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Take Control Of Your Money Now!

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Tina Hay, Napkin Finance, Take Control Of Your Money

With Tina Hay, Founder and CEO of Napkin Finance

Steve talked with Tina Hay, Founder and CEO of Napkin Finance, and the author of the book, Napkin Finance: Build Your Wealth in 30 Seconds or Less, to find out how to manage your money and simplify your financial life. The motto of Napkin Finance is, “Finances can get messy. That’s why we have napkins for you.” The website gives people the “written on the back of a napkin” version of everything from credit cards and mortgages to investing and retirement planning.

The Need For An Education In Money

Even though the US is the richest country in the world, we rank 14th in financial literacy. On average, U.S. adults only score about 50% on questions testing just basic financial knowledge. Speaking from his position as a professional financial advisor, Steve remarked, “I can tell you from the years I’ve been practicing that there is very little understanding of the basic fundamentals of investing and financial planning.”

Tina holds an MBA degree from Harvard, but she understands how difficult and confusing the subject of finances can be. At Harvard, she began creating visual aids for herself to help understand financial concepts. That idea eventually became Napkin Finance, where visitors can click on “Capital Gains” and see the main points of what you need to know about capital gains, such as the lower tax rate, illustrated clearly on a picture of a napkin, followed by an article with more in-depth information.

Tina explained her purpose in creating Napkin Finance and in writing her book. “It’s meant to be a very simple, easy, digestible way of understanding basic financial concepts, really distilling what’s most important. Like how you’d draw out or write out an explanation for someone on the back of the napkin.” Napkin Finance offers people a thorough education in money. For example, there are 32 “napkins” of information just on the subject of “loans”.

In her book and on her website, Tina explains the magic of compound interest by asking the question, “Would you rather get $10,000 a day for a month or a penny that doubles every day for a month?”

You might be surprised by the answer: Taking the penny would give you 15 times more money at the end of that month than taking $10,000 a day, a total of $10,737,418 versus $310,000. Why? Because compounding that 100% per day interest—even starting with just a penny—grows money very quickly.

Steve summed up the idea: “So, if you can just earn interest on your interest, that’s one of the keys to wealth creation. Einstein called compound interest, ‘The eighth wonder of the world’.”

It’s All About The Benjamins

Tina explained the reason that managing your money is of critical importance: money impacts every aspect of our lives. Education often brings student debt; buying a home usually includes a mortgage which involves rates and interest; retirement requires financial planning. The bottom line, according to Tina, is that “People can have either a virtuous cycle where they take control of their finances and make the right decisions to make themselves really financially secure or a vicious cycle where they’re not well-informed and they make bad decisions that set them in a spiral of just trying to pay off debt and never getting to the point of creating wealth.”

She went on to say that “Knowledge is power, especially when it comes to money and finances. What’s in my book and on the Napkin Finance website are these simple visual tools that can really help people get started on the path of financial empowerment. There are the napkins, charts, tables, videos, and different types of text, and fun anecdotes as well.”

Steve mentioned a quote from Benjamin Franklin that’s in the section on budgeting: “Beware of little expenses. A small leak will sink a great ship.” He asked Tina to tell listeners about her 50-20-30 budget rule. She explained, “It’s just a rule of thumb to make things simple and help make your money management automatic. 50% of your budget should go toward essentials like food, housing, and medical expenses; 20% should be going toward achieving your financial goals, like saving for retirement; and then the remaining 30% is flexible, disposable income that you can spend on things like vacations or buying gifts.”

Make It Fun And Easy

Steve seized on Tina’s comment about making money management simple and automatic. He said, “I think the key to this is the word automated. You can set up automatic savings—money that just automatically goes into your 401(k). You can set up automatic bill payments. You’re not sitting there having to make a conscious decision based on how much sleep you got the night before. Then a year goes by and, hey, you’ve actually got some savings! Your money starts earning money, and you keep automatically adding to it, and after a while, it’s become $10,000 and then $25,000, $50,000, $100,000. You’ve got a lot of money piled up and all you really had to do to make it happen was just setting a financial plan in motion.”

Steve said that one of the things he likes most about Tina’s approach to talking about money is that she makes it fun. She even manages to make learning about insurance fun, by putting in some fun facts. Supposedly, actress Shirley MacLaine is insured against alien abduction, up to the tune of $25 million. Dolly Parton has—you guessed it—her breasts insured at $6 million each with Lloyd’s. Back in the 1930s, actress Marlene Dietrich had her distinctive voice insured for a cool million.

Tina admits the fun part is intentional. She said, “We add a touch of humor. I think that’s what makes the book unique, that  in a world of very dry, boring, and intimidating content about money and finance, we try to make things more fun and engaging.”

And Steve agrees. He knows from his work as a financial advisor that many people shy away from things that could really help them out financially, like stock market investing, because they’re just intimidated and don’t feel comfortable with it. It goes back to the lack of financial literacy in the country, he says “People don’t understand how wealth is created. And so they just put their money in a savings account where, if they’re lucky, it earns them 2% a year, not even enough to stay ahead of inflation.”

The Importance Of Financial Planning

Tina summed up the essence of what she tries to teach people about money by stressing the importance of creating a financial plan and putting it into action. She cited three keys to successfully managing your money and reaching your financial goals. (1) Get expert help. Talking with a financial advisor can make a huge difference in terms of things like retirement planning and minimizing your tax bill. (2) Take advantage of all the freely available resources for learning about managing your money, like her website, Napkin Finance. And (3) “The most important thing is really to have a financial plan, to make sure that you’re being proactive about your finances and, like we talked about earlier, automating managing your money as much as possible.”

To start learning all you need to know to manage your money more effectively, visit Tina’s website, Napkinfinance.com. You can pick up her book there, too, or order it from Amazon.

Disclosure: The opinions expressed are those of the interviewee and not necessarily of the radio show. Interviewee is not a representative of the radio show. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by the radio show.

Read The Entire Transcript Here

Steve Pomeranz: I think Americans need some help. You know, even though the US is the largest economy in the world, we rank only 14th in financial literacy. On average, adults score about 50% on questions testing just basic financial knowledge. Four in 10 Americans would have trouble covering a $400 unexpected expense, and three in 10 adults are either already unable to pay their bills or are at one modest setback away from hardship. I can tell you from the years I’ve been practicing that there is very little understanding of the basic fundamentals of investing and financial planning.

Well, I think I’ve found someone who can help. Tina Hay holds a BA from UCLA and an MBA from Harvard University and has written a visual guide to money, creating a platform for users of all ages to learn finance in a simple and engaging way. I’m going to welcome her right now, Tina Hay. Tina, welcome to the program.

Tina Hay: Thank you for having me.

Steve Pomeranz: The book is Napkin Finance: Build Your Wealth in 30 Seconds or Less. When you say napkin, you mean like the back of a napkin?

Tina Hay: Yeah. So it’s the back of the napkin. It’s meant to be a very simple, easy, digestible way of understanding content and really distilling what’s most important, so like the back of the napkin.

Steve Pomeranz: Yeah, so there is drawings. There is simple ways of looking at the different aspects of finances, like compound interest, credit, stocks, college loans, retirement, saving for retirement, and so on. Let’s go right into it. For example, let’s talk about compound interest, which is the very first few pages of the book and you give an example. What would you rather receive, $10,000 a day every day for a month or a penny that doubles each day for a month? Take us through that a little bit, Tina.

Tina Hay: Right, so of course, it’s a trick question, right? It’s would you rather receive $10,000 a day, which seems very significant versus a penny that doubles each day. But, it just shows you the power of compounding where the doubling penny will eventually earn you over $10 million. And so, compared to 10, over about $310,000 if you only had $10,000 a day over a month. So again, it just shows you how powerful this idea of compound interest is, which is really at the core of so many different aspects of money and finance.

Steve Pomeranz: If you can just earn interest on your interest, on your interest, on your interest, this is one of the keys to wealth creation. As a matter of fact, I think Einstein called it, “One of the great wonders of the world and the most powerful force in the universe,” he said. So this is a simple example of how showing this book to, or reading it yourself and getting it and showing it to your kid, showing it to your grandkid is a great way for them to get on the road to understanding.

We work so hard at making money in this country and trying to get ahead making more money, so we can provide for our families that once we have a little money saved up or we start to use some of the tools of finances, like credit cards or student loans and things like that, we don’t really know what to do, right?

Tina Hay: Right. So, I think what’s really important is to your point is money, it impacts every aspect of life. People can have either a virtuous cycle where they take control and make the right decisions, don’t take on too much debt, and it’s a virtuous cycle, or a vicious cycle where people are not informed and make decisions that can impact their entire lifetime and set them in a spiral of debt and trying to pay off student loans and so on.

And so the way we look at it and why I wrote the book Napkin Finance, is that there are simple visual tools that can really help people get started on this path of empowerment, and knowledge is power. And so, especially when it comes to money and finances, that impacts, to your point, every aspect of your life, your earning power, your saving, how you will spend retirement, it’s really critical for people to really empower themselves early on. And so, we tried to do that with these visual tools. It’s napkins, charts, tables, the videos, and different types of text and fun anecdotes as well.

Steve Pomeranz: Well, talking about anecdotes, under the budget section, there is a little quote from Benjamin Franklin. “Beware of little expenses. A small leak will sink a great ship.” You write about the 50 20 30 budget. Real quick, what is that?

Tina Hay: Yeah, so it’s a rule of thumb. It’s 50 30 and 20. 50% of your budget should go to your essentials, everything from your medical expenses, food, housing, 20% for financial goals, saving for retirement and your savings, and then 30% is flexible for things like vacations, eating out, gifts, shopping. It’s a rule of thumb that’s really useful and adds some structure to a budget, which is really how you manage your saving and spending. For most people, this should be automated and really simple and become mostly function in the background, so you can enjoy the other aspects of your financial wellbeing and the rest of your opportunities.

Steve Pomeranz: Well, that word automated is I think the key to this. It’s also a key of circumventing human nature and that is if you could have these automatic savings that you don’t really see, it just goes into your 401k. It just goes somewhere on its own. Your bills are paid automatically and so that’s on its own. So, you’re not sitting there with a decision based on how much sleep you got the night before or something that’s going to impact your thinking, and it’s on automatic.

And then a year goes by and it’s like a snowball. You build some savings and it earns some money, and it builds some more and you keep adding to it and all. After a while you got $10,000, you got $25,000, 50 and then 100 and then really, you’re really starting to make some money. All the while, you weren’t really making it consciously, you were just setting forth in motion a plan to take you into the future.

You also talk about insurance and it’s fun. Fun facts that are in this book. Did you know that Shirley MacLaine reportedly has a $25-million-dollar insurance policy protecting her fortune against alien abduction? I don’t know if I would, as a planner, recommend that.

Tina Hay: Yeah. I don’t know if that’s true.

Steve Pomeranz: I’ve heard it.

Tina Hay: I’ve heard that, which is really interesting and I’m sure very uncommon. I’ve heard crazier things.

Steve Pomeranz: You have some quizzes in the back as well. This is under “When should you start saving for retirement?” A: as soon as you get your driver’s license, B: one year after your last Coachella, C: by the time you turn 50, and D: by the time you get your first job that offers a retirement savings plan? The Coachella was kind of funny.

Number two, “Your sources of income and retirement should probably include dividends on your Bitcoin holdings?” Well, that’s probably not going to be an answer to anyone.

Tina Hay: We add a touch of humor. I think that’s what makes the book unique is that it’s really, it’s a very, in a world of very generic, dense, intimidating content around money and finance, it’s more fun and engaging. And so, I think the humor helps with that.

Steve Pomeranz: A lot of people, when they start to save they’re afraid of the stock market. They don’t really understand how wealth is created in the stock market. So they’ll put their long-term savings into very safe accounts, which of course, there is nothing wrong with. Savings accounts from a bank means your money is insured. It’s not subject to volatility of the stock market, but the rates of return really aren’t so good. So, tell us about how the book approaches your savings, whether you should be playing it safe or whether you should be trying to get more return from other sources?

Tina Hay: Right. We don’t give any specific financial advice and every situation is different, so our thoughts are definitely get help and take advantage of tools and resources and technology that can automate saving, investing. But each situation is different. The most important thing is to really have a plan and to have a financial plan and make sure that you are being proactive about your finances and making the best decisions. And so, getting expert help is actually one way and taking advantage of resources, which there are plenty of right now, putting things on autopilot. Automation is the key. And really being very careful about different stages in life, making sure you have everything in order and planning early for retirement because it’s never too early to start saving.

Steve Pomeranz: We’re starting a new year and there is no lack of new year resolutions. Some call this, “The season of giving.” Well, okay, so if you’re going to be spending a lot of money giving gifts, you need to know how to manage your credit card debt after the holidays. Any thought on that?

Tina Hay: Yeah, so it’s interesting. With any kind of debt, and right now consumer debt is at its peak, especially like you mentioned after the holidays when credit card balances are up, I think the goal is to break it down into small manageable steps and to see how to pay off, whether it’s higher balances or to tackle smaller balances and close and consolidate accounts. It really depends on the situation. But, really finding a simple strategy can help instead of being overwhelmed by having debt and the credit card balances that have been racking up over the last few months.

Steve Pomeranz: Now, I know a lot of people can’t pay off their debt at the end of the month on their credit card, especially after Christmas, it’s too hard. You spend a couple thousand dollars or more and you don’t really have that kind of cash to pay down the credit card. But, it kills me that what you may be going to Amazon or other outlets to seek out a bargain is totally negated by the fact that now you’re going to be borrowing the money and paying 15 to 25% interest annually on that money until you paid it off. It’s kind of a conundrum and in a sense, a contradiction or hypocrisy to be looking for bargains and then putting them on a credit card and then paying the vig to the bank. I mean really, do we want the banks to make that much money?

Also, getting ready for taxes. You call it “The Eager Beaver: Understanding and Prepping for Tax Season.” What thoughts do you have with that?

Tina Hay: Yeah, again, I think our view is always planning ahead is the best strategy, getting help with taxes. Tax laws have changed quite a bit and making sure that you understand your opportunities and speaking to experts who can help you do that. I think again, planning, being organized is really critical to that as well.

Steve Pomeranz: The book is Napkin Finance: Build Your Wealth in 30 Seconds or Less. I really advise you to Google that. Tina, do you have a website people can go to?

Tina Hay: Yeah, so we’re at napkinfinance.com and on social channels @ Napkin Finance and we love hearing from our readers with any suggestions or thoughts. But, the book is available everywhere books are sold.

Steve Pomeranz: Very good. So again, that’s Napkin Finance: Build Your Wealth in 30 Seconds or Less. It’s an adorable book and something that young adults and even regular adults would really benefit by, especially considering the lack of knowledge on these issues. So, I thank you very much for joining us, Tina.

Before you go, I just want to remind my listeners that our mission is always to educate our listeners and we try to remind you week after week, segment after segment that we love to get your questions because we do. These are complicated times which makes for complicated topics and we’re always here trying to answer them.

Also, you can hear us on our podcast. We’ve had over 640,000 shows downloaded and so you can just go to your podcast app and just put in Steve Pomeranz or say, “Alexa, play the Steve Pomeranz Show.” Now, how cool is that? And when you come to our website, which is stevepomeranz.com, sign up for our weekly update for upcoming live events and the important topics we’ve covered this week straight into your inbox. That’s stevepomeranz.com. Tina Hay, thank you for joining me.

Tina Hay: Thank you so much.