Freedom From Financial Fear

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Don’t wait: Shield Yourself from Economic Instability.

1. Inflation and recession - what it is and how it affects you.
2. Things you can or can’t control during a crisis.
3. Importance of budgeting.
4. Necessary actions to take during financial uncertainty.

Title: 1. Inflation and recession - what it is and how it affects you.
If you read this “piece of artwork” during summer 2023 and you have to pay your bills - you have experienced what we call “inflation”, in simple terms, “food prices skyrocketed”, “rent and insurance cost went up”, “gas prices over $4/gallon” etc. It was caused by different factors, but that’s not what I will talk about this time.

The worse and more confusing word than “inflation” is “recession”. That’s when people spend less money because of the fear of inflation, which leads to businesses making less money, which leads to companies firing people, closing their doors or going bankrupt.

It's a very simplified version of complex concepts - but you get a point. People spend a lot more money for simple living necessities and are scared to lose a job. In today’s reality, 7 out 10 people already live paycheck to paycheck, and recently the Federal Reserve advised that Americans totaled more than $1 trillion dollars of credit card debt in the United States.

Based on my knowledge, these things like “inflation” and “recession” can impact your life through different lenses: financial, spiritual, relational and emotional impacts.
• Financial Impact - you might be running into more debt, notice decreases in your savings, defaulting on your monthly payments due to lack of funds.
• Spiritual Impact - you don’t feel peace in your heart, because you are not sure when things get better.
• Relational Impact - if you have a family, financial problems can directly affect your relationship with a spouse and can have a big effect on your children once they grow up.
• Emotional Impact - you might feel insecure, anxious and fearful of losing your job that can lead to health problems and depression.

The good news is - you can overcome these issues. I believe in you and you can believe in yourself too. You might have the following question pop up in your mind - “Wait, how can I control these things? I don’t think it’s my fault - I can’t control prices and my job stability”.

Title: 2. Things you can or can’t control during a crisis.
In order to understand how we can impact our financial lives during uncertain economic turbulence, we need to understand what we actually can or cannot control.
Things we can’t control:
• Prices for living - such as food, rent, gas etc. They can go up or down, depending on many factors.
• Your job - there is no such thing as “job security”. You might be laid off any day or find out that your company is getting closed.
• Natural Disasters, Wars, Government Handouts - things such Destructive Hurricanes, Covid-19, International Wars or crooked politics giving handouts all affect our current economic stability. We can just watch it, but we can’t change the fact that they occur.
Things you can control:
• Your budget - you can adjust your budget every month based on prices.
• Your job options - always be on a lookout for different employment options. If you know that things might be rough, start having a plan in case tomorrow you will be out of the doors.
• Your knowledge and skills - investing in proper financial knowledge over time and job skills can assure you becoming better prepared for future instability and getting employed faster.
• Your lifestyle - if you are spending more than you are making - you are or will be broke. Learn to say “no” to your friends and family. Learn to say “no” to a car or vacation that you can’t afford. Don’t buy or do things that you can’t afford.
• Your behavior - you can decide to follow a plan or just do what feels good. It feels good to use a credit card to buy things you can’t afford, it feels good to get drunk or get high when you are dealing with stress. If you follow a plan, however, you set your behavior based on the plan and will not let lifestyle, your broke family and friends or your emotions to get control over you and your life.

You can control way more than things you can’t and it can be a decisive point for you and your family’s future. Just ask yourself - “Do I need to take control of my life or just blame someone else for my problems?”

Realistically speaking from personal experience - change is so hard, and it takes a lot of hard work and support to go through. The great news once again is - you can do it - and you should start simple - buy following a simple, common sense plan. In the financial world we call it “budget”.

Title: 3. Importance of budgeting.
I will focus my attention only on the importance of budgeting during a crisis. If you have never personally made a budget, here’s a fun analogy of what it is:

People that budget:
“I want to cook a pizza and my fridge is empty. I plan to buy crust, tomatoes, cheese, onions and deli meat. I bought them, baked pizza following instructions and it’s so yummy !”

People that don’t budget:
“I want to cook a pizza and my fridge is empty. I went to the store, however I have no idea what ingredients I need and I have never made a pizza before. I just bought crust, ketchup, greens, apples, blue cheese and pineapple. I microwaved it and it didn’t taste great. It’s okay, maybe the ingredients were not that fresh”.

During a crisis, budgeting provides clarity on how much you can afford to spend or save based on the income next month. It helps avoid unnecessary purchases that you didn’t plan and results in having an inner peace. As an example, if you budget to spend $800 for food next month, you must have a plan on how to make it happen, instead of blowing $1500 and complaining that it’s all the government's fault.

Not budgeting leads to impulsive decisions, waste of money resources, racking insane amounts of credit card debt and loss of peace in daily life.

Budgeting is not a remedy to all the problems - but it’s a starting point. Other actions will be appropriate as well, however, they are all interconnected to having a plan.

Title: 4. Necessary actions to take during financial uncertainty.
These are not advices, but practical ideas that actually work.

1. Re-evaluate Spending: be realistic, transparent with yourself and your family. Make a budget that you can follow;
2. Reduce debt: stay away from consumer debt that is not necessary and focus on paying high-interest debts, especially credit cards.
3. Stay away from borrowing: don’t go deeper into debt. It’s very hard to pay it off down the road, especially while interest rates from banks are very high these days.
4. Build Emergency Fund: try to build a fund that will have at least 3-6 months worth of expenses.
5. Avoid Large Purchases: try to postpone buying large or luxury purchases if it might affect your savings.
6. Get a part-time gig: taking a part time job, or even two can be a great source for extra income. Don’t be ashamed of it and don’t let other people’s opinion stop you from taking care of your needs or your family.
7. Control your lifestyle and behavior: don’t let other people's opinion or your emotions affect your actions.

During times when money is tight or the economy is bad, it's important to be flexible, focus on what's really necessary, and think about the long run. Making smart choices, instead of quick ones, can help you get through tough financial times.

If you or someone that you love struggles or needs help with finances - feel free to reach out to me or send them this article and I will be glad to provide a free coaching consultation.

Freedom From Financial Fear Providing financial coaching and tutoring services to help you achieve your financial dreams.

American Dream - The Harsh Facts of today's Financial Well Being and How they Affect our future.
Written with love by Oleg Peleshok

1. What's your idea of the American Dream?

Everyone has their own version. Maybe it's about having a good job that pays well and offers chances to move up. Or it could be about getting married, having kids, buying your dream house and car. Maybe you dream of a relaxed retirement with a summer house in Florida, sharing stories of success with your grandkids, or earning enough money without much work so you can travel the world. Thinking about this can make you feel happy. This article will talk about the money part of these dreams.

2. Key Statistics of US Households.

To understand the problem and its solution, we need to look at the current data, which can be quite shocking:
• The median household income in the US is $70,784 (according to the most recent data from the US Census Bureau in 2021).
• 6 out of 10 people need a credit card to cover a $1,000 emergency (according to a study by Bankrate in 2023).
• 7 out of 10 people wouldn't be able to cover a month's worth of expenses if they lost their job today (also from a study by Bankrate in 2023).
• 5 out of 10 families earning over $100,000 a year would struggle to cover a month's expenses if they lost their job (another Bankrate study in 2023).
There's a lot more data to consider, but the point is clear: many people live paycheck to paycheck, and even high earners are not immune. Does this mean some of our friends, family members, coworkers might be broke?
Let's consider some more data (from a study by Experian in 2022):
• Total consumer debt in the US increased to $16.38 trillion in 2022 (a 7% increase from 2021).
• Average mortgage debt is $236,443 (money borrowed to buy a house).
• Average student loan debt is $39,032 (money borrowed to get an education).
• Average auto loan debt is $20,987 (money borrowed to buy a car).
• Average credit card debt is $5,910 (money borrowed to cover various expenses).
• Total average debt balance is $101,915.

From these figures, we can conclude that at least half of Americans don't have $1,000 in hand and live paycheck to paycheck. An average person carries around $100,000 of debt. However, observing the people around us, it's not immediately obvious that so many are financially insecure. They live in nice houses, drive fancy cars, share their vacation photos, and dine out on weekends. People tend to spend everything they earn, and when emergencies arise, they borrow more.

3. Who is to Blame?

Every morning, I have a routine of reading the news. I usually check the news channels for updates about the situation in Ukraine. Sometimes, I also catch up on financial news from around the world. Most of these articles make it feel like the world is ending. They talk about "recession," "US banks failing," and "high inflation." After reading them, I feel like things are falling apart - thousands of people are losing their jobs, banks are shutting down, food is becoming pricier, and no one knows when it'll get better.
These articles don't just give information. They also make us scared and worried. We start to think that we don't have control over our money problems, but the government and banks do. We often blame "them" or "someone else" for our money struggles. Does this sound familiar? Have you ever thought like this, or heard someone you know talk like this?

Everyone has their own views, but after learning more about personal finance, I realized that we need to take responsibility for what we do. We are the ones to blame if we're struggling with money. This doesn't apply to people who can't work because of a disability, or those who have had unexpected bad things happen to them. We make bad choices with how we spend our money, and we need to admit this and move on. I've also made bad choices, and I'll tell you about the biggest one.

When I was 25 years old, I decided to buy a Tesla that cost me nearly $60,000. I found many reasons to justify this purchase, thinking it would save me money in the long run, and believing I needed it. I also had a childhood dream of owning a self-driving car, like the one I saw in the old Sci-fi TV show, Knight Rider. The smart part about this purchase was that I planned to pay it off the next year, which I did. But I now see that this decision was not wise for several reasons:
• I still owed more than $60,000 on my mortgage.
• I bought a $60,000 asset that drops in value (five years later, it was worth $20-25,000).
• The money I had in the bank, my income, and my net worth (the money I would have if I sold everything I own) at that time did not justify buying such an expensive vehicle.
I let my feelings, not logic or knowledge, guide me into a purchase that could have put me into long-term debt if I lost my job.
I didn't understand how silly this was until I learned about managing money, the difference between "needs" and "wants", and the importance of "long-term planning." I also realized how hard it is to be a grown-up.
For example, if I had chosen to buy a $20,000 Toyota Corolla and invested the remaining $40,000 in an S&P 500 Index Fund (which is money put into 500 large U.S. companies), it would have grown to $482,277 in 25 years (based on a 10.15% average return, according to Investopedia). This could have paid for my children's education, their first cars, or their wedding costs.

We can choose to appear rich like everyone else or to become truly wealthy. We can decide to spend money based on our feelings and childish desires, or we can spend it based on what we can afford according to our budget and plan.

4. Why We Spend More Than We Earn and How to Change It.

Here are three simple habits that many of us follow:

1. Most of us wake up in the morning and brush our teeth. Why? It helps us avoid dentist visits and keeps our breath fresh.
2. Kids go to school and do homework. Why? To gain skills and knowledge that will help them grow into adults and find jobs.
3. Adults go to work. Why? To earn money, so they can support their families and live comfortably.
Who told us to brush our teeth? Who told us to go to school? Who said we have to work? We learned these things by observing our parents, siblings, and people around us. These activities became our norm. We plan for them daily, and we don't question them because we were taught as kids that they were necessary.

However, we don't often give money to the church or a good cause, set a budget, avoid debt, save money, buy the right insurance products, or invest in retirement. Why not? The reasons vary, but here are a few:

• Our parents didn't teach us about financial literacy, or they didn't understand it themselves.
• Our parents told us what to do, but they did the opposite in their lives. They didn't show us how to be responsible adults because they weren't responsible themselves.
• Our schools didn't offer classes on financial literacy.
• We were influenced by those who were financially irresponsible, like spoiled kids who always got what they wanted, or broke relatives who encouraged us to spend freely.
As a result, we often spend more than we earn, influenced by how we grew up and what we were taught in school.

Not understanding how to manage personal finance can lead to problems, such as:

• Higher stress levels and mental health issues due to fear of losing a job, or not having enough money to cover expenses.
• Risk of bankruptcy, especially without an emergency fund and proper insurance coverage.
• Poor decision-making (like my Tesla example. I got what I "wanted", not what I "needed", and took on more debt instead of paying off my mortgage).
• Insufficient retirement planning, possibly leading to a need to work into old age.
• Generational impact, as we can't teach our kids about financial literacy if we don't understand it ourselves.
The good news is that we can change this. How? It's simple. We have to change ourselves. We have to accept that we were wrong. We need to understand that we made poor decisions with money (I still do, just not as often). We should learn how to manage our finances instead of blaming others for our lack of knowledge.

We need to realize that whether we earn $50K, $71K (the national average), or $200K a year, our behavior with money affects our current life, our future, and most importantly, the future of our children.

5. How to Achieve the American Dream.

If we're ready to make a change, we must acknowledge a few things:
• We've made mistakes.
• We don't want to pretend to be wealthy while being broke, like many Americans do.
• We need to focus on what's important to us, not what others think or tell us to do.

We can start with a simple plan:
• Learn: Understand basic financial ideas like budgeting, saving, handling debt, and investing basics. There are many online resources, books, or financial coaches available.
• Define your dream: What does your American Dream look like? Financial freedom, a family with a paid-off home, early retirement, starting a business? Set clear financial goals.
• Budget: Plan where your money will go, instead of wondering where it went.
• Pay off debt: Clear any consumer debt you have.
• Build an emergency fund: Save up to cover 3-6 months worth of living expenses.
• Get insurance: Learn about the necessary types of insurance and the coverage you need.
• Plan for retirement: Understand the basics of investing and contribute to retirement accounts like a 401(K) or IRA.

If you're ready to make these changes, or you've already started, I'm thrilled for you and your family!
If you think this is all nonsense, that's okay too - I still care about you!

And if you need help or know someone who could use help or coaching, feel free to send them my way. I'd be happy to help.

Slava Ukraini and God Bless !