Archive for April 2013

SERIES: How To Win With Money – Part 6

Welcome to another series here on the wildly popular I Was Broke. Now I’m Not. website. We’re passionate about helping YOU win with your money. In this series, we are going to be talking about a practical, step-by-step plan that you can use to take your finances to the stratosphere!

How To Win With Money

6.  Place at least 15% of your gross income into tax-advantaged investments.

At this level, you truly begin to change your entire financial future. You have built savings, initiated investing, and eliminated all non-house, non-business debt. It is time to build wealth in a big-time way. You might call this “the dream funding” level.

Consider your annual gross income that you expect to receive this year. Multiple that salary by 0.15 to calculate your Level 6 investing goal. Suppose your gross income is going to be $40,000 this year. This means that your goal is to move at least $6,000 into tax-advantaged investments. Imagine how much this could grow to be after doing this year after year!

This money will be used to fund your big-time dreams and goals that you established way back at Level 1! This includes funding college for your child(ren), retirement, blessing others financially, dream vacations, and other items that are very important to you.

It is important to note that this 15% investment of gross income does not include any match you may receive from your employer. Whatever they may contribute is above and beyond the 15% goal.

Consider the following example:

  • 28 year old parents earning a combined income of $50,000 commit to follow this process
  • They achieve Level 1 (set goals) and Level 2 (save $2,500) in three months by using their tax refund
  • They achieve Level 3 (invest enough to capture company match in retirement account) one month later by contributing $100 per month and their employer matches with another $100.
  • They achieve Level 4 (become debt free except house) over the next 3 years
  • They achieve Level 5 (save 3 months of expenses) in another 8 months
  • They are now 32 years old and have arrived at this level – Level 6 – and begin to invest $7,500 (15% of gross income) into tax-advantaged accounts.
  • They receive another $3,000 in matching contributions from their employer making their total annual investments equal $10,500 per year (or $875/month)
  • They invest this amount every year until they are 66 (for a total of 34 years)
  • Because they started investing in Level 3, they have been investing $200 a month for 32 months. This investment is already worth $7,499 at age 32!
  • Using this $7,499 and assuming an annual growth rate of 12% with monthly contributions of $875/month, their investments will be worth $5,418,542 at age 66.

Get. Fired. Up!!!! By the way, this assumes that this couple never received a pay raise for 38 straight years.

Any doubt that this process will help you win with your money?

Read the entire series (available after 4/20/2013)

SERIES: How To Win With Money – Part 5

Welcome to another series here on the wildly popular I Was Broke. Now I’m Not. website. We’re passionate about helping YOU win with your money. In this series, we are going to be talking about a practical, step-by-step plan that you can use to take your finances to the stratosphere!

How To Win With Money

5.  Build savings to three months of expenses

Read step #5 again. Note that this level focuses on saving three months of expenses – not income. Because this follows level #4 (to eliminate all non-house, non-business debt), your monthly expenses should be much lower! In general, this level will take three to nine months to achieve.

It is amazing how much confidence this will give to you! Your ability to live is no longer wholly dependent upon an employer’s willingness to keep you. You can encounter financial challenges with substantially reduced stress. Even more, you are able to look beyond the current day and week and focus on “what could be.” It is at this step that you will begin to live in the vision and goals you documented at level one – the start of your journey to win with money.

Take a moment to determine how much your monthly expenses will be once you have eliminated all non-house, non-business debt. Now, multiply that number by three. This is your “Level 5 Savings Goal.” If you don’t have this much money saved right now, take a moment to think about how you might feel upon achieving this level. Let that feeling provide fuel to you as you progress up the nine levels required to truly win with money!

Read the entire series (available after 4/20/2013)

SERIES: How To Win With Money – Part 4

Welcome to another series here on the wildly popular I Was Broke. Now I’m Not. website. We’re passionate about helping YOU win with your money. In this series, we are going to be talking about a practical, step-by-step plan that you can use to take your finances to the stratosphere!

How To Win With Money

4.  Eliminate all non-house, non-business debt

Let’s face it. Debt is a drag. It hangs on like a bad relationship or a fixer-upper money pit house. Anyone, when given the choice, would choose to be debt-free over paying debt payments every month.

The average family possesses credit card debt, student loan debt, furniture debt, vehicle debt, and a personal loan or two. Then a house payment enters into the picture. Every single month, 40% or more of the family’s income is “dead on arrival” because it must immediately be sent out to lenders.

And the average family feels trapped.

The average person believes they will always have a car payment and credit cards must be used for every financial emergency.

But they are believing a lie.

The facts reveal that the average family can become free of all non-house, non-business debt with 12 to 36 months. The facts show that an average of between $500 and $1,250 per month could be freed up just by eliminating this debt.

You want to truly win with money? Eliminate non-house, non-business debt and utilize that freed up monthly money to achieve levels 5 through 9!

How to attack debt:

  1. Understand how much debt you really owe (I really like using the free website www.annualcreditreport.com to determine this)
  2. Calculate your Debt Freedom Date (use the free calculator HERE)
  3. Pay off debt using the Debt Snowball technique (focus on smallest debt first)

Read the entire series (available after 4/20/2013)

SERIES: How To Win With Money – Part 3

Welcome to another series here on the wildly popular I Was Broke. Now I’m Not. website. We’re passionate about helping YOU win with your money. In this series, we are going to be talking about a practical, step-by-step plan that you can use to take your finances to the stratosphere!

How To Win With Money

3.  Invest enough to capture your full company match (or $100 – whichever is greater)

Compound interest is an amazing financial principle that can literally explode your finances to levels you never believed possible. As proof, let me provide you some examples:

  • $50 per month for 40 years at 8% annual growth will yield $174,550 (you only invested $24,000 of your own money)
  • $100 per month for 40 years at 12% annual growth will yield $1,176,477 (you only invested $48,000 of your own money)

While you may be sick of debt and really want to start attacking it before you begin investing for the future, please ensure that investing is #3 on your journey to financial freedom. Here’s why: CONSISTENCY and TIME are what matter most when it comes funding your big-time goals and dreams (which is #1 on our “How To Win With Money” plan). If you have debt, it can take months or maybe even years to eliminate it. If you choose not to begin investing, you lose both “consistency” and “time,” the two biggest enablers for wealth!

Suppose you choose not to invest your $100 per month and focus on killing debt instead. Let’s assume that it will take three years for you to eliminate your non-house debt. Let’s see how much this will cost you:

  • $100 per month for 40 years at 12% annual growth is $1,176,477
  • $100 per month for 37 years at 12 annual growth is $819,259

Delaying your $100 per month investment for just three years will cost you $357,218 (the difference between $1,176,477 and $819,259! And if your company matches your investment dollar-for-dollar, double that amount to $714,438!

Non-investor: If that doesn’t make you RUN to begin your investments right now, I don’t know what will!

Where do you get started with your investments?

  • Start with company retirement plan (especially if there is a matching contribution from your employer)
  • Open a Roth-IRA (or similar tax-advantaged investment account)
  • Start or buy a business
  • Real estate
  • Personal talent or skill set that can create income

Read the entire series (available after 4/20/2013)

SERIES: How To Win With Money – Part 2

Welcome to another series here on the wildly popular I Was Broke. Now I’m Not. website. We’re passionate about helping YOU win with your money. In this series, we are going to be talking about a practical, step-by-step plan that you can use to take your finances to the stratosphere!

How To Win With Money

2.  Save money (Build a wall of protection) – Start with a goal of $2,500

I’ve seen nothing provide greater confidence to a leader than having financial margin. Money in the bank provides a person with the ability to take risks, pursue opportunities, fund dreams, and encounter obstacles. Without savings, a person will always be at risk of financial catastrophe. Any occurrence of a multitude of potential financial challenges could cause financial collapse – vehicle breakdown, air conditioning unit failure, replacing an appliance, and medical bills all seem to be attracted to people who have failed to save money.

If you want to truly win with money, you must prioritize saving money.

Saved money allows you to prevent future debt. This allows you to confidently turn your focus to eliminating any existing debt you may have.

A beginning goal of $2,500 will allow you to pay cash for most financial challenges you could potentially face such as an emergency trip out of town, replacing an appliance, or repairing the car.

Here are some ways to quickly achieve this goal:

  1. Sell something
  2. Use your tax refund
  3. Take a 2nd job and commit to depositing all of the extra money into savings
  4. Eliminate an “extra” or several “extras” from your monthly budget
  5. Use our “next steps – money saving ideas” page to find ways to save money

Read the entire series (available after 4/20/2013)