The Best Excuses Why People are in Debt

 

THe Best why people are in debt excuses

Do not let Excuses get the best of you.

How many excuses have you heard regarding the ability of people to get out of debt? I will feature here The Best Excuses Why people are in Debt. I believe those excuses are a way for individuals to place a barrier around not confronting the person in the mirror, and ultimately how that debt should be eliminated.  I have read some of these and I have heard people actually say these to me. Now the people that said it to me, instead of giving excuses, did it ever occur to you that its easier to just asked for help with the debt.

The thing is I feel that they are not ready for the financial help. It takes hard truths and real struggle for people to change. Plus people might feel ashamed to disclose their entire financial disaster, and finally what they really owe. If you find the right mentor, they can steer you in the right direction how to tackle the debt monster. I feel their are so many methods, but the two most widely used methods that come to mind are the Debt snowball and the Debt avalanche. See Below for The Best excuses why people are in Debt.

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The Best Excuses Why People are in Debt:

I will only use credit cards to buy the things I need. (Need List is very long)

I will always have debt, something always comes up. (Umm Wrong)

I can never find extra money at the end of the month. (Really)

I work hard to play hard. (Dumb Statement)

You can’t take it with you, when you die. (Of Course Not Genius)

The rich have debt as well. (Only the Dumb Ones Do)

Just enjoy your life, your still young. (Live for 45 years with debt is what your saying)

My interest rate is too high or I have a 0% rate. (Ok you still owe MasterCard)

The kids “Wants” are more important than paying off debt. (Live in poverty, nice lesson)

Live in the present (Really Means live with debt)

I don’t know how to get out of it. (Read a book)

I only use credit cards for rewards.

I can use my next tax return to pay it off. (Not happening)

I can’t tell my family No, so we will continue to live life. (Aka above means)

I can’t pay off the full balance every month, only the minimum. (Not enough focus)

I won’t pay this month; maybe next, I have to save the money for vacation. (In Denial)

I know it might be hard to be free of debt and nobody is perfect when it comes to personal money management. But for the love of God stop using these excuses, you cannot possibly believe that debt will be around forever. Tell the person in the reflection No, anytime you want something you can’t afford. It is that simple. Save up for anything you want later and wait till you have the cash.

Comment the best excuses why people are in debt you ever heard and I’ll add it to the list.

 

Rich Uncle EL

PS: If you can’t remember a debt excuse, just copy and paste the best one from the list above.
Pic credit to FreeDigitalPhotos.Net

The New MyRA Account

The new MyRA Account

The MyRA Media Talk

There is a new account that the government will be releasing soon to entice people to save more money. Its called MyRA and it obviously stands for My Retirement Account, I must say it is very catchy phrase. The government is backing it with full faith treasury bonds. Does this mean the government will take on more debt?

The New MyRA Account:

Employer must sign up for the program

You must have Direct Deposit

It will have a 191K household income limit

There is no match and you can put in up to $5500 a year.

It is not invested in the Stock Market aka No Risk

The funds will be invested in Govt. Bonds aka like TSP Plans

$25 minimum investment to start

You can contribute to a MyRA and 401K and other retirement accounts offered

If the account reaches 15K or 30 years, then it must be rolled into a Roth IRA

Expect to earn around 1-3%, with no loss to principal.

You can withdraw funds at any time with no taxes or penalties (Emergency Account)

Must wait till 59.5 to withdraw any earnings on money with no taxes or penalties at all.

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Is it better than a regular savings account at a bank, yes. (Anything is better than .25 interest rates) But how different is it than just buying regular government bonds on the treasury direct website? Well the main difference is the tax implications I assume. For bonds purchased directly you have to pay taxes on any interest earned in the time frame you held the bond. Given that Americans are saving less than 5% based off annual income, it is a step forward to help people save more. This will also hopefully help millions avoid living a paycheck to paycheck life.

One of the negatives I see is that you have to roll it over to Roth IRA when it reaches 15 thousand, that shouldn’t be the case because maybe people want to be diversified and not have so much risk in the equity markets. Another negative I see is that if they want people to save more dollars, why not offer an interest rate plus inflation protection. So every year the MyRA should match what inflation was that year and then give an addition 1-2% above in earnings. This to me makes more sense, instead having millions of citizens lose purchasing power with the money invested in MyRA. In any event be on the look out for this program to be enrolled at your employer towards the end of 2014.

Comment if you have heard any news behind the new MyRA account?

Comment if you feel this will be a good or a bad thing for your finances?

Rich Uncle EL

The Last Hundred Dollars

 

The last hundred dollars

Look at that nice crisp Hundred Dollar Bill

In this new series going forward, I will share what were the last things that I spent a hundred dollars on. Imagine if you had only a hundred dollars to your name, what would you spend it on? The last hundred is a way to lighten up the financial blogosphere with something unique. Yeah I could give you a bunch of boring spreadsheets showing my monthly net worth, but that’s been done a thousand times over. Also part of me is still hesitant to fully reveal my financial numbers in all its lowly glory. What will this accomplish, maybe nothing. But it sure is exciting to see what people spend money on, don’t you think.

Spring has arrived on our door step, and it’s time to shift focus towards doing more activities outdoors. Spring also brings Easter, mother’s day, father’s day, and one birthday for my family. Which means that money is sure to leave my pockets for a good cause? Now I want you to think about what new fun and exciting things you could do this spring? I feel it is not to bad to drop a few dollars on experiences for the family, so that’s why I allocate some savings for that purpose. When I say this I don’t mean going to the mall and getting some fast food at the food court while you window shop. I mean finding an outdoor photography class, or a city tour, or maybe you can visit a few popular tourist spots you have not witnessed in your area. The final point I’m trying to make is that money will be spent, but you can control if you spend it wisely or foolishly.

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The Last Hundred Dollars:

-Movie Tickets for the family (25) – This was a steal of a deal as the Mrs. Rich gets an employee discount for Movie Tickets. We will use it to see the next animated Disney or DreamWorks movie release. We have not been to the Movies in a while now, and I am hoping the lil ones can finally sit through a full 2 hours of a cinematic experience.

-Sneakers for one of my daughters (20) – I found a good deal for a nice pair of high top converse sneakers. She enjoys her converse look and I know she needs it. This pair will last her hopefully a full year.

-Taxes Prepared Online (18) – I think this is a good deal to prepare my federal and state taxes electronically filed. I don’t have complicated info, and I can easily handle it. It will probably get to complicated in the future, when I will eventually own a primary house, a rental house, buying and selling dividend stocks, and business income. So when that time comes I will just pay someone else to handle that for me, as time costs money. Plus I don’t want to add additional stress to my already busy life.

-Random Grocery Items – (37) – We all need food to survive and guess what my local supermarket likes taking my cash in exchange for some great healthy meat, fruits, veggies, and other misc. pantry items. I’m going to put my chef hat on and whip up a few meals.

So this concludes my Second series on the last hundred. See the first one here. Ben franklin is still crying all the way into others hands, but at least it was for a good cause. I got to give a little, save time by E-Filing, and also will experience a new memory with the family. (Movie Tickets)  I wonder with a thinking man pose, what did you spend the last hundo on? Do you want to be brave and reveal it below? I will be indebted to you and honored if you would volunteer below. Thanks.

Comment on what you spent The Last Hundred Dollars?

Rich Uncle EL

PS – The figures above are rounded up and down to eliminate the geekiness behind adding decimals.

PPS – If the figures don’t add up to a hundred you suck at math.

Road map when in Financial Despair

road map when in financial despair

Find the Path for your Money!

Many people have a do first then learn later lifestyle when it comes to personal finance, but what if we propose learning before we take action. First off the purpose of the post is to educate and help anybody before getting into financial despair. But if you are already at that point then you might want to buckle down to change your life immediately before digging yourself in a deeper hole. Did you know that the number one reason for bankruptcy is emergency medical expenses here in the US? Another reason is loss of employment that can leave a family in financial ruin. Now I ask you, do you have a road map when in financial despair. I hope you do, but if you don’t then keep reading as I will give my best to provide you the tools you may need to overcome any financial obstacle.

See below for the roadmap when in financial despair.

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Pay these Necessities when money is scarce in the order below:

  1. Utilities – Heat & Lights & Water
  2. Food – No Steak or Shrimp, Use $$ wisely
  3. Rent & Mortgage – Keep the landlord happy
  4. Transportation – Gas & Any Car Payments
  5. Insurance – Medical Only
  6. All debt – Snowball Method
  7. Clothes and Toiletries. – Only if needed
  8. Any Other Necessary Bills

Now with each step your money should be directed efficiently and do not move on or jump any steps. People get into trouble when they pay step 6 first before step 3. Always make the credit cards wait, and handle food and rent first. Many people pay the credit card companies first for fear of defaulting, but it should not be that way.

Random Financial Action Plan:

-Do you owe the tax man 30K in back taxes? – If this is you right now you must allocate any extra money you have to pay them as soon as possible because the IRS charges penalties and late charges that can really add up. After you have taken care of the most critical life necessities this should be next in line above any student loan or credit card debt.

-Do you owe the same amount in credit card debt as your annual income? Well if this is you I feel horrible to tell you that your best bet might be to file bankruptcy if you do not have a way to make extra income. The only way to avoid bankruptcy in this situation would be to sell something big like a car or a home to pay down 50% of the debt. If the debt is less than 50% then it might be manageable enough to do the debt snowball.

-Do you owe 100K+ in Student loans? – This is one of the worse scenarios because student loans are not allowed to be discharged in bankruptcy, so the best route of attack is to pay it down really fast with big payments. Begin paying it before you graduate and get an extra job to tackle it before having kids and or starting a family. Keep living the college lifestyle after you secure the first full time job out of college to help with debt payments.

-Do you owe more on your car than it is worth? – If you can manage the payments without taking money out of your food budget, then continue to pay it off. If it is too much to handle then sell it and pay the difference in the amount you owe from savings. If you do not have the savings then get a part time job in the meantime to cover the shortfall, then sell when you have the savings in hand.

-Do you feel your money can’t cover all monthly living expenses? – If this is where you are financially, only three things can help you. First thing you should do is cut off anything not necessary, cable and gym memberships. Second get another job or increase income someway. Three use any savings as a barrier against adding new debt to alleviate cash flow concerns. Going forward if you do these 3 things you will find your money will last till the end of the month.

-Unemployed and Benefits will run out soon? – Ask the agency for an extension and provide proof that you’re actively looking for work. In the meantime develop networking skills and reach out to old employers. Cut back on anything not necessary and save as much as you can in the interim. Get a part time job in the nights and volunteer in the mornings. That volunteer gig might turn into an employment opportunity.

Comment if you are now more informed with the road map when in financial despair?

Rich Uncle EL

Pic provided by Freedigitalphotos.net

When is Enough really Enough

 

When enough is really enough

Time for a change

In society I have witnessed many examples to question the satiation of people. When is enough really enough? I ask this every time I come across a perfect example of people wanting more. Why the thirst is never really quenched, I often ponder. Is it an environmental issue or an individual issue based on upbringing? I am ready to give you a few examples of people who do not know the word enough or the feeling of being satisfied with what they already have in life.

When is enough really enough:

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People taking vacations every year while still in debt. (Hey didn’t the vacation you took 6 months ago satisfy you enough – guess not)

People finally paying off their cars, then immediately running to the dealership to upgrade the paid for car for another car payment. (Why must you be so smart with money- Sarcasm?)

People getting 8 running shoes or high heeled pumps to really impress the masses. (I believe two to three sneakers or shoes is sufficient for your wardrobe needs)

People expressing discontent with money issues, but continue to open a 12th credit card. (They want more stuff or they might be using credit cards as an emergency fund-HUH?)

People constantly going to the Mall to kill time. (If you don’t want to be tempted, why hold hands with a temptress)

People desiring the newest gadgets. (The iPhone 8 does exactly the same thing as iPhone 7, except for one “I must have it feature”- Really?)

People Leasing away their cash flow because they can’t afford a car – (I can’t understand why anybody would pay for something for 4 years to then give it back)

People continue to set resolutions and never complete them – (Complete goals to get ahead)

People continue to play the Lotto, when they really know they won’t win. – (You have a greater chance of dying while driving-Sad but True)

People can’t hear your advice, because they know so much. (They have never read any PF finance books, Umm so tell me again how you know so much)

These are a few examples of the personal finance smarts roaming the blogosphere and everywhere in modern society. I am guessing the fast paced world with “super marketing tactics” influence to a degree individuals to never grasp the enough mantra. I am ready to happily provide these folks, who do not know their own limits, the tools to break the damaging personal finance cycle.

The secret is to have patience and will power with the ability to read a few personal finance books.

Comment if you understand when is enough really enough?

Rich Uncle EL

The Investing Rules

The investing rules

The best investing rules

Investing in today’s marketplace is extremely daunting, the plethora of choices can make for analysis by paralysis. The most experienced investor can become contrite with the choices. Just imagine somebody without any experience in investing and how hard it may be. Because of this issue facing many not familiar with investing, I developed the investing Rules. The rules will be there for many to follow as a guideline. This is an informative post on how to begin and what might be a financially smart path for you.

The first investing rule never invest more than the employer match in 401K when in debt. If you have a budget that allows you the ability to allocate $100 dollars a month to invest in after tax brokerage accounts and another $300 towards student loan debt. Yes you will be growing your net worth month by month and reducing debt month by month. The normal way of thinking behind this scenario is that you are paying down debt to the tune of 3 times what you are investing, and you might not see a problem with this process. The behaviors you are displaying are good, but they are also not the financially smart method. Why, you may be asking?

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First off let’s say that giving the $300 dollars a month to the student loan gets you out of debt in 60 months.Did you know that if you instead gave $400 dollars towards the student loans and stopped investing until you were debt free that you could potentially save thousands of dollars in interest? In addition to those savings you could be debt free 15 months sooner with the higher monthly amount, which can give you a motivational boost. Now many financial gurus might tell you to stop contributing to the 401K completely during the debt repayment phase, but I say do what makes you comfortable. Never turn down free money is a great mantra, but for debt freedom it makes sense to stop it temporarily.People see the most gains when they focus on one goal at a time, and with debt out of the way people can really invest some dollars afterwards.

Once you have completed the debt repayment then you will now increase the 401K to 10%, and invest another 10% in after tax brokerage accounts. This way you will be covered if you want to retire prior to age 59.5, the legal age where you can take out retirement funds penalty free. I want you to look into a mixture of 60% stocks, 20% bonds, and 20% international. This allocation will give you a good balance without too much risk.

The next rule is to be mindful of expenses. The best way to place investing dollars will be 5% in economical ETF’s, Index funds, and mutual funds. This is the easiest way to be fully engaged in the broad based market and not have to pay a large amount of money in management fees. The other 5% you will place in one dividend stock you have faith in and that is currently in the dividend champion list. This is the list of companies who have been successfully in business for 25+ years and have been paying dividends for 25+ years as well. I want anyone to find a systematic way to invest in a stock quarterly or semi-annually and always reinvest the dividends to maximize growth. The reason you do want to avoid monthly investing is to reduce trading costs. When you reach a goal of 100-300 shares within that stock then you will move on to the next stock and start the process over. (200 shares is a good threshold for me)  Obviously it all depends on the price of the stock, as higher priced stocks might take a longer time to build up than lower priced stocks.

Another investing rule is to never put all your eggs in one basket. Do not invest 100% in your employers stock or do not invest in a single stock or mutual fund in the long term. For example if you invested all $400 dollars into Coca Cola for 5 years into the future and are giddy with the amount your investment has been growing from 1 share to 500 shares, you might be tempted not to get off the gravy train. But I will advise you to get off because placing all your funds and faith into 1 company is very risky. The success you had was great, but one thing that people tend to forget when they are making money with stocks is what goes up eventually must come down. It’s time to diversify into a different sector of the market.

Now you have been debt free for 5 years, and have 500 shares of Coca Cola. Where can you place your new money for a better financial position in the future. Well Coca Cola is in the Food & Beverage sector of the market, and now you must consider moving into a different sector as mentioned above. What are the choices for all investors to consider? The sectors of the US stock market to name a few include Financial, Defense, Energy, Telecommunications, Technology, Utilities, and Industrial.  By taking a good approach to sector management you might get a diversified consistent rate of portfolio growth. The total number of sectors available is 30 different ones to choose from. It’s important to have the confidence to be able to select the sector you would like to invest in.

The last rule to ingrain in your mind is that investing is a long term process. Keep buying shares until you are either satisfied with the size of the portfolio or the investments can cover your expenses with dividends.  Always maintain a 10-15% buffer above and beyond future expenses, where your investments will still grow to help with future inflation costs.

Now with a balanced portfolio of 401K funds, ETF’s or Index Funds, and Dividend Stocks anyone can be in a better position with investing. The point is to get started and stick to a plan. After 20 years all your accounts with a bit of luck should cover all expenses and more. Now all that’s left is for you to experience extensive overseas traveling.

Resources:

Sectors

Dividend Champions

Comment on the investing rules?

Rich Uncle EL

What’s your coffee really costing you?

 

What's your coffee really costing you?

Where do you get your coffee fix from?

The daily coffee addiction might seem like a small price to pay for being alert at work. That rush you feel is not a trick, it actually wakes people up. Before you drive up to your local Starbucks or Dunkin Donuts, think about what’s your coffee really costing you over your lifetime. I believe we all should drink coffee from wherever we prefer, even if it will cost you $4 dollars a cup. Obviously your money is for you to spend, but I want to give you some details as to the real cost behind this daily morning ritual.

The average person has two cups of coffee per day and if you multiply that by the entire 243 million 18 and over adult population, then you get a staggering 486 million cups of coffee per day. If everybody in the US went to Starbucks for their daily fix, it would be the most profitable company in the US.  Now let’s discuss the facts. I will show you if you brew your cup of coffee at home and invest the difference in expenses how much you can save. In addition to the savings how much your savings will grow over a 30 year time frame invested in a US stock mutual fund?

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 What’s your coffee really costing you?

Coffee per month Brewed at home Dunkin Donuts60 cups x $1.80 Starbucks60 Cups x $4 Investing difference
2 x 30 = 60 cups $12 $108 $ 240
Starbucks 240-12=228 -228
Dunkin Donuts 108-12=96 -96
Savings 228 96 Dumb
Total $ Compounded after 30 years $340,000 143,000 0 money
 

 

Now that you see the results to the figures above if you take the difference between spending $240 a month on Starbucks or brewing coffee at home at 12 dollars a month, you get $228 dollars that can be invested in the stock market. The difference invested after 30 years at an 8% return on investment you will get $340,000 thousand dollars. Now I get it maybe the Starbucks people are already investing $400 dollars a month and still spending the $240 a month on coffee, those people are doing just fine, and you should still do as you please. Because you are investing, thus making you financially smart already. But if you do not invest any money, and still continue to go to Starbucks and spend on a monthly basis $240, then it is not financially smart.

The info is not to change your coffee fix, but to show you that when you invest you win. If you want to buy coffee at Dunkin Donuts for $108 dollars a month that’s fine, but you should be investing at least $216 in investments a month. That way you are doubling your coffee expenses and putting it towards the future. It ultimately shows that you care more for your future than a dumb cup of coffee. Many young people are so happy to place cups of coffee on social media, and never invested a penny for their future. This is what I want my readers to grasp; it is not financially smart to be wasteful.

If you take information like this to heart you can see that being irresponsible with money will cost you over a specific time.

If you can take away one thing from this post it is to invest or pay down debt more than you spend on coffee.

Resources:

Census Data

Financial Calculator

Coffee Stats

Random Facts:

4 Billion is spent importing coffee

18 Billion is spent on specialty coffee consumption

That’s 14 billion in revenue companies are making off consumers.

Comment if you have any info as to what’s your coffee really costing you?

Rich Uncle EL

 

*The US daily coffee consumption figures are estimates and not actual figures, they are given only as an example.