Archive - July, 2006

Car problems?

My car’s water pump went out. What a pain! I had to wait in the Wal-Mart parking lot while calling the dealership to get it in for repair. It was smoking hot. I was smoking hot at my broken car. Combine it together, I was in flames. Cost of repair? My frustration and

Lack of understanding can cost you big time!

Do you understand insurance? Life insurance? Auto Insurance? Health Insurance? I know that it is certainly NOT the most interesting subject in the world, but if you do not take the time to truly understand these products, it will cost you big time.

Rules for purchasing insurance:

  • Do not just “take an insurance agent’s word for it!” Truly seek understanding of the product! If you understand it, you will be able to make a good purchase that you will KNOW is a good purchase.
  • If you are speaking with an insurance agent, and you start feeling like you are being “sold” on a product – LEAVE IMMEDIATELY!!! Use Donald Trump’s words – “You’re fired!” Complete with the New England accent if you wish. You do not need to be sold on an insurance product, you need to understand the insurance products. Once you understand the products, you will be able to make a sound decision.
  • Obtain at least three quotes from three different companies. Ensure that at least one is an independent company that is able to surf your insurance needs among many different companies. Competition makes prices go down. When prices go down, you will get to keep more of your money.
  • Do not cancel an existing insurance product until you have obtained a replacement. Do not cancel your auto insurance before you have obtained auto insurance from another company. Do not cancel your life insurance before you have obtained alternative life insurance from elsewhere. A gap in coverage is ripe territory for Mr. Murphy to show up.
  • Do not allow your insurance to be combined with another financial product. For example, cash value life insurance is both life insurance and an investment in one product. The problem with these types of products is that the fees are tremendous. Purchase your investments and insurance separately.
  • Send out your insurance occasionally for quotes. You want to ensure that your rates are remaining competitive with the open market.
  • Ask for a better deal. Insurance is a service product. Service products are negotiable.
  • Be careful of purchasing insurance from a family member or a good friend. You may have your judgment impaired because you really want to please and help them.

Again, a boring subject. If you kept reading all the way to the end of this article, I am impressed! You can save a lot of money on insurance by employing these tips.

I am motivated!!!

I want to do something with my life! I want to help others accomplish far more than they ever thought possible! I want to make something happen! I will not accept status quo. I believe that tomorrow will be better than today! I believe that I can help make tomorrow be a better day for others. I will not wait for my ship to come in. I have found exactly what I have been made to do in life, and I plan to pursue it with abandon.

You too can make tomorrow better! What skill or talent do you have that you can share with the world to make it a better place? Who could you impact today and make their life nicer? Do you know what that skill or talent is? Here’s help. What is that one thing that just makes you want to wake up at 4AM every single day and say, “Let’s go!!!”? What is that one thing that you could talk about all day every day and not grow weary of? That’s it!!! Go do something with it!

We can talk about financial peace all day long, but the whole entire point of obtaining financial freedom is to be able to do EXACTLY what we have been made to do. REGARDLESS of the income potential. REGARDLESS of the naysayers. REGARDLESS of what your broke friends and family think. REGARDLESS of your comfortable life and ability to just lay back and put life on cruise control.

Make it happen!

Why people do stupid things with money.

Why do people do what they do?

Why does someone buy a brand new car and finance 106% of it (sales tax and all!)?

Why does someone go to college and finance it 100% with student loans while obtaining a degree in basket weaving?

Why does someone take a very expensive vacation to Hawaii and put it 100% on their credit card?

Why does someone withdraw all the equity out of their home to start a new business?

It happens every day! Look around! You can see it! You may have to only look into the mirror to see someone who has done one of these financially horrendous items. That is as far as I have to look!!!

Back to my question. Why?

Possible Answers
1. No plan. They wanted to spend the money on the item, but they did not plan for the expense. Consequently, they only money available when the purchase was made was very expensive debt money.

2. No control. They wanted it! They wanted it now! They did not want to wait. No! Must have item … Must have item now … Will be emotionally scarred for life if item is not obtained now …

3. Not willing to face up to the fact that the item may not be available for them at this time, so they buy it anyway hoping that “the money will come from somewhere”.

4. Talked into it. See #1, #2, and #3. You’ve seen it happen. The friends start talking about it. The friends are going on the vacation. The friends have the new car. Your friends are going to college and are not having to work while there. Justification is found through others’ circumstances.

If I were to attempt to sum the reasons that people do stupid things with money, I would say it is because they were ignorant of the COST of those major financial decisions. If they truly knew the COST of those decisions, many tears of sorrow and regret and many money fights with their spouse could be avoided.

Taking it to the next level!

I have a friend who helps coordinate the personal finance course with Jenn and I. This friend is in charge of delivering cost saving ideas after the intermission.

She has been doing this now for about 6 weeks. All I can say is , “WOW!” I have seen an entirely new level of financial discipline. This week she brought in three boxes of pencils with each box containing a dozen pencils. “How much did I pay for these pencils?”, she asked. “How much? Come on, how much?”

One of the class members ventured, “$1.00?”

“Nope! Less.”

“Fifty cents?”, another tried.

“Nope! Less.”

“Ten cents?”, a class member asked bewilderingly.

“Nope! Less.”

“Five cents?”, was asked cautiously.

“Nope! Less. I paid one penny for each box. They were so cheap that the store could not even charge me tax.”

This lady has brought in a fine art painting. “How much?”, she asked. After a series of guesses, we arrived at ZERO. She had checked the painting out at the library!

I am discovering that there is an entire new level to managing your spending! Don’t tell me you can’t do this! Don’t tell me you can not live on your income! All you have to do is control your own self!

You may be saying, “THIS WOMAN IS A WACKO!!!”

I would say you may be right, but she isn’t broke anymore.

I choose to be wierd. Why? Because normal in America is BROKE! I am NOT doing BROKE anymore!

Can I get a witness?

Home mortgage interest deduction a good idea?

Absolutely! If you have a mortgage and are paying interest, it is very important to take the mortgage interest deduction.

One thing I have heard commonly stated is the statement that “I do not pay off my mortgage early because I do not want to lose the mortgage interest deduction.” I believe this saying was initiated by banks :) Here is why. Look at the example below.


The Mortgage Interest Deduction
Let’s say you paid $5,000 in interest on your mortgage last year. By taking the deduction, you effectively reduce your taxable income by $5,000. You receive back the tax rate on that home mortgage interest deduction. If your tax rate is 30%, you get back $1,500 (30% of $5,000). The bank gets to keep the $5,000 you paid in interest. Uncle Sam gets 30% of your taxable income which is now $40,000 because you were able to reduce your taxable income by the interest you paid. The total net OUTGO from you to Uncle Sam and the bank is $17,000!

The Paid-Off House Scenario
Well, you are living life pretty good in your debt-free condition! So, now you no longer pay interest to the bank (sorry!). This means that you will be taxed on the full $45,000. If your tax rate is 30%, the total net OUTGO from you to Uncle Sam is $13,500!

$3,500 LESS OUTGO from you to someone else.

So that is why I believe that the banks started the statement, “I do not pay off my mortgage early because I do not want to lose the mortgage interest deduction.” If you do pay off your mortgage, the banks will not get any of your money!

THINK and you will prosper!

Save at the dentist …

A lady who went through the personal finance course that I coordinate told me of her trip to the dentist.

The dentist told her that she needed a crown. The cost of the crown was to be $650. She told the dentist, “I am paying cash. $250!” The surprised dentist responded, “$325.”

What a deal!

What a thought! You see, the dentist is performing a service. A service is negotiable. When you are paying cash out of your own pocket, you are more apt to question the fee.

It makes one stop and think about the impact of 100% payment insurance. It doesn’t make the patient pay out of their own pocket, so they are less apt to question the fee.

Go out and ask for a better deal!

The 8th wonder of the world … compound interest!

If I can get you to do only two things related to your personal finances (and I want you do far more than two things!!!), I would plead for you to complete a zero-based budget every single month, and I would beg you to start investing NOW to enjoy the awe-inspiring results of compound interest!

If you invested $1,000 per year at 10% interest for 50 years, you would have $1,163,909!!! If you only had 40 years, you would only have $442,593.

I say “only” with a smile, but let’s think about it. By starting your investing 10 years late, you have forfeited the miracle of compound interest for that time period, and it COST you $721,315!!! WOW!

If you are already enjoying the benefits of compound interest, you are smiling now. If you are not already investing, time is ticking away …

How to pay for your next car.

In conversation with a friend recently, he mentioned that he is starting to check out the new cars because he is going to be buying a car in three years. He has owned his current vehicle for seven years. His goal is to keep it for ten years. NOTE: This is how you win financially. Buying depreciating assets sparingly. Do not buy a new car every single year.

Anyway, I asked him if he was planning on paying cash for it. The answer was an uncertain, “No.” It was almost quizzical. It was like, “Who pays cash for a new car?” or maybe “How would I pay cash for a new car?”

Here’s how! YOU HAVE THREE YEARS!!!

Take the expected purchase price of the vehicle in three years. Let’s say that it will be a $20,000 vehicle. You have 36 months until you will be purchasing the vehicle. Divide the $20,000 by 36. You need to save $555.56/month in order to have $20,000 in cash three years from now.

IT IS THAT SIMPLE!!!

You may be saying, “Joe, there is NO WAY I can save $555.56/month for each of the next 36 months!” My answer? THEN YOU CANNOT AFFORD A $20,000 CAR IN 36 MONTHS!!! I bet you will get a raise between now and then. I bet you will get a tax refund between now and then. I sincerely hope that you will be paying off your consumer debt between now and then.

Listen – If you really want the $20,000 car in 36 months, save $555.56/month. We don’t do debt around here.

IT IS THAT SIMPLE!

Celebrating 36 months of budgeting!!!

We started to get our finances under serious control in January 2003, but it was not until June 2003 that we started to really win financially. Would it surprise anyone that June is when Jenn and I started budgeting monthly?

I love budgeting. I am the free spirit. The spender. And I am telling you that I LOVE budgeting. Why do I love budgeting? Let me tell you the reasons …

  • Jenn and I actually TALK about our finances at least once each month! This means that we also talk about the birthdays of nephews and nieces, brothers and sisters, parents. We talk about upcoming events and plan out our schedule accordingly. We talk. Very cool.
  • Budgeting has made our marriage better. With the systematic reduction of our debt, we were able to secure breathing room in our finances. With the systematic building of our 6 month emergency fund, we have been able to really secure breathing room. This means we can greatly reduce the chance that we will have an issue with the number one cause of marital conflict – finances. What an investment!!!
  • Our budget gave us great hope. There is nothing like seeing a zero-based budget balance to zero! It means that all of the bills are going to be paid, on-time, and we will not be turning to debt to make up the difference! It gave us HOPE that we can retire some day instead of just getting tired.
  • Budgeting is going to be THE THING that enables Jenn and I to do exactly what we were created to do regardless of the cost. The act of budgeting every month, before the month begins, and spending every dollar on paper, on purpose has strengthened our self-control and self-discipline. We have learned how to “Just say NO!!!” in so many ways.
  • Budgeting has made us win financially. We are so much better off today than the days when we had two incomes. Why? Because we grew up and put together a plan – our budget!

Happy budgeting!!!

Avoid Stuff-itis ==> Pursue Self-Control

Do you ever see something that created a “I really want that!!!” feeling inside? Maybe it was a jetski, or a new type of shoes, or a new car, or new furniture, or …

We all have! For me, one of those things was a brand new Honda Odyssey minivan. I remember it well. It was 2001, we had a one year old baby with plans for more, and this new minivan just captured me. You might be asking me, a minivan?!!? I know. I know. A minivan. I used to be cool. Anyway, I priced out this minivan. I really wanted this minivan. I wanted the one with the DVD player (not very common then), the 16″ aluminum allow wheels, the deep dark red metal-flecked paint, leather, and an awesome sound package. For only $30,000, I would be able to drive away in this new car.

Jenn is the saver. I am the spender.After many talks with Jenn, we decided not to buy it. This was before we really became serious about our finances, but even this seemed outrageous to her. I recently came across the annual budget that I had developed to try to convince her that we should purchase this new vehicle. The budget is $10,270 PER YEAR short!!!

Review of the budget is comical! In my attempts to make the budget balance, I had written in the costs that we could reduce. Let’s see, auto insurance (right, with a brand new $30K vehicle), cable TV (an annual savings of $600), internet (savings of $264), groceries (right … with a new baby), miscellaneous spending … It is really enlightening to look back and see how bad “stuff-itis” had captured me.

We did not purchase the Honda. A review of Kelley Blue Book’s estimated private party value for this vehicle in good condition shows $12,620. Additionally, if we would have followed the financing plan I had established, we would not yet be done making payments!!! WOW!!!

I am glad I had a great wife who forced me to pay attention to what this would do to our family’s finances. Instead of still being in debt, we have been debt-free (except for our house) since February 2004 (31 months!!!) and the house debt is being exterminated. I will take that trade any day of the week!!!

Avoid stuff-itis. Pursue self-control. You will win financially.

Someone needs to do this …

Here is a list of “helpful” companies that exist solely to “help” people.

Check Into Cash
Cash Advance
Extra Payday
Cash America
Axcess Cash
Payday OK
PayDay USA
Advance America
Check Smart
Check ‘n Go

Let’s see how helpful …

Check Into Cash states under their “Our Standards” link that “A payday advance is a responsible, dignified choice for short-term cash needs” and “Customers understand the value of convenience and the growth of payday advances reflects a broader national trend toward increased convenience and customer service.”

Under Check Into Cash’s “How It Works” link, the claim is stated “If you sometimes run short of cash between paydays, for any reason, let Check Into Cash be your safety net. It takes just a few minutes.”

I cry out, “BULL CRAP!!!” and “THAT IS UNACCEPTABLE!!!”

The FACT is that these companies charge OUTRAGEOUS amounts of FEES and INTEREST. They are only interested in ripping off poor people and keeping them poor. Annual Percentage Rates range anywhere from 250% to 500% on these loans. OUTRAGEOUS!!! This is NOT helping people.

Someone should do this … Open up a store next to every single one of these RIP-OFF, HORRIBLE financial institutions. That store’s name should be something like “It’s Like Free Money!” or “Cash Advice” or “Keep Your Payday, OK?” or “Be Smart, Not Check Smart”. Inside, there are highly trained, highly capable financial counselors that will meet FOR FREE with each person who walks into the door and helps them understand the true cost of a cash advance loan. That person would then offer FOR FREE to help them develop a budget and hold them accountable to that budget. Additionally, monthly follow-up visits are conducted FOR FREE to help them gain control of their finances.

I am fed up with poor people being ripped off. This must be stopped.

Are you investing for retirement?

Retirement.

What a word.

Ask 100 persons what retirement is, and you will probably get 100 different answers. However, each answer would probably have a similar theme. Each answer would most likely include the theme of “stopping or slowing down dramatically what I have been doing and replacing it with some other activity.” Many times, the “other activity” does not generate much of an income. That means that you must prepare for it.

Prepare?!!??! You want me to prepare??!! I can’t even force myself to pack one day before I leave on vacation, and you want me to think about something that is going to happen years from now?

YES!!!

Why?! Because I want you to be able to do that “some other activity” some day!!! If you do not prepare financially, your plans may never happen or will experience severe delays. I really want you to be able to do what you want to!

There are many ways to prepare for retirement including: investing in stocks, bonds, mutual funds, rental properties, owning a business, owning real estate, owning intellectual property, writing a great song and selling licensing rights, patents, antiques, precious metals, and 1000s of other ways. The key is to diversify your retirement holdings so that your risk is mitigated. Don’t hold all of your money in bonds, stocks, and mutual funds that are focused only on one segment of the market (like all in high-tech). Spread out your investments into many types of healthy markets.

The key is to START NOW!!! If you are 20 and you haven’t started, walk over to an investment advisor today. If you are 30 and you haven’t started, RUN over to the advisor. If you are 40 and you haven’t started, SPRINT over. If you are over 50, for Pete’s sake, TAKE A RACE CAR to the advisor’s office!!!

See you in retirement!

Back from vacation!

Well, vacation was awesome! Time spent with family far away from home is great!

I was able to take a lot of time to think. During vacation, I always take the time to ask myself the following questions:

1) Am I happy with where I am in life right now?
2) Will I be happy with where I will be in 5 years if I keep on the path I am currently on?

WARNING: Don’t ask yourself these questions unless you really want to know the answers!

As I thought through the questions, one thing stood out very clear to me (again!). I love to teach! I love to teach people tools and skills that immediately impact their lives for the better. Whether it is teaching someone about how to budget for the very first time or how to use Microsoft Excel to analyze data, I love to teach!

I was put on this earth to teach. It is what fires me up. My life’s passion statement is “to help others accomplish far more than they ever thought possible”.

Game on.