Don’t Act Rich!

I have read a lot of books about getting rich financially, and they almost all have one theme which applies to all of us who were not born into money or had some exquisite twist of fate come our way where money basically just fell in our lap. Let’s face it, how many people does that really happen to anyways?

They are definitely the exception, not the rule. What I’m talking about here, is the vast majority of us who were not born with silver spoons in our mouths, and yet we have that drive, that desire to become financially free at an earlier age and to retire very comfortably. I categorize myself in that niche. I grew up in a household where we had food on the table, but my dad’s job was of a volatile nature, and when money was tight, there were a lot of arguments between him and mom, and their spending habits were different.

I never wanted money to come between me and my spouse like that, and I never wanted to be wondering where my next mortgage payment would come from. Hence, I started working my butt off to create extra income, and started saving, saving, saving.

The main theme running through these kinds of financial wisdom books about getting rich from nothing is that you can never “act” rich and spend money like stereotypically rich people do, but rather you have to be frugal and save your money if you are to have hopes of retiring with at least a million, or several million, in the bank when your day finally comes to enjoy those golden years with abandon.

Books like “The Millionaire Next Door” and “Stop Acting Rich!” are just a few of the common sense books showing people that the most common millionaires are self made, and they usually don’t go around spending money on things that are expendable and disposable like fancy cars, lots of expensive dinners, lots of expensive entertaining, and huge mortgages and lots of toys like boats and other expensive bit ticket items.

Instead, they say that the millionaire, which means that you have a million or more in the bank and also aren’t ridiculously in debt, is more of a quiet type millionaire, not spending on flashy items, but rather is more of a practical kind of person who pays themselvs first before paying for items and “things”. They put money away before they run out and buy stuff. It does take discipline, but it will put you on the road to financial freedom quicker than walking the walk fo a rich person and talking the talk, trust me, I’ve learned that myself!

Dave Ramsey Mixes Faith with Finances

Dave Ramsey has become quite a phenomenon these days. I first heard of him when a coworker told me she listened to his radio show a couple years ago. Before that, I had never actually heard his name and didn’t know what he did. Then I actually caught his radio show when I was flipping channels in my car one day, and he reeled me in, because I’m a sucker for anyone who knows a lot about how to stay out of debt, invest wisely, and not spend more than you make, which all equates to retiring with a lot more than what you would have without that knowledge.

One of my biggest fears is that when my fiance and I retire, which is a long way off for both of us since we are in our thirties, early at that, we won’t have enough money to sustain the same type of lifestyle we enjoy today. I don’t want to be one of those people who is disillusioned into thinking that I am going to be just fine when I retire and won’t have to live on foodstamps and scrape by, because I’ve seen that happen to too many people these days, especially with the economy going belly up over the last two years.

Dave Ramsey’s message is one of faith and common sense. He does mix religion in with his financial advice, which is fine with most of his followers since many of them do happen to be religious as well. I’m actually agnostic, and I didn’t really hear any faith talk when I tuned in, but then again I only turned in for a little while. What I heard was a guy who offered solid, very practical advice to people to stay out of credit card debt and really tame their spending habits so they could live a life that is free of anxiety inducing debt that seems out of one’s control, and avoid ever having to deal with bankruptcy as he did in his twenties when he was already a millionaire but had it all taken away.

All in all, Ramsey’s teachings offer ways for average earners to save as much as they can, donate where appropriate and give away to the needy since this is all part of the sort of karmic cycle of money, and also to pay down their biggest debts quickly and efficiently, and above all, not to spend more than you make, which means never living off credit cards, or making sure you pay them off every single month to avoid finance charges.

Goal and Priority Setting in Your Finances

Sometimes, when I look at the plethora of goals I have for my financial future, as well as the many times conflicting goals that I have for things like home improvement, self improvement, vacations endeavors, business endeavors and other various goals that your need money to reach, I wonder how I’m ever going to prioritize them so that they can all get done within a reasonable period of time. It is hard for most people to prioritize their financial goals and other longings, unless they happen to be a millionaire many times over (just being a millionaire these days doesn’t seem to quite cut it).

I figured out that my timeline for one of my major goals was going to be five years. This timeline is fairly doable, since it has to do with paying off our secondary mortgage, the one we got to make up for the downpayment on our house since we decided to use the money we saved up for the myriad of furniture we needed to furnish our new home, plus the closing costs, etc. that we needed to pay to get in the home, hookup fees and so on and so forth.

I set this as a priority because paying this loan off will allow us to refinance our primary mortgage, which will save us thousands of dollars in mortgage interest over the years. I had to use another factor to determine this priority, and that was the additional savings in interest, so this goes to show that sometimes you need to use other factors in your decision making when determining which of your personal goals involving money in one way or another should go above the others.

In order to pay the additional principle on the home loan, we of course had to forego other goals, like putting a deck on our home, so that we could save money first rather than building more interest upon interest since we would have had to take out a home improvement loan to get this done. Another goal that came in place over our deck and other home improvement desires was to pay off some lingering credit card debt by consolidating and paying off several cards at once. By doing this, we saved all that revolving interest over several years, which puts us in a better financial position for the future.

When you make decisions about your goals, try to prioritize based on what is going to save you more money over the long haul, or what is going to allow you to put more money away for your future or for emergency savings and things of that nature. If you’re making decisions solely based on emotion, like taking that 5k vacation to the Pacific, then you could seriously regret it in the near future. Things like vacations feel great while you’re on them, but if you’re neglecting things at home, then the tension will just still be there when you get back, trust me!

Can You Live on 50% of Your Income to Get Out of Debt?

I should have titled this one to “get and stay” out of debt, however I was a little worried that would be too lengthy a title for it to be read by anyone What I’m talking about is a recommendation by financial experts that of course is not doable for everyone by a longshot, but can certainly be done if one puts their mind to it and makes sure they stick to a budget and also at the same time make sure they are disciplined in putting away an immediate percentage of 50% of their pay.

50% is a lot! I’ll admit that, but if you have a business, or you do make a lot more money than you need for the basics, and tend to waste a lot of money on things like eating out a lot and taking a lot of vacations, this option is definitely a possibility for you. Some experts say that most people don’t have the discipline, but if they did, they could potentially be out of debt in much less time than if they took traditional ways out like consolidation, plus they would also be guaranteeing themselves in effect that they would never go into debt again since they are not spending anything that they don’t have in cash.

If you could live on 50% of what you make, not only would you be debt free very soon, but you would also eventually have a lot of money to invest for your future retirement, which means you’d be putting a lot more money into yeilding investments, and have more time for that interest to compound which means you have higher chances of retiring as a millionaire like most people need to these days just to make it by.

I know someone like this. He and his wife both made very good money and were naturally frugal and wise when it came to spending decisions. They both put away a combined percentage of 50% of their income because he had always expressed that he wanted to enjoy an early retirement, especially since his job involved a lot of travelling. Now, they have their first child on the way, and I’m not sure if they are going to be realistically able to keep up with putting so much of their income away, but they can certainly shoot for it.

When is It Worth it To Consolidate?

My boyfriend and I live together. We do not share bank accounts as I personally do not believe that to be with someone, even married, that you have to share checking accounts, or even credit accounts. We do have our home we bought last year in both of our names, but even that is slightly split in that he is on one of the loans (we got two mortgage loans, it was the best way for us to go at the time), and not on the other because we had varying credit.

Which is funny because now he actually has better credit than I do, perhaps because my name is on the larger mortgage and that symbolizes a higher debt to income ratio for me, especially since I am partially self employed, which is typically a harder income to prove than a regular “salary” job. However, I digress. We both receive plenty of credit offers in the mail, ranging from special loans to balance transfer credit cards, to mortgage lines of credit that can be transferred into fixed rate low interest loans, but he still receives the bulk of the credit card offers.

Like I said, I think that even though I have a higher income and pay my bills on time every month, it is looked at as higher risk to extend more credit to me because of my debt ratio, so he does still get the bulk of the credit card offers. However, when do you know if it’s worth it to transfer a lot of outstanding revolving debt to a card that may be just the same thing pretty much after your introductory period is over? Well, it’s important to read the fine print on these.

Always go for something that says “fixed rate”, otherwise they “reserve the right” to change your APR terms on you any time, which can end up being the opposite of getting you out of debt, but instead steeping your further into it by increasing the interest you owe on your existing debt. Always have your calculator ready.

We’ve sat down and actually calculated, when the term is over, and how much you are paying for monthly payments, you are actually saving in the end on interest when taking on these deals, and sometimes you are better off just sticking with several balances on lower APR fixed rate cards rather than transferring it all to one card. Sure, it’s easier to make one payment a month as opposed to 2-5 payments to separate cards, but who cares when in the end you are paying more money for the luxury to do so?

My boyfriend and I live together. We do not share bank accounts as I personally do not believe that to be with someone, even married, that you have to share checking accounts, or even credit accounts. We do have our home we bought last year in both of our names, but even that is slightly split in that he is on one of the loans (we got two mortgage loans, it was the best way for us to go at the time), and not on the other because we had varying credit.

Which is funny because now he actually has better credit than I do, perhaps because my name is on the larger mortgage and that symbolizes a higher debt to income ratio for me, especially since I am partially self employed, which is typically a harder income to prove than a regular “salary” job. However, I digress. We both receive plenty of credit offers in the mail, ranging from special loans to balance transfer credit cards, to mortgage lines of credit that can be transferred into fixed rate low interest loans, but he still receives the bulk of the credit card offers.

Like I said, I think that even though I have a higher income and pay my bills on time every month, it is looked at as higher risk to extend more credit to me because of my debt ratio, so he does still get the bulk of the credit card offers. However, when do you know if it’s worth it to transfer a lot of outstanding revolving debt to a card that may be just the same thing pretty much after your introductory period is over? Well, it’s important to read the fine print on these.

Always go for something that says “fixed rate”, otherwise they “reserve the right” to change your APR terms on you any time, which can end up being the opposite of getting you out of debt, but instead steeping your further into it by increasing the interest you owe on your existing debt. Always have your calculator ready.

We’ve sat down and actually calculated, when the term is over, and how much you are paying for monthly payments, you are actually saving in the end on interest when taking on these deals, and sometimes you are better off just sticking with several balances on lower APR fixed rate cards rather than transferring it all to one card. Sure, it’s easier to make one payment a month as opposed to 2-5 payments to separate cards, but who cares when in the end you are paying more money for the luxury to do so?

Living Above Your Means?

All of us, at one point or another, feel like we’re going to lose it when it comes to paying bills, keeping track of what you’ve paid out to whom, and the sheer frustration that occurs when you simply don’t have enough to pay the bills, and it seems like you are constantly “robbing Peter to pay Paul” so to speak. I’ve been there, and I’m sure many of us can identify with these feelings of stress, and yes, sometimes even hopelessness when we know we are simply not brining in enough income to justify our way of life.

And yet, so many Americans are still living this way, living paycheck to paycheck, that is, and worrying about it only when they sit down to pay those bills they’ve accrued and realize that they’ve overspent for the month. You have to realize that if you’re paying so much in bills that you cannot put away any money for retirement or any type of interest bearing account, that you are simply spending too much and bring in too little income to be able to comfortably and justifiably be spending that much.

So many young couples and young people in general are finding themselves in this same unfortunate situation, and this is a large part of the reason for the recent housing slump and the “mcmansion” phenomena where young families think they need to keep up with the Joneses or buy the nicest items and furniture on the block so that they can keep up a more lavish lifestyle than what their income comfortably permits.

My advice to those who are living in this financial fastlane without the income to back it up is to seek the help of a professional financial analyst or counselor, and they will in turn force you to write down all expenditures and come up with an alternate budget so that you can begin saving the way you should be again. We all need help sometimes, and there are tons of excellent counselors who can help us budget our money and get our financial priorities straight when we can’t seem to get them straight ourselves.

Thinking of Consolidating?

There may be some good news for those of you who A.) own a home and B.) have been thinking of using the equity leverage of your home to help you to consolidate some high interest debts that are doing nothing to help improve your financial standing and in fact may be hurting your financial rating, known as your credit score, or FICO. What do I mean by possible high interest debts?

Well, credit cards with high interest, for one. There are also loans that are high interest and other forms of revolving debt or personal loans that are detrimentally high and would do much better for the consumer if consolidated under one roof of lower interest debt. Or of course you could consider a low apr balance transfer credit card to do the same.

The form of consolidation we are talking about here of course is a home equity loan or home equity line of credit, most of which offer a substantial benefit over higher interest revolving debts and installment loans that happen to be a high interest debt as well. Take for instance a furniture loan that you took out, which increased the percentage dramatically most likely when your introductory period was over and started charging interest, many times retroactive back to the date of purchase, once that intro period was over.

Wouldn’t it be nice to use the equity of your home to do something good for your family and your debt management, and use it to your benefit instead of paying thousands of dollars in interest to several different vendors? The other good thing now about home equity loans is that a portion of the loan is actually tax deductible, which can make this loan a lot more attractive.

Of course, there are always balance transfer credit cards if you don’t own a home which can offer an attractive alternative to those seeking to consolidate their debts.

The Lure of Easy Credit Fixes

There are many credit services out there that promise to erase or eliminate your debt. Usually, they are offering you yet another credit card without looking into your credit history. Along with a credit card of this nature, there is often a pledge of collateral or security on your part.

Debt consolidation loans are another common offering by credit repair companies. The monthly payment may look appealing if it is lower than the collective amount of your present credit obligations. It is often at a high interest rate and it will take you years longer to pay off your present debt.

Another downside to a debt consolidation loan is that usually you must offer collateral such as equity in your car or home. If you run into trouble repaying these loans and default, possession of your car or home is at risk.

The end result of either of these scenarios is that you will sink further into debt if you go for the extra credit card situation. And if you do the debt consolidation, you will be further into a debt situation for a longer time.

So, consumer beware. Before applying for a debt consolidation loan or second mortgage financing, get as much information as possible. This can be done by writing to “Facts for Consumers,” Bureau of Consumer Protection, Federal Trade Commission, Washington D.C.20580.

How Good Paying Off Balances Feels..

I read a powerful piece by my favorite financial self help guru, Suze Orman, the short haired blonde dynamo who seems to really care about the people she tutors in the ways of money.

Suze was saying what you choose in the new year to do in January as far as paying off the balances of the credit cards you may have racked up over the holiday, or just let them have a running balance, may have a great effect on your financial life in 2007.

She says that not only will paying off your credit card balances any way you can lift a huge weight off your shoulders and allow you to focus on other, loftier financial goals for the year, but you also gain a tremendous sense of accomplishment and respect for yourself, which can have a domino effect into other areas of your life, including your financial life.

So really it’s kind of a credit card karma if you will. If you pay those balances quickly, other things in your financial life will go more smoothly. In other words, skimp for one or two months, depending on the damage done, and you just might be able to pay off some of those balances and gain a fresh perspective for the new year, and some newer, better goals for your finances.

Paycheck to Paycheck : America’s Credit Crisis

I’ve been reading a lot about how so many American families still live paycheck to paycheck, even those that most of us would consider in the upper echelon of the financial and economic American society, that make a household income of $200k or more per year.

But how could this be? I would think that this amount of money would allow any family to live comfortably.

But that is not always the case, even if families are not constantly taking vacations and indulging in all the finer things in life all the time, many are finding it hard to struggle by, and are using credit to get them by, only to find that they might be stuck in a high interest payoff.

This is why getting good deals on credit cards is so important, but not only that, good deals on loans and other lending agencies lump sum payments is important as well, so that you aren’t finding yourself in a neverending cycle of robbing Peter to pay Paul.

Add a kid or two into the picture, and you’ve got all kinds of new expenses to think about. Doctor’s visits, clothes, toys, formula, you name it, kids are EXPENSIVE, and many people don’t really understand how expensive kids can be until they’ve had one or a few. They really can put a strain on anyone’s budget (although, from what I’m told, they’re worth it:)