Who in their right mind wants to send thousands of dollars to
banks due to debts racked up on high-interest credit cards? Or, God forbid, Payday loans?
And in normal circumstances, I would tell you to stick to the
following debt snowball script:
Save a thousand dollar beginner emergency
List ALL your debts, smallest to largest.
Pay the minimum payment on each EXCEPT the
smallest one. Take any EXTRA cash (including
any cash you have over your $1,000) you can scrape together and pound on that
debt until it’s gone.
Once that smallest one is gone, take all the
money you were paying toward it and roll it over to the next smallest one and
repeat the process.
Keep repeating until you get to the last (and
Once you are debt free, go back and build your
$1,000 emergency fund up to 3-6 months of expenses.
Yes, that is what I normally would advise.
But that was then and this is now and these are NOT normal
times. So, I now advise you make some
adjustments to your debt repayment plan.
First, $1,000 is no longer enough of a beginner emergency
fund in the age of Covid. So, STOP your
debt snowball if you are currently in it, meaning no more extra payments above
and beyond any minimum payments, and pour that cash into your emergency fund
until you reach 3-months worth of expenses, minimum. And certainly, do not start your debt
snowball until this is done.
Just to be clear, I define living expenses as all your
fixed expenses: Mortgage/Rent, Utilities, Debt Obligations, Food, Transportation. In other words, if it has a due date on it
each month, it’s a fixed expense.
This is now the new minimum standard for your BEGINNER
EMERGENCY FUND. Do not start your debt
snowball until you have this minimum amount.
And if things look shaky, go for 6 months’ worth of expenses.
Once you have 3-6 months’ worth of LIVING EXPENSES (Notice
I do NOT mean income) AND you have a stable income for the foreseeable future, you
can restart your debt snowball.
I know it aches to have cash and the ability to knock a debt
out. I feel you. I’m looking at one particular debt I have
right now that I could click and be done with.
But I have to control my urges.
There is simply no replacement for cash in this critical time. Cash is king. Let me explain my reasoning.
Say you take your savings down to $1,000 and you get to work paying
off that nagging credit card. If you don’t
lose your job in the course of this and you make it to the end of the debt,
good for you. But banks have a pesky
habit of “limiting exposure.” That’s a
fancy term for seeing you as too risky to give credit to. They did this on a
large scale in the last downturn in 2008, and they will do it again, mark my
words. So as soon as you pay off that
debt they shut down your line of credit.
You are now 1) Out of all the cash you just sent them and 2)
Without the line of credit that you might desperately need if you lose your job
or something else comes up. That’s a
double punch to the gut. If you had held
onto that cash, when they shut down your credit, you would still have the cash. They can’t take that away from you.
So, if you follow the new rules, once you pay off your
debts, your immediate next step is to save ONE YEAR of living expenses. This is now the new standard for your fully-funded
We can get through to the other side of this intact. It just means making some adjustments,
tightening our belts and looking for ways to increase our income, particularly
developing multiple streams of income.
That way, in case Covid takes out one stream, you still have the others
If you want tips on how to start and run a business, or handle your money more wisely, follow my blog at www.Org4LifeSolutions.com. You can also schedule a free discovery coaching session with me there.
In the meantime, stay safe and love the ones closest to you without reservation or regret. I wish you all the best! And remember, Own It, Be It, Achieve It.
It’s pretty obvious that today’s job market is shaky
at best and downright scary at worst. In
fact, the situation reminds me of the book “Who Moved My Cheese” by Spencer
In it, Johnson tells the
story of 4 characters: two mice (Sniff and Scurry) and two little people (Hem
and Haw). It is a parable on how we
react to change. You see, they went out
every day in a maze to find cheese that always seemed to be there and would
never run out.
But one day Sniff and Scurry
noticed the cheese was disappearing. The
handwriting was on the wall: the cheese would soon run out! They had a choice to make. They could trust that miraculously the cheese
would be replenished by a benevolent and unseen person, or take matters into
their own hands and find another source of cheese.
Long story short, Sniff and
Scurry got uncomfortable and ventured out into the maze to find a new source of
cheese. Hem and Haw chose to stay put in
their comfort zone. I don’t have to tell
you that Sniff and Scurry continued to eat, while Hem and Haw went hungry.
Well folks, the cheese
has moved on all of us, whether we realize it or not. The job terrain has shifted beneath our feet
and it won’t be going back to normal. Up
to 40% of lost jobs will not be coming back. And the jobs that remain will not be as
secure, being more prone to furlough when another pandemic swings our way again. And the medical experts all agree that
another pandemic is bound to be in our future.
More of us will be working from home, and social distancing looks like
it’s here to stay, more or less. That
begs the question: What are you going to do to safeguard your income?
Well, it is obvious to me and
a lot of other folks that having more than one stream of income is a
safer bet because it insulates you if the other one dries up. And if you are still working, how secure is
your job and do you have a plan for maintaining your income if your job were to
go away tomorrow? If you’re looking for
work, how secure is the field you are trying to get into? Wouldn’t you like to have more control over
your financial future?
The good news is you have
options! You can lay the groundwork for
a more stable income by starting a home-based business. I’m talking about a side-hustle that
you can start up in your spare time and build until it replaces your current
income. Or ramp up if your day job goes
bye-bye. You can choose from distance
learning, a cleaning service or maybe even a mobile dog washing business. Heck, you name it!
Sadly, though, people give
all kinds of excuses for not starting a business of their own ranging from fear
and uncertainty over loss of income and benefits, to being comfortable in their
current situation. If you are still
wondering whether or not starting a side gig is a good idea for you, let me
share with you 5 reasons why it just might be the right thing for you to
REASON #1- GREATER
CONTROL OVER YOUR INCOME
As an employee, your boss controls how much money you make
and when you will make it. When you call
your own shots, you decide your salary and you can give
yourself a raise by working harder, raising rates or cutting expenses. In short, you decide how much you get paid,
not some dweeb with a pocket protector and calculator, or ungrateful boss, who
has no clue what you do or how much value you bring to the table!
And if you had a side hustle in addition to your full-time
gig, when the boss tells you your services are no longer needed, well, you have
another stream of income to fall back on.
Sounds like a pretty good reason to me.
REASON #2- GREATER CONTROL
OVER YOUR TIME
How many times have you had to go to your boss, hat in hand,
to grovel for some time off? I’m
guessing more times than you’d like to remember. The good thing when you run the show is you
decide when to come into work, when to leave and when to take time off. You can also rearrange your schedule at will
to have greater quality of life when, say, your kid’s recital comes up
or you have a doctor’s appointment.
REASON #3- MORE
FAVORABLE TAX CONSIDERATIONS
When you work for someone else, you pay taxes at a set rate
and there is little you can do to change it.
But when you own a business, even a part-time, home-based one, you open
the door to all sorts of legal write-offs. Like for travel, office/electronic equipment,
food and cell phone bills. You can even
write off a portion of your mortgage and utilities for any dedicated space you
use as your home office!
Those savings can really start to add up and they are the
things rich people use to avoid paying as little in tax as possible, thus
holding onto more of their wealth than the everyday working stiff.
REASON #4- GREATER
How many times has the alarm clock gone off and you dreaded
prying yourself out of the bed to go to a place you don’t want to go, to do
work you don’t like and to work with people who get on your last nerve? I know it has happened to me more times than
I can count.
When you own your own business, you can decide to work from
home, doing work you love while only working with people who you actually
like. How’s that for job satisfaction?
REASON #5- YOU
CONTROL HOW YOU INTERACT WITH THE PUBLIC
In today’s climate your employer may require you to place
yourself at risk by coming into contact with people in high-risk situations
that can expose you to Covid-19 or any other infectious disease. And you have very little say in the matter.
When you work for yourself, you get to pick work that
is done entirely online or in such a way that your exposure to the public is
kept at a minimum. That didn’t matter
too much in the past, but now it matters a great deal!
Those are just 5 reasons to start your own side hustle, and
I could give you many more. The point
is, isn’t it time you took a greater look at starting your own business so that
you own your job rather than your job owning you?
Thanks for reading! If you want tips on how to start and run a business, or handle your money more wisely, follow my blog atwww.Org4LifeSolutions.com. You can also schedule a free discovery coaching session with me there. In the meantime, stay safe out there and enjoy life and your loved ones more than ever, because both can be taken away in an instant. All the best!
We are all a product of our experiences and environment.
For instance, I don’t like mayonnaise because once when I was a little kid on a boat trip to Bear Mountain (remember the Dayliner?) I was eating a baloney and mayo sandwich when a kid ran out in front of me, put his head over the rail, and threw up.
What came out of his mouth looked white.
I looked at him, looked at my sandwich, and threw it away.
I have not eaten mayonnaise since that day nor can you ever convince me to in life, ever!
Maybe you had a similar experience that seared itself into your consciousness and affects you to this day, for good or bad.
For instance, if you repeatedly had a bad experience with a particular group, race or gender, you might be inclined to form a judgment (prejudice) against them, even though it’s most likely wrong.
Meanwhile, we conveniently overlook what we may have done to bring the problem on ourselves.
We are humans and we tend to live in our feelings, hold grudges and remember the bad times more than the good, so prejudices can come easily and we have to fight them.
Also, it’s easy to blame someone else for a bad experience rather than look at ourselves and how bad decisions on our part may have led to the problem.
It’s no different with money. If we had great experiences with money in the past, we might be inclined to have very positive views about money.
But if we’ve overall had bad experiences with money, we might form very negative views about money (prejudices) that affect how we interact with, and use, money.
Either way, we can form predetermined responses when it comes to making, having and spending money.
These can have positive or negative affects on our finances.
For instance, if you heard your parents always say “The game is rigged and the little man can’t get ahead,” you might resolve yourself to being broke, taking on a victim mentality, because you believe the game is rigged against you, so whats the point in even trying?
Or say you made a series of uninformed and unfortunate mistakes when handling money (like I did big time!) then when you think of money that might also bring on negative feelings and unhealthy money habits.
But say your parents had healthy discussions around money in the home while you were growing up, or, you have overall made good decisions with your own finances, you probably in general have very positive feelings and habits when it comes to handling your money.
Understanding why we do what we do with our money is key to developing the habits and views regarding it that lead to a financially healthy and stable cash flow and net worth.
No one ends up in thousands of dollars of credit card debt with barely any cash on hand because they tripped and fell into it.
Likewise, no one ends up with thousands of dollars in an emergency fund and zero debt because they slipped, tripped and fell into it!
Whatever your experience, owning your part in it is the only way to move forward and grow toward a healthier financial situation.
Look, kids blame others for their problems rather than accept responsibility.
But adults suck it up and accept responsibility where responsibility lies and that is with the person in the mirror.
Financially unfit people share the following in common:
They play the blame game, spend blindly without a budget, have no regular system of saving and investing and they use credit cards to make up for failures in the first three areas.
Financially fit people, on the other hand, share the following in common:
They take personal responsibility for their financial situation, use a monthly budget to manage their money, regularly save and invest and they have very little to no credit card debt.
You see, it’s all about habits, and habits are shaped by experiences and the views formed by them.
What habits have you developed when it comes to money?
Do you have a life-shaping “financial mayo story” in your past that shapes how you view money today?
Mine was a bankruptcy in my mid 20’s.
We all have our own unique experience, but what has your experience with money been like overall?
Comment below or email us at firstname.lastname@example.org and tell me in 3 WORDS OR LESS how you would describe your relationship with money.
In my next post in this series I will let you know the results. Thanks and have a great day!
Starting a business can be scary. When you choose the road of self-reliance,
you give up a lot of what people consider “security” in exchange for taking on
all the responsibility of providing for yourself.
But is being self-employed
really more risky than working for someone else? Is the employee more secure than the
entrepreneur? The answers may surprise
you. So, in this article, I’m going to
debunk 5 myths about starting a business, using facts and my own experience,
and show you how you can overcome them and start reaping the rich rewards that
come from being your own boss.
MYTH #1- WORKING FOR
SOMEONE PROVIDES GREATER SECURITY
It is true that when you work for someone, you can generally
count on getting ‘x’ at the end of a week or two for working your assigned
hours. And people often assume that
having a job means that job will be there tomorrow and the day after, and on and
on, until they decide to leave.
But that’s not necessarily the case. First of all, your employer can fire you and
replace you with his nephew (or niece).
Second, your company could go out of business. In today’s climate, many businesses have
already folded and experts say 40% of those jobs will not be coming back. Try talking about job security to the 40
million Americans (and counting) who have filed for unemployment since the
TRUTH: Yes, your business could fail. But remember, so could your employer’s. When you work for yourself you can take
measures to increase your chances of success.
You can stay on top of your marketing to expose yourself to a broad base
of clientele so you are not impacted by the loss of one, or even a few. You can provide outstanding service so your customers
become loyal clients who won’t want to leave you. When the economy shifts, you can pivot and
adjust with the winds to follow economic demand. Also, no one can fire you from your business. You are the boss!
MYTH #2- I’LL MAKE
MORE MONEY AS AN EMPLOYEE
This is the reason so many of our parents from my generation
said “get a real job.” They firmly
believed that you can make more and steadier income working for someone
else. But is that true?
When I first took the dive into being self-employed my
constant worry was making at least as much as I made when I had a 9 to 5. Well, to my utter surprise, I was able to increase
my hourly rate 5 x’s and double my annual income in my first year. That meant I made more, while working less!
Consultants and coaches routinely charge double, triple, or
more of what they earned in their former jobs.
And companies accept that as the cost of doing business because they
value their expertise and recognize that
you have to pay your own benefits and other expenses.
many people sabotage their income by charging too little, when the truth is
people often judge your value by what you charge. That means if you work for peanuts, they won’t
perceive too much value in your services.
But if you charge a premium, mentally they often assume you must be
worth it. Here’s a simple trick to
deciding how much to charge. Figure out
how much you want to earn annually. Then
drop three zeroes. You now have your
hourly rate. For example, say you want
to earn $100,000 per year. You would
drop three zeroes from that and end up with an hourly rate of $100!
MYTH #3- IT’S TOO
LATE FOR ME TO START A BUSINESS AT MY AGE
This is a common belief and nothing could be further from
the truth. Vera Wang didn’t start
designing clothes until she was 39. Ray
Kroc was 51 when he started the company that would become the mega-success
named McDonalds. And Colonel Sanders started KFC at the ripe old age
never too old to start over. All it
takes is the vision, a belief in yourself and the work ethic needed to make it
happen. The cases I mentioned above, and
so many others you can Google for yourself, prove that point. So, wherever you are in life, just get
started. It truly is never too late!
MYTH #4- I DON’T HAVE
ACCESS TO BUSINESS FUNDING
So many people actually believe you need to raise a ton of
money and go into debt to start a profitable business. That wasn’t true back in the day, and it’s
even less true now. With the internet
and other technology, the playing field has been leveled. Now you can reach not only your neighbor, but
customers in Bangladesh who want and need your product or service.
Technology makes your reach global.
Also, you don’t need to sign a lease for an expensive space for your
business. Endless numbers of successful businesses
have started from kitchen tables or garages.
Dave Ramsey, noted financial guru, is fond of stating that he started
his business from a card table in his living room. That business is now generating over $200
million dollars per year. And I started
my business using a desk in my bedroom, a laptop computer, printer and business
cards. Total investment: Less than $100
since I already had the desk and computer!
And most of us already have that going for us.
MYTH #5- I NEED TO
WAIT UNTIL THE RIGHT TIME
Listen. There is no
more mythical thing than “the right time.”
There will always be a problem or obstacle in your life. You’ll be stressed out. Your money will be funny. Your kids will be driving you crazy. Your boss will make unreasonable demands on
your time. Your health may be
suffering. Blah-blah-blah… Life sucks.
The list can go on and on. We
live in an imperfect world full of imperfect people. So, there will never be a perfect time.
perfect time will never come. If you
wait for it, you’ll be lying on your death bed regretting all the things you
never tried or did. So, just start. Kids stressing you out? Start.
Job devouring your time? Start. It’s raining?
Start. It’s cloudy? Start.
Putin’s acting up? Just start. I was broke and unemployed when I started. Wherever you are with whatever you have… just
start from there. And when you start,
you’ll be surprised at how easy it is to keep going.
I hope you benefited from breaking down those 5 common myths
that keep people from starting a business.
Really, all of these can come under one heading: Fear.
And fear is, at the end of the day, a lie. It is False Evidence Appearing Real. So, kick it to the curb and just do it. The rewards are well worth it, as I and so
many other entrepreneurs can attest.
If you want more info on starting a side hustle, growing a
business or managing your income, check out my blog at www.Org4LifeSolutions.com. There you can also schedule a free discovery
coaching session with me. I wish you all
the best and a healthy, happy life!
that is. Everyone says they want it, yet
very few seem to have it. That is
proven by the fact that 78% of our fellow Americans are living paycheck-to-paycheck. And that includes the kid flipping burgers at
the local eatery all the way through to the local cop, nurse, secretary AND trader
pulling down 7 figures on Wall Street.
Because it’s not about how much money you make on the journey to
building wealth, it’s about how much you keep in addition to the habits you cultivate
along the way.
Most people like to daydream about having wealth. They play the lottery and talk about what
they would do IF they hit it big. They
fantasize about what they would do IF they could start this business or invent
that product. The problem is “IF” is
just a wish without a plan and action attached to it. It’s the same as with physical fitness. If you want to have a killer body, you need
to begin with a good fitness routine. So
too, if you want to have a killer bank account, you have to have a good financial
routine. The problem is, very few are willing
to put in the long-term effort it takes to walk the path of wealth. Folks, it’s a marathon, not a sprint. And that marathon has 5 clearly defined stages
that you need to be aware of and prepared for if you intend to finish the race
to wealth. This article will identify
those stages, explain what they look like in practical terms and help you see what
you can expect along the way.
STAGE 1- FINANCIAL
This is where most people find themselves and this is what
it looks like:
You are living paycheck-to-paycheck
You are borrowing from Peter to pay Paul
You have no savings
The smallest unexpected expense becomes a major
financial obstacle to you
You are constantly late and stressed out over monthly
There is always too much month left at the end
of your money and you can’t figure out where your money is going
If any of this sounds like you, then you are in this first
stage. You have no control over your finances
and it’s no fun. I’ve been there and it
can be scary as heck. But as painful and
scary as it is, it’s just not scary enough or painful enough to make some
people get off their butts and get out of this mess. It has become more comfortable for them to stay here and do nothing than to get uncomfortable and take action to change
their situation. The great motivational
speaker Les Brown once said, “People will never change until they get sick and
tired of being sick and tired.” And you
too will wallow in this miserable state unless and until you get sick and tired
of being sick and tired.
STAGE 2- FINANCIAL
If you got sick and tired of being sick and tired, you might
be here. In this stage you have a
starter emergency fund of $1,000. You
are not charging “emergencies” to credit cards and you are living within your
means by sticking to a written budget every month while tracking your spending. Here is where you have actually begun to
assert control over your finances and are growing in confidence that you can
actually get to that destination you have defined as wealth in your mind. In review, this is what your life looks like
if you are at this stage:
You have $1,000 stashed away for emergencies
You are living by a written budget and every
dollar you make has an assignment every month
You have stopped borrowing money to live on
You are current and on time with all your bills
If you are here, congratulations! You have finally taken ownership of your
finances and taken control over this most important aspect of your life. But no time to rest, because there is still much
work to do in order to advance to the next stage of wealth building.
STAGE 3- FINANCIAL
At this stage of the journey you are really rolling up your
sleeves and putting in the work needed to dig yourself out of debt and grow
your income. You are keeping your
spending under control. You are also using
the debt snowball method to repay everything you owe.
For those of you unfamiliar with the term ‘debt snowball’
let me explain. The debt snowball is
when you line up all your debts smallest to largest and pay the minimums on each
except the smallest. Any extra money you
have you throw at that smallest one until it is gone from your life. After that debt is gone, you now take all the
money you were paying on that smallest one and throw it at the next one in line
until that one is paid off. You keep
doing this, rolling your payments downhill from one debt to the next, growing
them larger and larger until the last debt is finally paid off.
In this stage you are also looking for ways to grow your
monthly income. That may mean selling
stuff, taking on second and third jobs or starting a side business that
generates extra income to use in your war on debt. See, your income is your greatest wealth
building tool and the bigger it is, the faster you will get out of debt and
build wealth. To review, here’s a
snapshot of STAGE 3:
You are working your debt snowball with
intensity, paying them off one after the other
You are laser-focused on growing your income
You are keeping tight control over your spending
STAGE 4- FINANCIAL
Now, when I say financial security, I am not speaking in
absolute terms. Rather, I am speaking in
a relative sense. I’ll illustrate this
with a home security system. No one can
claim that a home security system will guarantee their families’ safety and
keep all burglars away. But it will
serve as a deterrent to any would-be intruders and as a defense against any
that actually do try to break in by sounding the alarm, alerting you to the
danger and dispatching the authorities to the scene.
Likewise, in this stage you have relative financial security
because you have paid off all your consumer debts so the only payment you have
is your mortgage. Now all that money
that was going to payments can now go to building up your emergency fund until
it amounts to 6 months to one year of expenses.
So now, if you or your spouse loses a job, if a medical expense hits or
the car explodes, it’s no longer a major disaster. No, at this point it only becomes a minor inconvenience. Why? Because
the security that the emergency fund gives you means that life will go on as it
has without putting your financial life on hold or in jeopardy. And by the way, a this stage you have also
protected your family by getting and keeping all the forms of insurance you
need. Stage 4 is a great place to be so
keep in mind what it looks like:
You are debt-free excluding your mortgage
You have funded or are funding your emergency
savings stash to 6-12 months of expenses
You have put in place all the forms of insurance
you need to protect your family
Stage 4 is where your financial machine is really humming
and you are lining yourself up to launch yourself into the final stage of
wealth building. Hold on, because here
STAGE 5- FINANCIAL
I want to clarify again that when I refer to financial
independence, I only mean this in relative terms, not in the absolute. No one is completely immune to the unforeseen
occurrences of life. Wars, runaway
inflation and environmental disasters can devastate entire national economic systems. At that point, everyone is in the same boat.
So, here is how I define financial independence: The
ability to generate all the money you need to cover your living expenses and
then some, without working, solely
from any business, savings and/or investments you might own. You are independent in the sense that you don’t
rely on any outside sources of income to live.
Yes, here is where you don’t have to take crap from a
boss. When your boss starts acting up you
can tell him where to put his job and walk out.
When you want to take the family on an extended vacation, you don’t have
to beg for time off from work. And when
you see someone in need, you can reach into your accrued wealth and give like
no one else and effect meaningful change in that needy person’s life. How would you like to have a financial
situation that looks like this:
Your home is paid off
You have absolutely no payments due to anyone
Your business and/or investments generate enough
income to live a life of comfort
You can give generously to causes, institutions
or individuals who are truly in need
You have time to pursue your heart’s desire
You can leave a legacy for the generations that
will follow you
Sounds good, doesn’t it?
You bet it does! In fact, this is
where most of us would like to be. So, I
now have two questions for you. One, what stage are you on in your journey to
wealth? And two, how much work are you willing to put in to
get to that final stage of wealth building?
Only you can answer these questions.
I can’t and neither can your mommy or spouse. Only you.
So, now is the time to look deep within yourself, figure out
where you are, where you want to go and why, and how you intend to get
there. A financial coach might be the
thing you need to help you reach your goals.
A financial coach will be your guide and your encourager on this long
journey. A financial coach can help you shave
years off your journey and save you thousands upon thousands of dollars in
wasted time, effort and personal fortune.
Then if you are sick and tired of being sick and tired, take
decisive, massive action now and make the changes necessary to
live the life of your dreams. Through
private, one-on-one coaching sessions, I can teach you how to build your own personalized wealth action
plan. Contact me at www.org4lifesolutions.com and
schedule a free discovery session. I
look forward to helping you on your journey to wealth, no matter what stage you
may currently be at. In the meantime, remember: Own it, Be it, Achieve it!
Tragedy can strike suddenly, as recent high-profile
deaths have highlighted. Just think of
the sudden deaths in the news of late:
Luke Perry, of 90210 fame, dead at 52 from a stroke. John Singleton, visionary director of “Boyz N
The Hood,” dead at 51 from a stroke. And
who can forget Bill Paxton, who most recently starred in the series “Training
Day,” dead at 63 from a stroke.
Tragedy can strike at any time in any place. But usually, as in the case of strokes or
other heart-related conditions, there are warning signs like hypertension,
diabetes or a sedentary lifestyle, among others. And it can be the same with your finances. It may seem that Murphy has set up permanent
residence in your spare bedroom, but is it really Murphy, or something
else? Could it be that we are simply
ignoring the warning signs of impending financial tragedy?
True, life happens, and there are some things that you
cannot anticipate or plan for. But, like
health problems, there are usually warning signs that something bad is about to
happen. When we ignore those signs, it
usually doesn’t end well for us. But
when we heed them, we can most times ward off or at the very least, mitigate,
the effects of a sudden financial storm.
With that in mind, this article will look at 7 signs that let you know
that you are walking a financial tightrope and are probably headed for a
financial tragedy very soon.
SIGN #1- You
frequently overdraft your account.
Ah, overdraft protection.
That safety net that banks so gladly offer to save you from
miscalculation. “Go ahead,” they say, “write
that check and use that debit card. Don’t
worry about keeping track of your balance.
We got you covered for just a teensy,
weensy little fee.” Yup, banks make
a mint off fees and overdraft fees are among the top money makers for
them. But if you are constantly falling
back on overdraft protection, it’s a sign of something else more serious. It’s a sign that you are not paying attention
to your spending. And if you’re not
paying proper attention to your spending, eventually you will run out of money
to spend. Then comes the tragedy. So, get on a budget and track your spending
before you become another broke statistic.
SIGN #2- You have to
resort to credit cards frequently for “emergencies.”
I’ve written about this before. Credit cards are no substitute for an
emergency savings account. Resorting to
credit cards for “emergencies” or worse, every day expenses, means you are spending
beyond your means. This slow creep will
eventually max out your credit card limit and then what are you going to do? It also means you are not planning properly
for the future. Things like car
maintenance, household maintenance items and sickness can be expected and
planned for. The car is going to need
new tires. The boiler will break. The roof will leak and someone in your home
will need to visit the doctor at least annually. These things can be planned for by putting a
line item in your monthly budget for each and stashing away cash for those expected
expenses. Then when they come, they are
not “emergencies” but planned-for events that you already have the money set
aside for. The second thing you can do
is build a starter emergency fund of at least $1,000. That catches most of the little stuff and keeps
you from giving into the temptation to charge it. Once you get out of debt you can go ahead and
build that up to a 3-6 months of living expenses.
SIGN #3- Your 401k is
Have you, like me, neglected in your youth to recognize the
value of contributing to your 401k or other retirement plan? It can hurt you dearly in terms of lost
savings and income growth which can amount to hundreds of thousands of dollars
or more. Failure to pay attention to
this warning sign can mean spending your golden years working right up to the
day you die or living on the Alpo plan.
Get my drift? But have no
fear. No matter where you are in life it’s
not too late. Start taking advantage of
employer 401k matches and max out all your retirement account options now and
you’ll be surprised at how market growth and compound interest combine to make
you breathe a lot easier in retirement even if you have as little as 10 years
SIGN #4- You regularly
run out of money before your next paycheck comes.
Find yourself having too much month at the end of your
money? That’s a sign of one or two
things. Either you are spending beyond
your means or you are just not making enough to cover your basic living
expenses. If the first is the case, sell
stuff, lose the car payment, slash your spending and put a halt to retail
therapy. If the second is the case, look
for ways to boost your income with a side hustle, overtime, job change or
second job. If not, tragedy will come
when you miss as little as one paycheck.
SIGN #5- You have maxed
out all your credit cards.
This is a flashing red light with alarm bells ringing! At this point you’ve run out of the means to
support your lifestyle and the creditors are knocking at your door and blowing
up your phone. Repo’s, hits to your
credit and eviction are marching towards you over the horizon. Get a hold of the situation now. Cut up the credit cards, get on a written
budget and get your outgo in line
with your income. Or, you could just ignore the signs and
suffer any number of the things I mentioned.
SIGN #6- You are
consistently late paying most bills.
If this is you, then you already know the pain of late
fees. Add all those up in the course of
a month or year and they can cost you dearly.
Worse, like in sign #5, stuff will start getting repossessed and turned
off, like your lights and gas. Get on a
written budget, put alerts on your calendar as to when certain bills are due
and set up automatic payments if you are just finding that you are being
forgetful and it’s not really a money issue.
If you do, you will find life to be a lot less stressful and considerably
SIGN #7- You would
rather shop than save.
I’m not going to soft soap this one. This one right here is a sign of lack of self-control
and maturity. Children want what they
want when they want it. They don’t
understand the concept of the word “no.”
Adults, on the other hand, know the value of delaying gratification in
return for something greater later on. Things like no stress, no debt, fat bank and
retirement accounts and the joys of being able to give to help others in need. If this is you, stop it right now. Track your spending and see what your
carefree lifestyle is costing you. Calculate
what that money would be worth in 10, 20 or 30 years if invested in good mutual
funds. Realize that it is costing you
and your family your future. And look to
other ways to boost your mood like volunteering, having family game nights,
connecting with friends or enjoying a wide range of free activities in your
Yes, life happens. But it doesn’t have to happen to you more than it has to. Instead, happen to your life. Take control of your finances. Pay attention to the warning signs. If any of these apply to you, take action now! Educate yourself on personal finance. You don’t have the luxury of being neglectful of this important area of your life. Get a financial coach if you feel the need. Sometimes we truly lack knowledge of the actions we need to take. Other times we know what we need to do but we just need someone to remind us of why we need to do it. A financial coach can help in either case. If you choose to take control of your life today, you can avoid being another tragic statistic tomorrow. All the best to you and remember, own it, be it, achieve it!
I remember being 19,
fresh out of school and having my first REAL job. I was actually running a computer network for
a famous food company in SoHo, Dean & DeLuca. That was back when knowing DOS actually paid
off. (Did I just give away my age?) Anyway, I was driving my parent’s rust-orange
Chrysler Imperial and as I rode past the Chevy dealer I wondered to myself just
how much respect would they give a young, black kid in the car dealership? What they ended up giving me was more than I
bargained for. Over $10,000 in new car
debt! On a car that was not what I
really wanted and I paid full sticker at that!
I came to hate that car. Every time
I made the payment on it I kicked myself.
In the pantheon of epic dumb money moves that one stands out as probably
in the top 3 for me. I’m sure you have
your own stories.
The point is, we all have those money moments we wish we
could undo. Money is an integral part of
our lives and in life, we will all make mistakes. The thing is to learn from them and not
repeat them ever again. And when the
mistake is big enough that it leaves a mark (Like my $11,000 Chevy Spectrum),
we don’t soon forget the pain. People
still love and buy new cars. But there
are a lot of other costly mistakes we make.
We rationalize these by saying everyone else is doing it. That’s simply no excuse. These easily turn into a money drain that can
sap you of literally millions in future investment earnings.
In this article we will discuss some of these more common
money mistakes and how and why you need to take action to fix them NOW. They may not seem big at the time, but they
will eventually lead to death by a thousand small cuts. So, let’s see how we can stop the bleeding.
1. BUYING A NEW CAR
I just had to lead with this one, since the sting of my teen
blunder still haunts me to this day.
Everyone loves that new car smell.
But what you’re really smelling as you drive off the lot is the odor of
your hard-earned dollars going up in smoke.
See, the typical new car can lose up to half it’s value in the first 2-3
years. That is why the typical
neighborhood millionaire doesn’t even buy them.
Oh, but what about the warranty?
You can still get a used car with much of its manufacturer warranty
still intact. In fact, some certified
used cars have a stronger warranty on them than when they were new!
The smarter alternative:
Buy a quality used car that’s about 2-3 years old. At that point it has done the vast majority
of its depreciation and you are paying pretty much dead on what it’s actually
going to be worth for some time to come.
It will still continue to depreciate, but at a much slower,
less-scarier, rate. And it still looks
practically brand new. In fact, most
people will not even be able to tell the difference. But your pockets will be able to tell the
difference! And that’s what really
2. EATING OUT EVERY
Face it. We all have
fallen into this poor habit at one time or another. When I worked in the city as a teen so many
years ago, I remember spending $6 each day on lunch. That’s $30 each week and $120 each month. My car payment was $180. I made, at that time, $16k a year. That puts things into perspective. Nowadays, the typical daily lunch is well
north of $10 per day which easily blows away more than $200 of your income each
month. Can you honestly tell me you
couldn’t find a better use for that money?
The smarter alternative:
Brownbag it. Yep, bring a
sandwich from home. Or, pack some
leftovers from the night before and heat them up in the microwave at work. Chances are it will taste better than the
fast fare you will get on the street.
And if you just decided to cut your eating out by just half you could
bank $1200 per year in your account in this example. Or better yet, pay off $1200 in debt!
3. RENTING TO OWN
APPLIANCES AND FURNITURE
Rent-to-own spots are popping up everywhere. Problem is, the everywhere only seems to be
in lower income neighborhoods. There’s a
reason for that. The typical millionaire
makes decisions based on 10 years from now.
The average poor person makes decisions based on the next payday. Have you ever calculated the interest rates
these places charge? If you just banked
the weekly payment they want, you could actually pay cash for the thing in just
a few short months! Instead, short-sighted
folks end up paying many times what the item actually would have cost if purchased
The smarter alternative:
Stash away what you would have given to those crooks at the rent-to-own
spot every week. Exercise a little
self-control and save it up until you have enough to buy the thing for
cash. Then you will keep a lot more
money in your pocket and you won’t have to worry about a weekly payment sucking
your wallet dry.
4. USING A CREDIT
CARD INSTEAD OF CASH
But don’t the points add up?
Do yourself a favor and ask a millionaire if he ever got rich on
points. I don’t think you will find one
who did. Think about it. Credit card companies are not in the business
to lose money. They aren’t giving away
points out of the goodness of their hearts.
They know most folks will not even redeem them and for those who do,
they make so much money in interest that it’s a mere bag of shells to
them. In fact, the average person pays
more when using a credit card because they don’t actually feel like they are
spending cash. McDonalds is a prime
example. They found that the typical sale
is $4.50 when people use cash, versus $7 when they use plastic! Now you know why those card terminals are so
conveniently placed at every register.
The smarter alternative:
Carry cash and ditch those credit cards.
Dunn & Bradstreet did a study which showed that people spend 12-18%
more when using credit cards. That’s
because when you use cash you actually feel the pain of the money leaving your
hand. When you use plastic, you don’t,
so you’re apt to spend more. But if
carrying cash around isn’t your thing, at least use a debit card. Then you won’t be paying interest on that
burger and fries for months to come!
5. IGNORING YOUR
COMPANY’S 401K MATCH
What sane person would tell you they would be willing to
pass on a legal and guaranteed, double-your-money investment? None I’m sure. But that’s what millions of Americans do when
they take a pass on their company’s 401k match.
Dude, that’s FREE MONEY! An
automatic 100% return on your money before it even hits the market. Don’t miss out on that, please!
The smarter alternative:
Contribute at minimum the percentage that your employer matches. How many other guaranteed ways are there out
there to double your money immediately?
I’m not able to think of any actually.
So, head down to Human Resources and sign up for that match today!
We’ve reviewed 5 common money mistakes the average person
makes that ends up crippling their ability to grow wealth. We’ve also reviewed the alternatives you can
take to stop the money bleed. Now you
know. And knowing is half the battle, as
they say. The other half is actually doing something about it. In other words, if you know, act like you know! And if you do, you will rise above the
average and put yourself on track to becoming an above-average millionaire next
Ah, Spring! A time of renewal, life and light. We survived the long, dark winter and now
brighter days are ahead. It’s a good
time to take a look at things in your life and give them a buff and shine so
they look a little nicer. So, people
generally take the time to clean out the garage, clean the house, put away
those warm winter clothes and break out the Spring duds because beach season is
coming after all.
It’s no different with your money. Over the winter your money may have gotten
fat and lazy. It may have also picked up
some dust balls that are making it (and YOU!) look bad. So here are 11 quick and handy tips you can
use to dust off your finances and get them into tip-top shape for the coming
1. GET ON A BUDGET
Every winter season the holidays come. And every winter season the sales come right
along with them. People who have been behaving
and living below their means all year to this point suddenly lose their minds
and buy a bunch of stuff they don’t really need, with money they don’t really
have, to impress people they don’t really like.
If you are part of the masses and you’ve used the holidays as an excuse
to blow through your budget like a weed wacker on steroids now is the time to
rein it in and stop the madness. Sit
down and review your expenses, compare it with your income and create a budget
that makes sense and is more in line with what you really earn.
2. STOP CHARGING UP
YOUR CREDIT CARDS
Credit cards. You can’t
live with them… Let’s leave it at that. If you are like the average American, you are
carrying $8600 in credit card debt. That’s
according to a March 2018 ABC News article.
To put what that’s costing you into perspective imagine you had placed
that money into an investment account earning 8% (well below the 30-year
average S&P 500 12% return rate). In
10 years that money would be worth $18,566.
In 20 years it would be worth, wait for it, $40,084. And in 30 years it would be worth a whopping
$86,538! And that’s if you never even added
another dime. Imagine if instead of
sending that monthly payment to the banks it went instead into your investment
account? Now that number begins to take
off into the 100’s of thousands or, quite easily, millions of dollars. Get the point?
3. PAY OFF DEBT
But everyone lives with a payment, right? It’s the American way after all. Yeah, it is.
And that’s why 78% of Americans are living paycheck-to-paycheck. Monthly payments eat into your disposable
income like a piranha. If you don’t want
to be average stop carrying debt. The
average American carried over $38,000 in non-mortgage debt in 2018. If you want to know what’s that’s costing
you, just look back at item 2. Still
want to be average?
4. BULK UP YOUR
That’s what credit cards are for, right?
Wrong! 40% of Americans don’t
have enough cash to cover a $400 emergency.
Think about that. As little as $400
can break 40% of us. To get out of that
danger, quickly build a beginner $1,000 emergency fund. Sell stuff, work extra, turn a hobby into a
business, whatever. Just do it fast. It won’t catch every possible emergency, but
it will catch most and keep you from resorting to those high-interest credit
cards as a crutch. Again, if you haven’t
gotten the point, go back to item 2.
5. FILE YOUR TAXES-
Every year millions of Americans wait until the last second
to file and end up missing the deadline and thus incur penalties. Even if you know you owe and don’t have the
money to pay, file anyway. That way you
can at least avoid the hefty failure to file penalties, which are 5% for every
month the balance goes unpaid up to a maximum of 25% of the balance owed. Ouch! You
can set up a payment plan with the Feds later on. Just get it done now. And when you file, use a professional. The form 1040, that 69% of us use, takes 16
hours to prepare on average, according to the IRS. Think about the value of your time and the
money that a savvy tax pro can save you.
6. AVOID BIG REFUNDS
Got a big refund?
Happy? You shouldn’t be. You just loaned the Federal Government your
money for one year and they used it without paying you a dime of interest. The average tax payer in 2016 overpaid the
government by $260 each month! You could
have been using that money over the course of the year to pay off debt, build
savings, invest or take care of a lot of monthly budget items that need immediate
attention. Still excited about that
refund? If not, adjust your W4
accordingly so you have no, or very little, refund come next tax year. It’s your money, you work hard for it. Don’t just give it away to congress to blow
on some stupid pet pork project.
7. TAKE A LOOK AT
If you have paid off all your debt and your 401k has been
neglected you are leaving a lot of money
on the table. For instance, if your
employer matches up to a certain percentage, that’s a FREE 100% return on that portion
of your contribution. It’s crazy to give
that up. Also, if you have picked some dog
funds that should be taken out back and shot, you are missing out on some big
returns from the market. Do some
research and look at the range of funds your employer offers. Take a few minutes to research the average
10-year return. If it’s tracking close
to the average 30-year stock market return of 12% or more, you’ve got a winner. If not, you’ve got to make some changes. It’s your future and your potential loss of
hundreds of thousands of dollars if you don’t.
8. DUST OFF ANY UNECESSARY
Is your bank fee-happy?
Some banks would charge you for the air you breathe when you walk into
one of their branches if they could.
Review your fees. There are so
many options out there now with online banking, credit unions and regional or
local banks where you can drastically reduce or even eliminate the fees the big
banks charge you. Many offer no-fee
checking, no ATM fees at other machines and no minimum balance requirements. Shop around and save a buck or two. Or ten.
9. TRIM THOSE
Do you have a lot of zombie subscriptions sucking the life
blood out of your bank account every month?
You know, stuff that you pay for but never use. Are you really using that streaming service
subscription? Is your gym membership being
used or are you keeping it around just so you can say you belong to a gym? Get
out your statements and list all those recurring subscription and membership
charges. If you are not using them, cut
them off immediately. Those savings can
quickly add up to be used elsewhere in your financial plan.
10. REVIEW INSURANCE
Every person should have life, disability, renters (if you
rent), identity theft and long-term care insurance (if you’re over 60). I’m assuming you have homeowners and
auto. You’re not crazy, right? If you are missing any of these key defenses
in your financial walls, take care of it now.
And when you shop use a broker,
who can shop around at multiple companies for the best rate. On the other hand, using a captive agent (one who works for a particular company only),
locks you into their costs, which may be excessively high and not as good
quality coverage as you can get by shopping on the open market.
11. REVISIT YOUR
GOALS FOR THE YEAR
The first quarter is over.
Most people have thrown their goals into the trash bin by the end of February. But don’t let that be you! Dust off that list and see how your financial
plan stacks up against it. Make sure
your financial plan works with your
goals, not against them. If adjustments need to be made, refocus and
recommit. Get an accountability partner
on board. Write down your action plan
for achieving those goals and review it every day to make sure you are making
progress on them and not just making excuses.
If you do, you have a 70% better chance at reaching those goals than everyone
else who doesn’t do these things has. So
be a winner, not a lame wanter!
Now that you’ve read through this article, do yourself a favor and take the time to actually do the things you’ve learned. If doing all of them is too daunting for you right at this moment, pick just one and commit to taking some action on it today. Then pick another one tomorrow and take action on it that day. Work your way through the list 15 minutes at a time, one day at a time. Before you know it, your finances will be fit and in fighting shape for the rest of the year.
Unless you’ve been living under a
rock in Outer Mongolia you know that our government was shut down for over a
month until just this last Friday. What
that means is 800,000 Americans were either furloughed or forced to work
WITHOUT pay for over a month! The
stories were increasingly painful and we saw them on the news every day. Thousands of families are still scraping by
on next to nothing because backpay will not be received until the end of this
week most likely. If you are a federal
contractor, tough cookies on that back pay.
And this ain’t over folks. Trump
has threatened to do it all over again in 3 weeks if he doesn’t get his wall
Selling personal items, going to
food pantries and driving Uber are the popular stop-gap measures now. If you are a federal worker in this
predicament, my heart goes out to you. I’ve
been where you are financially, so I know how it feels. You can never really understand what this
feels like until you’re looking down at the bills on your kitchen table trying
to decide whether to eat, pay the utilities or the rent.
But as shocking as these scenes are, they should come as no
surprise. Wake up America! A 2017 survey
by Career Builder revealed that 78% of Americans are living paycheck to
paycheck. What that means is 78% of our
population (and even more when you add the people who count on them to provide)
is just one paycheck away from disaster.
They have NO savings whatsoever.
In fact, USA Today reported as recently as last year that 40% of
Americans don’t even have enough in savings to cover a $400 emergency! Yes folks, this is normal in America today. In my
opinion, that’s the national emergency.
Here’s the thing that’s getting lost in the sauce though. While any employer, including the government,
has an obligation to pay its workers for the work they do, emergencies like sickness,
injury, house and auto repairs and job losses can and will happen. It is only a
matter of when. That becomes your responsibility and yours
alone to prepare for. Imagine how
different this scenario would be for these federal workers if they all had 3-6
months of living expenses stashed away, no debt and other sources of
income? Let that sink in for a
It is possible for
you though. Yes, youcan take ownership
and control over your life. You can
choose to leave normal behind and become abnormal,
ready to face life’s curveballs. And
there are concrete steps you can take to shield yourselves from these inevitable
storms. With that in mind, I’ve compiled
a list of 5 action steps you need to
take immediately to protect yourself and your family in the future. Or the next person standing on line at the
food pantry could be YOU.
Actions Step #1- Build an Emergency Fund Now! I have written extensively on the need to
have an emergency fund in the past. I’ve
even given tips on how to build a $1,000 beginner emergency fund in a hurry
here. Suffice to say, an emergency
fund is that thing that keeps the wolf away from your door. Because when you don’t have one, Murphy will
come and visit often. Sometimes it might
seem that he even set up a bed in your home.
$1,000 won’t catch every emergency, but I can say that it has caught all
of ours including car repairs, furnace breakdowns and plumbing emergencies. In time you can bump that up to a fully-funded
savings of 3-6 months, or more, of living expenses.
Action Step #2- Build Another Stream of Income. Everyone has heard the saying “Don’t put all
your eggs in one basket.” When you rely
on one source of income, that’s what you are in effect doing. Because when your boss decides he no longer
needs your services, or your government decides it’s no longer going to pay
you, you need a backup plan. The time is
now to think about side hustles. Direct
sales, selling real estate on the side, turning a hobby into a stream of income
or starting a business are just a few choices for diversifying your
income. Pick one, two or several. The more the better. When your bank account has multiple sources
of income, when one dries up it’s not such a big deal.
Action Step #3- Get Out Of Debt. Nothing eats away at your ability to build
wealth like carrying debt. And there has to be a correlation between the fact
that so many Americans are living paycheck-to-paycheck and the fact that debt
levels continue to rise. Nerdwallet
reported that in 2018 the average US household with credit card debt had a
balance of $6,929. So, 40% of us don’t
have cash to cover a $400 emergency but we continue to charge burgers, jeans
and vacations at a rapid pace. This is
insane. If you have $1,000 in income,
but $200 of it goes out the door to pay debts, that’s $200 less you have to
build your emergency fund, save for retirement or pay for monthly household
expenses. The only way to stop that
madness is to stop going into debt and set up a plan to pay it all off and become
debt free. It’s not hard. Millions of Americans are doing it and living
like no one else because of it. You can
too. Just decide to change. Today.
Action Step #4- Get On a Written Budget. Oh no!
I said the ‘B’ word! Most of us
don’t like being told what to do. And
most of us don’t like being told no. And
that’s how most of us view a budget. It’s
limiting, it takes away the fun, it’s hard to stick to. That’s what “normal” people think. And sadly, most people are wrong. Listen, a budget is all in how you view
it. You can see it as a thing that
limits your spending and takes your joy, or you can view it as a powerful tool
for telling your money where to go instead of wondering where it went. The truth is, if you have too much month at
the end of your money, you need a budget.
If you have no savings, you need a budget. And if you are scratching your head wondering
where your money went before the next payday comes, you sure as heck need to
get on a budget. Guess what? Millionaires use budgets, broke people don’t.
What would you rather be?
Action Step #5- Take Ownership of Your Situation. So many of us have excuses for not doing well
with managing our money. I don’t make
enough. Taxes are too high. My parents didn’t teach me. I’m just not good with money. Blah, blah, blah. I recently heard something on the subject of
excuses by retirement expert Chris Hogan.
He said, “Excuses are lies dressed up as an explanation.” Nothing could be truer. Excuses are the lies we tell ourselves to
make ourselves feel better or look better to other people. But I’ve never seen a wealthy or successful person
who got where they were by making excuses, putting the blame on someone else
and half-stepping through life. It’s
your life. Not your boss’, not your mom’s,
not your spouse’s and darn sure not your government’s. So, own it!
Be an ownership hero, not an excuse loving zero.
So, what would you rather be? Normal, living paycheck-to-paycheck? Or abnormal, financially fit and ready to live
like no one else? Granted, these steps
are not the cure-all for your financial problems. I’m not some pie-in-the-sky positive thinker. But they are intended as a good start. And no, it won’t be easy. But what in life that’s worth it ever is? If you want the easy life, it’s there for the
taking. But be forewarned. It comes with money woes, food pantries and
eviction notices. But if you choose to
be different, if you dare to choose ownership, you can live like no one
else. You can live a life of
extraordinary accomplishment. All you
have to do is decide that you want
So you’ve got a big refund coming this year, huh? Whatcha gonna do with it? Pay a bill? Save it? Buy some shiny new toy? Newsflash! Whatever it is you plan on doing with it, it doesn’t matter. Because you’ve already lost a lot of dough in the game of personal finance. Sorry if I busted some bubbles, but I’m not here to make you feel good. I’m here to tell the hard truth so you can max out your money. Let me tell you what I mean.
I remember back to when I was much younger, about 19 years old. I was working in an investment bank at the time. As you can imagine, there were a lot of wealthy VP’s and such there. I used to rub shoulders with them every day in the course of my job function. Anyway, I’ll never forget what one guy told me one day. He told me he had to pay the government about $4,000 when he filed his taxes. I was like “What??? Are you crazy? Why didn’t you make sure you got a refund?” It was at that point that he literally sat me down and educated me in the ways of the wealthy and how they view paying taxes. What I’m about to share with you stems from the lessons I learned that day.
To start, according to IRS.gov the average refund was $3,120 in 2016. That means the average taxpayer over-paid the government by $260 each month!
What could you do with an extra $260 in your pocket each month? Get that debt monkey off your back quicker? Save for a vacation or a used car? Or maybe you could build a wicked emergency fund so you don’t have to resort to Visa or Mastercard every time some unexpected expense pops up.
Let me show you another thing you could do with it.
If you just took that $3,120, never added another dime, and put it into a mutual fund returning a decent 8% annually, in 30 years you would have $31,395.38. In 40 years guess how much you would have. $67,780.27! Mind you, that’s without adding one more dime to it.
But hold on Wilbur, cuz here’s where it really gets insane. Let’s say you’re 35 years old. If you were to take that same $260 each month and invest it in a mutual fund returning, say, 8% annually for 30 years do you know how much money you would have at the age of 65? $381, 719.11. And if you were to get on the investing bandwagon earlier at the age of 25 and did that for 40 years, by the time you reached age 65 you would have $872,916.87! Do you think that kind of dough would have a major impact on your retirement? Darn skippy!
You see, based on a GoBankingRates.com survey from September of 2016, more than half of all Americans don’t have $1,000 saved to deal with an emergency! And according to a CNBC article from the same time period, the median household retirement savings was just $5,000! So if you were to make this simple change of putting an end to lending your money interest free to the government, you could beat both those statistics in less than two years.
Now that you know the cost of getting a tax refund from the government, how do you fix it? March right over to your payroll or human resources department, get a fresh W-4, and fill it out. First you need to know your average annual refund amount. Divide that by the number of paychecks you receive. That will be the golden number you’re trying to get back in your hands each pay period. What you’re looking to do is tweak your witholding allowances until you get to a point where the amount gained back equals your golden number.
So, in the average refund case of $3120 we used above, if you got paid every other week, you would be looking to adjust your witholding until your take home rose $120. If you got paid every week, you’d shoot for an extra $60 in your take home. Don’t worry if you have to try it a few times. There’s no limit to the number of times you can submit a new W-4.
And once you get that money in hand you could start throwing it at your debts, building your emergency fund or investing it in a mutual fund or index fund. Set the transfer on autopilot every check so you don’t have to worry about it. Then just lean back, relax and let time and compound interest work it’s magic.
If you take away only one thing from this lesson, it’s that getting a refund is bad! If you are getting a fat refund every year, you need to fix that problem. Be smart, don’t lend Uncle Sam your money and get nothing in return. Now go forth and max out your money!
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