Archive for April 2014

3 Challenging Financial Statistics

Here are 5 financial statistics to mull over (and 3 challenging questions for you to consider):

  1. $10,890 is the median financial net worth of an American household today – According to calculations by Edward N. Wolff, an economics professor at New York University.  See how your net worth stacks up using the CNN|Money Net Worth Calculator
  2. The average large bank is currently paying 0.01% interest on regular savings accounts (and that interest is taxed). Let’s put this in real dollars and cents. If you had $10,000 in savings, you would be paid $1 in interest for the entire year. One single dollar. This is while they lend the money back to the average American with a credit card at 12% or higher.
  3. The poorest give more than the wealthiest to charity.  This article written by Ken Stern focuses on the research about why this is the case. The poorest give 3.2 percent while the wealthiest give an average of 1.3 percent of their incomes. According to the website JustGive.org, 75 percent of all gifts to charities are from individuals – not government or big corporate entities.

So here is the challenge for you right now – ask yourself these 3 questions and DO SOMETHING about them:

  1. Do you know what YOUR net worth is and where you stack up versus your peers? Take a quick moment to use the CNN|Money Net Worth Calculator to find out.
  2. What interest is YOUR bank paying on your savings account? Take steps to address it!
  3. How much money are YOU giving away? There’s nothing like giving. If you don’t like the amount you’ve been giving, take steps today to begin giving more away and discover the joy of helping accomplish great things together with like-minded people!

Monday Money Tip: How To Pay Off Your House In Less Than 10 Years

I was able to pay my house off just 6 years using this technique. I’m confident you can apply it and see dramatic results too!

Can’t see the YouTube video? Copy and paste the following link in your favorite browser: http://www.youtube.com/watch?v=qFleb2h0HrY

You can receive the weekly Monday Money Tip in your email by subscribing HERE.

Small Business Tip: Projecting Income

One of the greatest challenges small business owners face is projecting income.

When providing financial coaching to small business owners, I ask, “How much are you paid by your business?”

The answer is usually some variation of: “Whatever I can take. It’s always up and down.”

This makes it extraordinarily difficult to manage household financial affairs and can literally drive the bill payer completely crazy.

Here’s solution to this problem.

  1. Stop “investing” (spending) all the extra money. When you have a great month of revenue, don’t view it as a ticket to spend money. Instead, view it as a ticket to stabilize your income! Save the extra money in an operating reserve account.
  2. Establish a monthly (or weekly, bi-weekly, or bi-monthly) salary. In your household budget, determine the amount of money your business needs to pay you each month in order to thrive. Ensure your household budget includes saving for Known Upcoming Non-Monthly Expenses (KUEs) such as Christmas, Special Days (birthdays, anniversaries, weddings, showers, etc), HOA, Insurance Premiums, etc.
  3. Pay yourself the set amount of money each payday – and leave the rest alone at the business! Even when the business is thriving, it is important to continue to draw only your salary. This is because the “down times” will be coming soon through the natural business cycle of your business. It’s not fun to leave the money in the business during times of plenty, but it sure is nice to have those reserves when the business is struggling!

It’s how I operate my businesses, and I’m confident it will work for you too!

My book, Oxen, is a great resource to help you establish a new business or acquire an existing one.

Kids and Money Tip: No Spending Until You Prepare A Budget

Money is a foreign concept to most children until they are about 4 or 5 years old. It is at around this age they become aware that money has the ability to purchase things. However, most of their financial knowledge is focused on spending because that is what they SEE happening with money.

  • Mom gives money to the grocery store clerk and carries groceries out of the store.
  • Dad swipes his credit card at the gas pump, and it allows him to put gasoline in the vehicle.
  • Grandma gives money to her beautiful grandchildren (your children, of course) and you take the child down the toy aisle to buy something with it.

Since “spending” is what we see happening with money from our earliest days, it is what most children grow up knowing about money. For them, money equals spending.

The important financial principles of giving, saving, investing, and budgeting are not learned. Consequently, grown children leave the house knowing only that money equals spending. This is a recipe for financial disaster!

Here’s a simple thing you can do immediately to change that for your children (grandchildren):

Ask the child to prepare a budget for any money they receive – BEFORE they are allowed to spend any of it.

For example, my daughter receives money for her birthday. She and I count the money so we know exactly how much she has received, and then I confiscate it. Upon receipt of a well-planned budget, I release the money to her for use. Later on, I do a “check in” to ensure the money has been used according to the plan.

In a recent budgeting moment, my daughter was planning the use of $20. Her first budget had $2 for giving, and $18 for spending. I rejected it because there was no saving or investing. Her revised plan showed $2 for giving, $0.25 for saving, and $17.75 for spending. She gave the budget to me with a smile – knowing there was little chance of it being accepted.

I rejected it.

Her third try included giving, saving, investing, and spending. I released the funds to her.

Here’s the reasons I love this process:

  1. Teachable Moments This process creates space for “teachable moments” about money. It forces conversation about the importance of giving, saving, and investing. It allows us to talk about the “spender” mentality that we both share.
  2. Learned At Home Before my daughter enters the real world, she is receiving real financial knowledge that will set her apart. She knows what a mutual fund is and how it operates.
  3. The Pain of Wasting $20 is Less Than The Pain of Wasting $20,000 I want her to recognize the pain of poor financial decisions NOW when she is making $20 decisions so she doesn’t have to learn the lesson with a $20,000 purchase later.
  4. My daughter actually enjoys the process My daughter actually enjoys the process. It has helped her save a substantial amount of money toward her first car. She has financial margin. She knows her parents care about her.

I have my daughter use our FREE BUDGETING TOOL called the “Mini-Budget.” It’s perfect for kids.

My book, What Everyone Should Know About Money BEFORE They Enter The Real World, is a perfect resource for helping your child start out life with the financial tools and principles essential to life.

Monday Money Tip: Saving Money On Groceries

In this Monday Money Tip, I share several key ways you can save money on your groceries. This is knowledge that can literally help you free up cash to buy more food (or save, invest, give, etc).

Can’t see the YouTube video? Copy and paste the following link in your favorite browser: https://www.youtube.com/watch?v=t-QfOB-SgTo

You can receive the weekly Monday Money Tip in your email by subscribing HERE.