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Banking, Bankruptcy, Budgeting, Credit Cards, Saving, Wealth

3 Money Lessons from Til Debt Do Us Part

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“Money isn’t rocket science.” – Gail Vaz-Oxlade

Til Debt Do Us Part is a Canadian television series that follows couples that are going through financial crisis and financial expert, Gail Vaz-Oxlade, comes in to help the couple find solutions.

The series ran for over 100 episodes from 2005-2011. It also had a spin-off called Princess.   She teaches couples to go from red to black and gain control over their money.

The show would air right after the Suze Orman show during its run on CNBC. Read my post Dom Perignon Taste on a Budweiser Budget to see how it all went down on Suze’s show.

#1 REASON COUPLES BREAK UP

Money is the number #1 reason couples break up. She visits couples weekly and gives them challenges to help with their finances. Then at the end of each episode, after about 4 weeks, she awards the couple with up to $5,000 dollars to help them get out of debt.

CUT THE CHEQUE

By far the best part of the show, in my opinion, is when at the end of one month, Gail Vaz-Oxlade gives the couple a cheque for an amount up to $5,000, depending on their attitudes and how well they did during the challenges. Keep in mind, couples could get less and some have. One of the lowest amounts I have seen her give was $3,000, which is a 40% reduction of the prize money.

The show was so popular that a 52-Week Life Planner was released based on the television series and offers day-by-day, step-by-step strategies and tips for successfully managing household finances.

This reminds me of a Tom Holland interview he did for Spiderman talking about how Anthony Mackie always says, “cut the check.”

https://twitter.com/UNILADFilm/status/886949865330155521

Let’s get back to Gail.

If you have never heard of the show Til Debt or can’t remember it, no worries, I will take you back down memory lane tonight.

WHO IS GAIL VAZ-OXLADE?

“We feel good when our homes are bright and shiny, put a little elbow grease into your money and it’ll glisten too.” – Gail Vaz-Oxlade

Gail Vaz-Oxlade is a financial writer and was a columnist for numerous publications as a freelancer including Yahoo! Canada Finance.  She has helped people from high finance to low-income solve their money problems. Eventually, she became a television personality due to all of her work in finance and that is how the show Til Debt came into existence with her as the host.

She has written numerous books on the topic of finance. I have actually read one of her books called Debt-Free Forever.

Gail has a no-nonsense attitude when it comes to money. And that is what makes her so good at what she does.

FOR THE LOVE OF JARS

“You can have everything you want. All you need is a plan. And how do we spell plan? B-U-D-G-E-T!” – Gail Vaz-Oxlade

Watching the show was very interesting. One recurring theme was the jars. Gail advocated for couples to live on cash.

Every single episode, you got cash jars. You would put in a certain dollar amount. When you spend, you write it down in the budget binder cause cash slips through our fingers easier than that snail did with Julia Roberts in Pretty Woman.

Some couples were taking out cash at the ATM from their bank accounts or doing cash advances, which Gail said she could not track so we don’t know where the money went. When it’s gone, it’s gone. Without writing it down or keeping receipts, there is no other way to track cash. So, jars it is.

MONEY LESSONS FOR GAIL

Gai loves cash and hates banks. She thinks they are bleeding people dry slowly with their interest and fees. Gail says banks are wolves in sheep’s clothing. The only way this will change is to teach financial literacy in school. I say start in elementary when they are old enough to start asking for a $1 lollipop, it’s time to start the finance lessons.

Check out my posts on banking.

Banking at Credit Unions versus Banks – The Great Debate

New Banking Rules: Clear a check payment in a day

Q&A with Lisa Servon:, Author of the Unbanking of America

This is the secret recipe to building wealth: You need to make more money and you need to spend less money.

Here are 3 lessons that Gail taught me: (1) both partners need to manage the money, (2) no retail therapy, and (3) debt repayment takes time.

LESSON ONE: GAIL ON COUPLES MANAGING MONEY

  1. Do not have only one partner manage the finances.

“It’s not unusual for one person to assume the nitty-gritty of daily finances…. The problem is that when one person is excluded, or totally abdicates responsibility, it means the other can mess things up with no monitoring or grow resentful at always having to do the detail…. Taking turns managing the chequebook, and having regular conversations so that both of you are clear about what’s going on, means you’re both in the know and working to the same ends. It also means that one person doesn’t have to deal with all the crap, while the other merrily laughs off the stress and frustration with, ‘You’re managing the money, so this is your problem to deal with.’ (Yes, there are dopes who say this.)”

Always know what is happening with your money. I don’t care who signs the check and put it in the envelope. Just make sure you lick the stamp. Be involved. Ask questions. Don’t be in the dark.

It’s kind of like that scene in Charmed in the episode Be Careful What You Witch For. Remember that scene in the beginning, after the opening credits. I want you to be skeptical like Phoebe. Always know who you owe and how much. Nothing is for free.

The conversation went like this:

Phoebe: I don’t get it you’ve been stuck in that bottle for two hundred years then someone finally sends you to us and you’ve no idea who licked the stamp? I find that very hard to believe.

Genie:What? I don’t get it you win the lotto and you’re asking for explanations?

Piper:Actually we’d like to know who to send the thank you note to.

Same conversation you should have with your partner, but about which creditor.  And winning the lotto, yeah right? Read my posts Forget casinos, bet on yourself and Mega Millions win or bust.

LESSON TWO: GAIL ON RETAIL THERAPY

  1. Forget retail therapy

“Plastic is anesthetic — it dulls the pain, and then what happens is you just keep waiting for the next fake high.”

And don’t I know it. I had a huge shopping problem for years. It was done as a way to dull the pain of the things going on around me – low-income, working full-time, going to college – I was a mess!

I had some pretty terrible managers when I was younger too. All the stress was getting to me. I had to find a way to cope, but shopping was not it. As I got more mature, I found ways to de-stress that were cheaper or free.

I have said it before that credit is seductive and addictive. It should not be used to replace your emergency fund (liquid cash). However, if you do, be strategic and use credit wisely and sparingly.

How to get access to a $250,000 Emergency fund with $0 of your own cash

How Benjamin Franklin used 13 virtues to get rich 

LESSON THREE: GAIL ON DEBT REPAYMENT

“A goal without a deadline is just a dream.” – Gail Vaz-Oxlade

  1. Slow and steady is the way to repay debt.

“One step at a time. You are on your way. Expect challenges. Keep your goal where you can see it.”

You better believe it. If it took you 8 years to accumulate the debt, thinking you can pay it off in 3 months is delusional. See my post Getting out of debt one step at a time.

The good news is that once you recognize you have a problem with debt, then you can work on solutions. I have noticed that generally 2-3 years of cutting back and attacking debt is usually enough time to pay off most if not all of your consumer debt except the mortgage and student loans. After 5-7 years, the only debt left is usually the mortgage. That is a small price to pay for freedom.

TIL DEBT O US PART

I did a search online and found this synopsis of the show’s premise at IMDB.com. It’s spot on.

Storyline

Money can’t buy you love. But keeping love alive without money can be pretty tough. In fact, ninety percent of marriage breakups are due to money problems. And to get advice on how to manage money usually costs money! Til Debt Do Us Part, is a series that offers tough-love solutions to those willing to face their financial troubles head on. In each episode we meet a couple in crisis. Some are on the verge of bankruptcy, hounded by creditors or facing eviction. Others are just getting by, but in the midst of a personal meltdown or relationship breakdown because of money issues. With the sensitivity of a therapist and the toughness of a CFO, our host, renowned financial author and columnist, Gail Vaz-Oxlade reveals what she’s found in a couple’s finances – and then she’ll dig a little deeper. She asks some tough questions and then they’ll be forced to face reality. Where will it end if they continue on this rocky road? To get things back on track, Gail takes control of their finances …

This show was very eye-opening in how people managed their finances. Many did not have a clue what was coming in and going out. Gail would come in with her screen shots of the couples bank accounts and spending and give it to them straight.

Many times the wives would burst out in tears after seeing how much debt the family was actually in. Lots of couples were in over their heads. Some so deep in debt they had to consider selling their house, or worse, bankruptcy!

Some couples did not want to make any changes. Even though they were debt up to their eyeballs. These people needed to get their priorities straight. Much like Hermione, in Harry Potter.

Here is the show’s Intro and theme song along with a promo. This is just a taste, a light sampling, of what you are in store for with this show.

There are 2 episodes that stand out for me. They were called The Worst Family Ever and Love Affair with Luxury.

MONEY WORRIES CAN CAUSE SLEEPLESS NIGHTS

In the S03E13 entitled, “The worst family ever?” One couple were living in the wife’s family basement for about a couple of years. They spent with reckless abandon. Oh, the couple popped bottles night and day. Especially, after moving out and buying their own home for about $225,000. That’s not bad. What is bad is that they saved zero dollars while sponging off her parents.

That’s right. While mooching off the rents’ they saved $0. Not one dime. Even Scrooge McDuck saved his number one dime. See my post Money Lessons I Learned from Scrooge McDuck. Also, check out Why the Rents’ shouldn’t pay your rent.

Then, to make matters worse, they threw non-stop parties at their house for friends and family. This was obviously all to make themselves look good to friends and family. In Yoda speak, so concerned with appearances they are.

“Happy people don’t worry about what other people think about them.” – Gail Vaz-Oxlade

OUT OF CONTROL SHOPPING FOR BABY BUT THE KIDS ARE ALRIGHT

In addition, they expanded their family and had a son, but financially were unprepared for this. At one point, the wife was spending $1200 a month outfitting junior! I couldn’t believe it. What is she buying Versace onesies? Get real. A baby doesn’t care. They just want to be warm, feed, and dry.

This couple were overspending by the tune of $4,100 a month! Holy spending gone bonkers, Batman!

Fun Fact: For those of you unfamiliar with that Batman line, here is where it comes from. The Batman television series from the 1960’s. Batman was American live action television series, based on the DC comic book. It starred Adam West as the titular character and hero Batman and Burt Ward as his sidekick Robin.

It was also turned into a cartoon series. Here is Robin at his finest with his sayings. Hilarious!

I decided to post it so you won’t ever have to get the tongue lashing that Penny got from Sheldon on an episode of The Big Bang Theory about Batman at 2:48 into the video.

The Precious Fragmentation – Season 3, Episode 17
Aired March 8, 2010. One of my favorite episodes.

https://www.dailymotion.com/video/x6ng6kb

It was about The Lord of the Rings. Even Raj used a Holy Robin saying in there!

In this next video, Sheldon gives a fun fact to Raj. Now, you know where I get it from.

Now, back to the story.

The way the couple on the show  were able to overspend like that, drumroll please…the credit cards!

When Gail comes along they are so bad she tells them they have to sell the house. They flat out said they could not sell the house. Even though they are on the path to $1.3 million in debt and possible bankruptcy! Gail, at one point in the show, tells them they are the worst couple she has had on the show and that she had a few sleepless nights worrying about how to help them out of this situation. Coming from Gail, that’s scary.

The way it went down, it reminded me of that scene in The Chipmunk Adventure, when Jeanette and Eleanor was telling the Arabian prince that Brittany spends money like a drunken sailor and Brittany got mad. Hilarious. I just so happened to find the footage of that particular scene and the movie on YouTube. Hope you have fun watching! No need to thank me.  Like Dean Winchester says, “You’re Welcome.”

SHOULD YOU FINANCE A $100,000 CAR?

“Change brings challenges, learning, and a sense of New. Change is full of promise.”- Gail Vaz-Oxlade

In the S04E03 entitled, “Love Affair with Luxury,” which aired March 6, 2008, is the gold standard of delusions of grandeur when it comes to money management. The wife, Simone, is a champion shopper and a spendthrift who manages to make 53 shopping trips in a single month! That’s nuts. Even though she’s on maternity leave, a luxury car is next on her shopping list.

The only reason the couple is able to afford such luxuries is because they have each other’s incomes. The minute one person’s income is gone or reduced, i.e. disability or divorce, the whole house of cards comes tumbling down faster than the stock market has in the last 30 days.

Check out this post by BudgetsareSexy to see just how far down the stock market has gone in his The Red Wedding of Net Worth Reports.

LOVE AFFAIR WITH LUXURY SUMMARIZED

I found the plot summary for the episode Love Affair with Luxury online at IMDB.com.

Frank and Simone’s combined $110,000 annual income is currently curbed by Simone being on maternity leave. Simone is addicted to what she believes she needs to keep up appearances in every respect, which includes working out at the gym, and spending money on “stuff” for herself, such as clothes, getting beauty treatments of various kinds, and having a beautifully appointed house. A $125,000 new car is next on the list. Simone, however, states that she would never do anything that would place her family at risk. But Frank doesn’t realize he is just as guilty, spending money on his electronics, which includes six large television sets in their house of four people, including one infant. This spending has resulted in $55,000 in consumer debt so far. They constantly fight about money, something having to give if their marriage can overcome this issue. As such, Gail issues them challenges largely focusing on dealing with their root problem, namely their addiction to luxury, this focus which not only entails them doing the challenges, but understanding why she has issued these challenges.

At one point in the show she says, “we can finance $100,000 can’t we.” For a car no less! If you have ever read this blog, you know I can’t stand cars for the simple reason that they can keep you in debt forever. You could spend a couple hundred grand on cars in a lifetime. You know how much interest you could earn on $200,000! Here are just a few on my posts on my beef with car loans below.

If you want to be wealthy, drive a Ford 

Why not to own a $50,000 car on a $25,000 salary 

Life is good without a car payment 

A car and nothing more

Outrageous Loan Terms for Porsche that even the Rich can’t justify 

FINAL THOUGHTS

Money is a tool we use in the present to create the reality we want in the future. Learning about finance is a good start. Practicing good money habits and teaching your kids to understand the concepts of money – budgeting, saving, and spending – you help create their reality.

So, I want to always stay in control of your…I will now end this post in the last words of the Til Debt Do Us Part theme song, money, money, money, money, money, money, moneyyyy!

Budgeting, Celebrities and Money, Credit Cards, Retirement, Saving, Self-Made Millionaires, Wealth

Money Lessons I learned from Jay Leno

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Photo: Forbes.com

Everyday and in every way, invest in yourself. Invest in your health and education to help build your wealth. With money comes power and protection. The wealthy are protected. Build up your knowledge and money coffers. A war money war chest is your way to ditch the 9 to 5 and get out of the rat race.

Jay Leno gives advice on how to do just that.

MONEY LESSONS FROM JAY

Jay on starting out

“I wasn’t a millionaire when I started.”

“I would alternate between the two, so it was cars and hamburgers, which are actually still two of my passions.”

He started his career working for minimum wage at McDonald’s in Massachusetts. Jay also worked at a Ford dealership. He discovered the key or secret sauce (pun intended) to getting rich: Developing multiple streams of income.

Jay on working more than one job

“I always had two incomes.”

“I’d bank one, and I’d spend one.”

“I had two jobs because I realized that was the quickest way to become a millionaire.”

“When I got ‘The Tonight Show,’ I always made sure I did 150 [comedy show] gigs a year so I never had to touch the principal.”

He has worked two jobs simultaneously since he was 16.

And there you have it. Basically, if you want riches, then you have to put in the work. If you work 40 hours a week, then find a way to work 50 or 60. Gotta make that paper.

Jay on saving money

“When I was younger, I would always save the money I made working at the car dealership, and I would spend the money I made as a comedian.”

“When I started to get a bit famous, the money I was making as a comedian was way more than the money I was making at the car dealership, so I would bank that and spend the car dealership money.”

“Then I got to the point where the comedy money was, like, five times the other money, so I decided to flip it around and save the comedy money.”

“I would always spend the lesser amount of what the two were.”

Therefore, if you are working 2 jobs or more, then you bank the bigger paycheck and spend the smaller checks. Bank the bigger of the two checks and live off the other.

Forget the pundits that tell you not to save. There is value in saving. You need an emergency to help in case of job loss or illness. Life is full of hiccups. Once you have saved reasonable amount, then you start investing your surplus income.

The key is not to only save, but to also invest. Savings help you live your life to the fullest. In addition, savings can help you fund your dreams. Not having to go to the bank for a loan is an incredible feeling.

Jay on living on one salary

“I pretended as if I didn’t even have the ‘Tonight Show’ job.”

“You know, when you start making money, you get lazy. I wanted to make sure I always had that hunger, so I never looked.”

“It would go directly into a bank.”

Simply put, bank it and forget it.

Jay on patience

It took 22 years to accumulate, “a nice little nest egg.”

You heard it here folks. Building wealth takes time. In many cases, it takes a couple decades. There are no get rich quick schemes. There’s is no free lunch. There are no shortcuts. You do the work, get paid, invest the surplus incomes, and wait to earn interest.

Jay on retiring

“If you do something and it works, then keep doing it.”

You do not have to retire early unless you want to. If you are passionate about something, and can make a living doing it, then do it.

Jay on Buy-And-Hold

“The McLaren F1, I paid $800,000 for it in 1998. The last offer I got was $12 million. … The nice thing is, if you buy what you like, and it doesn’t go up in value, you still like it.”

Warren Buffet likes to buy-and-hold forever. Therefore, don’t even part with your cash, if you don’t want to keep an item to infinity and beyond. Just don’t even open your wallet.

Jay on avoiding credit cards

“I barely use credit cards.”

Words to live by. Either use credit sparingly for a purpose and get it paid off ASAP or don’t even bother using it at all.

Jay on house buying

“I didn’t buy my house until I had cash. When you own something and you don’t have to write checks every month, you’re just better off.”

I learned from James Brown, Dick Clark, Jay-Z, Oprah, JK Rowling and Michael Jackson to own what you do. You can control your earning potential and life, if you own. You can continue to make money off the things you own and control for many years to come.

Regardless, of whether or not you’re still working. You can still earn royalties from work you have done in the past. That is how the rich get richer. Earnings on top of earnings.

Jay on debt

“I don’t carry any debt. I don’t write checks at the end of the month for anything.”

“I didn’t buy anything I couldn’t afford to pay for in cash.”

“Here is the money, give me the thing, transaction over.'”

Jay hates installments, as do I. His cash only solution is what the world needs to adhere by.

I have literally saved for two years or more to purchase items or services I wanted or needed.

When I wanted Lasik, I used my flexible spending and waited about 3 years before I did the procedure. It cost between $4,000 to $5,000. And was worth every penny. Paid cash, not credit.

When I needed dental work done, I saved for 2 years. Paid cash, no installments.

Don’t buy on credit, build a fortune.

Jay on Retooling

“Since high school, I’ve always had two jobs. I worked at a McDonald’s and I worked at a car dealership. … When I was doing the Tonight Show, I’d be on the road at least two to three days a week because I thought, ‘We’ll see how long this lasts.’ ”

Do not ever get too comfortable. Things can change. Always have more than one way to earn a living.

Jay on owning

“I own everything. I own my buildings. I own my cars. That way, if it ends tomorrow, I know what I’ve got.”

His conservative money philosophy gives him peace of mind. When you are out of debt you just feel better. Take control of your finances and this too will help give you some peace of mind.

Jay on old-fashioned values

“I’m not a big splurge guy, partly because I had Depression-era parents: “They just frightened me to death, saying, ‘You gotta save every penny!'”

“It’s a little old fashioned, I suppose, but it seems to work pretty well for me.”

No impulse buying. This is the debt trap. Plan your expenses. Budget just means you plan where your money goes and it gives you permission to spend. Use it.

Jay on Taxes

“I just pay. Fine, I’ll get another job, I’ll work harder. That’s probably not very good tax advice. I don’t have money in the Cayman Islands or any of that nonsense.”

Always pay your taxes. Period!

Jay on being frugal

“McDonald’s sent me these Happy Meal coupons, so one day I’m in the McLaren and I’m going to McDonald’s. I say, ‘Give me two Happy Meals.’ And I give them the [coupons].”

“Now I look like the cheapest guy in the world driving this multimillion-dollar McLaren and I’m trying to get a free hamburger.”

“I’ve never touched a dime of my ‘Tonight Show’ money. Ever.”

He hates spending on clothes and has not touched one dime of his Tonight Show money. At one point, he was earning around $30M a year! It pays to be frugal.

So, you just avoid the mall, invest the money you would spend on clothes and start earning your way to a fortune with compound interest. Delay your gratification. Discipline is the key to wealth. Once you have it, no one can take it from you. Then you can save money to invest. Easy as pie.

Jay on Shifting Gears

“So many friends of mine, all they ever did was the TV show. When the TV show ends, suddenly their life ends, because that was their whole life. I was never that guy.”

It’s great to have hobbies and interests outside of work. See if you can turn a hobby or side gig, into an income. At the very least, have something to do after one thing ends. Remember, no idle hands.

Jay on shopping

“I’m not a big shopping guy. I’m just not interested in clothes outside of the essentials.”

“To me, it seems like a complete waste of money. I just want to have enough clothes to cover legally what parts I have to cover.”

Hear, hear! I used to like shopping. Until I didn’t. That happened once I learned I was losing a small fortune for that new purse or shoes.  Read my post How Millennial Money inspired me to start saving $13,333.06 a year for more on that topic and see how I quit shopping for good.

Jay on Fixing Things

“When you’re in a business like show business, everything is subjective. Some people think you’re funny, some people think you suck. …When something’s broken and you fix it, no one can deny it’s running.”

Very true. Always be tweaking or working toward expanding and doing better. People notice you the harder you work.

Jay on setting high standards

He, like Coco Chanel, believe in setting high standards for yourself. Chanel said, “keep your head, heels, and standards high.”

Jay learned this attitude while working at McDonald’s. A key pillar of success: You can never go too far to ensure you’re producing a great product.

He would go home every night after work and write jokes. Jay would go through hundreds with his staff and get it down to the top 20. He would record himself and then re-listen for timing. Tedious? Yes, I know. But effective. The hard work paid off.

Jay on idle hands

“I meet with the writers at about midnight or so and work until about 4:00 a.m.”

“I sleep four hours, maybe five.”

The way he saw it was, “if you have time to complain, you don’t have enough work to do.”

I am notorious for going to bed thinking of work and getting up to work. Sometimes I get up in the middle of the night to write down ideas about work. I work so much I barely have time to breathe.

I learned that from Pat Benatar who was a workaholic in the 80’s.  But guess what? She wrote hits songs for like a decade. When there are times I need a break or pick me up while working, I’ll listen to her songs Invincible, Shadows of the Night or Love is a Battlefield.

For those who may not know or remember those songs, check out the links below. Good stuff.

Jay on failure

“You learn a tremendous amount from the mistakes.”

I have learned to fail better. It makes you stronger. It also humbles you and makes you more empathetic to others.

Jay on money to blow

“So many people get to be the age I’m at now and they’ve got nothing because they just blew it all.”

“I put my money in a hammock and say, ‘You relax. I’m going to go work.’ And when I come back, I put some more money in the pile.”

It’s your money. Don’t blow it.

Jay on Life

“Life is not that complicated … if you’re kind and decent, and try to be honest, it’ll probably work out. Yeah, you’ll get screwed once in a while. I certainly have, but that’s okay … don’t dwell on it.”

Pick yourself up, dust your wallet off, and get back into the grind. Don’t rest on your laurels. Put your head down and work. Stay humble and stay hungry. Generate multiple streams of income, diversify your earnings, increase your savings, and build your wealth. Get that net worth pumping in that interest faster than Arnold Schwarzenegger did lifting weights in Pumping Iron and you will start rolling in the dough!

Just FYI: Jay is worth over $300 million dollars. Has no debt. Is a self-made millionaire. And still works at the age of 68.

Financial Freedom, Financial Independence, Investing, Real Estate, Saving, Wealth

How not to be house rich, cash poor

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“If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” —Edmund Burke

I remember watching an episode of Property Brothers and they were telling this couple that you do not want to spend too much or overspend on a home and end up being house rich and cash poor.

They instead wanted the couple to buy a fixer-upper, do some sweat equity, renovate the home, and put that money into their pockets.

Basically, when you buy a turn-key home, the work has already been done and you are paying the homeowners for the money they put into the home on renovations.

However, then you buy the house at a markup.

This is due to the fact that they may pay $20,000 for renovations and then the property may increase in value by $40,000 or double what they paid. Thus, allowing them to increase the purchase price of the property, ergo you pay them to renovate.

That’s pretty steep for move-in-ready.

If you do the work yourself, you get to keep the value that the home increases by.

This means buying a fixer-upper for $300,000 and putting in $20,000 for renovations will push the home value to $340,000 and let you keep the $20k in equity for yourself instead of putting it in someone else’s pocket.

If you read my last post, Save $10,000 by Avoiding PMI, then you know I am all about saving that paper.

So, let me show you how not to be cash poor, but house rich.

WHAT DOES HOUSE RICH, CASH POOR MEAN?

According to Investopedia, “house poor is a situation that describes a person who spends a large proportion of his or her total income on home ownership, including mortgage payments, property taxes, maintenance and utilities.”

Basically, you are paying more for your home than you can afford or simply buying too much home.

If you have to pay more than 40% of your income for your dwelling, then you will become cash poor.

Matter of fact, if the value of your home decreases, you can be both house and cash poor.

When you are house rich that means all your money or wealth is tied up in your home. The home equity may be something like $150,000, but you only have $1,500 in the bank. That is not even enough to cover one month’s mortgage payment!

https://twitter.com/AP_Lifestyles/status/1051911392704499713

In order to shift this, you would want $40,000 in the bank, and to owe less than $150k on your home. That $40k would be enough to pay one year’s worth of expenses including mortgage payments ($1,600 x 12 = $19,200).

You would need a fixed rate mortgage to help you do this.

STAY AWAY FROM VARIABLE RATE LOANS

The ARM, or “adjustable rate mortgage” loan is too dangerous. Any loan product that can change at the drop of a hat and without a moment’s notice is too risky.

Let’s think about this for a second. Why is anything at a drop of a hat so bad? Well, did you ever see the movie Tombstone?

The idiom is likely to have come from the Old West, when duels would begin with a signal consisting of a man grabbing his hat and thrusting it toward the ground, before weapons are drawn.

Is this any way you want any part of your life to be lived?! Absolutely, not.

Entertaining in the movies sure, but not for real life.

This type of trickery should be left out of the equation.

First, lenders approve you for wayyy too much. Second, they tell you it’s okay to only pay the interest when it’s really not. As you cannot get out of debt, without paying off the principal of a loan.

And going for the trifecta of trickery, the third thing lenders do, and this is the hat trick, your mortgage payments jump so high Bryce Harper couldn’t catch it!

Your mortgage payments spikes upward too sharply for most folks to keep up.

A reasonable $1,600 mortgage payment could reset and go up to $2,400 in a single month!

That’s no joke.

I had a conversation with someone this actually happened to. Shocks like this are hard for most people to fathom and continue to live comfortably.

A fixed rate loan allows you to plan the monthly budget in advance.

When you how much you monthly nut has to cover, you are just better off.

HOW TO BE CASH RICH

Buying a home for less than you can afford is a start.

If you are approved for $400,000, then slash this amount by 25%. This equals $400k x 0.25 = $100,000!

You heard me. Then bank says $400k, and then you say:  I’ll go $300k.

In one fell swoop, you both cut the amount of home you buy and monthly payment by 25%

You then take that $100,000 and over the course of the 15, 20, or 30 years you are paying your mortgage, you put this same amount into mutual funds.

You could do the S&P 500 index. Do whatever you want.

The goals are to simultaneously invest that money and pay down your mortgage.

For instance, that $100k over 30 years translates to investing $277 per month for 360 months. That would allow you to save anywhere from $500,000 to over $1 million depending on your rate of return through compound interest.

That means over a 30 year time period you have paid off a worth an estimated $300,000 or possibly more as home value may increase during this time and have an additional $800,000 in investments.

You would have a net worth of $1.1 million and would put you in the top 10% of wealthy households in America. See my post; Join the top 10% club for more on this.

WORDS OF WISDOM

A few words of wisdom to follow:

  • Buy less home than you can afford
  • Spend no more than 25% of your income on the housing payment
  • Invest the difference of the savings you received from not paying the full amount approved for
  • Stick to a housing budget
  • Have a god size emergency fund of 8 months or more

It sounds so simple, but most folks are actually living beyond their means and buying my house than they can afford. I have actually seen people in their 50s signing up for 30 year mortgages! Holy crap! The odds of paying off this home are slim at that age.

If you can follow the advice I give above, you could find yourself at the top of the economic pyramid.

Don’t believe me? Read my post Join the top 5% club and find out!

Budgeting, Financial Freedom, Saving

Dom Perignon taste on a Budweiser budget

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“A budget is telling your money where to go instead of wondering where it went.” ― Dave Ramsey

Most people out there have probably heard of the saying “champagne taste on a beer budget,” and that is exactly the kind of behavior I have been seeing more and more of lately.

It is not that I have a problem with nice things.

Quite the opposite.

In fact, I like to buy high quality and first-class items. This can include anything from airline tickets to a nice vacation. However, you have to be able to afford it.

You must therefore follow this advice: “Act your wage.” ― Dave Ramsey

Therefore, if you can only afford Bud Light instead of Rosé, then go for the beer.

If you are familiar with the Suze Orman show, she had a segment called “Can you afford it?”

Basically, people would call in and ask if they could afford to buy whatever item was the hot new thing that year.

Suze Orman would require certain criteria like a six plus month emergency fund, a job, income, and a realistic way to pay for the item either outright or over a reasonable period of time.

It was very engaging. By far, the most popular part of the show.

Let’s see if this post can bring back some of those feelings tonight.

If you can’t afford champagne, then it is perfectly acceptable to buy sparkling wine.  Just make sure when you pay for it, that you use cash and not plastic or it will not matter how much you think you are saving, if you are paying interest on it. Then beer can turn into the price of champagne.

Interest over time makes any purchase more expensive.

For example, buying a pair of jeans that cost $50 on plastic at a 25% interest rate could turn into a $500 pair if you pay the minimum payment over 5 years. That wasn’t on the price tag!

It seems that if you pay cash you are protected against this type of price inflation. Especially, if you get a 0% deal (teaser rate) and then do not pay it off and are charged interest retroactively from the date of purchase.

So, be very wary when it comes to credit cards. They will give one to anybody with a pulse.

In Elizabeth Warren’s books, The Two-Income Trap and All Your Worth, she discusses how even with two-income earners Americans are still struggling with debt, filing for bankruptcy in record numbers, and still unable to afford housing and higher education for their families.

Credit, in large quantities, is trapping people in an eternal debtor’s prison.

In the book Maxed Out, author James Scurlock talks about how having access to easy credit at young ages (college kids) is ruining people’s financial future before it even begins.

Starting out in a hole due to student loans and credit card debt means playing a constant game of catch up and struggling to get by.

Curtailing spending and only buying what you need and can afford are the only ways to stop this phenomenon of being maxed out.

Therefore, we budget.

However, “A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” – William Feather.

Below I will provide some fictitious examples of how it all goes down similar to the show.

So, let’s go back to the infamous Suze Orman question of “Can you afford it?”

What do you want to buy?

So, let’s say I get some tweets from followers asking if they should make a purchase. Let’s go.

Thank you for tweeting Greenbacks Magnet (GBM for short). What do you want to buy?

FOLLOWER: I would like to purchase a brand new Lexus RC 300 priced at $43,305. My birthday is coming up and I have never had a new car only used. Growing up, my parents said buy new. Why inherit someone else’s problems? I have always wanted one.

GBM: Ok. Show me the money.

FOLLOWER: I have $15,000 in savings, no credit card debt, $10,000 in student loans, no mortgage, no auto or personal loans and $55,000 in my retirement accounts. My after-tax income is $4,150 monthly. My expenses are $3,300 per month.

GBM Email reply: It’s great that your expenses are lower than your income by $850 so that you are able to save, but you could knock out the student loans and then have no debt. You have a 4 month emergency fund. I prefer to see 9 months ($29,700) as that is how long it takes the average person to find a new job (including me). Check out out my post How to build an emergency fund.

A car at that price of $43,305 will cost $676 per month at a 3.9% interest rate over six years. That will bring your monthly expenses up to $3,976 and decrease your net saving from a respectable $850 to $174. That is too close to the financial edge.

I want you to start putting more money toward retirement such as $200 more per month or whatever gets you to 20%. A car is not going to feed or house you it will only get you from Point A to B. You should also consider setting aside enough for a 20% down payment on a home as I know you are not going to want to rent forever.

Setting aside 4% of the purchase price of a home for 5 years will net you the 20% down payment. If you can beef up the 401k by $200 per month, pay off the $10,000 in student loans, start setting aside 4% for a home down payment, and get a 9 month emergency fund then you can get your car, but not before.  Until then, keep taking Lyft.

Next follower. Thank you for tweeting Greenbacks Magnet (GBM for short). What do you want to buy?

FOLLOWER: I would like to buy a Sony PlayStation 4 at $300. I am 20 years old and currently a college student, but I am working part-time. I have a game system, but the PS4 has more of the games I want to play and is cheaper than a new Xbox One X.

GBM: Ok. Show me the money.

FOLLOWER: I have $1,200 in savings, no student loans as I go to college online which is cheaper than traditional and stay at home, no credit cards, no 401(k) and a car note of $150 per month. My after-tax income is $600 monthly and my expenses are $350 per month.

GBM tweet: It’s awesome that your expenses are lower than your income by $250 so that you are able to save, always a plus, but I would like to see you open a Roth IRA. You are so young that this money could compound for like 40 years! Your future self will thank you.

GBM 2nd tweet: You can contribute $50 per month just to start in a Roth IRA. I do prefer to see a 9 month rainy day savings ($3,150). Since you have so few expenses, and live at home with virtually no debt other than a car note you could simply take the money from savings. Have fun!

Next follower. Thank you for tweeting Greenbacks Magnet (GBM for short). What do you want to buy?

FOLLOWER: My name is Lucy and I am 13 years old. I would like to buy an Apple watch for $219. I like it because it’s so cool and fun. A lot of my friends have it and I want one of my own.

GBM: Ok. Show me the money.

FOLLOWER: I have no debt. I have savings of $5oo from birthday money and saving my allowance. I get an allowance of $80 a month. I have no expenses.

GBM: Well, it is nice to see you saving. You could just take the money from savings as you have no expenses. I just want you to continue the habit of saving. You can afford it.

Less stress with a budget

You can see from the examples above that saving makes all the difference.

The more control you have over your money; the more control you have over your life.

Hope you enjoyed this walk down memory lane with me.

Now remember this: People first, then money, then things – Suze Orman

My motto is this: Always remember that cash is the best option. Cash is king. – Miriam Joy, author of financial freedom blog Greenbacks Magnet

Financial Freedom

You can be festive on a budget

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The holidays are just around the corner. I feel like Christmas decorations start getting put up as soon as Halloween ends. Sometimes before!

Don’t let the decorations, garland, and twinkling lights fool you. Retailers want you to spend. Shop ‘til you drop as they say.

Well word to the wise:  make a budget for gift shopping.

There is no reason that buying presents should mean that you have to burst the bank.

With piggy banks already on life support, there is no logical reason why shoppers should spend what they don’t have.

It really is the thought that counts.

I suggest to large families that they draw names out of a hat and just buy for that person. If you decide you want to do more, especially for the kiddies, then may I suggest planning for it well in advance. Regardless, of what method you use just make sure it’s cash that buys the gifts and not plastic.

Nothing is worse than buying presents on credit with money you don’t have.

It always feels better to buy with cash. Once the purchase is done, it’s done.

There’s no credit card bill coming in the mail for months after.

The holidays will be long gone and you are still paying off grandma’s toaster oven. Who wants that? Nobody, that’s who.

Set a realistic limit to spend and stick to it.

Limit the amount of gifts you buy and decorations. Save excess wrapping paper and tinsel for next year.

The point of gift giving is to show people you care not how much you can spend.

Some of the best gifts I have seen come from the heart. Those gifts are enjoyed and last a long time.

I once heard a saying that love leaves a memory that no one can steal.

Those are the types of gifts you want to give to others. The ones no one can lose.

If you really want to enjoy the holidays, instead of sparring no expense make a commitment to yourself to limit what you give from your wallet but not from your heart.

Happy Holidays!

Financial Freedom

Build wealth on a budget

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Get rich by leveraging what you know and using what you’ve got. I have read hundreds of articles, books, and journals about money and finance. The common theme is to become an expert in one subject area and use this expertise to create cash flow by selling your skills and knowledge.

This is a glimpse of what I have learned…yesterday. That’s right, yesterday! There is a plethora of information out there on finances. For example, there are numerous mobile apps you can use to earn extra money and one just for locking your Android smartphone! You literally just slide your screen to unlock your phone and make a profit. There are also various budget apps you can use for free or a small fee to track your spending (no more excel spreadsheets) and let technology do all the work for you.

Even after over eight years of learning about money; I still learn new things about finances.  For instance, the following is just an inkling of what I have learned over the years:

  1. Money can help you make better decisions because often times it’s the lack of money that can lead to bad decisions.
  2. Money cannot buy happiness.
  3. Money is the number one reason couples divorce.

Find ways to not only live below your means, but to expand them as well.

If you are good at writing, use this skill to build additional income as a freelance writer. Like to cook. Earn money on the side selling baked goods. Know your way around the city. Become a driver. Like being a homeowner and dream of being a landlord. Start by buying one home and renting it out.

These are just a few things you can do to earn income. The goal is to expand your means. Increase the distance from the amount you earn and spend.

For example, if you earn (that’s right because you don’t make money you earn it) $4000 a month and have expenses of $2500 a month, then invest the difference of $1500. The goal is to earn enough passive income to be able to live off it for the rest of your life. Once you hit your target number your working days are over.

In order to achieve this, you must limit debt and borrowing. Too much can have a negative impact on your savings goals. If I had to put debt in order of importance for payoff, it would look like this:

  • Payday Loans
  • Credit cards
  • Personal Loans
  • Auto Loans
  • Student Loans
  • Mortgage Loans

The first two come with high interest rates and fees. I have had the unpleasant experience of both types of debt.  I decided to get serious about debt repayment and once I got my tax refund I paid off the payday and auto loans. I used a zero percent credit card to pay off my personal loan. From there I used the savings from paying off my other debts to pay down and off my credit cards. I am not so worried about the student loans and the mortgage because at least I can deduct the interest from my taxes on my tax return. However, this is not a time to rest on my laurels. The goal is to get out of all debt ASAP to be able to save.

Emergency fund. My suggestion would be to have a savings account that is just for emergencies. The ultimate goal is to have at least one year of expenses saved. However, just to start and have some funds in case small emergencies happen, i.e., leaky faucet, car repair or medical bill you could have $500 to $800 readily available. This will alleviate some stress as opposed to having no savings.

Simple Math can lead to Riches.

Savings Tracker

Amount per month         Year One             Year Five              Year Ten

$100                                      $1,200                  $6,000                   $12,000

$500                                      $6,000                 $30,000                $60,000

$1,000                                  $12,000                $60,000                $120,000

Looking at the numbers above, you can see that after five years in any scenario you could use the amount as the down payment on a home. After 10 years of saving, you could buy a car outright or pay off part of a mortgage depending on what you owe or even start a business. However, savings like this don’t come easy. You must be disciplined enough to pay off debt so that you can maximize saving. But just look at the possibilities. They are endless!

This is my motto; Cash is King. Leads to prosperity. Debt leads to poverty and can cause degradation of character. Just choose cash.