Monday, July 30, 2018

Money Lessons from 2 Countries - Chapter 4

After talking about college education and the cost of it, and credit cards and other credit tools that are available more in the US than in Romania, this week we will talk about the way to earn money through work and investments.

I grew up during a time when all employees were paid in cash - in fact, my mother worked in the department that was in charge of giving out the wages 2 days a month. I remember my mom bringing home new bills, and then exchanging my savings to new crisp bills - the higher the value, the better. I have talked to many American friends who have memories from their childhood regarding saving money, and many of their stories are similar to mine. The main difference is the time of the childhood. My American friends talk about the 1960's and 1970's while my memories date from after 1985 - guess Romania was a little behind in adopting the plastic and the ACH as a method of collecting wages.

During the communist regime, we only have a central bank in the country and all the savings went there - building up a small interest for staying parked in the account. I remember taking a long time to collect an amount that I liked looking at and dreaming about. The system was set up in an artificial way that limited the inflation, therefore the value of money didn't go down much over time.

As soon as the Revolution changed the financial system in Romania - among other things - the inflation hit full force and many Romanians (including me) saw the value of the savings accounts shrink. the new "fashionable" savings accounts became the ones in foreign currency. This was quite profitable for a time - until the interest on in became so low that it lost all its appeal. The main challenge for the Romanians came a little later, when the banks caught on with the appeal of making more money from foreign currencies and started offering loans in foreign currencies. I have friends who are still struggling to pay off loans taken out in Swiss Francs many years ago.

From my experience with the financial system in the United States, I learned to appreciate the stability of the national currency that maintains the values of loans as well as savings on a level that can be easily understood. Since the banks make profits by trading money, the interest on savings is always lower than the interest on loans. This makes sense on a logical level, however much it affects the average Joe or Jane who is trying to make their money work for them. 

For now, I will stop the stories of my 2 countries. Next month we will be talking about money tips that can help you keep more of the money you make.

Monday, July 23, 2018

Money Lessons from 2 Countries - Chapter 3

This week I have decided to talk about the way people purchase stuff in both of the countries where I have lived. When you read this, please keep in mind that things have changed in Romania in the 3rd millennium and I have lived in the US since 2002. I would like to talk about the money habits I have observed in the adults that surrounded me growing up, as well as in my friends who still live in Romania, and who are now adults. 

When I talk to American friends, even now, about the ease of getting credit (especially via credit cards) in the US, they are surprised to find out that I had never even heard of a credit card while growing up - outside of movies (if that). I remember being fascinated by the amount of mail people found in their mailbox in the movies while I went for many weeks between letters from penpals around the world - in the world before the internet. After I moved to the US and I told this story to friends here, I found out that most mail consists of junk and bills. So my fascination with it died a quick death - especially once I started getting my own junk mail. 

Even now, when the banking system in Romania is much more developed compared to the 1990's and especially compared to the communist regime, there aren't many credit cards around - besides, most people still use the good old, hard cash when paying. Many of the mom and pop retail places don't even deal with any plastic. So if you believe in supporting local businesses, you don't really have a choice but use cash. 

When I first moved to the US, I had to figure out first what a credit card was, then what a credit history meant. I came from a country where you got a loan for a big ticket item, like a house, based on the fact that you had a steady job with decent pay. Nobody has a credit history somewhere for lenders to see, and a credit score is a foreign word - literally and figuratively. Getting my first credit card was exciting - event with a $500 limit, not because I could spend more, but because someone (albeit be it a big bank) believed I was trustworthy enough to have access to $500 that were not mine.

Of course, in the passing years, I learned that I wasn't that special, since almost every young American who turns 18 has the opportunity to into as much debt as he/she wants to. I found out that credit cards are a necessary evil if you want to have good credit - which allows you better interest rates on things many people can never pay cash for, such as a house or a good car. I also learned that they can get people in a lot of trouble because they show you there is money to be spent, even though it is not yours and you have to pay it back - with interest (and what an interest). 

If I didn't scare you with all this talk about credit cards, we'll talk some more next week.

Monday, July 16, 2018

Money Lessons from 2 Countries - Chapter 2

We talked last week about the differences between the school systems in Romania and the US. I would like to take this post to go over some other differences within the school systems, as well as the life of the students and their families during this period.

As I mentioned, during the communism, every high school graduate was offered a job - not one that required a lot of specific training or a certification, but still a job. Also, at the time that everyone graduated university, they were offered a job in the field of their studies. For instance, doctors, teachers and engineers ended up with jobs in their field - the only "catch" was that they went to very small cities and especially in villages. The only way for them to be in a big city or close to their hometown was to ask for favors or to bribe someone.

By contrast, after the revolution, just like in the United States, many of the graduates from different universities work in jobs that are different from their field of study. Also, with the increase in new universities after 1989, there are a lot more graduates than before. With all the changes that came with the revolution, the high school graduates had more options for university, and therefore many attended classes in fields that they were not passionate about, such as going to law school - similarly with many American students getting a degree in criminal justice.

While growing up both during the communist regime and afterwards, in Romania, teenagers and college students didn't have an opportunity to work - without the fast foods and grocery stores, like the big chains in the US, we didn't have a chance to earn money and have entry-level jobs that show up as "experience" on a resume. I still remember how hard it was after graduating college when I started looking for a job and everyone was asking me about experience. Yet nobody would hire me to give me the "experience" they were all requiring. 

I guess in this I always considered the students from Western Europe and the United States as fortunate to be able to achieve a certain level of financial comfort by providing the cash they needed for the things they wanted through their own jobs and efforts. As a funny side note, I also didn't grow up with an allowance, so I didn't have a "weekly wage" as a child, with which to make plans for things to buy. I always had to earn the money I wanted by maintaining good grades - which was not a hard thing for me (fortunately). 

Going away to college gave me an opportunity to manage my money while making sure I could buy the things I wanted while also having money to go home every time I wanted. For many Romanian students college is the first chance to leave home for a number of years and become independent (or at least depend on the parents less). What happens many times after graduation though, is that the graduates return to live with their family for a while longer - unless they find opportunities for work (most often out of the country). 

I used to think that the American and Western European systems, encouraging their youth to move out form their parents' homes in their late teenage years, was such a great set up. I longed to be independent back in my adolescence...

We will explore some of the other changes in the next weeks. Stay tuned! 

Monday, July 9, 2018

Money Lessons from 2 Countries - Chapter 1

This month is dedicated to talking about the ways the financial system is different in the 2 countries where I have lived my life. I grew up in Romania, first during a communist regime that believed that all are equal in rights and possessions (except that some were more equal than others, as we found out afterwards), and then in a democratic country that was designed in bits and pieces to mirror centuries old democracies in Western Europe - and not always for the good of the people. In my early 20's, I moved to the US and had to learn all about the financial system in a country that was totally different from the one I was raised in.

I decided to write some of my thoughts and the lessons I learn through my experience, so that both the Americans and Romanians reading these posts can find out what other people have to work with and through when trying to achieve their financial goals. It is my hope that readers from both sides of the Atlantic will take some of the info I share and use it so they can build better relationships with their money, and at the same time appreciate more what they have access to.

This week, I would like to address the school and university expenses in both countries. The similarity is that both countries have both state (public) universities and private ones. The differences are many on all the levels of schooling. I would like to also cover the differences in the Romanian system now compared to how things were set up when I went through my school years. I consider myself fortunate to have been in middle-school at the time of the revolution, when Romania overthrew the communist regime. I have always felt I was born at the right time, because it gave me a chance to experience life during the communism regime while being old enough to still remember it; at the same time, I was young enough when the revolution happened to benefit from the changes and the new opportunities that became available. 

The school system set up by the communists was designed to ensure all students graduated from high school, so all the students were supposed to pass, regardless of their actual level of knowledge or ability to pass tests. Also part of the propaganda was that university studies were not encouraged, because graduating from higher education was a threat to the regime - people became individuals instead of just one of the many average workers. Graduates of higher education were known as "intellectuals" and the way the pay system was set up (all under the control of the government) encouraged factory workers to have no aspirations for university degrees.  

The good thing about the universities during the communist regime was the fact that all education was free, with the only expenses related to the dorms or any other living conditions for the students who went to school in different towns. The hard part was not the cost but the entrance exam, because of the number of candidates for the student places available. When I went to college, there were over 9 of us for each of the 25 seats open in the Tourism Department. It used to be even worse back in the 1980's for Medical School and for Law School - sometimes even over 20 candidates were fighting for each spot. 

In the recent years the criteria have changed and now the entrance exam has been eliminated for many universities, while the grades from different subjects counted for the average considered for admittance. Along with the state universities that have been around for many years (a lot of them for decades and even hundreds), many private universities were founded after the revolution - these last ones not as picky in students admitted, and asking for tuition. The tuition there is a lot lower than what the American universities charge, but it can still be high for the average income in Romania. 

The private American universities, by contrast, are more prestigious and mostly more expensive than the public ones. The main drawback to going to college (for the majority of students) is the amount of student loans one gets saddled with, for many years after graduation. I think that the biggest concern for the families sending their children to college and knowing they will be taking on a lot of debt, is the statistic showing the small percentage of them that will actually work in the field that they are qualified for. Well, this is very similar to Romanian graduates, who also go for the diploma without a real plan to work in that field. This is more obvious for such graduates of business universities (named Economic Studies) and a lot of private law schools - Romania doesn't need that many attorneys. 

Now that I realize how much I can write on the topic, I decided to continue this subject next week, when we will explore some more details of the school system - similarities and differences. 

Monday, July 2, 2018

Half-Year GOAL Checkup Point

For the month of June, my goal for the blog was to help you reconnect with the goals you set for yourself in January, and to get you to refocus on them, to check on your progress and to recommit or modify them accordingly. As we are starting the second half of the year, I would like to talk about some strategies on achieving your financial goals for 2018. And since we are getting a bonus Monday in the month for July, what better time to focus on your goals and to highlight some of the finer points from June than right here, right now?!

If your main goal for 2018 is not tied to money, don't worry! You can apply some of these strategies as well. I will also state that all goals you set can help you improve your finances in some way. For example, if your goal is related to health and fitness, once you achieve the level of health and fitness you want, you will feel better about yourself and be able to monetize your business at a higher level. Even if you don't have a business and bring home a regular paycheck, you will be able to stand tall when you ask for a raise when you feel better about your self-image.

With all that said, let's move into some quick ideas on how you can raise your balance in your bank account by the end of the year. If you are already doing some of these things, congratulations! Please share this post with a friend and help her build her savings, investments and financial serenity.

1. If you are already saving 10% of your revenue for retirement, or for a big goal, make sure you are also setting aside 10% of any bonuses you receive, or from any other unexpected income - such as: tax refunds, refunds from stuff you may return to stores, little side jobs you may do while you grow your business, etc. 

2. If you handle cash, make it a practice to set aside in an envelope a certain denomination banknote (like $10, $20 or $50) anytime one comes to you, and then periodically put that cash into your savings account - and don't touch it until the event happens that you are saving for. This can be for your retirement or for a big purchase goal. 

3. If you want to teach your children how to save, consider starting them with setting aside the change they get anytime they spend a part of their allowance. That money can be then added into a savings account for them. Or if you are more determined and can shoot higher than that, veer a percentage of the allowance straight into a savings account.

If you have plans to take time off this week and spend it with your family, I hope you enjoy that time. I also hope you find a few minutes in the mornings to look over your 2018 goals, refocus and plan the second half of the year, so you can achieve those goals. Make 2018 the last year when you set these particular goals, so that 2019 can build on them and you (and your business) can get to the next level. 

Happy 4th of July! See you here next week for more ideas on how to build your financial serenity.