Equifax, Experian and TransUnion). I’m using the FICO breakdown in this article because that is the score that most creditors look at when assessing your credit worthiness, but for the sake of brevity I won’t go into the ins and outs of what FICO is right now. 

SCORE FACTORS: 

  • Your history with credit makes up 35% of your score

    • Do you pay on time? Have you ever missed a payment? Those things matter.

    • The more consistent you are the better!

  • The amount of your available credit that you use makes up 30% of your score

    • How much do you leave on your cards from month to month? How does that total usage compare to the amount that lenders are willing to give (i.e. your credit limits)? Are you maxed out? Maxing out hurts this part of your score!

    • Credit Usage = Total Balances/Total Limit

    • The lower your usage rate, the better (please note this is easier with larger lines of credit!)

  • The length of your credit history makes up 15% of your score

    • How long have you had your lines of credit (credit cards, car loans, student loans, mortgage, etc.)? 

    • The longer the better! This favors older folks and people who got lines of credit at an early age. 

  • Your credit diversity makes up 10% of your score

    • How many lines of credit do you have? Are there different kinds or just one?

    • The more diverse the better. My score actually went up when we bought a house in part because my mix got “better”

  • Credit checks make up 10% of your score

    • How many “hard checks” have you had on your credit? How many times have you applied for new cards?

    • The fewer checks the better

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The next step is to take steps to improve the parts of the score you have control over:

  • Always pay off the minimum each month (need help doing this? Let’s chat!)

  • Call and ask your credit card companies to increase your limit (this helps your usage ratio)

  • Don’t close accounts (the longer you have accounts open the better, so closing accounts will hurt your “length of credit history”. There are exceptions to this rule though, so if you’re feeling unsure let me know!)

  • Check your score for errors (I love creditkarma.com). Checking your score isn’t a hard check so it won’t hurt your score. However, when you apply for credit or a loan they will do a hard check on you and that can hurt your score. If you find an error, it can be removed! It isn’t always a fun process, but it definitely helps your score. 

  • If possible, don’t have any hard checks to your credit for at least 3 months. Hard checks are done by creditors to see ALL of your credit information. They have to get that information from the credit agencies I mentioned above and doing that will impact your score (ugh). Sometimes this feels like a catch-22 because you’re applying for a large line of credit! If you have questions on how to do this strategically, let me know. 

Next week I’ll dive deeper into using your cards strategically.

Credit Cards : A Love Hate Relationship // Part #1: The Credit Card Rollercoaster

This post is part of a credit card series & I want your input!

Click the button at the end of the post to ask me all your burning credit questions.

I’ve had my fair share of credit card rollercoasters. If I’m being brutally honest with myself, my credit card history feels eerily similar to my pre-husband dating history -- I would find a guy who seemed pretty good, the benefits were decent and then one thing lead to another and all of a sudden things would be completely out of hand. At best I’d end up having some annoying crap in my house that I’d have to figure out what to do with, at worst, with a steaming pile of shit to clean up (thankfully not literally). 

Like many Americans, I got a credit card in college. My relationship with it started out okay, but only because I completely ignored it. I was already in the habit of using my debit card (and was privileged with parents who deposited a set amount of money for my “needs” each month). 

After graduating two things happened simultaneously: my parents stopped helping out and I re-discovered this magical piece of plastic that I’d had lying around for ages. At first, I did pretty well at using the card and paying it off each month, but some time early on in my teaching career my relationship with money hit a low point. I was actively working on not accessing the feelings that kept coming up around money and, instead of reacting with caution, I responded by spending with almost complete abandon. I bought things on my card that I knew I couldn’t afford with the belief that “one day it’ll be fine.” In the beginning there were some months that I was able to completely pay off the card, but slowly those months got fewer and farther apart. Eventually I got to the point where I barely looked at my bills, threw random amounts of money at them and often ended up trying to pay off so much that I ended up just needing to use the cards again at the end (or middle) of the month. That sinking feeling  was the same feeling I had with my string of “not so great choices” in men. I would let them stick around for longer than I should have and put up with a lot of pain because it was so much easier than admitting I needed to work on my own emotional well-being. 

I was lucky that no super expensive emergencies came up while I was riding the credit card roller coaster. If a major medical or car bill had made a surprise appearance (their favorite sort of appearance), I would’ve found myself in a situation I couldn’t get out of on my own. 

It took years of personal research (deep dives into the crazy world of online money blogs, tons of books, and, maybe most importantly, creating curriculum for my teenage students at the time), attending grad school, starting a new career, and loads of emotional work for me to finally get off of that credit card debt rollercoaster. I’m here to share everything I’ve learned so that you don’t  have to do all that work on your own! 

Help me help you -- this is the start of a series on credit cards and I want your input! What questions do you have about credit cards? What do you want to know so that you can finally dump that toxic boyfriend? 

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Copy of True Life: I’m a Shopaholic // Post #5: Why We Buy

This post is part of a larger series on shopping and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

We buy things for all sorts of reasons: our old version has fallen apart, we “need” it for a specific event, we are tired, it fit well, it’s pretty, Cara Delevigne wore something just like it and looked effortlessly cool and who doesn’t want to look effortlessly cool like Cara Delevigne? Sometimes we buy simply because swiping a card feels good. But buying is not the problem. Buying without purpose and without the money necessary for the items, is the problem.

Just because there are reasons for buying that are valid, doesn’t mean they’re valid for you and your current lifestyle.

Figuring out why you buy:

  1. Write down the last few things you’ve bought

  2. Why did you buy those things?

  3. Do you think those reasons are valid for you right now? Why or why not?

  4. What reasons for buying feel good to you right now? (Note: this will change over time! We are not stagnant robots, so our reasons and feelings shift)

  5. What are the feelings that come up when you’re thinking about these shopping experiences? What can those feelings tell you?

I’m going to dive deeper into one of the reasons that several of your reached out about — “I buy because it fits.” Although the same thought processes can be used for any reason.

Of all the reasons I listed above, I think buying “because it fits” is the most difficult —it implies that what we currently have in our closets doesn’t fit and therefore makes us feel bad. Whenever our bodies change it is important to make sure we have things to wear that fit us and make us feel good.

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That may mean that at certain times in our lives we spend way more time and money on shopping than others, and that’s okay! One problem with the “it fits” reason is that we can easily get into the habit of always buying when we find something, regardless of whether we truly love the item or if we actually need it. That is when it’s time to review what we really need, want and love. That’s where my favorite closet review comes in!

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Caroline’s Closet Review 101:

  • To successfully complete this closet review you will need:

    1. Your closet!

    2. About an hour of time

    3. A journal/paper/notes app and a pen

Note: You can do this Marie Kondo style and pull everything out of the closet at once or go piecemeal. I completely recognize that not everyone has the time or patience to do the full MK system.

  1. Pull out your go-to items that you find yourself wearing over and over again.

    1. Why do you love those items? Is it something about the item itself (color, pattern, style) or is it something about how it makes you feel (confident, sexy, cozy)?

    2. Do you feel like you have enough of these types of items? (i.e. do you always get to put on things you love in the morning or are you often putting on something you dislike, but feel like you have to wear)

  2. Go back to your closet and pull out the items that you really struggle to wear. 

    1. Why do you own these things? Is it because you have to wear certain types of clothes for work? Is it because you thought you’d like them more than you actually do? Is it because you bought it for a future body that you’ll have when you lose 7 pounds? There is likely something about the item that you liked to begin with. Do you remember what that is? Does it relate back to the reasons you love your favorite items? 

    2. Do you need to keep these things? If you do, why? What could you be on the lookout for that could replace them? 

  3. Create your buy list (and check out mine!)*

    1. List the reasons why you love clothes at the top. Anything new you get should fulfill these requirements!

    2. List out the things you want to buy and, if applicable, the things this would replace. 

    3. Keep this list with you whenever you’re shopping & make sure to update it regularly -- I recommend quarterly, but the frequency should be based on what actually feels good for you. 

*Note: sometimes you don’t actually need to own the things on your list to be able to fulfill your reason for having it. Rent The Runway is perfect for having something special to wear to that event (you know, that event, the one where everyone will be trying to one up each other with their clothing while also somehow looking incredibly laid back?) or for trying out something that pushes your sartorial boundaries without forcing you to commit.

As always, I’d love to hear your questions, your thoughts or your concerns.

True Life: I’m a Shopaholic // Post #4: You Don’t Have to be a Minimalist

This post is part of a larger series on shopping and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

A few years ago I really got into the idea of a capsule wardrobe. For those of you who haven’t gone down enough Pinterest black holes (you go Glenn Coco!), a capsule wardrobe is a seasonal wardrobe of a limited number of items.

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The number of items differs depending on which fashion blogger bible you’re following, but the general idea is that there are strict rules that must be followed to be a successful, stylish minimalist. Anyway, I got really into this idea. Please note, that I did not say I got really into doing this. I think I put one capsule wardrobe together and cheated on it on day 2. Capsule wardrobe enthusiasts would tell me that my cheating was indicative of my poor choices in the wardrobe. But really my cheating was indicative of the fact that I don’t like arbitrary rules or being told no.

My failed capsule wardrobe attempt did not stop me from wanting to change my relationship with buying clothing. I knew that I overspent and that I often didn’t love the things in my closet, but being forced to stay in such a strict box wasn’t for me. What was for me was mindful shopping. Full transparency — I am NOT a master of mindful shopping, but I’ve been working on it for years, have discovered things that work and don’t work for me, and accept that my journey won’t be without flaws.

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Mindful shopping doesn’t have set rules. It doesn’t tell you no. What it does is help you figure out when and how shopping feels good for you and when it doesn’t. To bring mindfulness into your day-to-day shopping experiences try out the following tricks next time you hop on your favorite online store or take a trip to the mall:

  • Before you leave the house (or open the computer), take a few minutes to center yourself. Take deep breaths — breathing in for 6 counts and out for 6 counts. Do this at least 5 times.

  • Check in with your body — what are you feeling? How might those feelings impact your shopping experience? You don’t need to give a judgement, just be aware.

  • Check in with your emotions — how are you feeling? Again, how might those feelings impact your shopping experience?

  • What are your goals for shopping today? How will you make sure to not feel bad if you don’t reach those goals?

  • Are there any limits that you need to give yourself today? They can be monetary in nature or not (i.e. if it fits that isn’t good enough — I also have to LOVE it)

I know this might seem like a lot of work to do before even starting, but once you get into the habit it doesn’t have to take very long and it can mean the difference of leaving a store feeling hollow and drained vs leaving feeling like a fucking badass. And isn’t that really why we buy clothes? To feel like a fucking badass?

True Life: I’m a Shopaholic // Post #3: Mindless Shopping

This post is part of a larger series on shopping and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

Somedays I swear that my brain has been taken over by an evil monster. Here I am, minding my own business in my living room, when all of a sudden, I’m not reading that interesting article from the NY Times anymore, but instead I’m opening 38 tabs in Chrome to check out every possible new shirt that I need from Anthropologie. HOW DID I EVEN GET HERE?!

Have you been there too?

It is a scary place for me. I don’t like the feeling of being out of control and I don’t like the black hole nature of scrolling.

I know this same lack of awareness I feel can happen in an IRL store — ever walk into a Sephora to refill your Stila liquid eyeliner and walk out with a primer, highlighter, under eye mask and a receipt for $175.00? — but I don’t experience that nearly as often. There’s also something about being in a brick and mortar shop, pulling out your Visa, and having a human being ring you up that feels a lot more...real. Online shopping has the ability to sneak into our lives without our awareness. It pops up in ads while we read the news, instagram ads masquerading as actual posts, and, most importantly, in our habits.

I’m not anti-online-shopping as a whole (Nordstrom Anniversary Sale bras are what gets me through the rest of the year) but I am putting my foot down on MINDLESS online shopping. It doesn’t actually bring me joy, instead it brings me a lot of things I never even knew I needed. Newsflash: I don’t need them. Neither do you.

Ways to Stop Mindless Shopping Habits:

  • Remove all shopping apps from your phone 

    • Feel like you can’t remove Prime because you shop at Whole Foods? Take a screenshot of the QR code and save it in your notes app.

  • Put your phone in black and white mode.

  • Unsubscribe from all shopping site mailing lists. You don’t need daily, weekly, or even monthly updates from Revolve.

  • Stop following brands and stores on Instagram. Those espadrilles that look like they’re going to give you the life you always wanted? You didn’t even know they existed before they showed up in your feed. Trust me, you can live without them.

  • Make your phone background something motivating — maybe it is a quote that keeps you going or maybe it is a picture of an empty wallet (only sort of kidding).

  • Remove your payment information from all your favorite shopping websites. Sometimes all you need is to be forced to find your wallet to break the habit.

These habits are deeply ingrained for many of us, so don’t feel bad if you’re still struggling to break the habit — you may just need a little extra support from a money friend like me!

Here’s Whitney Cummings giving some sage advice about (not) shopping at GirlBoss Rally — where I was a proud participant, offering Money Therapy to the GirlBosses in attendance. If you need your own Money Therapy session, I’m here to help.

True Life: I’m a Shopaholic // Post #2: The Hedonistic Treadmill

This post is part of a larger series on shopping and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

Americans are not known for frugality. In fact, our materialism and deep desire for more has been part of our cultural identity since the first European conquerors arrived in America. Our “founding fathers” wanted more freedom – not just because they didn’t like to listen to someone else’s orders, but because they didn’t want to pay taxes. Not long after, Americans participated in western exploration and migration that centered upon the belief that it was the right of Euro-Americans to conquer and own everything from the Atlantic to Pacific Ocean. I remember learning about this concept, Manifest Destiny, in my high school U.S. History course and simultaneously feeling disgusted (how dare they think they can just take someone’s land!) and in awe (what must it be like to feel so drunk with power? ). At the time I didn’t connect these early American principles to my teenage existence, but they were absolutely playing a part in my day-to-day life.

Pop Question: Founding Father or American Teenager? A belief in one’s own exceptionalism (talk about conceited), fighting for independence at all costs (“F you Mom and Dad! And the British!”) and believing you are destined for greatness. Trick question! Turns out they are one and the same. Unfortunately for our wallets and foreign relations, we don’t tend to grow out of this mindset.

We might even get worse.

As a whole, we believe that it is our right to own things, land, money and ideas. We believe that owning more and flaunting it is good – just think about who the most famous Americans are right now. We believe that we are exceptional, special, unique and, most importantly, better than everyone else.

Some of this is good – our fierce independence and pride keeps us ambitious. It fuels innovation and a desire to better ourselves and the world around us. The problem is that keeping a balance between our desire to improve the world and our desire to own the world is tough. Social media, traditional media and friendships make this even harder. We are literally bombarded with the idea that more is better -- marketing execs have created whole genres of advertising that are based on our very real human desire to be better -- “if I only lost those 5 pounds; if I could just get those sneakers that I saw her wearing the other day; if I just joined that fancy co-working space; if I, if I, if I...”. 

All of a sudden we’re on a hedonistic treadmill. We can’t stop or slow down because we’ll get painfully thrown off (remind me to tell you about an awesome ER adventure I had once because of this very thing), so we just keep going. We keep buying, we keep accumulating and, much to our horror, none of the things actually make us happy, or at least not for long. What would have once felt like enough becomes not enough, so we continue to seek out more and more. 

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I’m not going to pretend like I’ve figured out how to gracefully get off the treadmill. There are months, weeks, or sometimes just hours that I feel like I’ve got a handle on it, but inevitably I stop being vigilant and the treadmill reappears again. What seems to work best for me is a combination of the following:

  • Writing down what I want and not letting myself buy until I’ve had it on my list for at least a month (I change the amount of time based on the price of the item)

  • Meditating (I go through phases with this, but when I’m consistent it really helps)

  • Practicing gratitude through daily journaling 

  • Being so darn busy that I don’t have time to shop

  • Eliminating online shopping (or trying to at least…)

I also truly love beautiful things, and I believe that is okay. I don’t think that in order to be good with money you need to go off-grid and remove yourself from our capitalistic society. What I seek, and what I believe many of us seek, is a balance between buying and doing what feels good for us and stopping before it starts to feel demoralizing and hedonistic. I believe that balance exists, but I also believe it is different for each of us and will differ throughout our lives. What felt good for 22 year old me definitely doesn’t feel good for 32 year old me and that’s okay.

I’d love to hear what works for you, in part because I believe that more heads are better than one, but also because I’m desperate for an easy fix that I haven’t discovered yet. Yes, I am still an American.

True Life: I’m a Shopaholic // Post #1: All the Feelings

This post is part of a larger series on shopping and I want YOUR input!

Email me by clicking the button below to share your questions, thoughts and ideas.

Last month my husband and I went on a vacation to Japan. While walking around Harajuku, we passed a store with the most gorgeous dress in the window — it was the perfect shade of yellow, a little bit flouncy (but not too flouncy) and a cut that would be easy to take from day to night. The store was closed, but I immediately planned to  go back the next day.

I have always been someone who finds shopping easy — clothes fit me really well (I’m a perfect size 8, don’t hate me, I know I’m privileged), fashion makes me happy, and I’m fast friends with salespeople. That ease that I feel in the States did not translate to Japan. I’m a giant woman in Japan. I’m a tall 5’9’’ (people tend to think I’m 6 feet tall, but I swear I’m not). The average height for women in Japan is 5’2’’. To top that off, I’m a good 35 pounds heavier than the average woman. 

Needless to say, that perfect yellow dress didn’t fit — even in the largest size. Miraculously, I did find an olive dress that fit like a glove. I was feeling pretty proud of myself when we left the store, but a little later on I asked my husband what he thought about my shopping habits. I was sure he was going to say that I had grown a lot in that area since we first met and I was maxing out my cards at Nordstrom. I knew he wouldn’t say I was a minimalist, but I did expect some sort of recognition of the progress I’ve made. That did not happen. Instead, he told me he was a little worried about how I felt about shopping. He didn’t say that I was spending too much or buying things needlessly, but that he thought my feelings about my mother were too wrapped up in shopping and that meant that I sometimes spent purely on emotion. While you might be impressed by my husband’s emotional intelligence and guru-like understanding of my shopping impulses in this moment, I wasn’t feeling very impressed with him at all. I was feeling like I looked amazing in my chic olive Japanese dress and I had earned it.

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But he was right – at least partly. Upon reflection, I haven’t actually made the progress I thought I had. I don’t let myself go into credit card debt over a pair of shoes, but I also don’t fully understand my own feelings around shopping.

I have determined this comes from two places:

  1. So many of my happy memories of my mom involve shopping. I cannot count the number of times we went to the Oak Brook mall, spent the day trying on everything at BP/Nordstrom (me) and Talbot’s (her) and both went home feeling thrilled at the goodies in our shopping bags. Like any other parent-child relationship, my mom and I would sometimes fight, but there was something about an Anthropologie dressing room that seemed to dissolve any and all of our differences.

One of the ways I can still feel close to her, even after her death, is to pop into a store and try on a bunch of things. And buy – always buy.

  1. Beyond that, I, like many others, connect my joy to having new things. I see pretty things and think to myself, “if only I had that, I would be happy.” Spoiler alert  -- it doesn’t work. But it’s still an easy trap to fall into. In many ways this feeling is much more daunting to me than my grief over my mom. I can pinpoint the exact mom memories that shopping relates to and I can intellectually understand why I feel the way I do, but with materialism it gets a whole lot squishier.

Since returning from Japan, I’ve talked to lots of friends about these feelings and realized how far from alone I am. Not everyone has a dead mom, but many of us have memories wrapped up in what we wear. And almost all of us have feelings of inadequacy that we try to buy our way out of.

I want to expand this conversation out of my little circle and open it up to you. Do you have feelings about shopping you want to explore? Any nagging feelings you always get at the register? Any online shopping highs? LET’S TALK ABOUT IT!

I'm Confronting My Privilege & You Should Too

Privilege is a tough thing to fully understand - it often feels slippery to pin down because of its complexity and yet, understanding it is key to understanding ourselves. Privilege impacts how we view the world, how others view us and what we are and are not able to do. As a money coach I am confronted with my own privilege and the privilege (or lack thereof) of my clients on a daily basis and, although confronting it is at times uncomfortable, I am grateful for the experience.

WHY SHOULD I DO THIS?

I believe that understanding my own privilege is important - not only for my own self improvement, but because it will help me better understand and change the world around me. And, I don’t know about you, but changing the world feels pretty darn important to me right now.

That reason may resonate with you too, but if it doesn’t here are a few more reasons that might feel more relevant:

  • Improve your Emotional Intelligence

  • Practice Gratitude

  • Figure out how to use your privilege to help others

  • Gain insight into your interactions with others

  • Become better connected with yourself

  • Fight injustice

  • Discover new ways to equalize (or at least improve) power dynamics

STEP 1: PRIVILEGE BRAINSTORM

This week, I’d like to urge you to start (or continue!) this tough conversation with yourself. Pull out a journal, the notes app on your phone or scrap of paper and start by brainstorming all of the ways that you are privileged.

MY PERSONAL PRIVILEGE BRAINSTORM:

I am white.

I am thin.

I am able bodied.

I am conventionally good looking.

I was raised in an upper-middle class neighborhood.

I went to public school at one of the best schools in the country (or at least it was when I was there).

I went to private university and grad school.

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I have no student loans and never did because my parents paid for school (undergrad I knew was going to be paid for, grad school became something they decided to pay for after my mom died).

Although I do not have monetary support from my family, the fact that I’ve had it in the past means I have fewer debts now and therefore am more easily able to make “risky” decisions (i.e. become an entrepreneur).

I know that if shit really hit the fan, my in-laws wouldn’t let us become homeless.

STEP 2: CONNECT IT TO YOUR DAY-TO-DAY LIFE

Look back at that brainstorm and pick one or two things to dive deeper into. As you go through your day jot down ways in which you see that particular privilege manifesting in your life. It might be something obvious (seeing a police officer doesn’t put me on edge) or it might be more subtle (I have the money to pay for a monthly yoga subscription because I don’t have to pay back student loans). The practice might feel difficult at first - and that’s okay! The more you think about it and the more you engage with this topic, the easier it will be for you to connect with your privilege.

This is just the start of a much bigger conversation that I will be sharing with you. I know it isn’t easy or fun, but I also know how important it is for understanding our own personal money philosophies and goals. And figuring out your money philosophy and goals? That part is really fun!

As always, if you have questions, let me know! You can email at caroline@verdiadvising.com or set up a time to chat with me here.