Thursday, December 29, 2011

Stop Lying about Money (To Yourself)

If you have been reading this blog for any amount of time you already know that I am a big fan of setting goals and resolutions (it turns out that a lot of successful people do it too). With the end of the year approaching, what a better time than now to start making some 2012 resolutions? Here, I’ll start you off with a suggestion!

Stop lying to yourself about money.

Yep, I said it. You lie about money…a lot. Wanna know how I know?

1. You create ridiculously unrealistic budgets.

2. You think bad (and expensive) stuff won’t happen to you.

3. You project (to yourself) that you make more than you do.

4. You spend money before you have it.

5. You use a credit card to get “rewards”.

6. You took out a 30 year mortgage and are “going pay it like a 15 year”.

7. You lease a car because it is a “good deal” and a small business “tax write off”.

8. You deserve a $5000 vacation.

<Deep Breath>

Sorry, I got on a little soap box there for a minute.

Here is the deal, I often write about things that I am thinking about for me personally. So if you felt like I just hit on something you do - it turns out, so do I on occasion. Actually, I think I can say with some certainty that we all do it from time to time.

So let’s make a resolution in 2012 when I think about money I am going to be honest with myself. When I make a money mistake, I am going to admit that it was an error and I am going to avoid it in the future. I vow to be an armed consumer who doesn’t fall for gimmicks and most of all… I am going to stop making excuses and start creating results.

Wednesday, December 21, 2011

Financial Tech Podcast #11: Big Bonus and Kindle Fire


So you got a year-end bonus… now what?

End of the year boosts are nice on multiple fronts but the variable income, if not planned for, can slip right between your fingers if you are not careful!

Here are a couple of great options for putting that money to good use:

  • Spend the bonus on paper first for 1 time bonuses
  • Pay down debt
  • Get rid of credit card and charge card debt
  • Make an extra payment on your mortgage
  • Save
  • Emergencies
  • Major Purchases
  • Wealth Building
  • On-going variable income
  • How much can you count on?
  • Make a budget based on your base income
  • Live within those parameters
  • Have a plan for variable income

Andrew recently ordered a set of Kindle Fire tablets for business use. He and Jim spend some time talking about using this consumer device for business purposes.

Thursday, December 15, 2011

How to Accumulate Wealth

It’s that time of year again – time to think about what went right this past year and what you would like to try again next year. Some of us will likely be thinking about improving our health by exercising more or eating better. Others will likely be thinking about ways to improve their finanmoney in the handscial position in the year to come. Maybe that is paying down debt, trying to save more, or simply just implementing a budget for the new year!
I often think about things in a process format, it makes things easier for me to comprehend so I thought I would share with you a process for accumulating wealth.
Step 1: Start Right Now!
All of my students should be able to tell you about the first step in the process – they all know that the driving factor in accumulating wealth is time!
I would love to break down the compound interest formula and show you mathematically why time is the key factor and if you come to one of my classes you will likely see that happen! But for now just take my word for it; the sooner you start, the more you can accumulate!
Step 2: Have a Goal!
I like having goals, they are a great way to track your progress! I suggest using a percentage savings goal. A great idea is to save 16.66% of your gross income each year for wealth building. I know that is a big number so start small, with something affordable and increase your saving percentage each year by 1-2%.
Step 3: Make it Automatic
I often hear stories about people setting up a contribution to their retirement account and then going in and changing it all the time according to their income needs. That’s a bad idea. Most of us do not have enough discipline to be able to set aside money on our own… we have to build fake discipline. The best way I have found to do that is through automatic deposits. I literally treat my saving like a bill that comes out automatically each month. Once I pay it, I forget about it. And just like a bill I cannot change how much I owe (myself), I am required to pay the obligation – because if I don’t, no one else is going to do it. Just set it up and then do not touch it!
Step 4: Find a Jet Engine
Most of wealth building is accomplished through great habits but there is also an element of risk and good fortune. A key piece of investing is the idea of risk versus reward. In order to be paid you have to take risks, the more you want to earn the more risk you have to take! An essential part of reaching your wealth goals includes the need for a high octane investment that will propel your portfolio to success. This could be a personal business venture, an investment in some sort of security, or even an investment in yourself – whatever it is you have to capitalize on those opportunities!
Step 5: Leave it alone
Find a strategy, implement the strategy, and let it run its course.
Have you ever tried to make a great omelet? As you practice the art of omelet creation, you will find that a key mistake people make is that after they crack the egg they don’t let it sit long enough before adding their filling (also people often overfill the omelet which is a mistake as well). You have to let the egg set up and run it’s course!
Too often people start meddling with their strategy too quickly! Either they aren’t performing how they hopped or they are out performing and want to try to do more.
Give it some time! Rome wasn’t built in a day! Things that come quickly are quickly lost!
Step 6: Keep Doing it
No matter what, press on. The only person responsible for your financial future is you. All you can rely on is that there are no excuses, just results.

If you like this post check out my weekly video commentary at:

Wednesday, December 7, 2011

Should I Pay Down Debt or Save?

What a great question! Honestly, this is one of the most common questions we get at the credit union.

**Disclaimer: this is an inherently individual question. Every family is in a different situation with different variables. This post is a generalization in every sense!** Smile

Here is our advice, If you are trying to decide what to do with some money; one of the best options is to pay down debt. By reducing outstanding balances you are saving money on interest cost, you gain some peace of mind, and you improve your net worth. However, as we all know, life happens! If all of your excess money is being applied toward debt payment and you have no emergency fund then if an issue comes up you will be forced to take on new debt.

To illustrate the process I decided to put together a decision tree for you: Picture2

So as you can tell the question really comes do to can you pay off the debt in 18 months or less. If the answer is yes – then go for it! If the answer is no, you might have to do some more saving along side your debt reduction.

The reason for this is simple. You cannot afford to put saving on hold for more than 18 months. It is essential to keep your intensity up and get rid of that consumer debt but you also have to establish a strong cushion.