The Financial Road Less Travelled

Today’s blog post title comes from the book, The Road Less Traveled, by Scott Peck. I’m putting a financial spin on his title. There are many financial roads you can travel. The most traveled road in today’s society involves carrying credit card debt, HELOC – home equity line of credit, and just being neck deep in debt. The financial road less traveled involves those who do the following:

  1. Live on a Budget – too many people don’t have a clue where their money is going month to month. If you don’t tell your money where to go, you will wonder where it went.
  2. Save up and pay cash for vacations – too many people in our society fund their vacations with credit cards and lines of credit.
  3. Save for Retirement – 52% of Americans have less that $10,000 in their retirement funds. This will not cut it. Americans are living longer lives. Social Security benefits could be less for the next generation. Not preparing for retirement can create a shipwreck when you reach retirement age.
  4. Being content – Our society’s marketing strategies are always pushing us to spend money on the next new gadget. If what you have isn’t broke, don’t replace it. You must learn to live within your means. You must say no to adult peer pressure. There will always be someone who has more than you. Know what a need is. Know what a want is. Spend only on needs. Comparison is the thief of joy.
  5. Teach your children about money – It is not up to the schools to teach your child about money. You are your child’s primary teacher. Your values are caught more then taught. You need to teach your child about spending, saving, and giving.
  6. In summary, you need to know what financial road you are on. If you find yourself following the crowd and saying yes to impulse purchases, you are probably on the road most travelled. You don’t have to stay on that road. You need to control your money and not let it control you. You need to live by your own values and not those of others.

19 Ways To Win With Money

Here it is. My quick list of ways to win with money.

  1. Spend less than you make.
  2. Invest early.
  3. Live on a budget. For a great free budgeting program go to: EveryDollar.com  All you need for set up is an email and a password.
  4. Don’t compare your wealth to others. Make goals that match your values.
  5. Make a very high income.
  6. Write down your financial goals.
  7. Work hard.
  8. Be disciplined. See my previous post.
  9. Save 10% of your income for retirement.
  10. Be united with your spouse about money.
  11. Educate yourself about money.
  12. Be content.
  13. Know your values.
  14. Create passive income streams.
  15. Invest in Real Estate.
  16. Own a business.
  17. Give to causes important to you.
  18. Define your financial priorities.
  19. Treat debt like a dreaded disease. Use the snowball method to attack your debt.

Book Review: Stop Acting Rich

I just recently read the book, Stop Acting Rich…and Start Living Like a Millionaire by Thomas J. Stanley. He shares tons of statistics about millionaires and millionaire wannabes. He calls those who act rich ‘aspirationals.’ These are folks who have little in investment wealth but wear the badges of wealth anyway. He shares that aspirationals very seldom become millionaires because they can barely afford driving the status symbol cars (Mercedes Benz, BMW, Porsche). Many aspirationals finance such vehicles through leasing because they cannot afford to purchase/finance the total cost of the vehicle. He calls someone a millionaire someone whose total net worth is 1 million dollars and only 1/4 of that wealth includes home equity.

Below are some telling quotes from the book: What percentage of the millionaires who live in homes valued at under $400,000 are happy? More than 9 in 10 (91 percent) indicate that they are extremely satisfied with life. Yet only 1 in 20 has a wine collection. Happy people tend to live well below their means. I have found this to be the case in all of the studies I have conducted.

The demographics of this group, millionaires who live in homes valued under $400,000, are quite similar to those of the millionaire next door profiled 14 years ago. Ninety-two percent are married. In 90 percent of the cases, the male head of household is the major breadwinner. Fully 62 percent of those who are married have never have never been divorced. The median value of their home is $293,214. Their median realized household income from all sources in 2006 was $152,193, or more than one-half the current value of their home.

This book reveals that hundreds of millionaires live way below their means. While they could afford to live more extravagantly, they simply feel no need to impress others. Their satisfaction comes from high levels of achievement. The author warns to not fall into the trap of becoming an ‘aspiration all.’ These are folks who are consumed with appearing rich while their balance sheet (investments) reveals they are in fact not millionaires. The book also reveals that millionaires are generous people. There is a strong correlation between donating to charitable causes and overall satisfaction with life. In conclusion this book is a good read if you want to know how millionaires live lives of value. You will find that many millionaires live below their means and invest wisely. I liked a quote from Henry David Thoreau shared in the book: “That man is richest whose pleasures are cheapest.”

PF Roundup #1

 

Planting Money Seeds shares  how to achieve your investment goals.

Over at Money Manifesto he shares that delayed gratification is the key financial success.

Blonde and Balanced shares how to avoid rookie investment mistakes

Wise Dollar share 4 simple ways to start investing.

Financially Blonde reveals the role of desire in reaching your financial goals.

Dough Roller shares how to invest your first $10,000.

Over at Paying Debt Down he shares top 10 tips for couples to plan their finances together.

Managing Money & Marriage

Managing money and marriage can be a delicate endeavor. Timing is important. Discussing a major financial decision right before bed may not be a good idea. My spouse and I made a pact to not discuss money on Sunday (God’s day) because we don’t want to set the day off in a negative direction. You also have to have money boundaries that work for the two of you. The two of you may decide on an amount of money (fun money) that you can spend without having to discuss it. Trying to micromanage your spouse’s spending is not going to have a positive outcome in most cases. It’s also important to discuss money goals. What do you both want to accomplish with the money you earn? Have you discussed retirement? Do you have adequate life insurance? If you have children….are you planning for college expenses? Do you have a budget? Which one of you crafts and maintains the budget? Not talking about significant money issues will NOT solve the problem. It’s not just what you say but HOW you say it. If things get too heated it’s OK to call a time out as long as you agree on another specified time to discuss the issue. Remember you are on the same team. Have you merged your two paycheck into 1 checking account? Do the two of you operate from separate accounts? What bills get paid from each account? The two of you may want to have a Money Date. This is an opportunity to discuss money issues specifically. You don’t have to go to a restaurant.  You can have the date on your front porch if you wish.

Money Talk Guidelines:

  • Use a civil tone of voice
  • Discuss one topic at a time
  • Agree to research a topic and bring it back later
  • Don’t play the blame game
  • Take responsibility for poor decisions
  • Be willing to forgive each other for mistakes
  • Be consistent in scheduling money talks (at least once a month)
  • Listen closely to each other
  • Remember that you both are on the same team

Discussing money issues in your marriage can be both challenging and rewarding. It is my hope that suggestions in this post can help guide your money conversations. What talking tips could you add to my list? Feel free to share your tips in the comments.

Giving Away Your Money

Many personal finance blogs give much attention to earning, investing, saving and managing money. Today’s topic is giving away your money to meaningful causes. What is a meaningful cause varies from person to person. There are literally thousands of non profits to donate money to. If your faith is an important part of your life you can give to your local church. Why should you give your money away? You worked hard for it and the choice to give some of it is a personal decision. There are no doubt millions of families and children that are far less fortunate than the typical American family. I just read on http://Www.pretendtobepoor.com that almost half the world’s population lives on less than $2.50 a day. We would be well served to take time to count our blessings to live in the U.S.A.  However, you don’t have to go beyond our borders to find those in need. I work in a local school and it well known that 1 of 5 students in U.S. Schools is food challenged. Take a minutes to count your blessings. Take another minute to ask yourself how you may give to others. Expressing gratitude is a worthy action in your life. If you are concerned about where your donated dollars go a great site to visit is http://Www.charitynavigator.org There is a search box where you can type in your charity of choice and see what amount of each dollar goes toward administration, program expense, and fundraising. Charities are given a 1-5 star rating. Giving money to great causes can be a great experience when it comes to blessing others. If you have a family taking time to discuss giving as a family can prove to be a valuable endeavor.

Do you give to causes that are important to you? Please share how you give money in comments.

 

 

Know Your Retirement Options

It is imperative that folks know as much as possible about their retirement options. Not knowing your options can have negative consequences for your retirement income. Every day you fail to educate yourself and take action can cost you thousands upon thousands of dollars in retirement dollars. There is a lot to learn about investing for retirement. This post will give you specifics on many retirement options that are available.

Below are some retirement account options for Business, Government and Nonprofit:

1) 401K  Private company employees are eligible for this retirement option. Your maximum contribution for 2016 is $18,000. Employers often offer matches that range from 1%-6%. If you are 50 or older you can catch up by contributing an extra $$6000 a year. Your usual investment choice is mutual funds.

2) 403(b)  Employees at nonprofits and state and local governments are eligible for this type of investment. The maximum annual contribution is $18000 a year. Employer match is typically 3% to 5% of pay. If you are 50 or over you can contribute $6000 more each year. Invesment options for this investment type is mutual funds or annuities.

3) 457  Some government and nonprofit workers are eligible for this investment. Maximum annual contribution is $18000 a year. It is rare to get an employer match with this type of account. If you are 50 or over you can contribute $6000 more a year. You usually get a menu of mutual funds for this investment account.

4) Thrift Savings Plan – This is for federal government employees, including the military. Maximum annual contribution is $18,000. Employer match is 5% for those in the Federal Employees Retirement System. Annual catch-up if you are over 50 is $6000. Your investment choices are 10 funds, including 5 target-date funds.

Below are some retirement options for small business employers and employees:

1) SEP-IRA  Small business employers and employees are eligible for this option. You can contribute 25% of your salary, up to $53,000 (same for all personnel). All employer match contributions come from the employer. There is no annual catch-up but contributions are also permitted after age 70 1/2. All funds offered where account is held.

2) Simple IRA Maximum annual contribution is $12,500. The match is 3% (or 2% employer contribution to all employees). Annual catch-up starting at age 50 is $3000: contributions are also permitted after age 70 1/2. You have a menu of mutual funds to choose from.

3) Solo 401K  Sole proprietors and their spouses are eligible. Maximum annual contribution is 25% of profits plus $18,000, up to $53,000. No employer match. Starting at age 50 catch up contribution is $6000. All funds are offered where account is held.

Below are some funds for individual investors.

1) Roth IRA  All earners making less than income phaseouts are eligible. The Roth IRA income phase-outs for single tax filers is $$117,000-$132,000. The Roth IRA income phase-outs for married jointly filers is $184,000-$194,000. Maximum annual contribution is $5,500. Annual catch-up starting at age 50 is $1000. All funds offered where account is held.

2) Traditional IRA  All earners are eligible for this retirement account. Maximum annual contribution is $5,500. Annual catch-up starting at age 50 is $1000. Usual investment options are all funds offered where the account is held.

I hope that the above information gives you help in knowing what retirement account options are offered with your current employment situation. Remember: Nobody should care more about your money than you. Continually educate yourself about your financial opportunities.

 

PF Roundup

There are lots of good PF posts out there in the blogosphere. Below are some gems that I happened upon recently.

http://www.frugalrules.com/mind-your-money/ shares that nobody cares (should care) more about your money than you.

http://eyesonthedollar.com/why-higher-income-doesnt-guarantee-financial-success/ reports how higher income doesn’t always equate to financial success.

http://ptmoney.com/budgeting-for-unexpected-expenses/ great read on how to conquer the financial “unexpecteds” in your life

http://www.goodfinancialcents.com/passive-income-ideas CFP Jeff Rose shares 23 ways to create passive income.

http://www.goodfinancialcents.com/5-ways-to-prevent-your-70-year-old-self-from-hating-you/ Jeff Rose shares some valuable tips on thinking about your future financial self.

5 Simple Financial Truths Smart People Tend to Forget