All posts by Greenbacks Magnet

I grew up in the Washington DC metropolitan area and have been working in the financial services and lending industry for over a decade. I earned a bachelor's degree in psychology and master's degree in distance education from the University of Maryland University College.
Automobiles, Financial Freedom

I won’t stop now, cause it’s Ford cars for life

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If you have been reading my posts, by now you know I think the worst waste of money by far is a car.

Money and relationships 3-2-1

A car and nothing more

If you want to be wealthy drive a Ford

Life is good without a car payment

This is my latte factor. I call it the fancy car syndrome. If it’s shiny and new, people want it. Especially, if it’s a car. People can waste a couple hundred-grand just to be able to drive from the corner store and back home. I think people should examine the amounts spent on buying and leasing cars over a lifetime not just over the next 36 to 72 months.

What I drive. I personally own a Ford. I have driven one for over 13 years. My car has over 150,000 miles. It has a dent in the side and costs a minimum of $1500 to fix a year, but I still drive it. Why you ask? It’s simple. I used to spend $450 a month on a car note. Now I don’t. That’s $5400 a year. I was able to direct that money into savings and debt repayment.

Let me give you something to think about it. Two people walk into a car dealership. Customer A decides on a low-cost model car with great gas mileage for $15,000. Customer B goes for the fancy BMW that costs $50,000.

Two customers. Customer A is frugal, cuts expenses and pays off the car in 3 years. The money they were paying per month got rerouted to savings. After 2 years, they save $10,000. This is added to the additional $5000 that was in emergency savings. Approximately, $5000 is used as a down payment on a FHA home loan. They have over $100,000 in a current 401(k). Within a few years, including making extra payments on the mortgage, the home has $15,000 worth of equity. Customer A has a net worth of $125,000.

Customer B likes to live for today, increases expenses, and takes 6 years to pay off their car. No money is going to savings and they have $500 in an emergency fund and $7000 in an old 401(k). The warranty on the BMW runs out as soon as the car is paid for and repairs cost $3500. This expense goes on plastic. After a 2 years, the credit card debt has been repaid. They take out a personal loan to go vacation and pay for additional auto repairs. They have to treat themselves for denying themselves a vacation while paying off the car. Carpe, diem! However, because of high fixed expenses, they continue to rent and are unable to afford to save for a home down payment. Customer B has a net worth of -$10,000.

Over a decade with my Ford. Over the years, a few people have laughed at me for driving an old Ford. Those same people have had money issues for years. Not that I have not had any but because I do not have a car note to worry about my money goes toward other things like vacations, retirement savings or an emergency fund. I have been growing my nest egg for years. While I have watched some of those same people go broke. Now, I’m the one whose laughing, all the way to the bank.

Not only are Ford vehicles affordable, but because they are American made, it is easier to find parts and cheaper to fix. My average repair bill is $500-$700. The lady I knew whose spouse’s BMW was sitting on bricks because he couldn’t afford the repairs had a repair bill of $8000.

Since, my car is relatively inexpensive to fix, I can save more. I also was able to lower my insurance due to not needing full coverage. However, I would not go this route with an expensive car. If the cost of repairs and the value of the car is a high variance, you could end up with a totaled car and still have a balance owed.

Let’s say my Ford had this issue, then I may owe a balance, but it could be more like $1500 I have to pay out of pocket. In contrast, the Beemer might be something like $7000.

My car may be getting older but at least I own it and can afford the repairs without having to go into a ton of debt to fix it. So, if a car salesman walks up to you and tries to push you toward a fancy expensive car, by saying things like just try it out and if you don’t like it you can stop. Just say no. And walk towards the Ford vehicles instead. They may not get as high of a commission, but you get to keep your shirt and the house does not win.

Financial Freedom

How to save $100,000 dollars for retirement

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They say the first $100,000 is the hardest. Believe it. It takes the longest amount of time to get to when you start investing because it’s the longest hill to climb.

After you get through this hurdle, the rest is a lot smoother sailing.

The trick is to save consistently over time and to not cash out.

If you invest $5,500 annually or its equivalent of $458 per month, then you can have $100,000 dollars saved in ten years with an investment return of 8 percent.

Basically, you would need to max out your Roth IRA or contribute to a company 401(k).

You could have even more invested if you get a match.

The Rule of 72.  You can determine how long it will take your investment to double by taking the number 72 and dividing it by the interest rate.

Years required to double investment = 72 ÷ compound annual interest rate.

For the example described above that would mean 72/8 = 9. Therefore, it would take 9 years for your $100,000 to become $200,000.

Getting over the hump. This takes time. Once you start to save, then you have to commit.

There are no easy routes or shortcuts. The path to wealth is a journey. It truly is a marathon and not a sprint.

Build $100,000 in retirement savings by age 40

Build $100,000 retirement savings    
$100,000  account
Starting Age Daily savings Monthly savings Yearly Savings
20 $5.48 $167 $2000
25 $9.59 $292 $3500
30 $17.81 $542 $6500
35  $43.84 $1333 $16000
Greenbacksmagnet.com

Make saving a priority and you can amass huge sums of money just by slashing expenses.

The biggest expenses by far are housing, transportation, and food.

If you can move into a smaller home, sell your car, and live off rice and beans you could save a small fortune.

Be that as it may, I would still suggest starting with a budget you could live with so that you will not feel so deprived.

The reason for working on the goal of saving $100,000 is to have this in principal and let compound interest do the rest of the work for you.

Since you have already done all the heavy lifting of saving a hundred grand, now you can concentrate on other goals you may have in addition to saving for the future.

Here is some food for thought: $100,000 over 30 years at an 8% rate of return can grow (thanks to the magic of compound interest) into $1 million dollars!

That’s right. You’re a millionaire. Now when they ask who wants to be a millionaire you can say your well on your way!

Automobiles, Financial Freedom

Life is good, without a car payment

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Ah yes, I can feel it in the air. Early spring. Home and car buying season.

The dreaded car note. The average car payment is now hovering around $400 or more per month.

Here’s what you can do to get rid of your car payment and where you can put that money now that it’s not being spent on a car.

Get a shorter term. Many dealerships offer 72 month terms. I see this advertised all the time whenever I research or look at purchasing a vehicle. Hogwash. You can get a car loan for less than five years. If you want to be out of debt sooner rather than later, buy a less expensive car and finance for four years or less. Preferably three as once this year comes up and is marked off the calendar you can’t stand writing out the check anymore.

Use a zero percent deal. There are dealers and credit card companies that offer 0% financing deals. The catch is that you have to pay it off with 12-15 months on average. However, if you start here, you pay less interest over the life of the loan. Better yet, if you can pay it off during this time, your done and can tell the car company to honk that horn where the checks don’t shine.  

Save up and pay cash.  I know what you’re thinking. Can’t be done right. Well, it can be. It just takes time and discipline. For instance, pick out a car, write down the price, and set a goal of 5 years. Do the math and figure out the how long it will take to save up the money monthly. For example, a $20,000 vehicle will require you to save $334 a month for 5 years. Then you can walk into the dealership and pay cash!

Invest your money in stocks instead.  Now that you don’t have a car payment, you can put that money to work. Check out some IRA’s and mutual funds with an investment company. Money not spent can become money that interest is earned upon.

Beef up your rainy day fund. It’s a jungle out there. Anything could happen so you best be prepared. Take that $334 and start socking it away in savings. Do this for three years and you will have saved $12,000! That could be a down payment on a home.

Donate.  There are many organizations and people out there who need help. You can decide to feed the hungry or become a genie and grant wishes or set up a scholarship fund. No matter what you decide it can make a difference in someone’s life. The best part is that when it comes from the heart you feel good too.

Credit Cards, Financial Freedom

Do you hear that VISA? It’s me, Greenbacks Magnet

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I like my Visa. Always have. But it does not outshine cash.

Let’s face it, Visa is everyone whether you want it to be or not. Visa is accepted at the gas station, grocery store, airports, restaurants, and shopping malls.

Even vending machines take credit cards now. I once read that if you have to put groceries and gas on plastic, then you’re in trouble.

A book I read called Maxed Out, discusses the dangers of heavy dependence on credit.

You want to get on the right side of Mr. Interest, whereas, you earn it instead of pay it.

Here’s how you do it.

Read the fine print. Make sure to read your credit card statement. Know what interest rates you are paying and pay attention to the fees.

Pay off in three years. Credit card statements now show payment information of what happens when you pay only the minimum or what to pay to pay off your account in 3 years. If you stop using your card, you can pay it off in this time and be out of debt.

Plan to repay debt. I have read over 100 finance books and many state the same messages. One in particular is to make a plan to pay off all debt if possible in 3 to 5 years. Excluding the mortgage.

Setting goals. Write down a realistic plan to get rid of credit card debt. You need the amounts owed and interest rates.  The goal has to be measurable such as 3, 4, or 5 years.

Stop digging. You will have to stop using plastic. It’s the only way.

Save for emergencies. Have a rainy day fund to help kick the credit card habit. If you can save 1-month worth of expenses, you can start to kick the habit as you can pay for what you want with cash.

Delayed gratification. Plan your expenses. If you want to go to a concert next year, then start planning well in advance and save the money to pay for it with cash. No credit equals no debt.

Right side of Mr. Interest. Once you pay off the credit card debt, you can focus on investing the money you were paying in finance charges and start earning interest of your own instead of paying it.

Simply put, you can go from paying interest to earning it on the money you invest. This 8-step plan will help you get there.

Financial Freedom

Join the top Ten Percent Club

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The wealth inequality in the United States has reached a height not seen since the Great Depression.

The cries of unequal pay are falling on the deaf ears of politicians.

Therefore, it is up to you to start figuring out what you can do to change this in your life.

For starters, let’s define what someone has to do to join the ten percent club of wealth.

Let’s keep it simple and define families in the top ten percent as those with a net worth of $1,000,000.

That means that if you fall into the top ten with a net worth of $1,000,000 in 2017, you have more wealth than 90% of the population. And you are a member of the top ten percent. This is no small feat.

How do you get to $1,000,000? In keeping with simplicity, you could have a paid off home or home equity with a value of $250,000.

The other $750,000, which is needed to reach the upper echelons of wealth in the ten percent club, would be in savings and investments.

To accumulate $750,000 in savings, you need to save $6,600 a year for 30 years and earn a rate of return of 8%.

Basically, you could amass a cool $1,000,000 net worth by paying off a $250,000 home and saving $6,600 over 30 years to join the top ten percent. All this done simultaneously over a 30 year career, would equate you to having accumulated a net worth of $1,000,000.

Being a ten percenter is not so bad. It’s actually pretty great. Simple math and living will get you there.

Financial Freedom

Forget Simon, do what Buffet says

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Warren Buffet is the greatest investor of all time.

He has a net worth of over $70 billion dollars.

It is safe to say that he knows what he’s doing. And if you listen to him, you are likely going to be better off than the average joes.

Some of his best quotes on life you can find here  Warren Buffet quotes

Here are some of my favorite quotes from the wisdom of the Oracle of Omaha, Warren Buffet.

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

Focus on value over price. If you do not want to lose money, then limit spending and find ways to save and invest to grow your money.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

If you wouldn’t do it when being recorded, then you probably shouldn’t be doing it. Don’t do anything you don’t want on the front page of a newspaper.

Someone’s sitting in the shade today because someone planted a tree a long time ago.

All good things need time.

Risk comes from not knowing what you’re doing.

It was reported that Buffet spends 80 percent of his day reading. He has knowledge and uses it to his advantage. Reading, studying, and learning are the only ways to limit risk. You can put all your eggs in one or a few baskets if you know what you are doing.

You only have to do a very few things right in your life so long as you don’t do too many things wrong.

Staying away from negative behaviors and activities in vices such as drinking, smoking, and gambling can make sure that you will not hurt your chances to become wealthy.

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Don’t follow the crowds. Use your knowledge to make informed decisions. When others say the sky is falling then it is time to invest.

Honesty is a very expensive gift – don’t expect it from cheap people.

People that look to cut corners often lack integrity. This could hurt your bottom-line.  If you skip all the rungs on the ladder to success and wealth, you also miss the lessons along the way to stay successful and wealthy.

If you’re in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.

Helping others is its own reward. It is a moral imperative to help those who need it. Helping the bottom 4 billion at the economic pyramid has far reaching and lasting positive effects on humanity.

Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.

Life is about building relationships. Treat them well and you will get that treatment back in return. People are always more important than things.

You can’t make a good deal with a bad person.

There is no value you can place upon a good person or friend. Stay away from negative or bad people because they can’t be reasoned with to do the right thing.

Final Remarks. In this life, it can’t be all science and no philosophy. Humanity is a part of everything you do. Your highest civilian duty is to be humane. If you want to build your wealth, it is simple: help others.