Great Strides

So as you can see I gave the blog a face lift with my new photos.  My good friend Karla is wonderful with a camera. Please visit her blog by clicking on my picture.  She also took the gorgeous picture of the sunflowers.  Her work will be displayed on my website when it is published in the coming weeks.  I have made great strides this week in getting things ready for my business.  I got my cell, started my business license application,  bought my domain name and ordered business cards, and of course got pictures taken for my website.  I am really looking forward to getting everything finished.  I am also so excited to leave for Nashville in 3 weeks to complete my training and learn more in-depth about counseling.  Until then, please remember that I am here to help answer any questions you might have.  Also if you have any requests of topics you'd like me to discuss please leave your feedback.  Thanks! and I hope you enjoy reading my blog :)

Patience Pays

These days a little patience in our society could go a long way in solving many problems we face.  Especially when it comes to our money.  I mean think about it.  We live in a world that has rush rush, buy now pay later, gotta have it NOW type of thinking.  So many people are willing to put money into the next 'sure' investment or other get rich quick schemes.  What ever happen to good old fashioned patience in getting what we want? Has this all too important virtue really been foolishly thrown by the wayside? It seems like now days adults walk around acting like a kid in a candy store throwing a tantrum.  Only instead of a candy store it's the Mall, Electronics R Them or Big Box store inc.  We use rationalizations like, "I work hard so I deserve it" or "I need it" because it's safer, a good investment, or "it makes me look sophisticated or smart."  Or my personal favorite- "I can pay the monthly payment so I must have the money to buy it."  These excuses are nothing but a bunch of garbage that make it all better when the bills come due.  While all of this stuff is nice to have, we delude ourselves into thinking that we must have it, no matter what the cost.  


I believe the amount of patience one has is in direct proportion to how much wealth one can acquire.  You see, your income is your most powerful tool in building wealth.  If it all goes out the door in payments to banks and corporations then you can't build wealth effectively.  This is true whether you make $50,000 or $500,000 a year.  In the average working lifetime you see at least a million dollars pass through your fingers.  How much are you going to hold onto?  If you lack patience, then you will always be in debt, going from loan to loan all because you want it now.  Most poor financial decisions can be traced back to a lack of patience.  Ironic when you consider that newlyweds spend the first 7 years of marriage trying to attain what took their parents 30 years to achieve. 


I have said before and I'm sure I'll say it again, the key to getting out of debt is to have focused intensity over the long haul.  This focus requires diligence and of course patience.  I know these concepts might seem a little abstract so let me give you an example of how patience really pays off.  The average car payment in this country is around $478 a month.  That's a pretty big chunk of change to be forking out every month for something that is going to go down in value every year.  Think about this instead.  If you saved up and paid cash for say a $2000 car and then continue to save what you would have spent in a car payment.  You could easily upgrade with to a better car in a matter of months.  Over a lifetime, these car payments can cost you dearly.  If you show patience and invest that car payment you could easily have close to a million dollars by the time you retire.  Last time I checked, a $2000 car in good condition will still get you work and back just as well as a $20,000 car.  It might not be as pretty or smell as nice but for a the time being, it's worth it's weight in gold- literally.


Patience will pay off every time you apply it, whether it's buying a house, car, big screen TV, furniture or anything really.  It's one of those behaviors that again separates the rich from the poor.  Like diligence and focus, it gives you perspective of what's really important in the long run.  This isn't to say that you can't ever go out and buy nice stuff.  But it means that you just shouldn't rush out and buy it all right now.  Chances are that you'll value the stuff more if you had to sacrifice more to get it.

Tip & Quotes of the Week Mar 19-26

Don't Touch it!

Retirement investments and savings are for just that- RETIREMENT! Not the "I'm saving for a house fund" or "pay down debt fund". Now I might be stating the obvious here, Do NOT withdraw or take loans out against your retirement. In my opinion this is one of the stupidest (with a capital S) and riskiest things you can do to stunt the growth of your retirement savings and could cost you thousands, if not tens or hundreds of thousands of dollars. Just because the government and your employer may allow you to 'borrow' your money doesn't make it wise to do, especially in the long run.

Homework:

If you have done what I've challenged you to do, then you should have a quick month-specific budget in place. That's a great step in the right direction. Now, if you are having problems getting that budget to balance and you are currently contributing to your retirement funds it would be far better to temporarily stop those contributions. Does it really make sense to be contributing to your 401k if you can't pay your light bill or mortgage?

"President Roosevelt, the author of Social Security, was the first to suggest that, in order to provide for the country's retirement needs, Social Security would need to be supplemented by personal savings accounts." John Doolittle

"Make all you can, save all you can, give all you can." John Wesley

Keep Going!

I just wanted to give you all a little mid-week pep talk.  Right now you might be feeling like a complete failure because you have veered off course from your budget and your goals are a million miles away.  Never fear! Consider this your kick in the pants to dust yourselves off and keep going.  As always, please let me know if you have any questions I can help you with.  Remember it's not how many times you stumble on your journey it's the number of times you get up and persevere.  The journey is hard but worth it!

A BIG Mistake

I will try to keep my rant limited here, but this is seriously one of my biggest pet peeves when it comes to advice from so called 'financial experts'- early withdrawls, loans or cashing out your 401k or other retirement accounts.  There are two things in this world that should never be used like ATM's.  The first being your home.  Just ask the millions of Americans who learned this lesson the hard way when they took out 2nd mortgages as a means of 'consolidating' debt.  This ludicrous lie was sold as 'financially responsible' and 'a good way to reduce interest'.  Of course all it did was move the debt and  more importantly the risk to the largest asset many of us will ever own- your home.  But this post isn't about past follies, it's about the second thing that should never be used as an ATM- your retirement funds.  It's now becoming the thing to tap since the collapse of the credit market and home values.  But I'm telling you don't fall for the gimmicks, because it could be one of the biggest financial mistakes of your life.


Have you ever heard the expression? Tell a lie often enough and long enough and it becomes accepted as truth.  Just because something is accepted and legal doesn't make it right.  Take for example smoking.  It's both accepted and legal, but it will still kill you.  As I said in my tip of the week using your retirement funds for anything other than retirement is straight up Stupid and here's why.


First- cashing out or partial withdrawl.  This option might be very tempting for some of you if you have lost your job and don't really have more than a few thousand in your 401k.  Because after all, it's not that much and you could really use the money now right?  Don't do it!!! Not only will you lose the potential growth and compound interest on this money over the next 20-30 years but the IRS will take up to half of it. That's right the IRS will charge you a 10% penalty, plus the money is considered ordinary income and is subject to whatever income tax bracket you fall into.  The money could actually bump you up into the next tax bracket making it even more costly.  Even though this is your money it's like taking out a loan at 25-50% interest.  That's crazy!  There are some legal ways to get around the 10% penalty- if you are using the money to buy your first home or pay for excessive medical debt or for college.  These are no good either.  If you are saving for a house or college then that should not be done in retirement accounts.  As far as medical debt, that is why you have an emergency fund and health insurance. 


Second- loan.  This option is billed as the 'better option' and has sadly become as common as 2nd mortgages in the housing boom days.  But this has just as many risks and lost opportunity as a withdrawl.  You may be thinking, but the money is going to pay down debt or some other worth-while financial endeavor.  Mark my words. As soon as you take a loan out of your 401k, you will lose your job or have some other disaster come up and struggle to repay the loan.  If you quit or lose your job then you are required by law to repay the loan in 90 days or pay the taxes and penalty.  This is the last thing you need to worry about in such a condition...to be continued in my next post. (This is just getting too long for one post.)

Opportunity Lost

I have briefly mentioned the potential loss of growth and compound interest over the scope of a lifetime.  Let me go into more detail with actual numbers just to drive this point home.  Lets say you are in your 20's or 30's and you have a little nest egg of $5000-$15000 built up in your 401k or Roth IRA.  You are young and think, "we need to buy a house because it's a good investment, all our friends are doing it and houses are just so cheap right now."  You are rushing to get into something and obviously have not saved for a down payment.  The first place you'll look is that little nest egg.  You might be thinking, "well yeah, I'm young I've got enough time to replace or repay a loan from it.  What's the big deal?  It's not that much money?"  So let's pretend that you take $5000 out, because you can do that without penalty to buy your first home.


You have all the intentions of replacing that money as quickly as you can, but instead life gets in the way and something in the new house needs to be fixed, or you have a major medical event when some idiot slams into you on the way to work.  Whatever the reason you go on contributing to your retirement plan as usual, $100/month, but never make up for that $5000 you took out.  Now let's fast forward 40-50 years and see what an impact it made on your overall retirement.  Can you guess?  If you had your money invested in good, solid, old mutual funds with long track records. Not individual stocks or some brand new hot-shot, but old mutual funds.  If you average, what the stock market has averaged over the last 80 years, and have a return of 11.9% on those funds, it could cost you around a million dollars in lost wealth.  That, is the power of interest compounded over a lifetime and if it doesn't make you think twice about 'borrowing' from your retirement accounts then I don't know what will.  Even if do pay the money back, the year or two that it was out of the market could still cost you dearly in unrealized gains compounded over your lifetime.  Half such a loss would turn most people's stomachs.  Please remember when it comes to investing your money, you only get hurt on the roller coaster, if you jump out while it's moving.

My Exceptions

Are you starting to see the big picture here? Of how important and costly these mistakes can be?  I know some of you are still thinking "but, but, but I really need the money now!"  As far as I'm concerned, the only reason you should ever cash out or borrow money from your retirement funds is for one thing- to avoid bankruptcy or foreclosure.  No- I'm not talking about the possibility or threat of these in the future.  I'm talking about, you've been served the foreclosure papers and the mortgage company is auctioning off the house next Friday- kind of bad.  Again, that's not, creditors are calling 50 times a day and threatening to take my paycheck.  It's they already filed a judgement against you, won and are taking the furniture out of the house for payment- kind of bad. I would rather have you work your tail off and sell everything you can to avoid touching your retirement, I feel that strongly about it!  If this sounds too harsh, then I'm sorry. But that's the long and the short of it.

Tip & Quotes of the Week Mar 12-19

Baby Savings

Before you start with anything else, you need your small emergency fund of $1000. To some of you this might seem like a lot, while others already have this or more in the bank. This is a vital step that is either the hardest or the easiest part of the journey. At this point in the game you NEED a small cushion between you and life. If you are trying to get out of debt the last thing you want is to turn to a credit card to 'save' you when an emergency arises. So here are a few ground rules. This money is only to be used in an emergency. It is not meant to support you if you lose your job, it's only temporary and my post will go into more detail. Failing to budget appropriately for something like clothing, car maintenance, or eating out is NOT an emergency.

Homework:

For now, your homework is to get that $1000 if you don't already have it. Use your tax return if you got one, have a garage sale, take an extra job. Do whatever it takes (legally and morally that is) to get the money. If you already have $1000 and then some, congratulations! I will deal with you in my post.

"Wealth can only be accumulated by the earnings of industry and the savings of frugality." John Tyler - 10th US President

"All days are not the same. Save for a rainy day. When you don't work, savings will work for you." M.K. Soni

"There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up." Proverbs 21:20

Practice

As you know by now I am getting ready to become a full-fledged financial counselor.  I need your help though.  For the next month I will be offering my services for free to anyone who would be willing to write me a short testimonial for my website.  That will hopefully be up in the next month.  I need the practice anyway and I figured this would be the perfect way to do it.  No matter how big or small your problems may be, I'm up for the challenge.  If you need help making a plan and sticking to it, then I'm your gal.  Even if you are on the right track, I'm confident that I could help you fine-tune to make the most out of your situation.  So please let me know if you and your spouse are interested in sitting down with me (either in person or by phone).  I'd love to help!

The Baby Emergency Fund

If you don't have any money in savings, then getting a $1000 between you and life could be challenge.  This step needs to be done ASAP.  Go crazy-  have a yard sale, sell stuff on craigs list or Ebay.  I learned recently that Ebay will waive the seller fees for up to 5 auctions a month.  Check it out. But no matter how you get that $1000, get it as fast as you can.  Also I must add, if you are behind on any bills (mortgage or utilities) get current on these bills first.  Of course, I'm not talking about old, bad, charged-off debts.  You just don't want to get your lights cut off, be foreclosed on or have your car repossessed in the process.   


Remember, this is an emergency fund not an investment account.  You can either put this in a savings or money market account at your bank or keep it in cash in a safe in you house.  Some of you (especially you men) will be tempted to use this money like an investment.  DO NOT put this money in a CD or retirement account.  It's not there to earn interest, it's a security blanket.  Wherever you keep it, the point is that you can access it easily in an emergency, but not so easily that you spend it on non-emergency things.


Now to those of you who already have this much money and then some in the bank.  I am going to suggest a very radical idea and to you savers this will sound crazy.  Drop your savings down to a $1000, use the rest to pay down on your debt.  I know, bare with me.  Consider this, if you have a paid for car would you borrow money against it just to keep the money in a savings account?  Keeping a bunch of money in the bank when you have a bunch of debt sitting out there is doing the same thing.  It doesn't make sense to earn at best 2% in then bank when you are paying 5-30% interest on your debts.  The thing you need to remember is that this is only a temporary step because after your debts are paid off you will build up that fund again.


Here are a few cautions to go with this advice.  Only do this if you are committed to the process of getting out and staying out of debt, as fast and intensely as possible.  If you are going to continue to borrow money or mosey your way out over a period of many years then, don't do this.  The other caveat is, don't do this if you are not in agreement with your spouse.  It will create undo stress in your marriage.  These issues go deeper than just the money and need to be worked through before you take action.  However, if your spouse is willing to lower it some, say down to $1500 or $2000, that's a good start.  As he or she gets more comfortable with the idea and you see progress, then you can drop it down again to the $1000.


One last thing.  I said that this is not meant to support you if you lose your job.  If the word around the water cooler is that layoffs are coming and you fear that your job is on the line then please, pile up as much money as you can to prepare for the storm.  After the threat passes then you can use that money to pay down debt.  Obviously there is only so much you can predict but if there are clouds on the horizon then hunker down and get ready for them.

What is an Emergency?

Now as I said, the emergency fund should ONLY be used in an emergency. So what constitutes an emergency?  Simply put, it's an unexpected expense that comes up during the month.  Obviously, this does not mean "I forgot, we want to buy pizza tonight", "Oh, we need the oil changed this month" or "my daughter needs a prom dress".  Those are all things that should be worked into your month-specific budget and yet another reason why a proper budget is crucial.  But if your transmission blows, you have a visit to the emergency room, or you get in a car accident and have a deductible to meet, these situations are what the fund is for.  If you took the time to watch our debt free story, then you saw that during our journey in becoming debt free we had some emergencies arise.  When I was 6 months pregnant with our 2nd daughter, the air conditioner died, in August no less. (This was actually edited out of the video segment.)  We also had our house flood when a faucet connector in the bathroom came out.  We had to pay the insurance deductible for the repairs.  These were legitimate emergencies and the reason why you have a fund for them in the first place.  Remember it's not a matter of if, it's a matter of when one will occur. 

Tip & Quotes of the Week Mar 5-12

Focus: One Step at a Time

Right now you may be feeling quite overwhelmed with the mountain you are attempting to climb. You have set some goals and been dreaming about the future and what it could hold. You might be tempted to try to do everything at once (build a savings, pay down debt, save for retirement and kid's college). The key to accomplishing your goals (especially if they include paying down debt) is to have focused intensity over the long haul. Trying to do it all at once will dilute your efforts. You won't see progress and you'll quit because you are discouraged. Dave Ramsey's method, that I teach, uses the power of focus to get out of debt and build wealth. This is NOT a microwave get rich quick approach. It's a slow cooker, change your life in the process, one 'baby step' at a time approach.

Instead of homework, I want to introduce you to Dave's 7 Baby Steps. I will go into much more depth in the future about why each step works in this order.

1. Save $1000 baby emergency fund as a cushion between you and life.

2. The debt snowball- pay off all debt (except for the house).

3. Save a full emergency fund of 3-6 months of expenses.

4. Start (or resume) saving 15% for retirement.

5. Save for kids college.

6. Pay off house early.

7. Build wealth and give like no one else.


"Goals provide the energy source that powers our lives. One of the best ways we can get the most from the energy we have is to focus it. That is what goals can do for us; concentrate our energy." Denis Waitley

"One reason so few of us achieve what we truly want is that we never direct our focus; we never concentrate our power. Most people dabble their way through life, never deciding to master anything in particular." Tony Robbins

Work, Discipline and Diligence

As you have seen, I have talked a lot about how to achieve your goals and that getting out of debt requires a behavior modification that is like the discipline that is required to lose weight.  That's why it's so hard and most people don't do it.  Last night we read a chapter in More Than Enough that was absolutely amazing.  I can't say enough about this book, it will truly change the way you look at things in life.  The chapter is called Good, Better, Best: Work, Discipline, Diligence.  The basic premise is (and this was another gem): Work is doing it, discipline is doing it everyday and diligence is doing it everyday well.  This theme was weaved throughout the chapter, plus it goes along great with this week's tip, focus. 


If you are struggling with making ends meet right now, work is a sure fire way to help.  It not only keeps you busy so you don't have time to worry, but it has the great side-effect of bringing in more money to help your situation.  Work is very good in these situations.  Now because work is good, then discipline is better because it is an everyday effort.  It's those little daily, monthly and yearly things that make a huge difference, especially with investing.  (I will have another post about this another time.)  To have discipline with your money is more than not buying that new pair of shoes that are on sale or passing up lunch with co-workers.  That's just will power and that won't get you more than a few weeks, tops.  Discipline is about seeing the big picture (your goals) on a daily basis.  It's a decision, a choice you have to make.   If you can do this you will develop diligence.  


Diligence is work and discipline done well.  This attitude trait is what separates the rich from the poor and why the rich get richer while the poor get poorer.  Think about it, when you show up at work with an attitude of diligence, can you guess what will happen?  Sooner or later someone will notice the difference in what you are doing.  No matter what your profession or rate of pay.  Diligence will always pay off in the end, whether you are trying to lose weight or get out of debt.  Since I liked it so much here is a bonus quote for you, "There is no shortcut to any place that is worth going" Beverly Sills.  I've said it before and I'll say it again, you have to pay the price to win, especially when it comes to your finances.

Focus

In the ultra-busy world that we live in today there is a constant cultural chant of "run, run, run- do everything, for everyone, all the time, everyday".  We see this everywhere from the mile-a-minute/ADD super market tabloids to the evening news.  Even driving down the road there are crazy people trying to "multitask"- talk on the phone or texting.  For crying out loud if you are guilty of doing this PLEASE STOP! for the safety of all those around you.  I say enough is enough!  A guy I know from back in the dark ages (aka high school and college), named Dave Crenshaw wrote a book called The Myth of Multitasking: How "Doing it all" Gets Nothing Done.  It is an excellent book about the illusions of multitasking society is under.  If you ever really want to achieve anything in life you have to use the power of focus.


Like I mentioned in my tip of the week, focused intensity is what will get you out of debt and on the road to financial success.  Without this key ingredient you will quit- frustrated and hopeless in your financial situation.  It's time to pull yourselves up by your bootstraps and focus on what you want to achieve.  This is why I introduced the 'baby steps' to you this week.  Focus is whole reason this method works and it's also the hardest part about it.  So this week start harnessing the power of focus in your finances.  Re-read and freshen up your goals and above all keep going!

Tip & Quotes of the Week Feb 26-Mar 5

Quick Budget

Yes- I have mentioned the dreaded “B” word, budget. It’s time to face the music. You can’t move forward if you don’t know where you stand. For some reason most people start to break out in cold sweats at the mere mention of a budget because they think it’s a bad horribly restrictive thing. Well it’s not and if you think it is then you’ve been going about it wrong. If you prefer to call it a spending plan, that’s fine, because that’s what it is- planning out where you need and want to spend your money.

Homework:                                                     

Gather your bills and statements. Sit down (with your spouse) and do a quick budget. Now you nerds, this does not mean a detailed 20 page spread sheet. I am talking about a one page basic income verses out-go spending plan. A quick snap shot of what you spend in the basic categories of food, clothing, housing, utilities and transportation. This is a basic step but very important. You might find that you are horribly out of balance in a few areas and maybe even digging deeper into debt every month. Or you most likely will discover that you spend a small amount of money every day or week that adds up to be a lot. See my post a more in-depth look the do’s and don’ts of a successful budget.

"If you lack the courage to start, you have already finished."Unknown

"Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver." Ayn Rand

"A budget is simply telling your money where to go instead of wondering where it went" John Maxwell

"You will either learn to manage money, or the lack of it will always manage you." Dave Ramsey

Create a Budget that WORKS!

I want to introduce you to the zero-based budget. It's a basic concept that says income minus out-go equals zero. Now I know some of you are thinking this sounds fishy. This doesn't mean you actually spend every penny you bring in. It means you assign every dollar a name. Whether it's going into savings or being spent out on the town, every dollar has it's place. When there is money just sitting there with no purpose, guess what happens? It leaves- via the pizza delivery man or the mega-store of your choice. This is why you will always be broke if you don't have a plan. Now obviously, it takes a little effort and planning to be this intentional with your money. But a funny thing will happen when you do this, you'll feel like you got a raise.
As I mentioned in the previous post, the pit falls of budget making and how to avoid them.  I want to go into more specific detail on a few things.  First, irregular income earners.  If your income varies widely from month to month or seasonally then you need a budget more than ever. Here's how you do it.  Again start with your four walls and make a list of all the things you need and want to spend money on this month.  Write down as many things as you can think of.  Then, number the list by priority.  Work your way down the list until the money runs out.  By doing this you know exactly what to do with the extra money that comes in and the money isn't wasted on, "let's go to dinner since I got a bonus."  This is not to say that you will never go out to dinner.   I am saying that there will be a limit and it won't be just because magic money appeared in your account.
This goes right into the next thing I wanted to talk about, categories that should be always be included in your budget.  In the beginning you must have a miscellaneous category to cover any little things that come up during the month.  As your budget gets more fine tuned then this category won't be as important because you will have learned to account for those little things.  Another category you should always have is a blow category.  This is for exactly what it says, to have a little money to blow on whatever you want.  Visit the vending machine at work, buy a couple of movie tickets or a pizza once in while.  Or you could buy games like my husband does.  This is especially important to have in order to release steam.  Remember, the first 3 months will probably be a mess, but it will get better.