Finance

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

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?

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!

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!

This is a series written for those who are struggling mightily with their finances and tough decision are being made about who will and will not be paid. It is my hope that this series will provide practical steps that can be taken to walk out of this situation and into financial freedom.

PART ONE  Evaluate
First, you need to determine why you are stuck financially? This will require you evaluate the root cause of the situation.

PART TWO  Plan!
I know what you have is limited, and in some cases, very limited. It is imperative, however, that you plan what you do have with a budget!

PART THREE  Prioritize
When you have an extremely limited amount of funds, it is important to remember the priorities. (Credit cards vs. house payments)

PART FOUR  Execute
Take action! Whenever I am overwhelmed, I’m more likely to freeze up and do nothing. I just want to shut down and ignore everything. However, running away from problems will just make the situation worse. You must follow your financial plan you put together.

I’m sure some will read this “take action” statement as “go work like crazy and earn more money”. I would certainly not disagree with working more and earning more as it is a GREAT way to fill in the gap. There are, however, many more ways to fill in the gap. Here are a few.

Pray. I am a Christ-follower, and I have seen the power of prayer.
If married, ensure that your spouse is on board. There is POWER when you work TOGETHER on your finances!
Sell Something. Maybe your house payment is eating you alive. Sell the house. Sell the motorcycle. Sell the boat. Sell the truck. Sell the swing set. Sell the four-wheeler. Sell the LCD 50″ TV.
Reduce OUTGO. Many times you can substantially lower your credit card payments just by calling them! I lowered my cable/internet bill by 75% just by calling! Use cash for the categories you tend to spend impulsively (groceries, restaurants, shopping, entertainment, spending money). Call and get a new quote on your homeowner’s/auto insurance.
Chop up the credit cards. If they are a crutch that keeps trapping you, it is time to chop them up.
Make it a family effort! There is NOTHING like a unified family. Nothing.
Ask yourself these questions:

• “Is there something that can be sold?” If there are items that can be sold, this needs to be fully investigated to understand how it can help the situation.
• “What expenses can be stopped?” Are there any “extras” in the OUTGO? Common examples of this expense are subscriptions like cable television, gym memberships, etc.
• “How can INCOME be increased?” An extra job or tons of overtime may not be appealing, but living in a pile of debt with no hope is even worse! It is very important to investigate short-term ways to increase income to get out of the current late bill payment situation.

It will be extremely difficult to work through your challenging financial situation. It will most likely not be fixed overnight. This process will take time and it requires you to ENDURE. Remain focused because the end result is worth it!

Below are some practical tips that have worked for me when I have faced overwhelming situations.

• Establish accountability.
• Ask for help.
• Seek wisdom. 

These three tips can be summed up with “get a financial coach!” A financial coach will hold you accountable to key decisions you need to make. They will also provide helpful encouragement that will help you endure to the finish.

Remember…YOU CAN DO THIS!