The automakers at BMW has been using this slogan since 1973 and it is featured on all advertising for BMW automobiles and motorcycles.
Their tagline explicitly uses the word pleasure to describe driving. And if you want that pleasure its’s going to cost you, at a premium.
New cars are now averaging $700 per month.
The University of Maryland College Park (UMD) has an annual Room and Board that is about this cost of $700 per month for that new car: Room (Standard 2-person w/AC, includes Telecom fee) $8,860.
https://reslife.umd.edu/
For some perspective, keep in mind that $700 times 12 months = $8,400.
A mere $260 more will keep you housed and fed on a university campus at the UMD, which is considered a Public Ivy, for an entire year.
Penn State and other public and private colleges are even higher.
When looking at these new car prices, you may see why some Facebook engineers chose to live in their cars rather than pay $3,000 rent on top of that car payment.
Most folks just do not have $3,000 per month to shell out on just rent and car payments, let alone $3,700.
Therefore, before you decide to start writing that check out for $700 every month, I want you to stop and consider this. Gas prices are topping $3 per gallon. Insurance keeps on moving on up like The Jefferson’s!
Expenses for the average joe in the middles class keeps on going higher and seems never ending.
Instead of paying $8,400 a year to floss in a new BMW, you can invest that money instead.
Let’s say the car payment will last you seven years. During that time if you put that money into stocks you could have a nice head start on your retirement savings. That sounds real good considering the average portfolio is worth about $30,000 for folks under 30.
Please also take note that I said to invest in stocks and not cryptocurrency. No Dogecoin, Bitcoin, Ethereum, Tether or Binance USD. After the FTX bankruptcy, no one can call these investments safe.
Going back to the new car payment being invested instead, over a seven-year period with a rate of return (ROI) of 10%, you could have $87,661 in your 401(k).
Please note that the ROI of 10% is doable as that is what the stock market has averaged. The historical average yearly return of the S&P 500 is 10.356% over the last 100 years, as of end of November 2022. This assumes dividends are reinvested.
If you decide not to invest another penny, over 26 years, you would have 1,044,764. Not buying a new car can literally make you a millionaire.
Maybe that is why Jim Cramer decided to keep investing in stocks even though he couldn’t afford rent and had to live in his car. He knew what it could mean for his future. By the age of 45, he had amassed a $1.5 million dollar nest egg in his brokerage accounts.
Remember those people on Pimp my ride from the MTV show. Wonder if they still even have those cars from back in 2008.
With all the money they spent on custom rims and tricked out this and that, if even one car was repossessed, it was all for naught! #*k cars!!
Buy the product. Own the business. Get the stock. Let those dividends pay for your future car with cold hard cash.
Take a lesson straight out of South Park’s playbook.
However, instead of foreign stocks, I prefer to just stick with domestic, as most companies are international and provide you with global exposure.
You just have to decide which one you want more: a new car or financial freedom sooner rather than later.
Always pay your taxes. – Felix Dennis, British publishing entrepreneur
Former British publishing magnate, Felix Dennis, states the above-mentioned quote.
At the time of his death, he was estimated to be worth over $100 million dollars. He wrote these words in his 2006 book How to get rich. He said there is no getting around paying taxes and that if you try it is likely to lead to severe economic problems and consequences.
That being said, let us jump right in to the topic at hand. It was recently reported that R&B singer, Montell Jordan, famous for the 1995 hit “This Is How We Do It,” owed the IRS $1.7 million in back taxes.
Surprising because the song ruled the airwaves and was No 1 on the Billboard charts. Fast forward to some years later and we find out that an $11,000 tax debt that went unpaid ballooned to almost $2 million dollars. WTF!!!
Please understand my surprise and literal shock upon hearing this as this song is still played in film and on television today. He should be raking in millions in royalties from this song alone. However, it is not the case.
He sadly had to sell his publishing rights to pay his tax debt. He immediately signed the $600,000 check over the the IRS and had to file for bankruptcy. Apparently, an accountant did not pay his $11k in taxes due one year and he was being charged 11% per day by the IRS until it hit $1.7 million.
On a personal note, I make sure to review all my tax documents, file them myself, and make sure to pay every penny owed to the feds. I do not ever put my fate in someone else’s hands.
This is not how we financially do it!
I cannot stress this enough. You are in charge of your money. Period. Do not ever let anything pass by you that you do not read when it comes to your finances.
Greetings to all you wealth-building enthusiasts out there!
We are in the homestretch of the New Year.
New Year’s Eve 2022 is a mere two days away.
Let your 2023 resolutions start to take shape and begin shortly. However, let us have a few moments of reflection over the last year shall we.
A recently elected Congressman, Maxwell Alejandro Frost, had a rent application rejected weeks ahead of being sworn in. He is unable to afford an apartment in Washington DC, as the median rent is $2,395, due to his bad credit.
Just applied to an apartment in DC where I told the guy that my credit was really bad. He said I’d be fine. Got denied, lost the apartment, and the application fee.
This ain’t meant for people who don’t already have money.
Frost had to quit his job to be a full-time candidate. Seven days a week, 10-12 hours a day. He is couch surfing with friends until he can again have access to a livable wage after driving for Uber did not leave him enough to pay all of his bills. Thus, the reason for his bad credit.
He is far from alone in this situation. In 2018, Alexandria Ocasio-Cortez (AOC) couldn’t find an apartment in DC. She didn’t have the money.
At the height of COVID, more than 100 members of Congress are sleeping in their taxpayer-funded Congressional offices in 2020.
Let us provide some context here.
While rank and file members of the U.S. Congress make a decent salary ($174,000 a year), they don’t receive a per diem. Meaning they have to pay for everything out of their own pockets while some, other members do receive a per diem that can be used for housing. If you think this is unfair or strange, consider that for most of the period between 1789 and 1855, the only compensation senators and representatives received was a $6 per diem.
The fact that housing has become so unaffordable is just insane. I wrote a blog post about how I used a Roth IRA to buy property. However, not everyone has access to these means. Especially, if you have no retirement accounts to begin with.
Many officials were screaming poverty at the time they were seen working in their offices by day and converting them into bedrooms at night.
When the rent becomes so high that those helping write the laws are sleeping on couches, we need to address the matter of housing affordability.
Why not have communal living spaces? Similar to college dorms. This is far better than sleeping on a cot in your office.
What about building micro apartments? Enough space for a bed, couch, bathroom, small kitchen, and closet in about 500-600 square feet.
There has to be some affordable solutions out there. I had to do some thinking outside the box to start buying property with my Roth. Maybe that is what we need. Some out of the box solutions for long-term housing problems.
I have been a little busy. However, never fear your advisor to the financial underdog is here! Ha ha.
Let’s get to it.
The student loan pause has been extended. The Biden Administration has announced that the payment pause on federal student loans for 43 million students will extend through June 30, 2023. Payments will also not start until 60 days after, August 30, 2023.
This means the loan forgiveness first announced in August 2022 will have time to work its way through the Supreme Court (SCOTUS).
I'm confident that our student debt relief plan is legal. But it’s on hold because Republican officials want to block it.
That's why @SecCardona is extending the payment pause to no later than June 30, 2023, giving the Supreme Court time to hear the case in its current term. pic.twitter.com/873CurlHFZ
If you are a Pell grant recipient, that means $20,000 in loan forgiveness for you, if approved, and for all others $10,000, if you meet the eligibility criteria for forgiveness.
This is good news indeed, as it will give many Americans time to squirrel away funds for saving, beef up investments or additional savings accounts, and pay off debt.
My advice is always to start with an emergency fund of $2,500. Then work your way to three to six months of expenses. As debt is paid off, you can increase your savings and investments.
The 0% interest rate while loan payments are suspended is also an added bonus. That means if you owe an average of 6% on the median $38,000 of student loans, then you are saving $2,280 a year on interest. Even higher for those that owe more.
The three-year repayment pause has allowed Americans to save a collective of millions of dollars in unaccrued interest. Basically, the saving on interest has turned this into a form of loan forgiveness.
In addition, to the $10,000 or $20,000 loan forgiveness, if approved, would effectively turn those amounts into grants.
So keep your figures crossed and make this a wish on every star and birthday candle, if you are one of the ones that will get forgiveness as this will allow you to receive 100% loan forgiveness.
Without these estimated $300-$500 loans payments hanging over your head, you are now able to start saving for your future in the form a home down payment and socking money away in your 401(k).
And by the way, the IRS has now raised the 401(k) limit to $22,500 per year. If you were to max out your retirements account with this amount of money, with a historical stock market return since 1980 of 11.34%, you would basically be a millionaire in 16 years with a balance of $978,768.96.
Put every dollar to work that you possibly can.
The math tells you that being a millionaire is within your grasp.
Buy land, they aren’t making anymore of it. – Mark Twain
I am a firm believer in the learning curve. A learning curve is the rate of a person’s progress in gaining experience or new skills. Through time and experience will your ever-increasing knowledge and skills grow to help you make better and wiser decisions. That includes not only in your personal life, but in your financial life as well.
This post was inspired on an episode from the television series Supergirl (2015-2021). In an early Season One episode, two or three, Supergirl (Kara Danvers played by actress Melissa Benoist) is having a talk with her boss, Cat Grant, at her job with the company CatCo.
See the events of that exchange below.
Cat penned an article for the Tribune on Supergirl’s blunder at the port and ordered Kara to get it ready for posting. Kara wondered why Cat was constantly criticizing Supergirl, claiming that Superman never faced such heavy backlash. Cat expressed that women need to work twice as hard as men to succeed, pointing out that Supergirl, despite her good intentions, is still a novice; she left Flight 237 in the bay after saving it and now caused an oil spill while trying to prevent a fire. Since Supergirl’s job is a learning curve, Cat advised her to start with smaller targets and work her way up, similar to how the latter rose through the ranks at the Daily Planet.
Put simply, no one starts in at the top. You have to work your way there. Wealth building requires the same.
You have to learn to manage one dollar before you can manage one million. You start small and work your way up. Then it hit me. You can use one wealth building tool to help you build another. They are both levers that can be used to help you scale up your wealth.
It is like the S meaning on Supergirl’s costume. It is the family crest for the House of El; it means Stronger Together.
Both your Roth IRA and home investment can help you build wealth faster. They are both stronger together.
The major fortunes in America have been made in land. – John D. Rockefeller
Buying a home takes money. You generally need money for two items: Down payment and closing costs. You can use funds from your Roth IRA to do this.
Roth IRA withdrawal rules allow you to take out up to $10,000 earnings tax and penalty-free as long as you use them for a first-time home purchase and you first contributed to a Roth account at least five years ago.
Normally you would need to wait until you are age 59 1/2 to start withdrawing funds. If you withdraw money from the account before age 59 1/2, you will typically have to pay a 10% penalty on the amount withdrawn. The distribution will also be subject to taxes. However, there are certain circumstances in which you might be able to take out funds from the account before reaching age 59 1/2 and not incur penalties.
One exception to the early withdrawal penalty is for the purchase of a first home. To be considered a first-time homebuyer, you cannot have owned a primary residence at any time during the previous two years.
This $10,000 exception is available for every individual, so a married couple can withdraw $10,000 from each of their IRAs for a total of $20,000 that can be used for a down payment.
In addition to purchasing your own home, you may qualify to help others buy their first house. IRA owners can withdraw funds penalty-free to help their first-time home buying children, grandchildren or parents purchase a home. Sweet!
However, $10,000 is the lifetime maximum for first-time homebuyer withdrawals. Therefore, the total of your withdrawals must remain under the $10,000 mark to avoid the early withdrawal penalty.
Many of you out there may say why not a traditional IRA. There is a method to my madness. Bear with me.
The reason for using a Roth versus Traditional IRA is that while there will not be a penalty on early IRA distributions for a first home purchase, you can expect to pay taxes on the amount withdrawn when using a traditional IRA.
For example, if you are in the 22% tax bracket, a $10,000 withdrawal for a home purchase will lead to $2,200 in taxes. For a couple in the 24% tax bracket who withdraws $20,000, the taxes due would come to $4,800.
However, this is not the case for the Roth because you have already paid taxes on that money so you owe no income taxes on money that is withdrawn for a first time home purchase.
So if you are all in on this plan, then let’s get down to business.
Ninety percent of all millionaires become so through owning real estate. – Andrew Carnegie
The rules for using a Roth IRA rather than a traditional IRA are slightly different. You can withdraw any contributions (not earnings) at any time from your Roth IRA before retirement age without penalties as long as the account is at least five years old. You will be able to withdraw any amount up to the total amount you contributed without being subject to taxes.
In addition to your Roth IRA contributions, you might opt to take out some of the earnings in the Roth IRA. You can withdraw an additional $10,000 from the earnings under the first-time homebuyer exemption.
This is where the withdrawal exception comes into play. You may withdraw a combination of both contributions and earnings or just earnings to use toward your home purchase.
Just remember that if you are only using earnings the cap is $10,000. Any penny above that will trigger the 10% penalty in a traditional IRA or just the the income taxes in a Roth IRA.
You can always take out funds above the $10,000 threshold if you are taking out contributions only or in addition to earnings.
Again, simple math can help you build wealth.
We don’t have to be smarter than the rest. We have to be more disciplined than the rest. – Warren Buffett
My method of using the Roth IRA early withdrawal exception.
First, I did some research and found out that if you qualify as a first-time homebuyer, you can withdraw up to $10,000 from your traditional IRA and use the money to buy, build, or rebuild a home.
Second, I learned that with a Roth IRA, you can withdraw your contributions tax- and penalty-free at any time, for any reason, as long as you have held the account for at least five years.
This got me thinking. At the time, I was renting. I had opened up a Roth IRA more than five years ago. I had been squirreling away cash in it since opening it up with T Rowe Price starting with $50 dollars a month.
I also opened up a second Roth IRA with another brokerage at another time as not to mess with the good thing I had going with the first one as you could no longer open a Roth IRA with T Rowe and continue with an automatic contribution of $50 per month.
Do not scoff or turn your nose up at investing small sums of money. Over the years dealing with both accounts and after regular and sporadic contributions over time my T Rowe account grew to over $10,000 as did my other one. I had well over $25,000 in both not counting my 401(k), Rollover IRA, or other cash and investments.
I was skeptical about moving forward at first with this decision to buy property. My first. Then, I thought about what Wayne Gretzy and Michael Jordan said, “You miss 100% of every shot you don’t take.”
This quote helped me as well. Progress always involves risk. You can’t steal 2nd base and keep your foot on 1st.– Fred Wilcox
Therefore, I went for it.
I started by combining both accounts. Then, I cashed out $13,000 of of my Roth IRA.
The first $3,000 was in contributions and the additional $10,000 was in earnings. After, using the funds for closing costs and a small part of it for renovations, I ending up paying taxes on a tiny portion. The grand total: $238.
I was shocked! I couldn’t believe it. I felt like I should have taken the plunge long ago.
Alas, we cannot look backwards, we can only go forward. Within a few months of me owning the property it had increased in value by $14,000. That is more than what I withdrew to get the place.
And owning gave me such a sense of peace. That right there is priceless. I decided to do some updates and renovations to feel better about the space I was in. It took some hard work and time, but it was worth it in the end.
I got inspiration from several places. I knew I wanted the feel of how I always felt every time I walked into a Restoration Hardware.
Restoration Hardware Front Entrance
I got the idea to base my bathroom feel and design on the Marriott and Caesar’s Palace in Vegas. Clean lines, white, simple and elegant. I also went with frosted sliding shower doors that you could not see through.
Caesar’s Palace Las VegasJW Marriott
My bedroom is my center and place of peace. I call it my home base. I also always have a mini home office in my bedroom as I like to roll out of bed in my pajamas and write, work and check the stock quotes.
Houzz design
And I love an organized closet. I got inspiration for mine from the Container Store. Although, mine does not look like this, I did make sure it was organized with all of my suits, shoes, and sweaters together like in the picture below.
The Container Store Custom Closet Design
Lastly, the heart of the home. The kitchen was inspired by honey + lime. Stainless steel appliances and organized kitchen cabinets make life easier. Again, although my kitchen does not look like this, it was done with something like the picture shown in mind.
honey + lime kitchen design
Every time I think back and ask myself if I made the right decision I think of this quote from FDR.
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world. – Franklin D. Roosevelt
After reading about a couple earning half a million dollars, I could not believe they did not have anything saved for retirement. Especially considering the couple were ages 65 and 59.
You don’t just start in at the top making that kind of money. Oh no. You have to toil in the salt mines for YEARS to make that kind of dough!
All their money is tied up in their home. They have a home worth a million dollars but a stock portfolio worth $0.
That is the type conundrum that just baffles those that are way lower on the income scale.
That would mean making $500,00 for just four years, they have earned $2 million dollars and not ONE RED CENT went to their retirement accounts.
I didn’t read anything about owning any vacation or rental property, old savings bonds, having a few shares in Apple stock, nada.
This couple is burning through money faster than those kids were buying chocolate bars in Willy Wonka. And if you saw the 1971 movie, you saw what pandemonium that was.
I mean where is the money going?
There has to be some sort of financial household accountability and management. Once all the expenses are tracked, you can look for ways to cut. At this income level, I find it hard to believe they do not have a financial advisor or accountant.
This couple could save a small fortune, if they sold their home, ate out less, and sold the pricey cars.
THE STRUGGLE IS REALLY NONEXISTENT
As soon as they earn the money, its spent. We have a serious cash flow problem here. We gotta stop the bleeding. This is a sinking financial ship and we have to plug those leaks. There has to be ways to save.
The couple own a home that will be paid for in 7 years, and at this time is worth around $1.4 million. They stated, “If we sold it tomorrow, we could net $1 million in equity. Home prices are going up faster , so it would be difficult to find a home for less than $750,000 (if we were lucky).”
One word: move.
Drop the financial anchor that is your home and move on. Is this home really worth you living today with nothing?
Take the $1 million in equity and but a modest $300,000 home with cash, then pay off any other debt you owe and start maxing put your retirement accounts. Keep a minimum $100,000 cash high yield savings account and start investing the rest.
If the couple does this, they could stash away $22,500 in a 401(k) and $7,000 in a spousal IRA for 7 years and have over $300,000 with the stock market average return of 10%.
If they can max out two 401k’s, then that would be the equivalent to investing $45,000 per year. Using the same factors as above, that would net the couple a col almost half-a-million ($500k) in retirement savings.
