Time to Break the Piggy Bank due to a Financial Emergency
Do you know what to do if a financial emergency strikes all of a sudden at your doorstep? Well during this time people might feel the need to panic and begin to do irrational things with their money. For example doing cash advances with a 20% or greater interest rate. Emergencies usually are based on various levels to different people, and it is on you to assess things before running to one of the worst financial lending institutions like payday loans sponsored by a famous 90’s talk show celebrity. This article is going to be based on a fictional emergency level 7, which results in an emergency that is not life threatening. (Level 10 would be the highest level) Ok now let’s discuss the steps anyone can take to get out of the emergency and not to hurt ones wallet too drastically.
What are the 10 secrets millionaires live by? Well I will share what I have read below from various books, money magazines, blog posts, and by word of mouth. These secrets can be attained by anyone looking to do things smarter, better, and financially sound regarding personal finance. Did you know I have a direct line of contact with Warren Buffett? So he actually told me three of these awesome secrets. (I’m Kidding) The rest were found on a very trustworthy site like Reddit. No seriously keep reading as it is worth it to find out the fabulous secrets the rich use day in and day out to grow their wealth.
The secrets do not involve insider trading or being on a fancy executive chair position when Facebook buys your online company for billions. No they will be secrets that are actually attainable in life, and will definitely not put you behind bars. One of the secrets if you already read this blog and I’ve stressed from the beginning is deciphering the value and symbolism of money.
Pick up the Phone I have a message for You – Control Spending to Build Wealth
We all like to judge the football players who make a ton of money but then go bankrupt within 5 years after playing football. How about the lottery winners who go insane and crazy, buying all sorts of stuff to please their deprived hearts. But what is the root problem behind their personal finance choices? Why are they and the average person so bad managing money? Well I have a theory aka as I witnessed a few while experiencing some and now I can talk about why people spend out of control.
STOP SPENDING SO MUCH MONEY!
I have gotten a few windfalls in my lifetime, which includes bonus dollars from past employers and a small work related settlement. Now the amount I received is nowhere near the millions of dollars I hear athletes make, but for argument sake it’s all relative. My spending level broken down by a percentage might be equal to theirs, give or take a few zeros at the end of the big fat check.
Why people spend out of control? See below for the 6 reasons I found plague most people with spending excessively. (Be open to reading the facts affecting most people because it can hopefully help folks with money, many people will shy away and only publish happy go lucky posts. I feel differently on this matter and I know this is real truthful writing that can change behaviors.)
Investing in today’s marketplace is extremely daunting, the plethora of choices can make for paralysis by analysis. The most experienced investor can become contrite with all 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 on 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?
Hey have you ever seen millionaires driving around in Ferraris, wearing Gucci scarfs and rocking Louie V. sunglasses every day of the week? Do you stop to notice that the only people who are flashy are the TV entertainers because they are getting paid to promote a brand? Well I believe people who are flashy all the time in regular neighborhoods, are not making a living as entertainers in the public eye thus living above their means. People with self made wealth do anything possible to stay under the radar for the most part. I can attest that most millionaires care more about continuing their high income and assets far more than living a flashy lifestyle.
What experience have you witnessed with someone who is always flashy? Buying the latest things, just to say they have something new. Trading up cars every 2 years, because they want to impress others. I cannot shake the feeling that those people always being flashy equals them living above means.
The standard definition of flashy is -stylish and expensive-looking in an obvious or ostentatious way.
How serious are you about getting out of debt? Well if you follow the debt rules you will hopefully kick American Express to the curb and drown discover card in the fish tank. The secret to the debt rules I will share with all of you today is first a disgusting desire to be free from all of these imaginary bosses telling you where to send those fabulous green dollars.
Do you want to continuously fund the credit card companies profit margin or would you rather increase your household profit margin? I think we all know the answer to that question, but it will take a long time coupled with an intense commitment to complete your debt repayment journey. If you are willing to step up and live life far from the average person then follow the debt rules below I will lay out for all of you. I will tell you a few strategies and far from average methods, but ultimately it will all be worthwhile.
Getting a degree should be a blessing not a burden.
School Debt is the topic in everybody’s mind currently, including the media overhype about student loan debt being the next trillion dollar bubble to pop. I will give you my two cents on this topic and it should help you decipher how to avoid being a victim to the student debt crisis. I think everybody that has dreams of getting a degree should do it with the expectation that taking out loans is not smart money management.
Why do I say this with a straight face and serious demeanor? Because recent college graduates cannot get a sufficient paying job straight out of college to cover loans and all the expenses of life. If you are lucky to land something immediately after your educational stint, then it will serve you best to not have the burden of student loans because in the early years of employment your wages will be lower than somebody with a few years of work experience. See below for the basics about how to avoid educational debt:
The Basics of Financial Management: The Top 10 Car Rules
One of the biggest money drains on a family’s budget; car costs. The old loyal car is the machine that makes your life that much simpler. It can take you from point A to point B in a flash, but at what costs will you pay for that convenience. If you do not know how to handle this money pit based on smart money management then you have arrived at the right time and right place. This advice is going to leave you wondering if having a car is worth it because it takes such a big chunk out of the budget. For a quick example add up the money you spend in a month to maintain the nice old dune boogie and write it down. All of the categories below should not add up to more than 15-20% of total monthly income. If when you add it you are at 30% when compared to income some changes must take place because it is not financially smart.
I have heard a few horrid stories of 20 something year olds who drive a car with a 500 dollar loan payment, 250 insurance, 200 in gas, 150 in cleaning costs, etc. That is $1100 hundred bucks going to waste month after month to drive in style. This young person should be earning $7 grand a month in order to effectively afford those high car expenses I just mentioned. (7,000 x 15% is 1050)
Just imagine if you invested that $1100 a month for a year, it adds up to $13 thousand a year. That is a sizeable emergency fund or initial investment amount that can grow year after year. Let’s assume that person drives 1250 miles per month or 15K annual miles. The cost per mile is .88 cents per mile. (This is not even including additional service fees / depreciation) If you add up the total costs it will be closer to 1.10 cents per mile driven. (I don’t know about you, but I don’t have an extra 15-20 thousand lying around to throw away on a piece of machinery)
Car Expenses Categories:
Car Note (Loan)
Car Insurance
Gas
Maintenance
Accessories
Cleaning
The Top 10 Car Rules:
Do not purchase a car that is more than 20% your annual income
Do not get a gas guzzler unless you can easily afford the gas bill
Do not let all the expenses for the car including maintenance exceed 15% monthly income.
Do not get a car to impress others (Getting a SUV that is 100% X annual income-not smart)
Do not get a New Car unless you are willing to lose 5 grand + in depreciation
Do not get a navigation package (cell phones can give you the same service for free)
Do not get car dealer financing or a Lease (Pay for it all in cash is best)
Get a used car if you are still building Wealth (Under the Radar Millionaires always buy used)
Never go to Car Dealer’s for service (Find a reliable/trusted Mechanic)
If you have a car loan, pay extra every month to eliminate the debt
Ok if you follow the car rules above and never break them, I believe you will be better off than 90% of the drivers on the road. Why you ask, because people are not making the right choices when it comes to a depreciating thing like a car. They overextend themselves and completely erode their monthly cash flow by breaking all the rules above. For example why pay 2500 extra to get a navigation system when you can easily set up the smart phone or standalone gps to get you where you need to go for free.
That kid that just graduated college wants to show off and get a BMW or Mercedes that equals 100% of his income. At that rate it will take him 7-8 years to pay it off plus a ton of interest. The time will come when you can truly afford a luxury car, and that time will happen when you do two things. Increase income and or save the complete amount in a car fund to not take out any car loans. The rules are made to protect you and help you grow your knowledge regarding financial management. If you follow these car rules you will have the ability to grow your money and not hurt your chances at retiring early. By taking all the extra money you are now saving due to smart choices you can invest it and watch it grow.
Comment if you have any suggestions to add to the top 10 car rules?
PS: Car Leasing is the worse car rule you can ever break!
