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Monday Money Tip: Using the Debt Snowball Concept

During the month of April, I’m focusing on all things related to debt. To start this week off right, I’m sharing the process that I used to eliminate all of my non-house debt in just 14 months and my house mortgage in 10 years.

Get fired up! YOU CAN DO THIS!

For more information on how to eliminate debt, pick up a copy of my latest book, I Was Broke. Now I’m Not. 

5 Basic Steps to Investing – Step 5

Investing! This is consistently given as one of the most confusing topics individuals face. In this series, I wanted to share some basic investing fundamentals. My goal is to help you understand this topic better and walk away with practical steps.

STEP ONE  Evaluate & Diversify 

STEP TWO  Automate Your Investments 

STEP THREE  Get the Free Money

STEP FOUR  Unleash the Power of Compound Interest

STEP FIVE  Continue to Learn about Practical Investing Opportunities
There are so many different types of investment opportunities, so I’ve broken down a few of them.

Stocks – When you own stock in a company, you technically become a part owner of that company. You have some claim to the assets and earnings of the company. Stocks are foundational to most investment portfolios. They are known to be very volatile in the short term but have historically outperformed other investments in the long run. 

Mark Twain has famously said this about investing in stocks: “October: This is one of the particularly dangerous months to invest in stocks. Other dangerous months are July, January, September, April, November, May, March, June, December, August and February.”

There are two major types of stocks:

  • Common Stock: Common stock allows the holder to vote in the shareholder meetings (depending on the amount of stock owned) and provides access to dividends or profit sharing produced by the company.
  • Preferred Stock: Preferred stock holders have priority over common stock holders. This applies in many areas including when dividends are being paid to shareholders.

Bonds – A bond is a large debt owed by a company, government, or even a school, where the borrowing institution has agreed to repay an established amount of interest payments for a set period of time. When this time expires, the borrower then returns all of the principal back to the lender(s). Bonds can vary in maturity times anywhere from 1 year to 30 years. I like to think of my personal residence as a bond investment. A bond is generally less risky.

Mutual Funds & Exchange Traded Funds (ETFs) - Mutual funds and ETFs let you accumulate a wide variety of investments that couldn’t normally obtain without consuming large amounts of time and money. Mutual funds and ETFs are funded “mutually” by you, me and millions of our closest friends. Our money is pooled together and then used by the “mutual fund managers” to invest in hundreds of other company stocks, bonds, and other sorts of investments. Usually, mutual funds and ETFs have specific charters that direct their investments. Our mutual fund might only focus on established companies in the USA while another could focus on investing in up-and-coming companies in third world countries.

Other Investing Opportunities - People so often hold themselves to these common types of investing and never branch out. Investing opportunities are all around you! You can invest in a small home and rent it out. You could invest in small businesses in your community. When you are investing, you can think outside the box. Some of the greatest returns can be found when investing in unorthodox ventures.

Next Steps
– Review your investments and know what you are invested in
– Start to think OUTSIDE of the stock market when you’re investing
– Start investing!
– Recommended Resource ==> OXEN: The Key to an Abundant Harvest – Learn how to maximize your money through investing

5 Basic Steps to Investing – Step 4

Investing! This is consistently given as one of the most confusing topics individuals face. In this series, I wanted to share some basic investing fundamentals. My goal is to help you understand this topic better and walk away with practical steps.

STEP ONE  Evaluate & Diversify 

STEP TWO  Automate Your Investments 

STEP THREE  Get the Free Money

STEP FOUR  Unleash the Power of Compound Interest  
Have you ever heard the say, “my money is working for me”? This is exactly what compound interest does for you! When you utilize the power of compound interest, you’re allowing the interest you’re making to also earn interest.

For example, let’s say we have $100 in an investment account that grew to $105 in one year. This is the equivalent of 5% interest. Now suppose the $105 is left alone for another year and continues to grow at a rate of 5%. Will it be paid another $5 interest when the second year is up? No! It will be paid $5.25 because interest was received on $105 – not just $100. Interest earning interest!

Take a look at the below example of a $100/month investment growing at an annual compound rate of 12%.

Compound Interest Table

 

 

Remember,  you are only investing $100 each month! After 40 years, you’ve only invested $48,000 BUT your account balance is $1,176,477! This means that $1,128,477 is the interest you have gained!

Now do you see the POWER of compound interest?

Where do you find investments that offer 12% return? I have found no investments that constantly return 12% every single year, but I have found several mutual funds that average over 12% return over the past 50 years. Some years could lose 15% while others gain 30%. You can see a list of my current investments HERE.

How to maximize your investment growth:

  1. Invest enough to receive the entire company match: By investing in an employer-sponsored retirement plan that matches a portion of your contributions, you could even receive a 50% or 100% return!
  2. Monitor your investments at least every six months: I track my investments at the end of every single month. This helps me understand how each one is performing and allows me to make necessary adjustments.
  3. Consider investments beyond the stock market: The stock market is just one place to invest. Consider investing in a small businesses, real estate, and intellectual property – like patents and licensing rights. Remember, a higher interest rate almost always means a higher risk.

Next Steps
– Establish a consistent investing habit. Invest into your retirement account every paycheck for the rest of your working life. Even if you can only invest a small amount, it will add up to more than you can imagine!
– Recommended Resource ==> OXEN: The Key to an Abundant Harvest – Learn how to maximize your money through investing

5 Basic Steps to Investing – Step 3

Investing! This is consistently given as one of the most confusing topics individuals face. In this series, I wanted to share some basic investing fundamentals. My goal is to help you understand this topic better and walk away with practical steps.

STEP ONE  Evaluate & Diversify 

STEP TWO  Automate Your Investments 

STEP THREE  Get the Free Money 
Yes, I said FREE money. Many employers will match a portion of your contributions into a self-directed retirement plan! I encourage you to go to your human resource department and sign up for the retirement plan. Start investing money into it immediately! Contribute enough money to obtain the entire employer match. Remember, this is really just FREE money!

Each company is different, but most companies will usually match up to a certain percent of your pay. I worked for an employer that matched me dollar-for-dollar up to 8% of my pay (100% automatic rate of return!!). Another matched dollar-for-dollar up to 6% of my pay. Still another matched dollar-for-dollar up to 3% of my pay. Whatever your employer is willing to give you is FREE MONEY!

It is baffling that many people don’t take advantage of this opportunity. I have heard several excuses about why people choose not to, excuses like:

  • “I can’t afford to contribute.”
  • “I’m living paycheck-to-paycheck already.”

These people are basically saying they can’t afford to be given free money. Doesn’t make a whole lot of sense. This is an opportunity to receive 100% return on your investment! DO NOT WASTE THIS CHANCE!

Next Steps:
– Talk to your employer TODAY and sign up for your company’s retirement plan. Start contributing something – at least enough to get the full match.
– As quickly as possible, increase your investing contribution to at least 10% of your gross income. I know this is a lot of money, but you will NEVER regret this decision.
– Recommended Resource ==> OXEN: The Key to an Abundant Harvest – Learn how to maximize your money through investing

5 Basic Steps to Investing – Step 2

Investing! This is consistently given as one of the most confusing topics individuals face. In this series, I wanted to share some basic investing fundamentals. My goal is to help you understand this topic better and walk away with practical steps.

STEP ONE  Evaluate & Diversify 

STEP TWO  Automate Your Investments 
Make your investments automatic! Your bank account can be set up to auto draft money into different investment plans (401k or a child’s 529 college-savings plan).

When your investments are automated, it prevents you from forgetting to transfer money each month. It also eliminates the possibility of using that money for splurge purchases. This is awesome for those of us who are highly susceptible to spend any and all extra money! You’ll also see your net worth increase every single month.

One thing to note, if you have to ever switch banks, you’ll need to set up the auto-drafting again at your new bank. I would try to do this ASAP! I know from firsthand experience how hard it can be to write a check to your savings account or 529 college-savings plan when the auto-drafting isn’t set up. There are moments where you will think, “Wow! I could really use this money elsewhere!”

If I had to write a check every month to my investments accounts, there is a good chance that my investing plan would be seriously off-track. Make it automatic!!

Next Steps
- Set up auto-drafting with your bank (via phone or online) and start automating your investment account(s) , such as a 401k, retirement account, or 529 college-savings plan.
– Recommended Resource ==> OXEN: The Key to an Abundant Harvest – Learn how to maximize your money through investing

5 Basic Steps to Investing – Steps 1

Investing! This is consistently given as one of the most confusing topics individuals face. In this series, I wanted to share some basic investing fundamentals. My goal is to help you understand this topic better and walk away with practical steps.

STEP ONE  Evaluate & Diversify 
Before we begin, you need to assess what investments you currently have. You might be saying, “Joe, I don’t have any investments.” My question to you would be: do you contribute to some type of retirement plan at work, own a home, or own a business? Investing is much more than owning stocks. To start, let’s make a list of all your investments. (A great place to list these investments is on the asset side of the Net Worth Calculator.) Now that you have all your investments listed, lets evaluate to make sure they are diversified.

I’m sure you’ve heard the saying, don’t put all your eggs in one basket. This directly relates to investing! A key step when investing is to diversify your investments. For example, you should not put all your money into one company’s stock, instead spread your investments out. By spreading out your investments you greatly lower the risk of your investment.

You can research countless times where people have put a large portion of their money into one company, only to have that company fail. Several people lost large sums of money when they invested solely in Enron during the early 2000’s and the company went under. If these people would have diversified their investments, they could have softened the blow.

An easy way for you to diversify is to invest in mutual funds. A mutual fund allows you to purchase a portion of many stocks and bonds with a single share purchase. This purchase automatically diversifies your investments, even though you’ve only bought one share! Also, don’t just think stocks. Invest in a new business or a home that can be rented out. Investing is much more then the stock market. You have a world of things to invest in – real estate, land, new businesses, or even your own business!

Next Steps:
– Review your current investments. Are they diverse?
– Are you only investing in one type of company? If yes, take steps to address right away!
– What other investments could you make outside of the stock market?
– Recommended Resource ==> OXEN: The Key to an Abundant Harvest – Learn how to maximize your money through investing

Joseph Sangl’s Current Investments – 2015

Anyone who has attended a Financial Learning Experience has heard me say that it is important to INVEST money and to do so every single time you are paid money. At the end of our live events, I am regularly asked or emailed the following question:

“What investments do you recommend?”

My answer is always, “I don’t recommend specific investments. I can only tell you the investments I own, and they have worked well for me. The investments you choose are up to you.”

Occasionally, I update everyone on the investments I currently hold. Below is a chart of the current investments we hold. If it is publicly-traded, I have included the ticker symbol. Click on the chart itself (or HERE) to see a larger version.

JSInv2015

It is hard to believe that another year has passed by! If you look at last year’s update, you will see quite a change in the allocation of my investments. This is most noticeable in our real estate holdings. This is due to acquisition of more properties as well as the appreciation in the value of other real estate holdings. You can click the pie chart below to see a larger version of the chart.

PortfolioDistribution2015-02JDS

My views of the investing market place:

  1. I anticipate the stock market will continue to grow at a moderate pace. While the current Price-to-Earnings Ratio (P/E) for the overall market is at nearly 18, there are are many reasons to believe that we will see some growth. These include:
    • (a) cash rich companies – I believe we will see a hastening of the investment of these monies through 2015,
    • (b) low interest rates – while the Federal Reserve Board has ceased QE3 and are clearly signaling an increase in interest rates, these rate hikes are going to be low for the foreseeable future, and
    • (c) oil price collapse – while this certainly affects Big Oil stocks, it has an overall economic stimulus effect as it puts substantial dollars back into the pockets of consumers
  2. I continue to believe there will be ample investment opportunities within the real estate markets in 2015. I travel throughout the U.S. and Canada and rarely have I seen construction – both large-scale commercial and residential – at the levels I’m observing right now. It’s only a matter of time before this shows up in the profit statements of the largest contractors.
  3. I also believe there will be ample investment opportunities into new business start-ups and purchase of existing businesses
  4. Worldwide instability has existed since the beginning of time. It exists today. While the problems may change names tomorrow, I’m convinced we will still face worldwide instability tomorrow as well. I believe a great risk is in not investing at all. I will continue to be an investor!

I welcome your thoughts on the investing market place as well. What do you think? What are your strategies?

Read previous installments of Joe Sangl’s “Current Investments” posts HERE.

Monday Money Tip: Compound Interest – Friend or Enemy?

Happy Monday! Welcome to another addition of Monday Money Tip! In this video, I’m sharing all about compound interest. How does it work? Is it your greatest friend or worst enemy?

Want to automatically receive a helpful and practical money tip every Monday? Just sign up HERE (It’s FREE)!

Monday Money Tip: 0% Balance Transfer Credit Card

It’s Monday and I’m sharing another Monday Money Tip. Do you have a credit card that carries a balance every month? If yes, this money tip can literally help you save hundreds or thousands of dollars a year!

You can access the current listing of 0% interest card card balance transfer offers HERE.

**NOTE – Discover It™ Card recently changed their promotional offer from 0% APR for 18 months to 14 months.**

Register HERE (it’s free) to receive this weekly tip in your email bright and early on Monday mornings!

 

What 5 Questions Should You Be Asking? Part 3

When it comes to spending money, we all need a little guidance sometimes so I’ve put together 5 questions to ask before spending! It’s my hope that this series will provide you with practical questions to ask when preparing to spend a substantial amount of money (or any amount of money). Hopefully, these practical questions will help you truly understand the enormity of the decision and help you make the decision that is best for you and your family.

Let’s review questions 1 – 4:

QUESTION 1:  Is this a want or a need purchase?

QUESTION 2:  Will this item INCREASE or DECREASE in value?

QUESTION 3:  Do I have the money to pay CASH for this item?

QUESTION 4:  Will this purchase generate or take away income?

 

QUESTION 5: Will this help me achieve my future plans, hopes, and dreams? 
I believe the number one reason that people fail with their financial plan is a lack of organization and lack of a plan. Without a long-term perspective, it becomes extremely easy to fall into the trap of living for the minute and immediately spending everything we earn. As one develops a long-term perspective, it really helps us recognize that spending all of our money right away will rip our future dreams away from us!

When my family first started improving our financial future (December 2002), I noticed that we started looking ahead a few months. Now, twelve years later, my entire perspective has shifted. You see, I want to leave a legacy for my children and community. I want to start a university. I want to leave a huge inheritance to my family, church, and others. My wife and I want to give our children a paid-for-college education. We desire to teach them to manage their finances, recognizing that it’s not just for them but it’s FOR THEM TO HELP OTHERS!

Statistics say that I’m already halfway through my life. Time is short. Too short to spend all of our resources on stuff that does not support our plans, hopes, and dreams.

What are your future plans, hopes and dreams? What purchases will help you achieve these?

What 5 Questions Should You Be Asking? Part 2

When it comes to spending money, we all need a little guidance sometimes so I’ve put together 5 questions to ask before spending! It’s my hope that this series will provide you with practical questions to ask when preparing to spend a substantial amount of money (or any amount of money). Hopefully, these practical questions will help you truly understand the enormity of the decision and help you make the decision that is best for you and your family.

Let’s review questions 1 & 2:

QUESTION 1:  Is this a want or a need purchase?

QUESTION 2:  Will this item INCREASE or DECREASE in value?

 

QUESTION 3:  Do I have the money to pay CASH for this item?
It’s a great feeling when you can pay cash for an item and not have the weight of debt, financing or interest looming over your head. 

I wrote the “I Was Broke” part of my book, I Was Broke. Now I’m Not. (you can check out all the details HERE), by always financing things. My car, truck, next truck, engagement ring, wedding ring, honeymoon, credit cards, college student loans, furniture, and many other things were all financed because I didn’t stop and ask myself this question. The day I started asking myself this question, my family moved one step closer to winning with money.

If I do not have the cash to pay for it, I’m not buying it UNLESS it’s a house or an asset that will increase in value (like a business, rental house, etc). Even then, the answer is still usually “NO!” unless I have all of the money available to pay cash.

QUESTION 4:  Will this purchase generate or take away income?
What an incredible question to ask – and what a difference it will make in the way you think about money! I used to earn money and then immediately begin pondering which fun item I was going to buy. I rarely (if ever) thought about the fact that I could use the money to buy in to a small business, purchase stocks and mutual funds, start a small business or purchase a rental home.

Even more, I didn’t truly realize the ACTUAL cost of many of the items I had purchased. I had purchased a new car (a smokin’ hot Chevy Cavlier) and I only thought of the bank loan as my “cost” to purchase. In actuality, I also added the costs of insurance, property taxes, license tags, maintenance, repairs, and additional gasoline consumption.

Before spending money, just stop and ponder the options available to use those resources to generate more income for you in the future.

Questions 5…TOMORROW!

What 5 Questions Should You Be Asking? Part 1

When it comes to spending money, we all need a little guidance sometimes so I’ve put together 5 questions to ask before spending! It’s my hope that this series will provide you with practical questions to ask when preparing to spend a substantial amount of money (or any amount of money). Hopefully, these practical questions will help you truly understand the enormity of the decision and help you make the decision that is best for you and your family.

QUESTION 1:  Is this a want or a need purchase?
This might seem like a basic question but do you really need this item? As a “spender” I can get caught up in the “I WANT THIS!” mentality and never stop to ask, “Is this a want or a need?”

My garage is full of “I want this” items that we never use. EVER! This includes a RC Airplane (it’s cool – but I don’t use it), bike (never ride it), tennis rackets (once every 3 or 4 years), and many other items.

Pausing to ask “Is this a want or a need purchase?” can prevent a lot of poor spending decisions. I’m not saying that I never purchase things that are pure “wants”. I am saying that when I ask this key question, I make much smarter overall decisions.

QUESTION 2:  Will this item INCREASE or DECREASE in value?
Asking this simple question can also help prevent a lot of poor spending decisions! 

Chewing gum goes down in value. So do cars, 4-wheelers, refrigerators, swimming pools, and clothes. Business can go up in value. So can houses, land, antiques, mutual funds, company stocks, bonds, and intellectual property (patents, licenses, etc).

Here’s what I know: Not all of your purchases can be for items that increase in value, but if ALL of your purchases go down in value – something isn’t right!

Join me tomorrow for questions 3 and 4!

Monday Money Tip: Opportunity Cost

Happy Monday! I love it when my week starts off right! The Monday Money Tip was created as a weekly service to provide people just like you with a practical and simple money tip – right at the start of the week so that you can take action with it!

 

Maximizing Your Tax Refund – Step 2

How should you maximize your tax refund?

STEP 1  Before You Spend It, Plan It
It is exceedingly important to have a plan for the refund money BEFORE you ever receive the money!

STEP 2  Build the Wall
Next, you need to build a wall of protection! 
When maximizing your tax refund, there are three categories that can help you build this wall:

(1) Save it, (2) Reduce Debt, (3) Invest it

FIRST: Save it
One of the biggest reasons people fall off of the “I’m Going to Achieve Debt-Freedom” wagon is because they do not have any savings. Life is going to happen and it will cost money! If you do not have any savings you will remain broke. Do you currently have money saved for emergencies or Known, Upcoming Non-Monthly Expenses (Christmas, vacation, property taxes, annual memberships, homeowner’s association fees)? Before attacking debt or investing, you need to save money! Start with saving at least one months of expenses. How would it feel to have one month’s of expenses JUST SITTING THERE in your bank account? I remember the day that this happened – and I did not have to mail it out to a creditor!!
If you do not have savings, use your tax refund to fill it up!

SECOND: Reduce Debt
Don’t skip ahead to this step! Make sure you have savings first! Too many people race past the previous option and use their $3,000 tax refund to pay off $3,000 of a $5,000 credit card. They have no Emergency Fund, they haven’t saved for Known, Upcoming Non-Monthly Expenses, and now they have just spent all of that money on a credit card. Even if the $3,000 paid off the credit card, it is still not worth it if one does not any savings! Think about it this way. If the $3,000 credit card had a monthly payment of $100, how long will it take to get that $3,000 back into the bank? THIRTY MONTHS! Not worth it.
BUT, if you have taken care of the Emergency Fund and have saved for your Known, Upcoming Non-Monthly Expenses, it is time to attack the debt! Pull up the Debt Freedom Date Calculator (Excel) and calculate your own Debt Freedom Date! Make some debts leave your life!!

THIRD: Invest
If you have already saved money and reduced or eliminated your debt, your next step is to invest. Investments are the KEY to funding your big time plans, hopes and dreams! Investing is simply using your money and possessions to create more money and possessions. The goal for any investments is to gain more in return.

Stay tuned for Step 3!

Maximizing Your Tax Refund – Step 1

Since we’re right in the middle of tax season, I wanted discuss how to maximize your tax refund.

Last year, about 75% of Americans received a tax refund. Were you one of them? Will you receive one this year? If so, it can be a tremendous tool to start your journey toward living your fully funded life!

STEP 1  Before You Spend It, Plan It
I used to have my tax refund spent sixteen different ways by the time it actually arrived. It was assigned to pay for Christmas, vacation, clothes, credit card bills, student loan payments, car payments, a new appliance, a new electronic device, etc.

In addition to having spent the refund sixteen different ways, I had already made all of the purchases via credit cards or other forms of loans.

When the refund actually arrived, it was woefully inadequate to cover all of my crazy spending.

Talk about feeling miserable! Is anyone reading this feeling my pain, or am I the only one who has done this?

When I decided once and for all to take control of my finances, I realized the root cause of my problem.

What was the root cause and the reason for all of my crazy spending?

I did not have a PLAN! 

Before you spend your tax refund, plan out the spending! I highly recommend that you use the Mini-Budget Form (Excel) to plan your spending. Enter the amount of the tax refund at the top, and spend it to exactly zero. Remember: INCOME – OUTGO = EXACTLY ZERO.

Start planning now – BUT don’t start spending just yet. We are still in the planning stages.

Next, we’ll cover where the money should go!

 

 

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