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.
“All the world is made of faith, and trust, and pixie dust.” ― J.M. Barrie, Peter Pan
Trust is a five-letter word. A word that is small in size, but whose meaning is of monumental importance.
Today on Greenbacks Magnet we are spilling the tea and reading the tea leaves on the topic of personal finance.
Somewhat like Jalen and Jacoby do on their podcast.
This is a no-holds barred conversation about getting your fiscal house in order.
If I had a podcast right now, I have several friends or family members that could be my partner on this magic carpet ride. Aladdin had Princess Jasmine. Jordan had Scottie Pippen. Keenan had Kel. Barack has Michelle. Oprah has Gayle. Key had Peele. Batman has Robin. Kermit the Frog has Miss Piggy. Jalen has Jacoby.
Having a partner just makes things more fun.
I ask my significant other all the time, “Are you gonna back me up?! Are you gonna be the pip to my Gladys?!” I need people with good character that I can trust around me.
It’s like my man Shakespeare says, “Love all, trust a few, do wrong to none.” ― William Shakespeare, All’s Well That Ends Well
Trusting people with your money comes with huge financial risks! And I notice it is more risk than reward. You have to be on top of things when it comes to your money.
So today, I am going to give you some real stories of private conversations I have been in, eavesdropped on, and stood witness to in hopes it might help you more easily navigate these hostile fiscal waters out here in these mean streets.
I’m doing it Jalen Rose and David Jacoby style for those of you ESPN fans out there, you know what I’m talking about.
I want you to trust my advice, and me but I also want you to verify it.
Let’s get started and dive right in.
In the spirit of Jalen and Jacoby:
Got to give the people…
Give the people what?
What they want!
What do they want?
Current events! They want you to spit that hot fire!
And in this blogs case FIRE is Financial Independence, Retire Early!
TRUST, BUT VERIFY
That is a famous quote uttered by former President Ronald Reagan during the Cold War.
He was a former Hollywood actor turned politician, which was unheard of at the time in 1981. My how times have changed.
Reagan also gave us Reaganomics, also known as Voodoo Economics, it works as crazy as it sounds. Voodoo (magic) is French in origin and hails from Louisiana around the 1700’s, which is before the Louisiana Purchase between the United States and France, negotiated by President Thomas Jefferson and Napoleon in 1803.
Therefore, the term Voodoo Economics simply means magic economics or finances (magic money).
There goes that Peter Pan quote I put at the top circling back to us as magic money is like pixie dust! It just doesn’t exist! In my mind, this is like creating money or great finances out of thin air.
It’s kind of how 50 Cent said he owed $8 million worth of Bitcoin when he owed nothing and created $8 million of wealth for himself in the eyes of his followers on Instagram because we are all just, and I roll my eyes as I type this, “living for the Gram.” I discuss fifty and the Gram on this post.
According to Psychologytoday.com, Reaganomics is this in that “the simple answer: when the outcome is essential and matters more than the relationship, use “trust, but verify.” When the relationship matters more than any single outcome, don’t use it.” Basically, if you are unsure of how to proceed in making a decision where the outcome can be life-changing, then do your research to uncover the facts before saying yes.
In my opinion, that means reviewing credit reports before walking down the aisle.
Why should I commit to someone with four felonies, two bankruptcies, a property lien and $50,000 of back taxes owed to the IRS without knowing what I am getting myself into. You would be surprised what you uncover with a simple credit report.
A woman has a right to say no or change her mind about marriage all the way until the time she is in front of the minister. It’s cool to trust your partner when they say they paid off that Neiman Marcus credit card, but request that copy of the credit report baby to verify.
WHAT IS REAGANOMICS?
Reaganomics, or Reaganism, refers to the economic policies promoted by U.S. President Ronald Reagan during the 1980s.
The economic policies of the former US president Ronald Reagan, associated especially with the reduction of taxes and the promotion of unrestricted free-market activity. “the claim that cutting taxes generates more revenue was a key element of Reaganomics”
When looking up Voodoo Economics this pops up in the search: an economic policy perceived as being unrealistic and ill-advised, in particular a policy of maintaining or increasing levels of public spending while reducing taxation. “as governor, he put into practice the same voodoo economics that he would later impose on the country as president”
I will give it to you in layman’s terms, give more to the rich and their gains of money and benefits should also find it’s way down to everyone else.
It’s the reverse of Robinhood’s theory of taking from the rich and giving to the poor, by instead giving to the rich. There you have it. I just gave you the premise of Trickle-down Economics.
WHAT IS TRICKLE-DOWN ECONOMICS?
Great question. Trickle-down economics, also called trickle-down theory, refers to the economic proposition that taxes on businesses and the wealthy in society should be reduced as a means to stimulate business investment in the short term and benefit society at large in the long term.
According to thebalance.com writer Kimberly Amadeo, Trickle–down economics is a theory that claims benefits for the wealthy trickle down to everyone else. These benefits are tax cuts on businesses, high-income earners, capital gains, and dividends. … All of this expansion will trickle down to workers.
I don’t know about that.
When I look to my left on the West Coast, I see massive homelessness.
When I look to my right on the East Coast, I see wage stagnation.
Taxes got cut, but people are in even more debt. When the top 10% of the richest American households own 84% of the stock market wealth in the country something is terribly askew.
I call gentle bullshit on all this record stock market gains that is causing the country to grow wealth for all.
It seems more that instead of lifting all boats to prosperity for 99% of the population, stocks are lifting a few yachts of the 1%.
In the illustrious words of Sheldon Cooper, pardon me, I mean Dr. Cooper, this is a bunch of hokum. I mean the term even has the word trick in it. Hello?
WHEN IN ROME, TAKE OUT MORE DEBT
I have seen stuff you would not believe people have done when it comes to their money.
I saw a couple of government workers deciding to take on an $800,000 mortgage. Don’t ask me why. After 30 years of payments, they will have paid $1.6 million for a pile of bricks they are never at because they are always at work. Then the husband loses his job and they lose the house!
If you do not have $1.6 million in retirement or other assets, then you cannot afford or should not buy a home for three-quarters of a million.
Since, many college students see their friends take out loans to fund spring break trips they feel they are entitled to do it too! I actually knew someone who got a boob job and paid off a car with a student loan refund.
I hear tons of people say they are never going to retire, can’t afford college, and will work forever but no one wants to downsize their $400,000 mortgage. If they want it, they get it. How you ask? Do what the neighbors did and take out a HELOC.
A FLY ON THE FISCAL WALL
I’m about to spill that tea so don’t blink or you might miss it!
Overheard around an office watercooler.
“I owe $100,000 in back property taxes to the IRS.”
“I am in $25,000 worth of credit card debt. I am on a fixed income. My granddaughter was supposed to use my credit card for a one-time charge to pay her auto insurance when she got a new car and then I found out she never stopped it and I paid for the whole year! When I asked her for the money back she said she didn’t have it and then told me about all the bills she has.”
A male-exotic dancer told me, “I strip because I don’t make enough at my job to live on that.”
The guy who can’t pay his child support who owns a Range Rover and house is constantly in danger of foreclosure.
A beauty salon owner who confided in me. Her child support payment is $25 a month and the father keeps quitting his job so he don’t have to pay it! At the tender age of 25, she also decided to lease a beauty shop and buy a home. She said, “It’s like paying two mortgages.”
Another friend.
“I would rather struggle today and get my forever home, than buy a starter home and have a smaller home and have to move.”
A cousin.
“I can’t make too much or they will take me off Section 8 housing.”
Just FYI, many safety net programs do not allow you to make too much or have too much in savings or assets. If you have more than $2,000 in checking, you could lose all income assistance benefits and NEVER be able to get back on. Essentially, keeping the poor trapped in a cycle of poverty.
CHANGE THE MONEY GAME
There is a saying. Control your money; control your life. When you know how money works life is easy. When you don’t, life is hard.
I read every book I can get my hands on about finance. I have learned about taxes, insurance, stocks, real estate, and entrepreneurship.
Here are a couple books I have read that changed my money mindset.
I stopped getting personal loans. It took me years to pay off a $20,000 personal loan. I took that $333 monthly payments and started saving money.
I once had a $448.65 car payment. I paid off the car and started investing that money.
I started studying the stock market.
I cut out buying clothes and all shopping and stared saving over $8,000 a year. I canceled subscriptions. Maybe Jillian Michaels may want to do the same as on her Instagram, cause you know we are all “living for the Gram,” she stated she would like to figure out how “like to get my American Express bill down.”
I only spend on things I love and I cut spending mercilessly on the things I don’t.
I transferred over $84,000 out of multiple stock funds and placed my bet on one 500 index fund.
I write money milestones.
The goal is to be a 401(k) millionaire.
By investing over 25% of my income into things like the VFINX, VFIAX, or VTSAX, I can make this dream a reality.
Milestone number one was $100,000 in Mr. Market. I hit that marker and kept on climbing.
The money starts accumulating faster like a freaking avalanche once you have that first $100k. The next stop was $200,000.
Then I started making my way to a quarter million.
I estimated that once you hit $250,000, then you can get to millionaire status in 14.5 to 23.5 years with a 6% or above interest rate. And that is without adding another dime.
Once you get to one-quarter of a million, the other three-quarters are not too far behind.
If you could invest $20,000 a year including employer match, you could be a millionaire in 10 years with a 10% return with a principal investment start of $250,000.
That first $100,000 is your capital to a better future. It plants the seed money from which the rest of the harvest will grow.
DROPPING DIMES LIKE SCROOGE MCDUCK AND OTHER MONEY HINTS
Dropping dimes used to mean putting a dime in a payphone to connect with someone.
Now it is used more figuratively than literally as in giving some knowledge in this case.
The reason I invest most of my money in index funds is this piece of advice from Warren Buffet.
He instructed the trustee in charge of his estate to invest 90 percent of his money into the S&P 500 for his wife after he dies.
Warren Buffet is worth $81 billion. Most of his wealth came after the age of 50. Buffet gained 99% of his wealth after 50. That 1% of his wealth took 50 years to build, the other $80 billion too like 25 years or less than half the time it took to get the first billion.
He had to create companies, invest, graduate from Columbia, start businesses, and save the excess for 50 years to create the other 99% of his wealth!
In farming, like 99% of the crop comes from just 2% of the seeds that survive. Every time you invest your money, you are sowing seeds for your future self.
In a book I read, they state three of their truths about money. She stated, “the Scarcity Mind- set taught me the three lessons that would eventually turn me into a millionaire:
Money is the most important thing in the world. Money is worth sacrificing for. Money is even worth bleeding for.
Those willing to do more than the bare minimum. We are talking captains or titans of industry and business mavericks, that buck the trend, throw caution to the wind, and are all in.
Steve Jobs, Bill Gates, LeBron James, Phil Knight, and Walt Disney, to name a few, embody the characteristics of what it takes to dominate in one’s field. They are outliers. If you dare to dream and be an outlier yourself, then you are in great company.
WHAT IS AN OUTLIER?
A person or thing that is atypical within a particular group, class, or category. – Merriam Webster Dictionary
Simply put, you are different than the rest. You stand out. An outlier is the proverbial diamond in the rough or needle in the haystack. The 1 out of a million.
We all know how it worked out for Aladdin in the end.
When everyone else goes right, you go left and turn down the street.
You have tunnel vision. All energy is focused on a single task until it is completed or you are an expert. The rejection of noise and naysayers are a must.
A great definition of focus is this: To follow, without halt, one aim: There’s the secret of success. – Anna Pavlova (Prima Ballerina)
WHO ARE OUTLIERS?
The more you like yourself, the less you are like anyone else, which makes you unique. – Walt Disney
We will take the examples above and expand on those individuals that have either been born great, achieved greatness, or had greatness thrust upon them. (To revise Humphrey Bogart’s famous words: Here’s looking at you, William. Shakespeare that is.)
So, who are these mavericks you say? Just keep reading.
Steve Jobs
Photo: Forbes.com
Steve Jobs was the CEO and co-founder of the most valuable brand in the world: Apple. The first ever trillion-dollar company in the entire world. He pioneered revolutionary technologies. Thanks to his genius and willingness to dare to be different, we now have a computer in our pockets.
He decided to buck the trend and paid no dividends for Apple shareholders (this changed in 2012), as he thought that money could be better spent to expand the company.
Forbes, in 2011, estimated Jobs’ net worth to be around $6 billion to $ 7 billion dollars prior to his passing.
Bill Gates
Photo: Forbes.com
Bill Gates is a business magnate who is the founder of Microsoft. He took the road less traveled by famously dropping out of one of the most elite and prestigious universities in the world: Harvard.
Mr. Gates devoted every minute of his time to computer technology. He would read trade magazines and stay informed on the latest in tech. Becoming an expert in the field and later launching Windows in 1985. It became the top operating system for PC’s.
Forbes lists Gates’ net worth at $96B.
LeBron James
Photo: Forbes.com
LeBron James started playing basketball at a very young age. He loved the game so much that he played and practiced non-stop. By the time LeBron was 14, he had ESPN covering his high school basketball games because he was just that good.
He was drafted in 2003, to play professional basketball with the NBA. It is estimated that he spends $1.5 million dollars a year just on his health care and personal training to keep his body in the best athletic shape possible. He would go on to win the first ever championship for Cleveland. Ever. He recently built a school and is offering college scholarships to those students.
Forbes estimates James’ net worth at $440 million. That’s a lot of M’s just for going hard in the paint. It pays well to be the best.
Phil Knight
Photo: Forbes.com
Phil Knight is a business magnate and the co-founder of Nike. He ran track for the University of Oregon under the infamous track coach Bill Bowerman, with whom he co-founded Nike. Bowerman is famous for coaching 31 Olympic athletes including the legendary Steve Prefontaine.
After attending Stanford Graduate School of Business, Knight decided to become an entrepreneur. His business plan paper became the catalyst for his company. He traveled to Japan to see about good running shoes, which would go on to become Nike.
Forbes estimates Knight’s net worth at $31B.
Walt Disney
Photo: Forbes.com
Walt Disney was a pioneer in the American animation industry. He always loved to draw. He had a paper route with a grueling and exhausting schedule as a kid, which contributed to his poor grades at school.
None the less, he continued to draw. He had $40 dollars in his pocket when he moved to CA to start his career. After, getting fired from a job in animation at one company, he decided to start his own.
People laughed at him for wanting to draw a talking mouse. An old legend states he was rejected 302 times to get financing to start Disney World. He ended getting the last laugh as Disney is the biggest and most diversified mass media and entertainment conglomerate in the world.
At the time of his death in 1966, he was estimated to have a net worth equal to $1 billion in today’s dollars (adjusting for inflation).
HOW CAN BEING AN OUTLIER MAKE YOU RICH?
Go confidently in the direction of your dreams. Live the life you have imagined. – Henry David Thoreau
People are willing to pay for unique. Something that is one of a kind. The rarer the better.
Do something so good that people can’t wait to see you.
“Make sure it’s mean so them fiends keep on coming back” – Who Dat (Song by J. Cole)
Keep them wanting for more.
They say the riches are in niches.
Mae West wrote on taboo subjects in the 1920’s. She made a mint in real estate and oil. This is what she thought of all that hoopla she made way back when.
I believe in censorship. I made a fortune out of it. – Mae West
Figure out what you are good at and make it happen.
When you start out you have to take what you can get, but when you blow up, you can name your price.
Remember that song Back Then by Mike Jones. Yeah, it can be something like that.
GO AHEAD AND TAKE THE ROAD LESS TRAVELED
Two roads diverged in a wood, and I — I took the one less traveled by, and that has made all the difference. – Robert Frost
Many people have made a fortune off being different.
Success depends in a very large measure upon individual initiative and exertion, and cannot be achieved except by a dint of hard work. – Anna Pavlova
Let’s see some numbers for clarity and perspective.
Only the best can become NFL players. Here is what the best can make.
Rookie Salaries in the NFL
Source: FootballNextLevel.com
Highest Paid Players in NFL
Source: Spotrac.com
These are just salaries for one profession. There are many others.
CEOs are making bank. In addition, so can authors, producers, actors, musicians, professors, doctors, and more can as you can garner success in many other fields.
How hard are you willing to work to make success happen?
Dwayne “The Rock” Johnson says success takes no less than everything you’ve got. You don’t need directions on the road to success, just point to the top and go! Here are a few more of his words of wisdom for motivation.
I'm always asked "What's the secret to success?". The secret is, there is no secret. Be humble, hungry and the hardest worker in the room.
