Helping You Avoid Life's Financial Mistakes

How Much Can You Really Cut Back Till It’s To Much?

September 3, 2008 By Leave a Comment

I recently reviewed an excellent article from yahoo talking about several different ways to save money and cut debt off the tough way.  Everything from selling your car to downsizing your house.  But what happens when you downsize to the point where just one more financial issue and you are over the edge?

With the fears of ressesion, the forclosure mess, and a stock market with more waves than a hurricane in the ocean the true question is how much can we really cut back until it’s just to much?

What do you do once you have already downsized the house and sold the car and still find yourself in the financial gloom?

So here are a few ideas that may help out. 

1.  Never give up!  No matter how bad the situation may get never give in.  Although it may feel as if you are trapped and the walls are caving in this is when you need to put your foot down. 

2.  Educate yourself.  You can’t get out of debt if you don’t know how.  Read books,  listen to tapes, and check out the Internet.  You might say that all cost money, but it’s free at the library.  Education is one of the biggest reasons most even got into debt.  You can even educate yourself on how to get out of debt right here.  You can sign up for are RSS Feed and review past articles, tips, and a polethera of new content being developed on a daily basis.  The thing about education is that it never stops.  The day it stops you stop growing.

So everyday learn one new thing about getting out of debt.  This don’t sound like much but if you would learn one new thing about getting out of debt everyday you would learn 364 new things that could help you get debt free and on the road to success that much faster.

3.  Put a debt free snowball plan together.    If you haven’t heard of this before here is a great article by No Credit Needed that illustrates this point very well.  The simple version of getting out of debt is pretty simple.  Anyone can do it.

4.   Pay yourself first.  Take a tip from the rich this is what they always do first.  Just like when you get your pay check and the first thing they do is take your taxes out the first thing you should do is take money from what you got paid and save it.  Remember it’s not how much you make but how much you keep. 

Save at least 10% back from your paycheck but if that is to much start at 1% and then gradually bump it up.  Then ever few months you can build it up a percent or two.

5.  Stay Focused!  This is again a tough thing to do but you can do it.  I am not going to reiterate this so just review my article on How to Keep a Debt Free Mindset.

Getting debt free is only as tough as you want to make it.  You can do it the hard way or you can do it the easy way.  The hard way you make a lot of mistakes yourself or you find proven ways that successfully helped people get debt free.  I like the second way. 

Finally, there is a long term way to get debt free and a short term way to get debt free.  The only thing for you now is to decide which is the right way for you.  Either way will get you there.  

Filed Under: Debt Managment Tagged With: , ,

How To Beat The Banks At There Own Game.

September 2, 2008 By 6 Comments

This rule that will set you free.

I have seen so many people make this mistake trying to get debt free but for some reason they just can’t break away from debts grip.  With all the rules about getting out of debt spending less than you make is one that if not followed will never get you debt free.

For example I know people who make $200,000 a year but as a result of spending nearly more than they make they barely break even at the end of the month.  It’s always been said that it’s not how much you make it’s how much you save. 

Being in financial service you could say I’ve seen it all or close to it.  I’ve known people who’ve had 15 plus credit cards, car loans, HELOCS, and whatever else you can think.  I have even seen situation where people had so much debt that even if they made all of there payments they still couldn’t break even at the end of the month.  So in this article I decide to break things down a bit.

Einstein called this the 8th wonder of the world.

What I am referring to is the Rule of 72.  If you haven’t heard of it don’t worry most people haven’t.   The Rule of 72 work regardless of whether you know it or not.  It can work for you or against you.  Here’s how it works.

Take any interest rate you are earning and divide it into 72.  This will tell you how many years it will take for your money to double in size.

For example, let’s say you have $10,000 in an account earning 4% interest.  If you divide 72 into 4 you get 18.  This means it will take 18 years to double your money.     Which means your $10,000 would turn into $20,000.   Then 18 years after that you would double again to $40,000.  Sounds great but it takes 18 years to double your money.

So what would happen if we would get 6%?

72 divided into 6 is 12.  Which means it will take 12 years for your money to double.  So if you had $10,000 with a 6% interest rate it would double to $20,000 and 12 years after that it would double again to $40,000.  Getting better. 

Now here is what most people don’t realize.  Just by getting an extra 2% interest on your money you will double your money 6 years sooner than if you just got 4% on your money.

So what would happen if you got 8%?

It only gets better from here.  If you divide 72 into 8 you get 9.  Which mean again that your money would double in just 9 years.  Just by getting 8% and not 6% your money would double 3 years sooner and 8 years sooner if you only got 4%. 

Now let’s illustrate this.   We’ll do another example to help you understand this a little better. 

AGE                  4%                       6%                       8%

25                    10k                      10k                      10k

34                                                                            20k

37                                               20k

43                    20k                                                  40k

49                                               40k                       

52                                                                             80k

61                    40k                     80k                        160k

Look at this chart for a moment.  If at the age of 25 three people set back $10,000 and earn the three various interest rates 4%, 6%, and 8% what would they end up with if they all retired at 61?  The person who got 4% only made $40,000 after 36 years.  Then notice the person who got 6% got $80,000 after 36 years.  Just by getting 2% more.  And finally, the person who got 8% got $160,000 after 36 years.  That’s $80,000 more than the person who got 6%  and $120,000 more than the person who got 4%.

WOW!  What a difference a little interest can make. 

Sound great but this can also work against you as well.  Lets say you have credit card debt and you are currently getting charged 18% interest.  Well 72 divided into 18 is 4.  That means your debt is doubling every 4 years. 

The big mistake.

The problem is that if you are getting charged 18% interest on your credit cards and you only have your money invested at 4% is it no wonder that most Americans can’t get out of debt.  It’s like you’re playing a game of tug of war, but you just can’t win.

How Banks Make Money.

This is exactly how banks make money.  Take a look at the chart again.  If the bank was charging you 8% on all of your loans combined after 36 years with you paying in on your loans you would have gave the bank $160,000 in interest. 

Now, if you had $10,000 in the bank in a CD at say 4% after 36 years you would have $40,000 provided you added no more money to it. 

Its pretty simple how the bank made its money.  They took your $10,000 that you invested into the CD and turned it into $160,000.  Form there they paid you the $40,000 they owed you and the bank keeped the $120,000. 

Hardly seems fair, right?

So what should you do?

Two things you should do to get on the fast track.

1.  Start paying off your high interest rate cards first.  Not your mortgage or car loans. 

2.  Review where you invest your money.  Talk to a financial advisor about possible investments that would be suitable for you. 

Just by doing those two things you can easily put yourself in a position to be on the debt free fast track and beat the banks at there own game.

Filed Under: Saving Money Tagged With: ,

How to Keep a Debt Free Mindset

August 28, 2008 By 2 Comments

Getting debt free is a tough challenge.  There are many obstacles to overcome.  Such as deciding how to pay off your debt, which debt you should pay off first, or for the least part staying focused.

 

But there is one challenge that you will face.

 

Can you handle the negative pressure that paying off your debt consists of?  Keeping negative pressures off of you while you are trying to get debt free is hard simply because debt is in itself is a negative word. 

 

Think about it.

 

What is the first thing you think about when I say the word “debt?”

 

I bet they aren’t happy thoughts for the least part.  Debt in itself is a negative term. 

 

So how do you hold off these negative feelings and get past it?

 

1.  You need to except that you are in debt and that you need to solve this problem before it gets any worse.  I have seen times where people literally believe that they can’t become debt free so they create more debt by getting more credit cards. 

 

You may think that isn’t any new advice but how many of us actually like to say we are in debt.  Much less admit we need help.  Some people can be very open about it but for the most part any client I have ever talked to never liked to mention it.

 

 2.  Stay away from anyone or anything negative.  If you are a negative person by nature then go on a negative free diet.

 

If you have issues with debt collection agencies calling you don’t talk to them.  Turn of your answering machine or cell phone.  These calls will only drag you down more.

 

Also stay away from anything written that is negative.  This could be an article in the paper or magazine, something on the radio, something on television, or even the statements and other trash you may get in the mail.  You can keep the statements but don’t spend a lot of time reading them.  A lot of times I find that just reading the statement can be an emotional energy drainer. 

 

This will be hard to implement just because most things generally are geared to a negative aspect.  With all the negative trash out there these days this will definitely be a test of your will. 

 

3.  Put an achievment poster together.  This is a simple picture which will show you all the exiting benefits you will receive once you are debt free.  This can be done on a big poster board all the way down to a simple sheet of paper. 

 

The idea is to put a list of things you will do once you are debt free.  If you want to go one step further type them out and then put pictures with each thing you will do once you are debt free. 

 

For example if your goal when you become financially debt free is to go on a nice vacation to Aruba.  Then find pictures of what it would be like once you achieved this.  Such as a picture of a couple sitting on the beach watching the sunset.  Then post it on your refrigerator or in a familiar place so that you will see it everyday.  This way it reminds you of what you will achieve once you get there.

 

4.   Have fun!  Being in debt doesn’t mean that you can’t have fun.  It just means you can’t spend money like you got holes in your pockets. 

 

They’re lots of things you and your family can do to have fun while trying to hold down extra spending.  You can go to the beach, invite a few friends over, or take a walk.  Those are a few things my family and I have done.

 

Get creative!  Make it fun. 

 

Last but not least.

 

Don’t wait to implement these ideas.  Start now.  Don’t just let this be another article you read, do it now.  I find somewhere between reading and doing most people get lost.  Maybe that’s why so many people just can’t get out of debt. 

Filed Under: Debt Managment Tagged With: , ,

3 Objectives this Blog will Help You Achieve

August 25, 2008 By Leave a Comment

Don’t be afraid to stumble a few times.

I started this blog for 3 major reasons.  Three things several million Americans are trying to achieve today.  With this blog I hope to take some of the mystery out of achieving these goals but first I feel it’s important to relay one important principle to you first.  Don’t be afraid to stumble a few times.

You have to stumble forward to win!

All the greatest achievers in history have one thing in common.  They didn’t give up.  They stumbled forward and got through the tough times.  They faced fear in the eyes and won. 

When Thomas Edison attempted to invent the light bulb he failed more than 10,000 times.  When someone said to him that he had failed 10,000 times to make a light bulb, Edison simply replied he didn’t fail 10,000 times he just found 10,000 ways not to make a light bulb.   Edison could have given up after the first try but he didn’t.  Just imagine if Edison did give up after the first few tries.  Where would we be with out that simple little invention today. 

That is just a brief overview of what stumble forward is about.  Stumble forward is about not giving up and pushing forward.  I was once told the only differece between a rut and a grave is the depth of the hole.  We all fall in a rut now and then but that doesn’t mean we’ve been condemned to a grave.

With that on the table Stumble Forward deals in three major areas. 

1.  Going beyond debt free.  This is a big issue lately in the U.S.  Did you know that there is more   consumer debt  today  than corporate and goverment debt combined.  We as consumers are spending more than ever.  For every dollar the average American earns we spend roughly $1.15.  No wonder most Americans are in debt up to there eyeballs.  That brings me to my next issue.

 2.  Becoming financial secure.  It’s not just about getting debt free.  Once you get debt free you have to build financial security or you will run the chance of falling back into debt.  With proper planning this can be farley simple.  Becoming financially secure deals with properly setting up an emergency fund and making sure proper documents are in place to protect you in case an emergency should arise.  Finally, once we have installed financial security you need to…

 3.  Build financial freedom.  Most Americans want to achieve this however most don’t.  We want to  fire are boss and be free from punching a clock.  To be able to run are own business and not have a boss breathing down your neck.  There are many ways to achieve this from starting your own business to proper financial planning.   Also, there are other great benefits I will talk about in future blog post such as tax benefits, time management benefits and of course personal benefits.  

Overall, going beyond debt free and becoming financial secure are the two biggest issues that will be covered in this blog.  The reason being because most American are facing these challanges more than ever.

Finally, do you want to help fight the war on debt?  Don’t let you or your family become another statistic and sign up to are RSS or via email and receive the best in tips and new content.

Filed Under: Uncategorized Tagged With: , ,
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