If you can, you will quickly find that the greatest rate of return you will earn is on your own personal spending. Being a smart shopper is the first step to getting rich. ~ Mark Cuban
Wednesday, March 23, 2011
Tuesday, March 22, 2011
What the HECK Is A HELOC?
If you want to consolidate debt and have done any research you may have heard the term HELOC, but what is it? The acronym HELOC stands for home equity line of credit. A HELOC is an open ended line of credit similar to a credit card, however a piece of real estate, typically your primary residence is used as collateral. HELOCs are powerful financial tools and can be great for debt consolidation but there are some things to be aware of when using them. Please keep in mind that the following statements are about HELOCs in general, each one is different and specifics will depend on the terms of your particular loan and the bank who provides it for you.
Interest Only Payments
One thing to keep in mind with a HELOC is your minimum payment. Typically the minimum payment is interest only which can be great because it gives you flexibility, for example lets say you have a HELOC and you pay $500 each month. If the interest is only $100 that would be all you are required to pay, so if something came up one month you can pay less than you typical $500 one month and not worry about any negative credit impact. The downfall is that if you become accustomed to only paying the minimum payments you will never pay the loan off.
Variable Interest
Another advantage to a HELOC is that they typically offer the lowest interest rates of any loan product at any given time. However, they are usually variable. We are currently seeing the lowest interest rates in history so which direction do you think rates will go in the future (Hint: the answer is not down). Usually the interest rates on a HELOC have to rise quite a bit to get to the rates that your credit cards or other loans are at, but keep in mind that your interest rate will most likely fluctuate.
Early Closure Fees
HELOCs typically have the highest early closure penalties of any loan product on the market. It is usually a percentage of the total limit of your credit line. Just because you pay your line off does not mean you have to close it, but keep the fees in mind if you don't plan to live in your house for very long. Typically the bank will require you to keep the line open for about 3 years.
As I said earlier, a HELOC can be a great tool to use in consolidating your debts or even to make large purchases, but as with every financial decision do your research and make sure it makes sense for you and not get you into trouble.
Interest Only Payments
One thing to keep in mind with a HELOC is your minimum payment. Typically the minimum payment is interest only which can be great because it gives you flexibility, for example lets say you have a HELOC and you pay $500 each month. If the interest is only $100 that would be all you are required to pay, so if something came up one month you can pay less than you typical $500 one month and not worry about any negative credit impact. The downfall is that if you become accustomed to only paying the minimum payments you will never pay the loan off.
Variable Interest
Another advantage to a HELOC is that they typically offer the lowest interest rates of any loan product at any given time. However, they are usually variable. We are currently seeing the lowest interest rates in history so which direction do you think rates will go in the future (Hint: the answer is not down). Usually the interest rates on a HELOC have to rise quite a bit to get to the rates that your credit cards or other loans are at, but keep in mind that your interest rate will most likely fluctuate.
Early Closure Fees
HELOCs typically have the highest early closure penalties of any loan product on the market. It is usually a percentage of the total limit of your credit line. Just because you pay your line off does not mean you have to close it, but keep the fees in mind if you don't plan to live in your house for very long. Typically the bank will require you to keep the line open for about 3 years.
As I said earlier, a HELOC can be a great tool to use in consolidating your debts or even to make large purchases, but as with every financial decision do your research and make sure it makes sense for you and not get you into trouble.
My Weekend of Savings
The reason for the long delay between posts is because I went on a little weekend get away with the family. Even when I am vacationing I can't stop thinking about money (It's both a gift and a curse). Anyway, I couldn't wait to get back and tell you about my deal. I stayed at a 4 star Hilton Hotel in a major city for $40. Yes 40 bucks.The standard rate for the room was almost $200. So how did I do it? You've seen the commercials for "unpublished rates" every travel site has them and let me tell you they really can save you lots of money.
Whats the catch? The answer is simple. You find a deal and reserve the room, but you don't know where you are staying until the reservation is booked, and there is no cancellation.
WHAT!?!?!?!?
I know, I know, calm down. Here's what makes it great. You do get to specify the neighborhood, the star rating, the room type and the amenities the hotel offers. So ask yourself, with all of that information out in the open, what difference does the brand make? Plus, the gamble is kind of exciting.
And, its not just hotels...
Once I booked a rental car for a vacation in Florida with one of these deals. I got a full size car through Hertz for $11/ day.
The moral of the story is there are a lot of great deals out there, you just have to find them. So next time you are traveling and feeling a little crazy give it a try
Whats the catch? The answer is simple. You find a deal and reserve the room, but you don't know where you are staying until the reservation is booked, and there is no cancellation.
WHAT!?!?!?!?
I know, I know, calm down. Here's what makes it great. You do get to specify the neighborhood, the star rating, the room type and the amenities the hotel offers. So ask yourself, with all of that information out in the open, what difference does the brand make? Plus, the gamble is kind of exciting.
And, its not just hotels...
Once I booked a rental car for a vacation in Florida with one of these deals. I got a full size car through Hertz for $11/ day.
The moral of the story is there are a lot of great deals out there, you just have to find them. So next time you are traveling and feeling a little crazy give it a try
Thursday, March 17, 2011
How to "Rebuild" your credit
There comes a time in every one's life when we just can't seem to make ends meet. There are also times Murphy's law smacks us in the face. Let's face it, bad things can happen to good people. Sometimes those bad things can have a negative impact on your financial situation and your credit. When something bad happens, whatever the situation may be, it can feel like you will never be "credit worthy" again. The good news is you can get back on track by following a few simple steps.
Get Current on Your Bills
This article is assuming that you are recovering from your "financial disaster" so I am not going to spend a lot of time on this section. It deserves a post of its own so I will work on it. However, it is important to keep in mind that it will be difficult to "rebuild" your credit if you can't pay the bills you already have, so if you are behind do whatever it takes to get current.
Check Your Credit Score
Go online and find a site where you can get a credit report and a credit score. Getting a credit score will give you a starting point. Sign up for a program where you can monitor your credit every month. Most of the credit monitoring services will also give you tips on how to improve your score. Follow them. I've seen clients increase their credit scores dramatically within just a few months by simply following the tips.
Get a Secured Loan or Credit Card
This may sound crazy, but the only way to build good credit is to borrow some money and establish a good payment history. The hard part is that most banks won't lend you money if you have a poor credit score. A secured loan or credit card is the way around that. The way it works is simple. Save some money, put it in a savings account and then use the savings account as collateral for your loan. I have seen banks issue secured cards for as little as $300 in collateral, term loans usually require about $1000. The most important thing good payment history and some banks will consider a good payment history with their institution enough to issue you unsecured credit or give you lower rates on loans in the future. Usually small banks or credit unions are easier to deal with when you are trying to rebuild or establish credit.
Monitor Your Progress
Use your credit monitoring tool to track your progress until you are satisfied with your credit score. It's even a good idea to use the tool going forward to keep your score at the level you want, but the fun part is watching your score grow every month because of your hard work.
Get Current on Your Bills
This article is assuming that you are recovering from your "financial disaster" so I am not going to spend a lot of time on this section. It deserves a post of its own so I will work on it. However, it is important to keep in mind that it will be difficult to "rebuild" your credit if you can't pay the bills you already have, so if you are behind do whatever it takes to get current.
Check Your Credit Score
Go online and find a site where you can get a credit report and a credit score. Getting a credit score will give you a starting point. Sign up for a program where you can monitor your credit every month. Most of the credit monitoring services will also give you tips on how to improve your score. Follow them. I've seen clients increase their credit scores dramatically within just a few months by simply following the tips.
Get a Secured Loan or Credit Card
This may sound crazy, but the only way to build good credit is to borrow some money and establish a good payment history. The hard part is that most banks won't lend you money if you have a poor credit score. A secured loan or credit card is the way around that. The way it works is simple. Save some money, put it in a savings account and then use the savings account as collateral for your loan. I have seen banks issue secured cards for as little as $300 in collateral, term loans usually require about $1000. The most important thing good payment history and some banks will consider a good payment history with their institution enough to issue you unsecured credit or give you lower rates on loans in the future. Usually small banks or credit unions are easier to deal with when you are trying to rebuild or establish credit.
Monitor Your Progress
Use your credit monitoring tool to track your progress until you are satisfied with your credit score. It's even a good idea to use the tool going forward to keep your score at the level you want, but the fun part is watching your score grow every month because of your hard work.
Wednesday, March 9, 2011
Resources
I was thinking today. Eventhough a great deal of what I know about personal finance has come from trial and error through time in the industry, a lot of what I have been talking about comes from some of my favorite books. So I thought it might be helpful to give you a list of some of my favorite books and authors to take a look at. The previous 2 post contain some of my personal favorites.
Here are a few of my favorite books
Here are a few of my favorite books. I want to disclose that I am in no way affiliated with Dave Ramsey or his organization. I just think that his message is great and his books have the power to Change Your Life. Check them out for yourself.
Tuesday, March 8, 2011
How to Avoid Bank Overdraft Fees for Good
If you've ever been tight on cash chances are you know how painful the sting of bank overdraft fees can be. I once overdrew my account by $11.37 and paid a $96 overdraft fee. When I questioned the charge the bank was quick to let me know that the fee was charged as a courtesy for paying my transactions. However they also said that the fee would have been the same if they had to return the transactions so it was in my best interest that they paid them. This was when I realized that overdraft fees were part of a game I didn't want to play. Here are some tips to help you avoid a similar situation.
Keep a ledger
Working with the balance you get online or at the ATM is not enough. The bank balance only shows transactions as they "post" to your account, and certain transactions cannot be seen immediately. Rather than risk the costly mistake of forgetting a tramsaction write everything down as you go and keep a running total. That way you always know how much money is available in your account.
Most banks also manipulate the order in which transactions clear your account. Most banks post transactions largest to smallest so you'll want to find out how your bank works, but again if you keep a good ledger you will always be safe because you'll always know how much cash is in your account.
Ask about Funds Availability
Some banks hold your money for a short period of time if you deposit a check. This hold allows the bank to make sure the check will clear. Always be sure to ask when your money will be available BEFORE you start spending to avoid any unpleasant surprises.
Opt Out of "overdraft coverage"
Your bank will have a fancy name for this service, and they will have a well scripted sales pitch for why you need it. The fact of the matter is, the recent finacial reform passed by congress made it illegal for banks to pay debit card transactions and charge you overdraft fees when they know you don't have funds available at the time you swipe your card, unless you give them written permission. Sure there are reasons when you might want the transactions to be paid, but for the most part I would rather have a cashier tell me my card is declined than get a $100 fee because I spent $3 more than I had in my account.
Overdraft Protection
Most banks will give you the opetion of setting up another account to cover you in case you spend to much. Common practice is to link your savings account or credit card to your checking and if you over spend the bank automatically transfers funds from the other account to cover your transactions. There is usually a fee for this service but it is always less than the overdraft fees that would accumulate if it wasn't there.
There you have it. Those are the best and easiest ways to avoid overdrafts. Keep in mind it is always best to ask how your banks overdraft policy works when you open your account. This will give you the set of rules you have to play by.
Keep a ledger
Working with the balance you get online or at the ATM is not enough. The bank balance only shows transactions as they "post" to your account, and certain transactions cannot be seen immediately. Rather than risk the costly mistake of forgetting a tramsaction write everything down as you go and keep a running total. That way you always know how much money is available in your account.
Most banks also manipulate the order in which transactions clear your account. Most banks post transactions largest to smallest so you'll want to find out how your bank works, but again if you keep a good ledger you will always be safe because you'll always know how much cash is in your account.
Ask about Funds Availability
Some banks hold your money for a short period of time if you deposit a check. This hold allows the bank to make sure the check will clear. Always be sure to ask when your money will be available BEFORE you start spending to avoid any unpleasant surprises.
Opt Out of "overdraft coverage"
Your bank will have a fancy name for this service, and they will have a well scripted sales pitch for why you need it. The fact of the matter is, the recent finacial reform passed by congress made it illegal for banks to pay debit card transactions and charge you overdraft fees when they know you don't have funds available at the time you swipe your card, unless you give them written permission. Sure there are reasons when you might want the transactions to be paid, but for the most part I would rather have a cashier tell me my card is declined than get a $100 fee because I spent $3 more than I had in my account.
Overdraft Protection
Most banks will give you the opetion of setting up another account to cover you in case you spend to much. Common practice is to link your savings account or credit card to your checking and if you over spend the bank automatically transfers funds from the other account to cover your transactions. There is usually a fee for this service but it is always less than the overdraft fees that would accumulate if it wasn't there.
There you have it. Those are the best and easiest ways to avoid overdrafts. Keep in mind it is always best to ask how your banks overdraft policy works when you open your account. This will give you the set of rules you have to play by.
Friday, March 4, 2011
thank you
Thank you all for visiting the Blog. I am glad to see that the info is helping so many people. I'm sorry I haven't posted in a while, but I am in the process of working on some great new posts. if you are intersted I also have some articles posted on ezine articles and on goarticles.com. Take a look and let me know what you think. If you have any specific topics you'd like me to write about, leave a comment to this post with what you want to see and I'l do my best.
Thanks Again For All Of Your Support
Thanks Again For All Of Your Support
Monday, February 21, 2011
Amazing Resource
This is a great set oftools to use in our quest for financial freedom. As those of you who have read my posts know I don't say that about just anything.
To see for yourself Click Here!
To see for yourself Click Here!
Basic Mortgage FAQs
Whether you are looking for your first home or trying to save money by refinancing your current home the process of obtaining a mortgage can be scary especially if your not exactly sure you know what your doing. We’ve all heard the horror stories of people not realizing what they were getting themselves into and losing their homes because of it. Here are some questions that I am frequently asked that I will share to keep you from being one of those people.
What is an ARM?
Besides a very important part of the human body and ARM is a mortgage acronym that stands for Adjustable Rate Mortgage. The rate is generally fixed for a short term at the beginning of the loan, generally for the first 3,5, or 7 years of the loan and after that the rate adjusts to the current market rate as often as stated in the contract, usually annually. The reason people usually choose an ARM is a bet that rates are going to drop. An ARM usually offers a lower initial interest rate, someone choosing an ARM generally wants to take advantage of the initially low interest rate but intends to refinance at the end of the fixed period, or if they think rates will drop further they will take advantage of the rate adjustments while rates decline.
What is a Balloon?
A balloon is a short term loan that is amortized over a long period of time to get the borrower a low payment. For example a 100,000 loan could be set up as a 5 year balloon with a 30yr amortization. Lets say the payment is 500 per month. In this instance the borrower pays 500 per month for the first 59 months and the remaining loan balance is due in full on the due date for month 60. A balloon mortgage is usually used in a strategy where the borrower only intends to own a property for a short time or refinance quickly.
What is the most Stable Type of Mortgage Loan?
By far the most stable type of mortgage is the Fixed Rate Mortgage. They are most commonly offered in 30 and 15 year terms. The nice part of these loans is that the principal and interest payment is the same for the life of the loan so there are no surprises. This type of loan is preferred by most people who plan to stay in there home long term.
How can I make sure that I am not paying unnecessary closing costs?
All lenders are required by law to disclose the costs to you in writing, both at the time of application and at closing. At application they will give you a Good Faith Estimate of settlement costs, and at closing they will give you what is called a HUD-1 statement of settlement costs. Have your lender explain this to you and explain where the money is going for each line item. Common costs are Appraisal fees, Title insurance fees, Title search fees and flood certification fees.
I hope the answers to those questions help you out. I know that there are a lot more questions but the keys to getting a great mortgage are keep it simple and find a lender you trust.
What is an ARM?
Besides a very important part of the human body and ARM is a mortgage acronym that stands for Adjustable Rate Mortgage. The rate is generally fixed for a short term at the beginning of the loan, generally for the first 3,5, or 7 years of the loan and after that the rate adjusts to the current market rate as often as stated in the contract, usually annually. The reason people usually choose an ARM is a bet that rates are going to drop. An ARM usually offers a lower initial interest rate, someone choosing an ARM generally wants to take advantage of the initially low interest rate but intends to refinance at the end of the fixed period, or if they think rates will drop further they will take advantage of the rate adjustments while rates decline.
What is a Balloon?
A balloon is a short term loan that is amortized over a long period of time to get the borrower a low payment. For example a 100,000 loan could be set up as a 5 year balloon with a 30yr amortization. Lets say the payment is 500 per month. In this instance the borrower pays 500 per month for the first 59 months and the remaining loan balance is due in full on the due date for month 60. A balloon mortgage is usually used in a strategy where the borrower only intends to own a property for a short time or refinance quickly.
What is the most Stable Type of Mortgage Loan?
By far the most stable type of mortgage is the Fixed Rate Mortgage. They are most commonly offered in 30 and 15 year terms. The nice part of these loans is that the principal and interest payment is the same for the life of the loan so there are no surprises. This type of loan is preferred by most people who plan to stay in there home long term.
How can I make sure that I am not paying unnecessary closing costs?
All lenders are required by law to disclose the costs to you in writing, both at the time of application and at closing. At application they will give you a Good Faith Estimate of settlement costs, and at closing they will give you what is called a HUD-1 statement of settlement costs. Have your lender explain this to you and explain where the money is going for each line item. Common costs are Appraisal fees, Title insurance fees, Title search fees and flood certification fees.
I hope the answers to those questions help you out. I know that there are a lot more questions but the keys to getting a great mortgage are keep it simple and find a lender you trust.
Save For Retirement
You may be disappointed but this post is not going to give any hot tips on stocks or mutual funds. Find a good financial advisor and have him/her help you decide the best way to invest your money based on your situation. However, there is one point I would like to make. I will start with a simple question. When is the best time to start saving for retirement? NOW! Yesterday would have been better, but we can’t go back in time so start now. I don’t care how old you are. There is an old saying in the financial industry that says “time in the market is more important than market timing.” It means a lot of things to different people, but for this example it means get in early and stay for the long haul. Here’s how to do it.
The best way to save for retirement is through your employer, usually a 401k. The reason this is best is because it’s automatic and it comes out of your paycheck pretax. What does that mean to you? It means that you can contribute quite a bit of money to your plan without even noticing. Also, many employers will match employee contributions up to a certain level.
If your employer doesn’t offer a retirement plan you are not out of luck. There are other accounts that you can use. The most common is the IRA, individual retirement account. There are 2 types, Traditional and Roth. The difference is when you pay the taxes. Consult your financial advisor or tax preparer to determine which one is right for you.
So how much should you contribute? Most experts say that you should contribute an average of 15% of your pay through your entire career. I say you should contribute at least that and don’t count any employer match as a contribution, this should just be a bonus. This money is for you and your retirement, save as much as you can, contribute the maximum you are allowed if possible. You will thank yourself later.
The best way to save for retirement is through your employer, usually a 401k. The reason this is best is because it’s automatic and it comes out of your paycheck pretax. What does that mean to you? It means that you can contribute quite a bit of money to your plan without even noticing. Also, many employers will match employee contributions up to a certain level.
If your employer doesn’t offer a retirement plan you are not out of luck. There are other accounts that you can use. The most common is the IRA, individual retirement account. There are 2 types, Traditional and Roth. The difference is when you pay the taxes. Consult your financial advisor or tax preparer to determine which one is right for you.
So how much should you contribute? Most experts say that you should contribute an average of 15% of your pay through your entire career. I say you should contribute at least that and don’t count any employer match as a contribution, this should just be a bonus. This money is for you and your retirement, save as much as you can, contribute the maximum you are allowed if possible. You will thank yourself later.
Grow Personal Savings
This one is pretty self explanitory. Though it is important to build personal savings I think it is most important to get out of debt before you begin to put a large amount of money away in savings. We live in a time where savings interest is as low as credit card interest is high and I am a firm believer in the fact that the best return on your money can be achieved by paying off personal debt.
That being said I also believe that having enough personal reserves to get you through an emergency is vital in today’s economic times. Plus, having cash reserves will help to keep you out of debt once you get there because you won’t be tempted to use your credit cards when something comes up. So once you pay down your debts follow these steps to build your savings.
Take a look at your budget now that you don’t have any debt. What are your monthly expenses? Include all of your utilities, your mortgage payment, your disposable income expenses. How much money do you spend every month?
Take the money that you used to spend on debt payments and put it in a basic savings account. Most experts say that you should have at least 3 to 6 months of expenses saved for emergencies, but in this economy who knows what could happen and since you are debt free and your expenses are low I recommend at leas 6 months and possibly even 9 to 12 months of expenses. Keep going build that savings account. Like I said before, once that cash is saved you will not be tempted to go back to the credit cards when something comes up.
That being said I also believe that having enough personal reserves to get you through an emergency is vital in today’s economic times. Plus, having cash reserves will help to keep you out of debt once you get there because you won’t be tempted to use your credit cards when something comes up. So once you pay down your debts follow these steps to build your savings.
Take a look at your budget now that you don’t have any debt. What are your monthly expenses? Include all of your utilities, your mortgage payment, your disposable income expenses. How much money do you spend every month?
Take the money that you used to spend on debt payments and put it in a basic savings account. Most experts say that you should have at least 3 to 6 months of expenses saved for emergencies, but in this economy who knows what could happen and since you are debt free and your expenses are low I recommend at leas 6 months and possibly even 9 to 12 months of expenses. Keep going build that savings account. Like I said before, once that cash is saved you will not be tempted to go back to the credit cards when something comes up.
How to get out of debt quickly
The reason I am writing this article is because about a week ago I talked to a couple who had started a “credit repair program” with a credit counselor. For a $2000 up front fee and $100 per month the credit counselor was going to help them get out of debt and rebuild their credit. The plan that they were on is the same plan that is taught by almost every financial advisor in the industry. What made me angry was the impact that $2000 and $1200 per year could have if it was used to pay down debt instead of being used to pay the expert. I explained my concern to the couple who told me, with what seemed to be a little bit of shame in their voice, that it was well worth the money to have the accountability. Without being forced to do it they would never complete the process on their own.
The most important step in trying to get out of debt is making yourself want to get out of debt. Let’s face it. It is fun to live a lifestyle that you can’t afford, but it’s not fun to pay the bills. Especially when the credit runs out. And believe me at some point the credit will run out. The question is how deep in debt will you be when it happens. Think about it for a minute. How badly do you want out of debt because it takes a lot of discipline and determination to get there.
Now that you’ve decided to start this journey here’s how to do it. If you have a lot of debt or any debt for that matter this step will seem crazy and difficult, but if you are disciplined and stick to it, it is a great way to payoff debt fast.
In my career I’ve seen this technique used many times by many and done any different ways. This is my favorite. Find all of the debt payments you have, include everything but your mortgage. Look at credit cards, personal loans student loans, vehicle payments, and sort them by balance from smallest to largest. I’ve seen people advise clients to sort their debts by interest rate so you pay off the debts with the highest rates first. The reason I ask you to sort them by balance is when you get started and you find yourself paying things off quickly you are more likely to stay motivated and keep going.
So, now you have your list. Take the money you set aside in your budget and put it with the minimum payment for the smallest loan. Continue to make this larger payment along with the minimum payments for all of your other loans until the smallest loan is gone. Next, take the amount you were paying on the small loan and put that with the minimum payment of the next largest loan is gone. When that loan is gone take the payment you were making and add it to the minimum payment for the next largest loan. Keep going until all of your debts are gone. Please be disciplined and give this process a try. Stay focused, you can do it.
The most important step in trying to get out of debt is making yourself want to get out of debt. Let’s face it. It is fun to live a lifestyle that you can’t afford, but it’s not fun to pay the bills. Especially when the credit runs out. And believe me at some point the credit will run out. The question is how deep in debt will you be when it happens. Think about it for a minute. How badly do you want out of debt because it takes a lot of discipline and determination to get there.
Now that you’ve decided to start this journey here’s how to do it. If you have a lot of debt or any debt for that matter this step will seem crazy and difficult, but if you are disciplined and stick to it, it is a great way to payoff debt fast.
In my career I’ve seen this technique used many times by many and done any different ways. This is my favorite. Find all of the debt payments you have, include everything but your mortgage. Look at credit cards, personal loans student loans, vehicle payments, and sort them by balance from smallest to largest. I’ve seen people advise clients to sort their debts by interest rate so you pay off the debts with the highest rates first. The reason I ask you to sort them by balance is when you get started and you find yourself paying things off quickly you are more likely to stay motivated and keep going.
So, now you have your list. Take the money you set aside in your budget and put it with the minimum payment for the smallest loan. Continue to make this larger payment along with the minimum payments for all of your other loans until the smallest loan is gone. Next, take the amount you were paying on the small loan and put that with the minimum payment of the next largest loan is gone. When that loan is gone take the payment you were making and add it to the minimum payment for the next largest loan. Keep going until all of your debts are gone. Please be disciplined and give this process a try. Stay focused, you can do it.
Create A Budget
I wanted to spend a little more time on this subject , since I believe it is the most important. You can’t change your financial situation if you don’t know what your financial situation is. Simply put, how much money comes in and where does it go? Like I said before, most people wince when they hear the word budget, but don’t be scared, it wont hurt I promise.
Start with a sheet of paper and write down All of the money that come IN to your household each month. Its OK to estimate if you don’t know the exact numbers, but be conservative. In this case a low estimate is better than a high one. This is usually pretty simple, your paycheck and maybe your spouses paycheck. It could also include interest or dividends from investments, rents from investment properties, a lot of things any money that comes in to your household should be accounted for here.
Next take all of the Bills that you pay every month write down everything. The mortgage, the car payment the electric bill, the trash bill…you’ve got it. Your doing great. Now subtract the bills from your income and what is left over is your “disposable income.” One quick side note, if the number you get is negative you have to find a way to cut the monthly bills or increase your income. We are going to talk about ways to lower your bills in steps to come, but you will never get ahead financially if you spend more than you make.
Disposable income is the money we have to do the fun stuff. Movies, restaurants, morning coffee. A key step in budgeting is tracking what you do with your disposable income. My challenge to you is to track it for one month. Any time you spend money keep the receipt and take a look at all of the receipts in 30 days. You’ll be surprised what you find. It’s a very eye opening experience to realize that you buy $100 worth of coffee on your way to work in a month, or $300 because you refuse to bring your lunch, and if you smoke or drink alcohol regularly be prepared to see some shocking numbers. I once helped a friend of mine figure out that if she and her husband quit smoking and drinking beer, and invested that money to earned a very conservative return, they would have enough money to retire in just over 10 years. She and her husband were just over 40 and earned $10- $15 per hour respectively.
When you figure out your disposable income put it into your budget. Is there any money left? Probably not, most people spend what they make, but if so good for you. We are going to take this money and put it to work for you. If there is no money left look for a few simple ways to free up some money to use in the up coming steps. Would you give up a cup of coffee, a night out, or bring your lunch to work once in a while to become financially free. I would. Take another look at your budget and look for ways to invest in your future.
It really is simple, but it all depends on your willingness to stick too it. How much are you willing to change the way you live now for your future? It’s all up to you.
Start with a sheet of paper and write down All of the money that come IN to your household each month. Its OK to estimate if you don’t know the exact numbers, but be conservative. In this case a low estimate is better than a high one. This is usually pretty simple, your paycheck and maybe your spouses paycheck. It could also include interest or dividends from investments, rents from investment properties, a lot of things any money that comes in to your household should be accounted for here.
Next take all of the Bills that you pay every month write down everything. The mortgage, the car payment the electric bill, the trash bill…you’ve got it. Your doing great. Now subtract the bills from your income and what is left over is your “disposable income.” One quick side note, if the number you get is negative you have to find a way to cut the monthly bills or increase your income. We are going to talk about ways to lower your bills in steps to come, but you will never get ahead financially if you spend more than you make.
Disposable income is the money we have to do the fun stuff. Movies, restaurants, morning coffee. A key step in budgeting is tracking what you do with your disposable income. My challenge to you is to track it for one month. Any time you spend money keep the receipt and take a look at all of the receipts in 30 days. You’ll be surprised what you find. It’s a very eye opening experience to realize that you buy $100 worth of coffee on your way to work in a month, or $300 because you refuse to bring your lunch, and if you smoke or drink alcohol regularly be prepared to see some shocking numbers. I once helped a friend of mine figure out that if she and her husband quit smoking and drinking beer, and invested that money to earned a very conservative return, they would have enough money to retire in just over 10 years. She and her husband were just over 40 and earned $10- $15 per hour respectively.
When you figure out your disposable income put it into your budget. Is there any money left? Probably not, most people spend what they make, but if so good for you. We are going to take this money and put it to work for you. If there is no money left look for a few simple ways to free up some money to use in the up coming steps. Would you give up a cup of coffee, a night out, or bring your lunch to work once in a while to become financially free. I would. Take another look at your budget and look for ways to invest in your future.
It really is simple, but it all depends on your willingness to stick too it. How much are you willing to change the way you live now for your future? It’s all up to you.
Financial Freedom in 4 Simple Steps
4 steps to financial security
You’ve heard to the old saying so many times, it has probably become cliché. It has been used by many people in many different ways, but the idea remains the same: “It’s not about how much money you make, it’s what you do with it that counts.” Take that quote and think about it for a minute. Have you ever done your taxes at the end of the year and thought; “Where in the heck did all of that money go.” Don’t feel bad, most people have, and your in the right place. This article will help you figure out where the money goes and develop a plan to put your money to work for you in 4 SIMPLE steps.
STEP 1 Create a Budget
Most people wince when they see what step one is, but don’t be scared, it wont hurt I promise. Keep in mind I said the steps were simple I never said they were easy. J
Start with a sheet of paper and write down All of the money that come IN to your household each month. Its OK to estimate if you don’t know the exact numbers, but be conservative. In this case a low estimate is better than a high one.
Next take all of the Bills that you pay every month write down everything. The mortgage, the car payment the electric bill, the trash bill…you’ve got it. Your doing great. Now subtract the bills from your income and what is left over is your “disposable income.” One quick side note, if the number you get is negative you have to find a way to cut the monthly bills or increase your income. We are going to talk about ways to lower your bills in steps to come, but you will never get ahead financially if you spend more than you make.
Disposable income is the money we have to do the fun stuff. Movies, restaurants, morning coffee. A key step in budgeting is tracking what you do with your disposable income. My challenge to you is to track it for one month. Any time you spend money keep the receipt and take a look at all of the receipts in 30 days. You’ll be surprised what you find. It’s a very eye opening experience to realize that you buy $100 worth of coffee on your way to work in a month, or $300 because you refuse to bring your lunch, and if you smoke or drink alcohol regularly be prepared to see some shocking numbers.
When you figure out your disposable income put it into your budget. Is there any money left? Probably not, most people spend what they make, but if so good for you. We are going to take this money and put it to work for you. If there is no money left look for a few simple ways to free up some money to use in the up coming steps. Would you give up a cup of coffee, a night out, or bring your lunch to work once in a while to become financially free. I would. Take another look at your budget and look for ways to invest in your future.
STEP 2 Pay down debt
If you have a lot of debt or any debt for that matter this step will seem crazy and difficult, but if you are disciplined and stick to it, it is a great way to payoff debt fast.
In my career I’ve seen this technique used many times by many and done any different ways. This is my favorite. Find all of the debt payments you have, include everything but your mortgage. Look at credit cards, personal loans student loans, vehicle payments, and sort them by balance from smallest to largest. I’ve seen people advise clients to sort their debts by interest rate so you pay off the debts with the highest rates first. The reason I ask you to sort them by balance is when you get started and you find yourself paying things off quickly you are more likely to stay motivated and keep going.
So, now you have your list. Take the money you set aside in your budget and put it with the minimum payment for the smallest loan. Continue to make this larger payment along with the minimum payments for all of your other loans until the smallest loan is gone. Next, take the amount you were paying on the small loan and put that with the minimum payment of the next largest loan is gone. When that loan is gone take the payment you were making and add it to the minimum payment for the next largest loan. Keep going until all of your debts are gone. Please be disciplined and give this process a try. I have seen credit counseling companies charge their clients over $2000 to use this exact same process. Stay focused, you can do it.
Step 3 Build Personal Savings
Take a look at your budget now that you don’t have any debt. What are your monthly expenses? Include all of your utilities, your mortgage payment, your disposable income expenses. How much money do you spend every month?
Take the money that you used to spend on debt payments and put it in a basic savings account. Most experts say that you should have at least 3 to 6 months of expenses saved for emergencies, but in this economy who knows what could happen and since you are debt free and your expenses are low I recommend at leas 6 months and possibly even 9 to 12 months of expenses. Keep going build that savings account and once that cash is saved you will not be tempted to go back to the credit cards when something comes up.
Step 4 Save for retirement
Ok, at this point you are debt free and have plenty of money saved for an emergency. You are in good shape. Now it’s time to focus on retirement. The best way to save for retirement is through your employer, usually a 401k. The reason this is best is because it’s automatic and it comes out of your paycheck pretax. What does that mean to you? It means that you can contribute quite a bit of money to your plan without even noticing. Also, many employers will match employee contributions up to a certain level.
So how much should you contribute? Most experts say that you should contribute an average of 15% of your pay through your entire career. I say you should contribute at least that and don’t count any employer match as a contribution, this should just be a bonus. This money is for you and your retirement, save as much as you can, contribute the maximum you are allowed if possible. You will thank yourself later.
So there you have it. Four simple steps to financial security and even financial freedom. Again, the steps are simple but they are not always easy. With a little bit of discipline and determination you will be able to achieve a financial situation you never thought was possible. Good Luck!
You’ve heard to the old saying so many times, it has probably become cliché. It has been used by many people in many different ways, but the idea remains the same: “It’s not about how much money you make, it’s what you do with it that counts.” Take that quote and think about it for a minute. Have you ever done your taxes at the end of the year and thought; “Where in the heck did all of that money go.” Don’t feel bad, most people have, and your in the right place. This article will help you figure out where the money goes and develop a plan to put your money to work for you in 4 SIMPLE steps.
STEP 1 Create a Budget
Most people wince when they see what step one is, but don’t be scared, it wont hurt I promise. Keep in mind I said the steps were simple I never said they were easy. J
Start with a sheet of paper and write down All of the money that come IN to your household each month. Its OK to estimate if you don’t know the exact numbers, but be conservative. In this case a low estimate is better than a high one.
Next take all of the Bills that you pay every month write down everything. The mortgage, the car payment the electric bill, the trash bill…you’ve got it. Your doing great. Now subtract the bills from your income and what is left over is your “disposable income.” One quick side note, if the number you get is negative you have to find a way to cut the monthly bills or increase your income. We are going to talk about ways to lower your bills in steps to come, but you will never get ahead financially if you spend more than you make.
Disposable income is the money we have to do the fun stuff. Movies, restaurants, morning coffee. A key step in budgeting is tracking what you do with your disposable income. My challenge to you is to track it for one month. Any time you spend money keep the receipt and take a look at all of the receipts in 30 days. You’ll be surprised what you find. It’s a very eye opening experience to realize that you buy $100 worth of coffee on your way to work in a month, or $300 because you refuse to bring your lunch, and if you smoke or drink alcohol regularly be prepared to see some shocking numbers.
When you figure out your disposable income put it into your budget. Is there any money left? Probably not, most people spend what they make, but if so good for you. We are going to take this money and put it to work for you. If there is no money left look for a few simple ways to free up some money to use in the up coming steps. Would you give up a cup of coffee, a night out, or bring your lunch to work once in a while to become financially free. I would. Take another look at your budget and look for ways to invest in your future.
STEP 2 Pay down debt
If you have a lot of debt or any debt for that matter this step will seem crazy and difficult, but if you are disciplined and stick to it, it is a great way to payoff debt fast.
In my career I’ve seen this technique used many times by many and done any different ways. This is my favorite. Find all of the debt payments you have, include everything but your mortgage. Look at credit cards, personal loans student loans, vehicle payments, and sort them by balance from smallest to largest. I’ve seen people advise clients to sort their debts by interest rate so you pay off the debts with the highest rates first. The reason I ask you to sort them by balance is when you get started and you find yourself paying things off quickly you are more likely to stay motivated and keep going.
So, now you have your list. Take the money you set aside in your budget and put it with the minimum payment for the smallest loan. Continue to make this larger payment along with the minimum payments for all of your other loans until the smallest loan is gone. Next, take the amount you were paying on the small loan and put that with the minimum payment of the next largest loan is gone. When that loan is gone take the payment you were making and add it to the minimum payment for the next largest loan. Keep going until all of your debts are gone. Please be disciplined and give this process a try. I have seen credit counseling companies charge their clients over $2000 to use this exact same process. Stay focused, you can do it.
Step 3 Build Personal Savings
Take a look at your budget now that you don’t have any debt. What are your monthly expenses? Include all of your utilities, your mortgage payment, your disposable income expenses. How much money do you spend every month?
Take the money that you used to spend on debt payments and put it in a basic savings account. Most experts say that you should have at least 3 to 6 months of expenses saved for emergencies, but in this economy who knows what could happen and since you are debt free and your expenses are low I recommend at leas 6 months and possibly even 9 to 12 months of expenses. Keep going build that savings account and once that cash is saved you will not be tempted to go back to the credit cards when something comes up.
Step 4 Save for retirement
Ok, at this point you are debt free and have plenty of money saved for an emergency. You are in good shape. Now it’s time to focus on retirement. The best way to save for retirement is through your employer, usually a 401k. The reason this is best is because it’s automatic and it comes out of your paycheck pretax. What does that mean to you? It means that you can contribute quite a bit of money to your plan without even noticing. Also, many employers will match employee contributions up to a certain level.
So how much should you contribute? Most experts say that you should contribute an average of 15% of your pay through your entire career. I say you should contribute at least that and don’t count any employer match as a contribution, this should just be a bonus. This money is for you and your retirement, save as much as you can, contribute the maximum you are allowed if possible. You will thank yourself later.
So there you have it. Four simple steps to financial security and even financial freedom. Again, the steps are simple but they are not always easy. With a little bit of discipline and determination you will be able to achieve a financial situation you never thought was possible. Good Luck!
Welcome!
This is my first post let me tell you the reasons for setting up this blog.
Reason #1 I have been in the fiancial industry for over a decade and I want to share what I have learned with my friends and family.
Reason # 2 NO ONE TEACHES THIS STUFF. If you don't go to college to get a business degree or have been blessed with financially intellegent and gifted parents, you have to learn basic personal finance by trial and error. That trial and error for most people is getting burried in debt early in life and then spend years struggling to get out.
So here it is, my knowledge of personal finance, learned from a carrer of financial consulting and a little trial and error. I hope it helps.
Reason #1 I have been in the fiancial industry for over a decade and I want to share what I have learned with my friends and family.
Reason # 2 NO ONE TEACHES THIS STUFF. If you don't go to college to get a business degree or have been blessed with financially intellegent and gifted parents, you have to learn basic personal finance by trial and error. That trial and error for most people is getting burried in debt early in life and then spend years struggling to get out.
So here it is, my knowledge of personal finance, learned from a carrer of financial consulting and a little trial and error. I hope it helps.
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