The world is in love with credit cards. – Warren Buffet
I’ve heard it so many times before.
Your favorite sports team is coming to town. You have wanted to go see them play live for years, but you don’t want the nosebleed seats. You want to be close to where the action is.
So close that you can almost touch your favorite player and shake their hands or pat them on the back while their names are announced as they come out of the tunnel.
This year you have decided to treat yourself and will go see your team play.
However, tickets aren’t cheap.
After reviewing information on ESPN.com, you will see that watching James Harden dunk on LeBron James comes at a hefty price.
The average ticket in the NBA now costs $51.02, according to the Team Marketing Report, which monitors the business of sports leagues. Add charges for food, drinks and parking, and that cost rises to $72.53 per person.
And if you want to sit front row, the range for a courtside seat in the NBA is generally anywhere from $300-$20,000 just from a quick price check on Ticketmaster.
Since almost everything in America costs more than the federal minimum wage of $7.25 that millions of low-wage workers are earning; Americans are turning to plastic to fund clothing, doctor fees, college, medical bills, furniture, cars, excursions, and jewelry. You name it, then folks are dropping down their American Express to make a purchase faster than The Rock can put out another film!
The problem with that is pretty obvious. You don’t have the money to go to the game so you put it on plastic instead. This can have serious consequences down the line. If you are unable to pay off the balance, now you have to pay interest on this purchase.
With the average credit card interest rate hovering around 18 percent, you could end up paying double or triple the cost of this little excursion to go see the LA Lakers play at Staples Center over the next several years!
In the book American Plastic, the author stated she saw consumers going into debt to pay for cosmetic surgery, which could cost you $7,000 for one procedure. Putting many Americans further behind in their wealth building.
The book Credit Card Nation by economist Robert D. Manning, published in 2000, provides a comprehensive overview of a social and economic crisis going on in America-escalating dependence on credit. The deregulation of financial services in 1980 paved the wave for Americans to become dependent on credit cards.
According to CNBC and USA Today, the average credit card debt in Americans held is approximately $6,200. And Alaska topped the 50 United States with the most credit card debt at $8,026. This is also the state that gives all its residents annual checks from its rich oil supply. Just something to chew on right there.
Meanwhile, the average credit card debt is now becoming a major wealth killer. Those households with it and more likely to have lower 401(k) balances, less in savings and investments, and less home equity.
Billionaire investor Warren Buffet says you should avoid using credit cards like a piggybank; it doesn’t work because a piggybank is filled with cash and credit cards are not cash. Credit cards funnel all your cash that should be used for wealth building into the banks coffers. Banks are now making a billion dollars a month thanks to easy credit access!
The credit card love affair usually ends in trail of past due bills.
Once the minimum payment (usually a paltry one percent of the balance) becomes unmanageable, you can get into serious trouble. Instead of making minimum payments are paying interest, you should be earning it instead in Mr. Market.
The one percent you are paying could be going to your retirement accounts or toward the down-payment of a home. How important is once percent really? It is enough that if you subtract that amount from the expense ratio of a mutual fund, then that one percent difference can be enough to fund 10 years of retirement. Very important in my book.
Forget credit card debt. Go max out that 401(k) at $19,500 annually and/or a Roth IRA at $6,000 per year and $7,000 if you are 50 and over.
This will of course take discipline, but so what. If you are willing to fork over $10,000 for season tickets to see the San Francisco 49’s play, why can’t you put away $100 a month for your future?
Maxing out a 401(k) over 20 years with a 9 percent return would net you 1,087,408.34. Don’t let credit card debt take this away.
Here is Suze Orman’s FIRE protection gear: $5 million dollars to retire early. Really? Do tell. Care to elaborate. Absolutely.
It was around late 2018 that I heard talk of Suze Orman’s thoughts on the FIRE movement.
The rumblings in the financial blogsphere was that when Suze was asked her opinion about the FIRE movement on the Paula Pant podcast Afford Anything and she says, “I hate it, I hate it, I hate it.”
Suze told Paula Pant that $2 million isn’t enough for early retirement. At a 4 percent withdrawal rate, that’s $80,000 per year, which she says isn’t enough to protect you “when the floods come.”
“If you only have a few hundred thousand, or a million, or two million dollars, I’m here to tell you … if a catastrophe happens, if something happens, what are you going to do? You are going to burn up alive.”
The “Suze Slapdown” of ’18 was coined. And I thought watching WWE Smackdown was tough. Whew! They ain’t got nothing on Suze when it comes to laying the smackdown on finances.
She made headlines for saying that people who buy a daily latte are “peeing $1 million down the drain as you are drinking that coffee.” On Suze’s watch, spending at Starbucks SBUX is a no-no.
Let’s not drop out of corporate America on a whim and stop working. Get back to work.
Check out the tweet below that 2020 Democratic Presidential candidate Bernie Sanders tweeted out last year to see what I mean.
Wealthy TV "experts" are shaming millennials for buying coffee and avocado toast. But young people are broke because they’re drowning in debt and low wages.
The ruling class wants to divide the young and old to distract us from an economy that’s rigged for the richest 1%. pic.twitter.com/v4LCNpoExU
Suze Orman’s the sky is falling attitude about retiring early is not so far-fetched now during the coronavirus.
For anyone who isn’t up to speed on the FIRE acronym, it stands for Financial Independence, Retire Early. I am all for Financial Independence (FI).
This is me. Financial Independence: count me in!
Retire Early: slow down tito!
The focus of FIRE is to retire early by stopping the corporate grind and ending the rat race in your 30s or 40s, and not 55 or 65.
However, I am not yet ready to be put out to pasture. Luckily, other leaders in the FIRE movement gave some clarification and said that FIRE is not about stopping work, but finding your passion and earning passive income streams that keeps the money flowing.
The goal is to live life On. Your. Terms. So, I thought to myself okay. I can live with that.
Saving 25 times your current income and then retiring before age 40 without continuing to make money is risky.
The notion is that you can then afford to live off of your savings by limiting your withdrawals to just 4% of your assets each year.
Meaning if you earn $75,000 a year, then you need to save about $1.9 million before walking away from work. Money that was supposed to last starting from age 65, now has to starting from age 35.
The millennial had caught the FIRE bug and she was looking to hang it up within two years.
“Well, how much money do you have?” Orman asked. “Two or three million?”
No.
“A million?”
No.
“$250,000?”
Yes, but with some debt.
“Really?” Orman could only shake her head.
“Don’t talk to me about it. If that’s what you want to do, go ahead. But 40 years from now, I hope you remember everything I’ve said.”— Suze Orman, on retiring in your 20s
According to Suze, “time is the most important ingredient in your financial recipe.”
As financial blogger Mr. Money Mustache put it bluntly: “In the interview, Suze Orman goes on and on about what might go wrong, and how you need an incredible amount of money saved to protect you, just in case. But this thinking is completely backwards – money will not cure your fear, as megamillionaire Suze proves so clearly. Most high-income people are still within just a few paychecks of insolvency, because it is possible to blow almost any paycheck, simply by adding or upgrading more cars, houses, and vacations. Physical health FIRST: Salads and barbells every day, no goddamned excuses.”
Real estate financial expert and FIRE member Coach Carson posted some great advice on Suze’s opinion: “As Paula said after the interview, we should all make a practice of listening deeply to others (especially if you disagree). If you can reserve judgment temporarily, you can always learn something.”
Coach Carson says time not money is the most precious thing we have. The biggest regret is time wasted when people are on their deathbed. People do not wish they worked more or spent more time in that cubicle or corner office.
Very true. Washington Post financial columnist, Michelle Singletary, also weighed in on the interview. She says “let’s also put this debate in perspective. Many people aren’t saving enough to retire at all – early or late.”
I remember when my portfolio hit $100,000. It took half the time to get the next $100,000 and zoom to $200,000. Next stop, $250,000. That’s right a quarter of a million.
Then I was looking to moving on up like The Jeffersons to the tune of $300,000, $400,000, $500,000 and beyond. I only move forwards. I never look backwards. I could still work for another 30 years if I want to. Without putting in another penny, if I let this money ride I could have between $1 million and $2.6 million dollars. And that is if I stop investing. There is no way I am doing that.
I live for today. I live in the moment. I stop and smell the roses. I enjoy the present, but save like I am going to live forever.
Stop worrying about the world ending today. It’s already tomorrow in Australia. – Charles M. Schulz, creator of the Peanuts
I like to plan in advance. I have a plan to create a plan.
“If plan A doesn’t work, the alphabet has 25 more letters – 204 if you’re in Japan.”― Claire Cook, Seven Year Switch
If I want something, then I go get if. I get off my duff and go make it happen. Don’t complain. Go do something about it. To quote Mindy Kaling, “We are all just a treadmill and six laser hair removal treatments from being Ryan Reynolds and Blake Lively.”
Ask for credit when you don’t need it. Credit dries up like tears in a recession. That’s just my two cents. Back in the 2008-09 recession, they cut my credit lines in half. Overnight *poof* half my credit limits were gone. Like a puff of smoke.
The thing is that work gives us something to do. It lets humans be productive.
If you have $1.5 million at age 65, you have a much shorter retirement to spend on versus at 37.
What really makes the difference is that by age 55-60 many people are empty nesters, own a home, and already own most of their possessions.
You have a lot less things to buy because you have what you need already.
When you are 35, you may still have no kids, are just starting, or have a young family. You have costs that are still rising like inflation.
Empty nesters are not worried about paying for college. Its paid for. That’s in their rear-view. Juniors 529 is spent.
If you are still raising kids, it is likely you will need a decent income and a job. Kids cost…a lot. Most people are still buying homes, cars and having kids well into their 40s these days.
One of the biggest expenses that a job helps subsidize is healthcare.
Financial blogger Financial Samurai puts this into perspective: “Just know that once you get to your target number, you might find that your needs have changed. Life is unpredictable. A job helps you subsidize health care costs that are increasingly becoming a racket IMO, but it would help reduce our $2,380/month health care bill. However, I am grateful for every day.”
You want to retire early. Here is what Suze has to say.
Orman: “It would have to be in the millions . . . You need at least $5 million, $6 million.” (She later says $10 million to account for taxes.)
FIRE proponents fired back at Orman that she has it all wrong.
Really? When a government shutdown causes people to be in soup kitchen lines, then I beg to differ. Here were some of the things I read online during the 35-day government shutdown last year:
“I only have $1.06 in my bank account. I don’t know what I am going to do.”
“I can’t pay my bills.”
“I can’t afford groceries.”
“I’m scared I won’t be able to pay my rent or mortgage.”
“I can’t miss one paycheck.”
Not even one check? Even I try to keep a minimum of $10,000 in the bank at all times in savings. Just in case sh*t happens. I need that rainy day fund because when it rains it pours. Keeping a 3-6 month rainy day fund is what helps me sleep at night.
My 1-tweet financial plan government #shutdown edition. 😉
1. Save a 9-month emergency fund 2. Instead of maxing Roth IRA use extra funds for your rainy day fund 3. Do not get any student loans 4. Do not buy a new car, home, or go on vacation until rainy day acct 100% funded pic.twitter.com/Xmslbml3qC
Now to be fair, the FIRE movement is about saving and investing your money. The more, the better. If you are practicing FIRE, then, in theory, you should be able to weather any storm.
Meanwhile, Orman isn’t sweating her emergence as somewhat of a villain in the FIRE community.
Now that COVID-19 has swept across the globe, it looks as if Suze may have been on to something when she always says, “hope for the best, but always plan for the worst.”
On one of her most recent podcasts she stated that a lot of her advice on saving that eight-month emergency fund has come to roost. She now thinks you need a 3-year emergency fund.
I have always been more about FI than RE because no matter what happens in this world, I know one thing to be sure; you will always need money in the bank.
Now I’m going to sign off on this post the same way Suze Orman ended her show on CNBC every night, “now you stay safe.”
When it comes to cars, people can blow more money than a newly signed NBA player or first round pick of the NFL draft.
It was recently reported that Americans are spending $18,000 a year on non-essentials. Which makes it pretty hard to stack those Benjamins; and even harder to be saying stuff like Drake and Lil Baby : Got M’s in the bank, like: “Yes, indeed.”
I have found that either you can be rich or act rich; you cannot be both.
However, don’t feel bad. Lots of people take years to learn that lesson. That is why this latest post is going to be a two-parter. 😉
So don’t drop that top just yet playboy or playgirl, cause we’re equal opportunity like that here, because we’ll be right back later with part two of this post.
As soon as Springtime hits, more people are lining up at the convertible dealership faster than Punxsutawney Phil can make his prediction and see his shadow.
People are blowing major dough on their rides. If you are old enough to remember the MTV show Pimp My Ride, then you know its serious out here in these streets. $5,000 rims? You know it. Got to have that tint too? No problem. $2,000. Custom sound system? It will only set you back $8,000. And have to be like Three-Six Mafia and Stay Fly in the new whip by dropping $2,500 for a new pair of tennis shoes, $250 for Illesteva sunglasses, and $700 for new gear.
A new BMW can run you $40,000 and fully loaded could cost you over $100,000! Why not invest that money you say? The problem with investing in stocks and bonds is they’re boring as hell. A boss turns their garage into a Bentley dealership, stockpiles platinum Rolex watches, collects houses like chess pieces, turns their closets into a fashion house, collects $500 shoes like monopoly pieces, and opens up nightclubs. Got it, nerd? So light a Cuban cigar with a hundred dollar bill, pour your most expensive champagne in that crystal glass and put your feet up on a diamond-encrusted ottoman as Greenbacks Magnet presents Beamers, Benz, and Bentleys or a GMC Truck?
THE PRICE OF LUXURY All things come with a price tag. Food. Water. Houses. But when it comes to cars, people are willing to drop some serious coin. I’m talking enough to put down a 10-20 percent down payment on a half a million-dollar home.
Remember cars are now coming more high-tech; like Lil Baby says, “Brand new whip got no keys.”
So what is the price of all this luxury?
Let’s take a peek.
For goodness’ sake, a GMC truck will run you $20,000-$30,000. Buy a decent quality car one-time and you’re done for like a decade!
When you have to start putting gas and groceries on plastic, then you are in some serious trouble.
If you can drop $75,000 on a new S-Class Mercedes-Benz, but your credit card gets denied while in the drive thru for a double-cheeseburger, then you need to check your priorities at the door of the Range Rover dealership.
If you are only able to make the minimum payments on $55,000 of credit card debt, then at that rate it would take you over half a century to get back in the black. No one should stay in the red that long!
TURNING HEADS LIVING LARGE AND TAKING CHARGE If your theme song starts off like this, “rain drops drop top,” then you may be in trouble.
Trying to impress people with stuff usually leads you down to a life of misery and penury.
Personally, I have seen too many people get taken to the cleaners trying to impress family, friends, and acquaintances at stop lights for 20 seconds. That is a quick way to end up in bankruptcy court. Don’t believe me. Check out the NBA or NFL player’s union, stating that over half of NBA players are broke within five years of their retirement and even less for NFL ballers (there’s is three years).
I even read an article discussing how men that drive fancy sports cars are less likely to want long-term relationships! Is that why so many pro athletes owe millions in alimony and child support! Then show up in court crying and telling the judge they can’t afford payments like T.O. After making more M’s than the M&M’s can put on its candy, it’s hard to feel sorry for you. But we hear you out there. It’s hard out here for a pimp.
FINANCIAL DISASTER ON FOUR WHEELS I guess I don’t have to tell you that overspending on cars is dangerous. What I do not get is when I see people not bat an eye at paying $50,000 for a new car, but then loss their minds if they get overcharged $0.50 for an ice cream sundae (um, what?)
Pinching pennies on small items and dropping G’s on blackjack tables and designer car seats. That makes no sense.
You want to keep your fixed expenses low. That includes mortgages and cars. Why? So you can save and invest of course.
In order to try and retire early, it usually takes most folks saving 50% or more of their income.
Tough to do if you have to spend $3,000 every 3 months on repair bills at the BMW dealer. But because you are unwilling to negotiate at the farmers market or wait in line at Target or Costco, you spend like your life is made up of 75 hours instead of 75 years.
In order to avoid this fate myself, I paid off my car in 2009 and have not had another car note since! I then went from saving $1 a day to over $1,100 per month! I calculated that if I could save $13,333 a year, then I would have over $100,000 of cold hard cash within 8 years! And I would be that much closer to saying “Got M’s in the bank, Yes indeed!”
At least that’s what they kept saying in the film Risky Business.
Risky Business is a 1983 American coming-of-age comedy film written and directed by Paul Brickman (in his directorial debut) and starring Tom Cruise and Rebecca De Mornay. The film covers themes including materialism, loss of innocence, coming of age, and capitalism. Known as Cruise’s breakout film, Risky Business was a critical and commercial success, grossing more than $63 million against a $6.2 million budget. The soundtrack was done by Tangerine Dream. The movie poster reads: There’s a time for playing it safe and a time for… Risky Business.
Meet the model son who’s been good too long.
However, the title of the post is Catwalking To Get Paid: Modeling Is Risky Business. So why is modeling risky business?
Well you are about to find out.
The film Risky Business was released on August 5, 1983. Joel had all the normal teenage fantasies…cars, girls, money. Then his parents left for a week, and all his fantasies came true.
He was just a Chicago teenager looking for fun at home while his parents were away, but the situation quickly gets out of hand.
Speaking of dreams coming true and things getting out of hand; People magazine reported in the news this week that former Victoria’s Secret model Erin Heatherton (former girlfriend of Leonardo DiCaprio) has filed for bankruptcy owing $560,242.13 in debts and having $6,464.57 in assets.
Like our protagonist in the film, she has goals of securing her future.
Joel (Tom Cruise) chose Princeton, but Erin chose modeling.
He is the model son.
She is the model.
How can it be possible to get in debt so bad that you have to take drastic measures such as filing for bankruptcy or starting, in Joel’s case, a brothel?
Keep reading and find out.
EVERY STORY HAS A BEGINNING AND LIFE IS BUT A DREAM
A suburban Chicago teenager’s parents leave on vacation, and he cuts loose. An unauthorised trip in his father’s Porsche means a sudden need for lots of money, which he raises in a creative way. While the cat’s away, the mice will play. After his overprotective parents leave town, Joel has some fun.
He plays loud music, dances around the house, and invites over a young woman named Lana (Rebecca De Mornay) from a house of ill repute. It will cost him. For her services, she charges him $300.
On a joyride, he later crashes his father’s Porsche and that’s when things really get crazy.
The model son turns into a enterprising young man indeed. Although this movie is pure fiction and for entertainment, the business of modeling, which is very lucrative and glamorous, also has its pitfalls.
Model Erin Heatherton was discovered by a model scout in South Beach Miam,i FL. She moved t New Yorl City to chase her dreams and launched her career in 2006 walking for Diane von Fürstenberg.
At the same age as Joel, 17, she began to focus on her future and started modeling for top designers such as Prada and Chanel.
She began walking in the Victoria’s Secret Fashion Show in 2008.
In 2010, Heatherton was officially contracted as a Victoria’s Secret Angel. Then things begin to change after a few years.
ALL BUSINESS IS RISKY Going back to Joel, he knows he needs money fast to fix his father’s Porsche so he decides to be enterprising and recruits Lana to help him turn his parents house into a brothel for one night.
In Erin’s world, she is collecting paychecks and accumulating debt fast. She purchased a $1.7 million dollar home in 2012, then the very next year ended her contract with Victoria’s Secret in 2013.
In her bankruptcy filing she states she only makes $1,089.91 a month and $221 of that comes from family and friends.
So, now I have to ask that infamous question that keeps coming up in the movie, “What the F*ck?” How in the world did she go from catwalking for top designers to barely able to avoid the mortgage on her million-dollar price tag bachelorette pad?
After doing some digging, it seems that models are not all as rich as Gisele.
According to a website called Job Monkey, Models can make lots of money and depending on the type of modeling you do you can actually make a huge amount per day you work. … Photgraphic Model – You can earn anywhere from $100 per hour or $1,500 per day for catalogues and for advertising agencies $250 per hour or $10,000 per day is average.
Independent brands well-respected in the fashion community: Runway Show: $1,500 in trade Runway Show: $800 in trade Runway Show: Trade (unspecified amount) Runway Show: $2,500 in trade Runway Show: $300 plus trade (unspecified amount) Runway Show: $1,000 Runway Show: $100 plus trade (unspecified amount)
Not exactly enough to buy that yacht yet.
Modeling is a young woman’s sport. Most models are considered over the hill by age 30. That would mean you need to make a boatload of money from ages 15-27.
Those are your peak earning years.
Very risky business indeed.
THERE IS ALWAYS A PRICE TO BE PAID
Joel succeeds in getting the funds necessary to fix the Porsche, but then he has to pay a pimp to get his furniture back that was stolen from his house while he was away. He tells Joel that he seems like a smart kid and to not mess with a man’s money during a bad economy. That night at his house cost the man money because the girl’s were working for Joel instead of him. Instead of making a profit Joel was in the hole.
In Erin’s case, so far this year, Heatherton says she’s made $2,820. She currently has $919 in her checking accounts and her living expenses are a little over $1,000 a month.
How can she possibly save making so little?
From ages 22 to 28, I doubled my income. No where near what a Victoria Secret model is earning, but still managed to start putting away $150 a month until I was able to ratchet it up a notch to $1,100 per month. I am basically saving the same amount PER MONTH what she needs to live on!
According to Complete Payroll, Average model salaryVictoria’s Secret Models are among the highest paid models in the world. These women make anywhere between $100,000-$1,000,000 a year, on average. However, the paychecks increase due to seniority and fame. Some of the most experienced models, like Gisele Bundchen and Adriana Lima, earn significantly more.
I have reviewed dozens of bankruptcy filings of celebrities over the years. Ms. Heatherton hit every mark that generally throws people’s finances into a tailspin.
Owe IRS. Check. Tons of credit card debt. Check. The list goes on and on.
The usual suspects are living beyond your means.
It just so happens I discuss this topic of bankruptcy more in detail in a post I did on the film about models in TheDevil Wears Prada. What a coincidence?
IT WILL COST YOU Joel hands over his cash he made on that incredible night to get his parent’s furniture back. It cost him EVERY CENT HE MADE!
As for Erin, she currently owes $11,514 on one credit card, $9,485 on another and $194,602.49 on a third — adding up to $215,601.49, the outlet reported. Heatherton owes City National an additional $201,000 for a separate line of credit. She also owes $41,000 in back taxes to the state of New York.
She owes over$416,000 in credit card debt! That is more than most people owe in student loans. And she is has no degrees and is not a doctor, lawyer, MBA-holder, or CPA!
She also sold her Manhattan apartment for $2.68 million last year in 2018.
Makes you wonder where all her money went?
At the end of the film, Joel and Lana meet up after everything that went down. They are still friends. She tells him that she wants to keep on seeing him; he jokes that it will cost her.
“Life is a cruel teacher. She loves to give you the test first and the lesson later.” ― Daymond John star of “Shark Tank”
They say hindsight is 20/20. That just means It’s easy to know the right thing to do after something has happened, but it’s hard to predict the future. Hindsight means thinking about things after they’ve happened.
When I was younger and got my first credit card, I did not realize all the little nuances that come along with carrying a little square piece of plastic. Those lessons came later.
For instance, the bank likes to play a game called name that fee: Deposit fees. Transaction fees. Insufficient funds fees. ATM Withdrawal fees. Annual fees. Inactivity fees. Checking account fees. Mortgage fees. Credit card fees.
The Credit CARD Act of 2009 has tried to limit these fees and help consumers, but the banks can still create new fees.
There is no cap on fees. And no limit on how high they could go as there is no regulatory limit on what banks can charge for service fees on deposit accounts.
How do I know that?
I did my research.
However, there is a limit on what amount of interest a credit union can charge you to lend out their money to you. It’s an 18 percent rate cap.
How do I know all this?
I did my homework. I also work in lending.
Today, I share with you what you can do differently.
What it will cost you? $0
How much can it save you? Potentially, over $150,000.
Let’s begin.
FEES ARE EVERYWHERE
Your challenge, should you choose to accept it, is to avoid ALL fees!
ATM FEES
Service: Transaction at another bank’s ATM Average Fee: $2.00 Explanation: This is the fee that an average bank charges for using an ATM outside its network. Sometimes they will add on another $1.00 fee for your bank to process it!
Service: Non-customer ATM transaction Average Fee: $3.00 Explanation: This is what the average bank charges non-customers to use its ATMs. Combined with the ‘foreign’ ATM fee (yes, another fee) charged by your own bank (see above), you’re looking at $4.20 in service charges for using another bank’s ATM.
CHECKING AND SAVING ACCOUNTS FEES
Service: Monthly Fee for Checking Account Average Fee: $10.00 Explanation: This is the average monthly fee charged by the bank to house your money for a standard checking account . Fortunately, these fees are typically avoided by maintaining a minimum balance or meeting some other criteria. Usually a monthly direct deposit will allow you to avoid this fee. However, it usually requires a minimum of $500 or more per month. This can be difficult for part-time worker or student. If you are a student, usually there are student accounts that will waive this fee. You can also look for banks with free checking.
Service: Monthly Fee for Savings Account Average Fee: $5.00 Explanation: This is the average monthly charge for a standard savings account, which can usually be avoided by meeting certain criteria like establishing a regular direct deposit to the account or maintaining a minimum balance.
CREDIT CARD FEES
Service: Minimum Interest Fee Average Fee: $1.50 Explanation: This is the average monthly charge for holding a credit card in your wallet. Check your credit card agreements and statements to see if your bank charges this fee.
Service: Late Fee Average Fee: $38.00 Explanation: This is the fee charged for every late payment you make to your credit card. Which can obviously be avoided by paying on time, but what about when you forget. The only way to truly avoid this is to set up an automatic payment so that you never miss a payment again. This fee is egregious.
Service: Annual Fee Average Fee: $29.00 Explanation: This is the average annual fee a credit card company will charge you to say what’s in your wallet? Fees can go as high as $450.00 a year the more exclusive the card. This fee can usually be avoided only applying for credit cards with no annual fee.
Service: Return Check Fee Average Fee: $25.00 Explanation: This is the average charge for non-sufficient funds and being unable to cover a check. This can usually be avoided by making sure you only write checks when the funds are available in your account. You definitely don’t want to rack up too many of these fees. You will get put on the bad check writing list. It’s called ChexSystems. It can cause banks not to do business with you. Essentially, making you bankless. It is designed for people with bad credit or banking histories. Reported information usually is removed from your ChexSystems file after five years!
ALL THOSE FEES ADD UP
If you start adding up all these fees, you see how much it could cost you and how you could slowly drip (like a slow roast cup of coffee) a small fortune away out of your wallet.
ATM Fee: $3.00
Checking Account Fee: $10.00
Savings Account Fee: $5.00
Return Check Fee: $25.00
Late Payment Fee: $38
Annual Fee: $29.00
Total: $110.00 per month or $1,320 per year
You do this for 30 years and you spent $39,600.
If you invest this money instead, with an 8% return and you could have $161,000! Yes, that’s USD.
By no means will this turn you into an overnight millionaire, but it has the potential to give you the foundation to set you up pretty good for later in life.
The banks know what they are doing. You have to pay to play. In order for them to house your money, you have to pay for the convenience and service.
The problem is that they pay measly amounts of interest on their savings and checking accounts.
You receive a 0.10% return on the money you let them hold, which they ultimately can lend out and invest and make deals to increase their honeypot. On the other hand, when they lend you money it can cost upwards of 29.99%!
So, let’s break this down. We give you thousands of dollars to hold. You pay us less than 1%. You lend us thousands of dollars and we pay you 29%. Sure, that seems fair.
I guess in the law of supply and demand the customers are not always right.
Even though, they need us to make money.
But borrowing is borrowing. You have to pay to borrow. That’s just the way it is. The only way to get around this is not to borrow.
Yes, that last sentence is $161,000 advice I just gave you. Your welcome.
John Legend is a Grammy and Oscar Award winning musician. The singer-songwriter won his first Grammy Award with 2004’s Get Lifted. The album went platinum, thanks in large part to his hit single “Ordinary People.”
He was a child piano prodigy. He skipped two grades and graduated from high school at 16.
He sang in the church choir (which he joined at 7 and was leading it by 11), was head of the music department in his church, served as a music director in college and also worked as a wedding singer.
He has done numerous interviews in his career and much of the information in this post comes from them. I discuss multiple ones in this post.
John has an estimated net worth of $40 million dollars.
He did an interview with Katherine Schwarzenegger for her 2014 book I Just Graduated… Now What?: Honest Answers from Those Who Have Been There. You may recognize the last name. Yes, she is the daughter of Arnold Schwarzenegger and Maria Shriver (Kennedy).
Here is some of what he had to say. (Not every word or quote is from her book, but numerous interviews) I highlight his advice in her book with KES (Ms. Schwarzenegger’s initials). There they are (KES) on the board right behind her.
“I had followed the path that the Penn graduate was supposed to take, but I didn’t fall in love.” – John Legend
KES: John directed theater productions in school and performed in talent shows. He wanted to be a big star, but did not know the steps to get there. John said he had a fire in his belly. No one was coming along to make him a star as he learned along the way. John had to put together a demo and have it produced by the right people. Anything that he was doing that wasn’t music, was going to be temporary.
Although, music is his first love, he worked a safe corporate job for three years while hustling to get his music off the ground. He received lots of rejections, but continued to side hustle as a musician playing anywhere he could.
DON’T BE AFRAID TO FAIL
“Fear of failure stops too many people from doing things. It’s not wrong to be afraid, but you have to fight through fear to overcome it.” – John Legend quoted as saying this in Katherine’s book (KES)
Many of his friends became bankers and consultants so he did too. However, after following in their footsteps he found that was not meant for him. He was not cut out to be a consultant.
“I couldn’t shake my passion for music.” – John Legend
He made savvy moves to make his dream a reality. During the day he did PowerPoint presentations, but at night he wrote and performed music.
Fun Fact: While in college, Legend was introduced to Lauryn Hill by a friend. He played piano on Lauryn Hill’s “Everything Is Everything.” That was his first album appearance.
WHY SIDE HUSTLE?
“I needed money. I lived in New York and had to pay my rent.”
KES: John didn’t have any financial support from his parents and he had student loans to pay back. He found that you could make good money in consulting.
He was rejected by all major labels. All the heads of these labels all turned him down.
KES: John paid his own way through college, racking up tons of student loans in the process. He had to deal with them after graduating college. He rolled the dice, took chances, and worked his butt off to follow his dreams, and never lost faith along the way.
Basically, he moonlighted his way to a music career.
BREAKTHROUGH
Havin’ money’s not everything, not havin’ it is. – Kanye West
KES: John would go to the studio straight from worked dressed in his business attire. He said he definitely stood out from the way everyone else was dressed in the studio. He ended up getting a manager and a lawyer that were also well-connected. This was in 2002.
If you want to be treated like an adult, you have to dress like one. – Diane Kruger (actress and star of National Treasure) See my post on the film.
Through his collaboration with Yeezy, he was able to parlay that into a record deal. His first album was produced by Kanye. He got a deal with Sony.
That album would go on to earn eight Grammy nominations.
Years of toiling and hard work had paid off. It just goes to show, it’s not only what you know, it’s who you know. If you want to be taken serious, then you have to act like you do.
John Legend joined the elite group to have earned Hollywood’s most prestigious awards – an Emmy, Grammy, Oscar and Tony – on Sunday. At 39, he is the youngest person to achieve EGOT status. He’s also the first African-American man to win all four awards. https://t.co/5YSh5rYfPUpic.twitter.com/AUK3Kgh1S0
“When I got my first big check, I paid [my college loans] off. No more debt!” – John Legend
As you can see, his biggest earnings are from his music. It goes to show that passion can pay off big!
KES: John quit his job and started working part-time so he could focus more on his music. He struggled for a while, living on credit cards and skating by. Then he started making money touring with Kanye. In 2004, he got a deal with Columbia Records and when that happened he didn’t have to worry about money anymore. As soon as he got my record deal, he paid off all his student loans and credit card debt. He said no one ever told him about college loan debt and how to manage it.
Preaching to the choir here with not knowing how to manage debt. And in his case, that is literally speaking as he was in the church choir singing, which would become his meal ticket.
INVESTMENTS
“I bought a place [in Manhattan]. I just bought some art—some abstract stuff—and some collages are coming too. A friend who works at MoMA is like my art consultant. I just wanted nice stuff that would hold value.” – John Legend
You should always invest and buy things that go up in value. It just makes sense.
PASSION MAKES A GRAMMY WINNER
“But that cool detachment only gets you so far. Passion gets you a lot further. It makes you a better entrepreneur, a better leader, a better philanthropist, a better friend, a better lover.” – John Legend
He chose to pursue his interest. This made him his fortune. I call it the House that was built on a piano. 😉
