financial know-how Archives - DIYmoneytrack.com

The high cost of tapping your retirement savings early

The 2025 Employee Financial Wellness Report by Payroll Integrations found that a significant portion of the U.S. workforce is experiencing financial strain, which is impacting their retirement savings. The report reveals that 38% of employees have withdrawn money from their retirement accounts, with this trend being particularly prevalent among Gen Z workers, of whom nearly half (46%) have done so. The withdrawals are primarily driven by urgent needs like unexpected emergencies and debt repayment, not discretionary spending.

This pattern is expected to continue, as one in three employees anticipates having to withdraw funds again in the next year to cover emergencies or daily expenses, indicating widespread financial fragility and a lack of sufficient emergency savings.

When bills pile up or emergencies strike, dipping into a 401(k) or IRA can feel like the easiest fix. But the real price of tapping retirement savings early is much higher than most workers realize. Between penalties, taxes, and lost compounding growth, a short-term withdrawal can snowball into a major setback for your financial future.

Here are five reasons why you may want to reconsider taking an early withdrawal from your retirement account:

Lump-sum vs. Cost-averaging: Which investment strategy is right for you?

So, you’ve got a tidy sum of money – maybe an inheritance, a generous bonus, or years of careful saving – and now you’re faced with a classic investment dilemma: Do you invest it all at once (lump-sum) or spread your investments out over time (cost- averaging*)?

Both strategies have pros and cons, and understanding them can help you make an informed decision for your financial future. If you are interested in learning more about these investment methods, please read on.

73% of U.S. adults victimized by online scams according to new report

The digital landscape is a minefield of scams and attacks, and a recent report from the Pew Research Center, highlights just how widespread this issue has become in the U.S. The report, titled “Online Scams and Attacks in America Today,” reveals that a staggering 73% of U.S. adults have been a victim of some form of online fraud.

How to stop financially subsidizing your adult children

Our second child just graduated college, and will be starting a new job soon. This is a pivotal time in her life and ours. Like many parents with college students, we have been paying for most of her living costs for past 22 years.

For the last few years, we have been easing her into self-funding her life by transitioning specific discretionary expenses to her, like clothing and eating out. Now that she has graduated and working full-time, the transition will expand to all subsidized expenses.

If you are also in the process of helping guide your child toward financial independence, then you may benefit from a worksheet application we deployed with our children when they started working full-time.

Using this worksheet, called Financial Independence Transition (FIT), can help you and your child get on the ‘same page’ about their financial future. Specifically, what they will be expected to pay for and when. Following a transparent and structured approach, like FIT, will also improve your relationship by reducing the chances of misunderstandings and disagreements about money, now and in the future.

To learn more about FIT, please read on.

Am I on track? Use these 5 personal finance ratios to find out

As a young adult, you’re at the early stages of your financial journey through life. You may be thinking about saving for a down payment, paying off student loans, or maybe even planning that dream vacation.

But how do you know if you’re truly on track? This is where personal finance ratios come in – they’re like your financial GPS, giving you a quick snapshot of your financial health and helping you make informed decisions.

There are 5 essential ratios that you should know, and track regularly over time. These ratios give you a well-rounded view of your financial stability and highlight areas for improvement, such as reducing debt, increasing savings, or building investments. If you are already following your money, then calculating these ratios on a regular bases will be straightforward.

To learn more about the 5 personal finance ratios and how to calculate, please read on.

When you need umbrella insurance

About ten years ago, my wife got into a car accident and the driver of the other car made a very large claim against us and our auto insurer. The claim amount initially exceeded the liability limit of our policy. We were notified by our insurer that we should consider hiring a lawyer to fight the amount of the claim above the policy limits. Ultimately, the claimant settled with our insurer for an amount within our liability amount, otherwise we would have needed to get directly involved legally.

After this unsettling incident, we decided to increase the protection of our assets with an umbrella insurance policy. Umbrella insurance provides an extra layer of protection on top of your existing insurance policies (like auto or home insurance). It helps cover costs if you’re sued and the damages exceed the limits of those other policies, protecting your assets.

If you are interested in learning when you may need an umbrella policy and how to determine coverage needs, please read on.

Why being financially literate may only take you so far

I’m sure you’ve heard of financial literacy. It is a major focus of the media, academic and financial institutions, and has its own month (April). You may have also taken a class on the subject. Despite all the attention, financial literacy has been declining since 2020, according to a TIAA Institute-GFLEC report.

This is concerning, because even being financially literate may only take you so far. To be a skilled money manager and increase the likelihood of achieving your financial goals comfortably, you need to strive for financial proficiency.

What’s the difference? Financial literacy is the knowledge of fundamental concepts and principles of personal finance. Being financially proficient refers to the application of that knowledge (literacy) to achieve positive financial outcomes.

Unfortunately, considering recent statistics about the state of financial literacy worldwide, the foundation for building proficiency is still weak for many individuals and families. Moreover, even if you exhibit a high level of financial literacy, this does not mean you are financially proficient.

If you are interested in learning more about financial proficiency and 3 steps you can take to progress from literacy to proficiency, then please read on.

How do you compare to the wealthiest U.S. households?

What do the wealthiest households own that separates them from others?

The answer to that question can be found in research data from the Federal Reserve on the distribution of U.S. household financial accounts.

This data allows you to compare the level, composition, and share of assets and liabilities with households in other wealth percentile groups, and see what the wealthiest households buy and own that makes them different.

If you are interested in learning what assets are prioritized by the wealthiest households and how you compare, please read on.

2024 Year in Review

Happy New Year! Wishing everyone a healthy and prosperous 2025.

Thank you for continuing to support my efforts to increase personal financial proficiency and well-being.

I believe strongly in the financial and emotional value of the content I produce and it gives me great pleasure when I hear and see it helping others.

I created DIYmoneytrack.com to support the content in my books, obtain feedback from readers about new content, and connect with other DIY financiers.

I’m delighted to report that my mission continues to gain traction.

How to protect your credit reports

In my prior post on protecting yourself from cybercriminals, I shared steps you can take to stay ahead of fraudsters trying to use your personal data against you and steal your identity. While all of those actions should be used to protect yourself, there is one action I recommend you consider implementing now:

Create a fraud alert or freeze access to your credit reports.