Ever since I can remember, I've been going out to California every Memorial Day Weekend for our annual family reunion. This year was the 46th straight year that we've had it with over 90 people attending. I love having a big family and being around family that I don't get to see as much of is something that I always cherish. During the 3-day weekend that we spend together we had a fish fry, went skating, played dominoes, played softball, went bowling, went out at night and of course, had a lot of great barbeque and other side dishes! Like any time you're around family, it's filled with a lot of laughs, debates, and jokes and the energy is always on a 10! This year, along with all of those activities listed above, we also introduced a new tradition; one that we hope to carry on every year that we have the picnic. We hosted our first Family Picnic Financial Summit!
It all started with a FaceTime call a few months ago. One of my older cousins Wesley Terrell, who I talk to on a consistent basis, is an entrepreneur, business owner an and very financially savvy, asked me what I thought about putting this on for our family. I told him that I loved the idea and that we should work on trying to make it happen! We also brought in my older cousin Philip Haylock, who is the VP of Business Banking at JP Morgan in LA. Together we came up with about a 45-minute presentation to give to our family and just start the conversation about finances. The goal of this was to increase the financial literacy knowledge within our family because the more control you have over your finances the more control you have over your life. For us to continue to grow as a family, be successful, and live our best life, we need to know where our money is going. This includes understanding how to increase it and how to not work paycheck to paycheck. We were met with a lot of energy and enthusiasm during the time that we spoke, and I know that we will all benefit years to come from having this first financial summit!
In this week's post, I wanted to give a brief recap about some of the things we discussed.
This was my topic and a quote that I found that summarizes what I wanted to get across was that "You have residual bills, so why not have residual income." To break this quote down here is what it's saying. If you have cable TV or internet, regardless of how much time you are spending using your TV or internet, do you still get the same bill? If you have a car payment, regardless of how many miles you drive, you still get the same bill. Now, think about RECEIVING money whether you are working or not. THAT is residual income. Money that comes into your household even when you are sleeping.
We've talked about how the average millionaire has 7 streams of income. Why is that important? Because It's hard to become wealthy if all you have is earned income where you are exchanging time for money. You are also putting yourself at risk by only having one income. For example, Think of income streams as pegs on a stool. The more pegs you have, if one gets knocked out your chair won't fall. If you only have one peg and it gets knocked out, there goes the stool. That is also why it is important to have an emergency fund of 3-6 months of expenses.
We also talked about if you want to retire early, before the average age of 65, having multiple income streams is a way to help you get to retirement faster. So, we introduced the concept of the Income Snowball. Part of that process can come from starting a side hustle using the unique talents and gifts you have and working on the things you are passionate about to create extra money! I then ended my segment talking about the 7 basic streams of income and gave examples of what each of those things looks like.
Budgeting and Tracking Expenses
My older cousin Wesley took this topic and started off by saying, "You Can't Manage What You Don't Measure." This was very important especially as you are starting out in the beginning and trying to figure out how to divide your money. If you don't know where your money is going, then it makes it harder to plan for the future. He issued a challenge to everyone that for the month of June, keep track of everything you buy whether you write it down in your phone, a notebook, or put the receipts in a box. Once you've done that, analyze how much you're bringing in, how much you're spending, and then you will have an idea of where you can cut back.
He also talked about the concept of paying yourself first and that if you can put away at least 10% every time you get paid, you will start the habit of saving and not living paycheck to paycheck. Another tip he gave was to automate your savings so that the process is simpler, and you'll be less tempted to not consistently save!
He was able to illustrate this with an example that Shaq gave. Shaq's advice to athletes is to take a piece of paper and rip it in half. That is your savings you don't touch. With the other half, split it again and you're left with another two smaller sheets of paper. With one of the pieces of paper that is what you use for your everyday spending and expenses. The other half can be fun money you use for going out and things of that nature. A great example!
Banking and Investment Basics
Since my older cousin Philip works for a bank, it made sense that he took this topic. He discussed the 4 basics of banking: what a checking account is, a savings account, a CD, and the uses of a credit card.
A checking account is used for everyday expenses. Things that you want to use a checking account for are expenses that occur every 30 days or less. That could mean gas, phone bill, car payment, mortgage, and things of that nature. This is your spending money.
A savings account is used for things that are 60-90 days or more out. This could mean saving for a down payment on a house, a new couch, or a new lawn more. Now, there are two parts of the saving account. You want to have an emergency fund of 3-6 months of expenses that you don't touch at all unless it is in an emergency, but you also want to have your savings account for those long-term expenses that I mentioned above.
CD (Certificate of Deposit)
With the CD he introduced the concept of interest and how you get a return on your money by investing in this CD. He broke it down and explained that if you deposit $100 with a 6-month CD making 5%, at the end of those 6 months you would have made $5 dollars just by leaving your money there. And then with compound interest, that same thing continues to happen year after year depending on what investment you're in. This was a very key part because although CD's aren't the most exciting investment vehicle, the concept of it was what we were looking to share.
Credit cards can be both good and bad depending on how they're used. Philip discussed that the reason you use a credit card is to build credit. The way you do that is building a payment history and if you use your credit card for everyday expenses with money you know you have in your checking you can start building good credit. However, on the other hand, you get in trouble when you pay for things on credit that you can't really afford, and you start to incur credit card debt. Credit card interest rates are very high with an average of close to 15% which puts you in the whole even further! His best advice was that if you can't pay for it in cash, don't buy it!!
At the end, we also shared some different resources including books, podcasts, blogs, and apps that our family could check out so they could continue their learning outside of what we talked about. This was a great experience and I'm glad we were able to do it and also that our family was receptive of the message. I'm excited to see how it changes and gets better in the years to come and I know this is only the beginning!