Financially Responsible Kids

By: Gaby S. Dominguez

Welcome to our series called Confident Kids℠!

The goal and mission is to assist parents and grandparents in helping their children and grandchildren learn how to think about money, i.e., how to save, how to invest, and how to become financially responsible, not only as children but as teenagers, young adults, and eventually as parents.

Age Focus: parents & guardians; teens & young adults

This Confident Kids article informs and guides youth, along with their parents and guardians, on a fruitful path of financial prosperity and ease. Fully grasping the concept of financial literacy provides the fitting puzzle piece in managing the complex whirlwind of finances. Whether you are a parent or caregiver, young adult, or someone stuck in the darker depths of finance, use this article as a tool for relief, insight, resourceful guidance.

While you are relaxing and reenergizing this summer, it is the perfect opportunity to take time to refresh your financial literacy knowledge and boost your tactics before getting wrapped up in the chaos of life, school, and work.

Considering the intensely alarming statistics that young Americans owe over $1 trillion in debt, along with 70% of millennials living paycheck to paycheck, there is an urgent need for proper financial education for the youth of society (1). Due to the lifelong consequences of early-adult financial decisions, it is even more dire to equip people with adequate tools earlier than later. By doing so, a secure financial foundation can be established early, steering young adults away from the cycle of economic insecurity and debt (2).

What is Financial Literacy?

Financial literacy consists of both the knowledge and skills needed to make informed, responsible financial decisions, which contribute to financial well-being and security. The building blocks of financial literacy include concepts such as saving, spending, investing, and borrowing. Additionally, credit management, asset building, debt reduction, and avoiding scams are vital elements for a healthy financial life. Financial literacy education can begin as early as preschool age by helping children with impulse control, behavior modification, and the ability to juggle ideas (3). It is beneficial to allow youth to learn through trial and error, as it strengthens the ability to set career and education goals, along with improving financial decision-making.

The Importance of Financial Literacy

The well-being of many individuals and families is at risk because of low financial literacy, especially among underserved and low-income communities. The lack of a financial foundation leads our youth to fall into risky, highly consequential traps, such as predatory lending and costly errors in managing expenses and debts (2). Leading a life of low financial literacy can result in missing significant wealth-building opportunities and receiving less access to professional training and higher education. Actively engaging in financial literacy bridges the opportunity gap prevalent in underserved communities, while empowering their youth with the skills they need to follow financially healthy, secure lives. The same is true for youth in any economic situation as financial success is a function of maximizing the skills and resources available to any individual.

The Financial Literacy Gap

According to a national financial capability study done by the FINRA Foundation in 2022, a persistent financial literacy gap is evidently present in the United States (4). As a result, the study shows that the most vulnerable groups include young adults, people of color, and low-income households. These groups were also more likely to express psychological symptoms of financial stress, along with having higher rates of missing payments and making hardship withdrawals from retirement accounts. Overall, this study highlights the urgent need for financial literacy education and adequate access to service, to promote economic opportunity and gain.

A Journey Toward Financial Capability & Confidence

The fundamental component to improving financial health is proper financial education. However, the ultimate goal is to fully develop financial capability to optimize one’s available resources and opportunities. Financial capability reaches its peak when financial knowledge is rehearsed and implemented until it becomes natural and subconscious, driving behavior that constantly results in financial optimism and success. Consequently, this heightens one’s financial confidence by exploring and solidifying financial security for oneself and their family.

Next Steps

No matter where you are in life, if you haven’t already jumped on the financial literacy wagon, then it is your chance to do so NOW! Building strong financial habits and skills at an early age creates a key to financial success in adulthood. The best first step is to remember you are not alone and check with your financial advisor to see what programs may be available to be customized to one’s individual or family needs. But it doesn’t end there, positive effect of investing your time and effort into financial literacy early will translate into one’s ability to pass that knowledge onto their children and empower them to preserve and benefit from the legacy you have created for your family. Early success, however, hinges upon parental involvement, a benefit that gives your children real-world experience with money. If you are already stuck in the whirlwind of the financial realm, it is time to take a deep breath, talk to your financial advisor, create an organized plan, and immerse yourself in financial literacy education programs!

Helpful Tools & Resources

If you’re not sure where to start, here are some guiding resources to build your personal financial literacy and capability:

Financial Literacy for All (FL4A)

• A national initiative to embed financial literacy into society and culture in America. Their website includes more information about the FL4A program, an extensive resource library, and ways to get involved with the organization.

Youth.gov – Financial Capability & Literacy

• This page includes a further dive into what financial literacy and capability means, tips for financing higher education, access to youth employment programs, plus various other resources and tools.

Publications from the Consumer Financial Protection Bureau (CFPB)

• This website provides a list of the CFPB’s bookmarks, handouts, guides, books, worksheets, and posters (that can be downloaded or ordered in bulk). Plus, many of these publications are available in multiple languages.

Consumer.gov

• This site helps youth manage their money, understand credit, identify scams, and prevent theft.

Money Smart for Young Adults

• The Federal Deposit Insurance Corporation (FDIC) offers a financial education curriculum to teach basic financial topics to those with low to moderate levels of income. Tools are available for different age groups and in nine languages. The instructor-led curriculum provides practical knowledge, skills-building opportunities, and resources to manage finances with confidence.

MyMoney.gov

• This website contains financial education resources for young people, caregivers, and educators. It is organized around the “My Money Five Principles”: spend, earn, save and invest, protect, and borrow.

Quick Tips for Managing Your Money (from the FDIC)

• This page provides strategies and practical guidance to help teens and adults with borrowing, saving, banking, and avoiding scams.

When consistently utilizing tools and knowledge from financial literacy, people can feasibly adopt healthy financial practices leading to stability, capability, and confidence in life. Everyone deserves to experience the protection and relief of asset-building opportunities, and luckily some of these are available with just a click of a button! Despite your personal situation, anyone can valuably benefit from the beauty of financial literacy and capability. While you’re out sunbathing by the beach or pool, ease your worries by doing some of your own research and planning, while guiding your loved ones on a path to financial security and happiness. ■

Sources

(1) Young Americans Owe $1 Trillion of Debt, Zack Friedman, February 27, 2019, https://www.forbes.com/sites/zackfriedman/2019/02/27/young-americans-owe-1-trillion-of-debt/?sh=51fa993b78ad

(2) Financial Literacy for Youth: Why It Matters, United Way NCA, June 6, 2023, https://unitedwaynca.org/blog/financial-literacy-for-youth/

(3) Recommendations for Improving Youth Financial Literacy Education, Matt Kasman, Benjamin Heuberger, & Ross A. Hammond, October 9, 2018, https://www.luminafoundation.org/resource/recommendations-for-improving-youth-financial-literacy-education

(4) Financial Capability in the United States, FINRA Investor Education Foundation, July 2022, https://www.finrafoundation.org/sites/finrafoundation/files/NFCS-Report-Fifth-Edition-July-2022.pdf

(5) Financial Capability & Literacy, Youth.gov, https://youth.gov/youth-topics/financial-capability-literacy

By: Gaby S. Dominguez

Welcome to our series called Confident Kids℠!

The goal and mission is to assist parents and grandparents in helping their children and grandchildren learn how to think about money, i.e., how to save, how to invest, and how to become financially responsible, not only as children but as teenagers, young adults, and eventually as parents.

Age Focus: any student loan borrower & students heading into college

Over the past few years, federal student loan borrowers have faced an overwhelming series of changes and updates. As tempting as it may be to tune out the noise and ignore the return of payments, doing so could be devastating. There are crucial, upcoming deadlines that borrowers must keep in mind. If you’re among the 40 million individuals with federal student debt, here are important dates and action items you should add to your checklist immediately.

New Employer Retirement Benefits for Student Loan Borrowers

■ Date

December 31, 2023

In late 2022, a significant retirement-savings reform package was passed, the SECURE Act 2.0. This introduced new benefits for workers with student loans and retirement plans. Traditionally, employers would “match” worker contributions to retirement accounts like 401(k)s or 403(b)s.

Now, employers can “match” on-time student loan payments by contributing an equivalent amount into a retirement account. This benefit also extends to payments made for workers’ spouses or dependents.

■ Why This Matters

With this new benefit, you no longer have to choose between saving for retirement and paying off student debt – You can effectively do both.

■ Recommendations

• Reach out to your HR department to see if they are implementing these new benefits.
• Even if your company does not currently offer this benefit, asking about it can initiate the conversation and show demand.

Expanded SAVE Repayment Benefits

■ Date

July 2024

This summer brings additional student-loan repayment benefits linked to the Biden administration’s new SAVE income-driven repayment (IDR) plan. Enrolled borrowers can have their monthly payments capped at 10% of their discretionary income— defined as income above 225% of the federal poverty line. For example, single borrowers earning less than $32,800 annually or families of four making less than $67,000 will have a $0 payment. Currently, about 3 million borrowers qualify for $0 monthly payments.

■ Other SAVE Benefits Effective in July

• More affordable undergraduate loan payments.
• Potential for loan forgiveness in as few as 10 years.
• Consolidating loans won’t affect progress toward forgiveness.
• Payment credit toward forgiveness during deferment or forbearance.
• Automatic IDR enrollment after missed payments.

■ Recommendations

• If you want to benefit from these changes, sign up for SAVE before July.
• Keep in mind that SAVE might not be suitable for everyone, particularly those with higher incomes, as it could increase your payments. Use the Education Department’s repayment calculator to determine the best repayment plan for you.

End of the Student Loan Payment On-Ramp

■ Date

September 30, 2024

The Biden administration’s “on-ramp” period, designed to help borrowers transition back into making payments post-pandemic, will end this fall. Missing student loan payments after this date will have more severe consequences.

■ Current On-Ramp Benefits

• The Education Department isn’t reporting missed or late payments to credit bureaus.
• Loans aren’t being placed into default or delinquency status.
• Borrowers aren’t being referred to collections.

(Outside of the on-ramp period, loans become delinquent after 90 days of missed payments and go into default after 270 days.)

■ Recommendations

• Continue making affordable student loan payments to get accustomed to regular, on-time payments by the end of the on-ramp period.
• If you suspect your credit has been incorrectly affected by missed payments during this period, check your credit report and contact the Education Department’s student loan ombudsman.

Prepare for Uncertainty

As the Biden administration continues to navigate the complexities of the student loan forgiveness plan, it’s crucial to prepare for the possibility that the new program may fall apart. The best strategy for your financial well-being is to proactively manage your student loans. Utilize the tools already available, such as the SAVE plan, other IDR options, the on-ramp period, the Fresh Start program, or existing student loan forgiveness plans.

By staying informed and taking advantage of these benefits, you can effectively navigate the challenges of student loan repayment this year. Provide yourself with relief instead of distress!

Sources

4 Key Dates Student Loan Borrowers Should Know in 2024, Adam Hardy, January 3, 2024, https://money.com/key-student-loan-dates-2024/

By: W. Kirk Taylor, CFP® & Gaby S. Dominguez

This article is Part Two in a two-part series for Confident Kids℠!

In the realm of personal finance, the concept of credit can be seen as both an opportunity and a risk. The first part of this series, “Unlocking the Mystery of Credit: A Guide for Teens and Young Adults (Part One)” highlighted the significance of understanding credit, shedding light on its distinctions and implications. However, as we embark on the second leg of our journey, we delve deeper into the sometimes darker side of finance where credit intersects with its gloomy counterpart – debt.

The Weight of Debt

In the vast expanse of the United States, a staggering $17.06 trillion in consumer debt balances loomed heavily as of 2023. A significant portion of this burden rests on the shoulders of individuals grappling with student loans and credit card debt. According to data from 2019, a startling 43% of Americans who pursued higher education found themselves intertwined in debt, a statistic that continues to climb. Among millennials, in particular, individuals are burdened by significant credit card debt, ranging from $10,000 to over $30,000.

The Toll of Indebtedness

Studies have revealed a stark correlation between mounting debt and diminished levels of financial well-being, coupled with adverse health behaviors and outcomes. Debt goes beyond finances, taking a toll on mental and physical well-being, while eroding community cohesion and life satisfaction. Financial obligations weigh heavily on the psyche, diminishing feelings of security and contentment.

Understanding Debt: A Primer

What, then, is debt? At its core, debt represents an obligation – a promise to repay borrowed funds. From credit cards to mortgages to student loans, debt invades our daily lives, assuming various forms and functions. Whether secured by collateral – i.e. when you borrow money to buy a car, the loan is collateralized by the car, which could be repossessed if you don’t pay on time – or unsecured, revolving or installment-based, each type of debt carries its own set of implications and risks.

The Double-Edged Sword of Debt

Debt, used wisely, can be a powerful tool for achieving progress and prosperity. Mortgages facilitate homeownership, auto loans enable mobility, and credit cards offer convenience and flexibility. Yet, the allure of easy credit often drags individuals into a risky balancing act with financial ruin. Excessive and unmanageable debt can threaten stability and success if your collateral is seized by creditors, or if your credit score is impaired.

Charting a Course to Financial Freedom

For those managing debt, a solid plan is essential. Start by controlling debt with smart spending habits and careful budgeting. Pay off high-interest debts first, gradually chipping away at the mountain of obligations. Remember, the road to financial freedom is paved with discipline and determination.

A Blueprint for the Next Generation

For teens and young adults embarking on their financial journey, the path to prosperity begins with a keen understanding of debt’s pitfalls and potential. Distinguish between good and bad debt (good debt = car or home; bad debt = credit cards), cultivate a habit of saving, and wield credit with caution. By honing these essential skills early on, young investors can chart a course towards a brighter, debt-free future.

In the world of personal finance, debt often clouds aspirations for prosperity, turning dreams of financial freedom into distant hopes. Yet, armed with knowledge and foresight, individuals can confidently navigate these challenges, ultimately achieving financial freedom.

Sources

(1) Financial debts and subjective well-being of young adults: An adaption of the stress process model, Lu Fan & Soomin Ryu, September, 26, 2023, https://onlinelibrary.wiley.com/doi/10.1111/joca.12560

(2) 1 in 3 Americans maxing out credit cards because of inflation: survey, Nora Colomer, April 12, 2024, https://www.foxbusiness.com/personal-finance/credit-card-limit-debt-inflation

(3) What is debt? Get to know the common types of loans, credit, Olivia Munson, March 4, 2024, https://www.usatoday.com/story/money/2024/03/04/what-is-debt/72789879007/

(4) Debt: What It Is, How It Works, Types, and Ways to Pay Back, James Chen, March 25, 2024, https://www.investopedia.com/terms/d/debt.asp

(5) Teens’ Guide to Building a Strong Personal Finance Foundation, Nathan Paulus, December 8, 2023, https://www.moneygeek.com/financial-planning/personal-finance-for-teens/

(6) Budgeting for Teens, Boys & Girls Clubs of America, May 13, 2022, https://www.bgca.org/news-stories/2022/May/five-tips-for-teens-to-avoid-debt/

By: W. Kirk Taylor, CFP® & Gaby S. Dominguez

This article is Part One in a two-part series for Confident Kids℠!

Credit. It’s a word that carries immense weight in the realm of personal finance, yet it remains shrouded in mystery for many teens and young adults. As NextGen’s study reveals, the majority of high school students are navigating the world without any formal education on personal finance, leaving them ill-equipped to understand the intricacies of credit and its impact on their financial future.

Parents, too, often find themselves stumbling when it comes to discussing money matters with their children. The discomfort stems from various sources, including a lack of confidence in their own financial situation and a fear of passing on their mistakes. However, avoiding these crucial conversations only perpetuates the cycle of financial illiteracy.

Demystifying Credit

At its core, credit is the ability to borrow money with the promise of repayment in the future. Whether it’s a student loan, credit card, or mortgage, credit allows individuals to access goods and services when they need them, deferring payment until later. But this convenience comes at a cost — namely, interest charges and fees.

Your journey into the world of credit begins with establishing a credit history. Every time you borrow and repay money, you’re building a track record that lenders use to assess your creditworthiness. This information is compiled into a credit report by agencies like Experian, TransUnion, and Equifax, which then generate a credit score ranging from 300 to 850.

Understanding this three-digit number is crucial. It not only determines your ability to borrow but also influences the interest rates you’ll receive. With a high credit score, you gain access to better financial opportunities, from favorable loan terms to higher credit limits.

But how can you ensure a winning credit score? Think of it as a game with five key strategies

• Payment History (35%): Pay your bills on time to score big in this category.
• Amounts Owed (30%): Keep your credit utilization low by borrowing responsibly.
• Length of Credit History (15%): Maintain long-standing accounts to show your reliability.
• New Credit (10%): Avoid applying for multiple lines of credit in a short period.
• Credit Mix (10%): Diversify your debt portfolio to demonstrate financial responsibility.

For teens and young adults, building credit can feel daunting. However, there are ways to ease into the process. Authorized user cards and secured credit cards offer entry-level options, allowing individuals to piggyback on a parent’s credit history or provide a cash deposit as collateral, respectively.

Moreover, understanding the importance of credit is paramount. Good credit opens doors to major purchases, secures access to credit cards, and even influences employment and housing opportunities. But with great power comes great responsibility.

If you find yourself in debt, don’t despair. Take proactive steps to regain control of your finances

• Stop borrowing money immediately.
• Craft a realistic budget to manage your expenses.
• Build an emergency fund to cushion against unforeseen setbacks.
• Prioritize debt repayment, focusing on high-interest accounts first.
• Explore opportunities to increase your income and accelerate debt payoff.
• Don’t hesitate to negotiate with creditors for better payment terms.

(Stay on the lookout for Part Two of this series, where we will dive into debt more deeply!)

In essence, credit is a double-edged sword — a powerful tool when wielded wisely, but a potential pitfall when mismanaged. By arming yourself with knowledge and adopting responsible financial habits, you can navigate the complexities of credit with confidence and secure a brighter financial future. After all, mastering the game of credit is not just about winning; it’s about ensuring long-term financial success.

Sources

(1)  Personal Finance for Young Adults: Understanding Credit, Halsey Schreier, June 30, 2020, https://www.forbes.com/sites/halseyschreier/2020/06/30/personal-finance-for-young-adults-understanding-credit/?sh=77290fd33d5a

(2)  How to Teach Your Teens About Credit, Dia Adams, November 27, 2020, https://www.forbes.com/advisor/credit-score/teaching-teens-about-credit/

(3) Ultimate Guide to Understanding Credit for Kids, Teens, and Young Adults, Credit Critics, https://creditcritics.com/credit-guide/

By: Gaby S. Dominguez

Confident Kids℠ is a newsletter dedicated to helping parents and grandparents educate the next generation of young investors in the family how to think about money, i.e., how to save, how to invest, and how to become financially responsible as children, teenagers, young adults, and eventually as parents.

“The earlier, the better” is a popular refrain that is vital in accumulating wealth over time, as it harnesses the power of compound interest i.e., “interest on interest.”

Parents dream of financial independence for their children. To that end, many shell out big bucks for the best education money can buy. A quality higher-education, from a respected university often translates into a well-paying, post-college career. All too often though, parent’s stop short of educating children on how to save and invest at an early age.

When you are a parent, you want your children to have the most financial success possible. Therefore, influencing them to take steps to save, as soon as they begin earning income, will benefit their future finances even further.

The first step that your child can take, once they’ve started earning income, in high school or college, is to fund an Individual Retirement Account, specifically a ROTH IRA, once they have “earned income.”

As a parent, you may be constantly stressing over how to ensure your children’s future overall success and what next steps to take.

The basic principle needed to improve one’s financial literacy is grasping the overall concept of saving and how to implement it into your own life. Therefore, the use of an Individual Retirement Account, or IRA, becomes more than ideal for opening the door to opportunity for your child’s financial literacy.

An Individual Retirement Account, or IRA, is a retirement savings account that is typically funded with pre-tax dollars depending on one’s income. Introducing an account like this into your child’s life will add to their understanding of saving and investing for their future.

To re-emphasize, it is extremely important to begin this process with your child earlier rather than later, as they will benefit more from the reinvestment of dividends and interest earnings over time, along with the power of compounding.

Embarking on this journey with your child will put them on the path toward financial independence!

When your child is old enough to legally work, your children can contribute their earnings to an Individual Retirement Account (IRA), if they have earned income. Opening an IRA account is the first opportunity for your child to take their financial literacy to the next level. They are creating a tangible connection between money earned, money saved, and money invested, with a goal of generating more money for the future, instead of spending it.

Since there are different kinds of IRA accounts, there is a need for evaluating the various factors provided and how each type works overall…

In general, the ROTH IRA option is utilized more commonly for children as they are likely in a zero-income tax bracket and don’t need the tax break by making a deductible contribution to a pre-tax IRA. Unlike a Traditional IRA account, a ROTH IRA is funded with after-tax dollars. Lastly, withdrawals for ROTH IRAs are tax-free and penalty-free after five years, or after the age of 59½.

When opening a ROTH IRA for your child, the adult maintains control of the account until the child reaches age of majority, when control of the account can be transferred from the guardian to the child. In this case, the account will be initially established as a custodial account.

Custodial accounts are commonly opened as a Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA – only used in South Carolina). In some states, the UTMA account age of majority may differ from the legal age of majority, which is 18. For example, in Maryland, the UTMA account age of majority is 21. However, in Virginia, it is age 18, but there is an option to change it to either 21 or 25. In Washington, D.C., the UTMA account age of majority is 18 or 21. These options allow the custodian, or parent, to manage the funds until the minor is fully prepared to manage it themselves.

Your child can contribute up to $6,000 per year, or the total of a child’s earned income for the year, whichever is less. These contributions must come from earned income generated from activities such as, yard work, washing cars, babysitting, cleaning homes, selling lemonade, or caring for or walking pets.

In addition to getting a traditional job at places like McDonalds’ or Chipotle, earned income can also come through helping family businesses. For example, if you own a small business, have your child assist you by fulfilling tasks such as filing and shredding paper, bookkeeping, or social media management.

Parents can also contribute to a ROTH IRA for their child, which is commonly known as “parental matching.” As an example, if your child earned $1,000 this year and decided to spend $225 on clothes, video games, and other wants, they could contribute $775 of the money they earned into their ROTH IRA, while you can make up the $225 difference, if you choose to.

If you believe that you and your children are prepared to take on this financial voyage together, then there are steps to consider that will assist in properly achieving your goals…

First, work with your financial advisor for guidance and use them as a valuable resource for educating your child on saving and investing.

Second, research financial institutions that provide custodial IRAs. It is important to create a plan on how contributions will be invested, such as determining asset allocation and exploring desired stocks, mutual funds, and ETFs.

Finally, it is time to begin venturing on this path with your children. They will learn to become financially aware and responsible, while building on valuable lessons, like compounding and importance of saving. Jump into this process confidently with your children, so they can become financially savvy at a young age! ■

Please stay tuned for Part 2 of this Confident Kids℠ Series where I will discuss my personal experience opening my first investment account!

By: Gaby S. Dominguez & Mark D. Troutman, PhD, CFP®

Congratulations! You made it; you are a college graduate! Now, you can embark on this exciting and complex chapter in life; an achievement for which you should be proud. Only a staggering 25% of the population manages to accomplish that milestone, and it has required patience, discipline, and commitment along the way. Yet as you celebrate, there is a need for acknowledging that a career and your biggest challenges await you.

You may find a lot of career advice along the way, such as “control your emotions,” “trust your instincts,” “guard your integrity,” “know what you do not know,” and most importantly “have fun.” Utilizing these points will make you effective in your career, while obtaining a more open outlook.

However, some advice is notably absent: being financially prepared. A successful and happy personal life requires the same patience, discipline, and commitment that led you to graduation, but there are additional, significant steps that need to happen. Below are six basic financial concepts that will assist you in reaching the same level of success with your personal finances.

1. Create a Budget: Know the reliability of your pay and know where your money goes. Start by paying close attention to the details. The little things will add up and you might be surprised to learn how much you spend on your Starbucks coffee or from dining out each month. Seek advice where necessary to help you understand your finances and make good decisions that free up resources for saving and investment.

1. Pay Yourself First: Retirement and major life decisions will arrive sooner than you think, so start planning now and make the most of your earning potential. It is a wonderful feeling to attain a level of financial freedom that allows you to work by choice and in a field you love. Make it your goal to save 10%-15% annually. Consistent investments allow earnings to compound and build wealth for you. For instance, investing $500 per month in a diversified portfolio that earns an average 6% return over a 40 year career will provide you $1 million to fund your retirement and other long term goals.

1. Save For a Rainy Day: Even if your paycheck is predictable, life has a funny way of throwing us financial curve balls. You just never know when your car’s transmission will give out or when an appliance will die. Estimate the unexpected expenses that may come your way and sock away some funds in an emergency reserve account each month. Having a rainy-day fund, totaling 3-6 months of living expenses, means you don’t have to dip into your retirement savings or rack up debt to meet those unexpected expenses.

1. Beware of Excess Debt: There is good debt (for example, a mortgage) and bad debt (such as credit cards). Mortgage interest is tax deductible (for mortgage debt $1,000,000 or less) and generally low (at present, about 3% for a 30-year fixed mortgage), while credit card debt is generally high (10%-20% annual rate on your balance) and is not deductible. Don’t underestimate how quickly interest can add to the true cost of your purchases. If you must carry a balance on your credit card for a brief period, pay off the balance as quickly as you can. If you carry balances on multiple credit cards, focus on paying off the higher interest rate cards first.

1. Build, Protect and Monitor Your Credit: Be organized and pay your bills on time to avoid late fees and impairing your credit. Having good credit means you’ll be able to borrow at lower interest rates when needed. Monitoring your credit will also keep debt management front and center in your mind.

1. Diversify Your Investments and Think Long-Term: Invest in high-quality, low-cost stock and bond investment options. Build a diversified portfolio to smooth out volatility. The younger you are, the more you can look long-term and invest more heavily in stocks that may provide higher returns over time.

By applying this advice and taking steps to better your own financial journey, you will inevitably be well on your way to absolute success in your professional and personal life!

Gaby Dominguez is an Executive Assistant with Kirk Capital Advisors. She can be reached at gaby@kirkcapitaladvisors.com. Mark D. Troutman, PhD, CFP® is Director of Financial Planning for Kirk Capital Advisors. He can be reached at mark@kirkcapitaladvisors.com.