Archive for February 2007

The power of an invitation!

I was recently invited to guest-post on someone else's blog.

I must say that it was an honor to be trusted enough to post on the blog.

It made me stop and think about the power of an invitation.  Because someone invited me to guest-post on a blog, I was able to write a guest-post while that person was unable to post.

How does this relate to personal finances?  Simple – I want you to invite someone to learn how you are managing your money.  It is a teacher's greatest accomplishment when you see someone you have personally taught teaching others.  PAY IT FORWARD!  You have not been learning all of this information, all of these tools, and all of this practical advice to keep it to yourself!

Who should you be teaching?

  • Your children!!!
  • Your brothers and sisters!
  • Your grandchildren!
  • Your neighbors!
  • Your friends!

Any teacher will tell you that if you really want to learn a subject well, you should teach it!  You encounter questions that you have not thought about, situations that you have never considered, and you will broaden your understand of the subject.

Invite your friends over to dinner and say, "Hey, let me show you this really cool tool I have started using to manage my money."

Why not have them over on Saturday evening?

The POWER of an invitation.  You just might change a life! 

How to Spend the Tax Refund

It is Tax Refund season!

I know that every year, I am giving the government a tax-free loan, but I still receive a large tax refund every year.  I am not sure why I have not changed it to where I break even at the end of the year, but I think it might be related to the poorhouse days.

Anyway, many of the persons that I am counseling this time of year are receiving a large tax refund, and they are looking for advice on the best use of that money.  Most of the time, they are wanting to pay down debt with the entire refund.  My response might surprise you.

Joe Sangl's Guidelines – Spending Tax Refunds

  • Create a Mini-Budget.  You can download it HERE or click on "Tools" on the top of the page.  Spend ALL of the refund on paper FIRST before the money ever gets into your grubby little paws!  (Joe's grubby paws tend to spend all money that has not been budgeted – trust me on this!)
  • If you do not have at least $1,000 in an emergency buffer fund, you need to make this TOP PRIORITY.  AHEAD of paying down debt!!!  Why?  Because if the entire refund is spent to reduce debt, but there is NO emergency fund, it is VERY LIKELY that more debt will be incurred when life happens – the car breaks down, the refrigerator dies, the kids get sick, etc.
  • If you have at least $1,000 in an emergency fund, and you still have debt besides the house, pay down debt and fund KNOWN, UPCOMING expenses.  For example, the Sangl's use the tax refund to fund their summer vacations and some larger home improvement projects.  These are KNOWN, UPCOMING expenses that could have been Budget Busting expenses.

If you have retained nothing of what is written here today, PLEASE get this – I spent three straight years of tax refunds paying off credit cards ONLY to look up and see that I was back in debt up to my eyeballs again.  Spend your money on paper every single month, and you will not EVER regret it.

Another New Tool: The Mini-Budget

A Mini-Budget is used to spend irregular income such as tax refunds, bonuses, and inherited money.  It can also be used to budget for a home project, wedding, or other event.

Here is how it works – let's say you are going to be having a wedding.  Lord knows how much money we can spend on a wedding!  The average is OVER $20,000!  It strikes fear into every dad who has a daughter.  It strikes TERROR in every dad who has daughters!

Anyway, let's say the budget is $20,000.  SPEND THE MONEY ON PAPER FIRST!!!  You are MUCH MORE LIKELY to stay within the budget if you actually think through the expenses IN ADVANCE!

So you pull up the Mini-Budget form (link is later in post) and spend the money on paper FIRST.

Mini-Budget 

You can see that the $20,000 has been spent 100% on paper.  The chances are GREATLY INCREASED that this family will not overspend on this wedding (if you call $20,000 not overspending – ouch!).

See how it works?  GREAT!  What do you need to budget?

Get a copy of the MINI-BUDGET tool HERE.

Budget-busting expenses

Need help in overcoming budget-busting expenses?  You know the big ones – Christmas, the quarterly insurance premium, the annual property taxes, etc.

Here is a simple way to smooth out these large expenses.

 

In the example, you can see some certified, bona-fide budget-busting expenses.  Wouldn't you agree with me that a $450 or a $950 hit in a single month's budget would BLOW UP a budget?  ABSOLUTELY!  To eliminate this peak-and-valley, feast-and-famine style of living, take the time to list out all of your KNOWN, UPCOMING expenses and their associated annual cost.

In the example above, the annual budget-busting expenses total up to $4,400 per year.

Divide this number by 12 months, and you arrive at $367/month.  If you save $367 EVERY SINGLE MONTH, you WILL be able to absorb these budget-busting expenses without the huge headaches that you may currently be experiencing!

Don't believe me?  Ask anyone with a Christmas fund or a home mortgage escrow account!  These are really nothing more than budget-buster smoothing tools!  Why?  Because mortgage companies and businesses have realized that if the costs are not smoothed out and absorbed monthly, the chances are unlikely of you having enough cash on hand when the bill arrives otherwise.