Tag Archives: saving

Credit Cards, Financial Freedom

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

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

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

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

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

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

Here’s how you do it.

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

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

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

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

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

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

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

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

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

Financial Freedom

Join the top Ten Percent Club

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

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

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

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

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

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

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

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

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

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

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

Financial Freedom

Forget Simon, do what Buffet says

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Warren Buffet is the greatest investor of all time.

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

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

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

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

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

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

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

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

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

All good things need time.

Risk comes from not knowing what you’re doing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Automobiles, Financial Freedom

A car and nothing more

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Outside of a home, one of the biggest expenses for most people is a car. A car can help you get to work to provide for your family, allow you travel long distances at your leisure, and give you a sense of freedom. However, spending too much on cars can lead to debt accumulation and this could negatively impact your net worth.

I call those who would rather drive the fancy car and have no emergency saving – Autoholics.  My definition is the buying of automobiles that are more than you can reasonably afford which results in problems.

I have known people whom both would lease and buy expensive vehicles. To most of their chagrin, the price of that freedom on four wheels was not worth it.

The moment you drive a car off the lot it goes down in value. Therefore, if you brought the car back within 1 hour of purchase the car would be worth less than what you just paid. Because of this a car is a depreciating asset, and must be chosen carefully to avoid having consistent negative equity in a vehicle over the course of your entire driving career.

If people are not careful, you could easily spend anywhere from $50,000 to a couple hundred grand on cars in a lifespan.  Those numbers do not include maintenance. That’s right, just the sticker price!

I am not saying not to buy a car. What I am saying is to choose what cars you buy carefully as you do not want to have a car parked in your garage that you cannot afford to fix because the repairs cost $8,000. And that number is not a typo, I actually knew someone who owned a BMW and that was the repair cost.

I have seen people paying $300, $400, $500, or even $600 car notes for five or more years. I actually know someone who has had a car payment almost her entire adult life. If you added those amounts up, it would be some pretty big numbers.

If you were to invest $100,000 in the stock market, with a return of 8%, you would have a million dollars in 30 years.  Even a $10,000 investment would net you $100,000.

With the average price of a car, even used, being $10,000-$20,000 thousand dollars it is worth considering cheaper alternatives. When the goal is to build wealth and have financial independence, then instead of choosing an expensive car go for the one that is more practical but still looks pretty decent on a postcard.  But the best looking car is the one that’s paid for no matter what brand it is.

Financial Freedom, Retirement

R-E-T-I-R-E oh yeah I ment for this to happen

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Retirement the best laid plans. First, they tell you to go to school and get good grades. You won’t be able to get into college they say. Little do they know that there are many colleges willing to accept you because bottom-line is they want your money. So you get into college, you graduate, and get a job. Now you have to plan your exit strategy. Sounds daunting because it is.

Expert advice. All the experts say you have to start saving and investing early. Pretty much from the time you start your first job. They might as well say as soon as you can start walking and talking because it takes a while before your investments are self-sustaining from what is known as compound interest, which is interest calculated on the principal and also on the accumulated interest that grows money over time. In other words, if you invest $5 dollars and $1 dollar of interest grows on it, then interest will now start accruing on $6 dollars and so on. That’s how you build wealth. This happens even faster when you get out of debt because then you have more money to invest.

Most commonly known and used retirement plans

401k. This is a retirement plan where participants make a contribution from his or her paycheck that is usually done through pretax and/or post-tax deductions. Investments are chosen among the options provided under the plan. Pre-tax deductions grow tax deferred and are tax deductible.

IRA’s. Roth vs. traditional

A Traditional IRA is a retirement account that allows participants to direct pretax income into investments that grow tax deferred until the money is withdrawn.

A Roth Ira is similar to a traditional IRA, but contributions are from after-tax income, are not tax deductible but distributions are tax free.

I remember being in my twenties and finally landing a job that had a 401k. I thought it would never happen. Little did I know I now needed to manage paying the bills, picking investments, eating, bathing, juggling work and school on top of becoming a semi-professional financial expert to manage it. I just decided to do enough to get the match.

This was a time when I was not making a lot of money mind you. Less than $30k thank you very much but something is always better than nothing. So I had to work with what I got. My other coworkers laughed at me for contributing so little (we all made peanuts) and some even decided not to invest at all!

I ignored the naysayers. I continued to invest until I was laid off during the financial crisis. Since, I did not know much about 401k’s and rollovers at the time I left it alone and let it sit. It turned into about $5,500.

Later, I was informed that it went below the $5k mark needed for it to stay invested and I would have to cash it out. I learned that if your investments fall below this amount that it cannot stay with your old employer’s plan. However, to cash out any retirement plan before the age of 59 ½ means paying steep penalties such as 10% for early withdrawal and paying federal and state income tax. I was like no way!

I just held fast and waited to see what would happen. The only way that I was cashing in my golden ticket was if the tax man himself came to my house, tipped his hat, flipped over with his cane and said I have no choice or Uncle Sam, aka the government, would take my money away from me. Well, guess what, that never happened.

My investments ending up going up and down for a while teetering between $5k and $5500 but eventually settling down to the tune of over $8k. Not bad for someone who was laughed at and told that I did not make enough to invest.

I would go on to rollover that account and invest modestly over the next few years and that balance within 3 years became over $15k! I’m glad I stuck to my guns and decided to trust my gut instead of listening to others. Your instincts are usually the best advice you can take.

And after seeing what was endless possibilities thanks to compound interest I said to myself…this is just the beginning.