Joe's Money

I hear a case of living beyond your means just about daily.  The entitlement factor in this country is unreal.  You need to get realistic and buckle down your finances.

Unfortunately, most people in our society have been brought up to live beyond their means.  We are surrounded by images and videos of people living extra large lifestyles that are simply out of reason for most.  Growing up with the constant barrage of the rich and famous, has created a society that not only thinks they need this lifestyle, but think they are entitled to it.

When growing up, most teenagers spend their parents money.  Unless they are working, they are likely spending their money on frivolous things like fancy clothes and electronics.  According to statistics, only about 42% of high schoolers find paid employment.  According to the statistics, less than 50% of teens are working, so their parents are funding their popularity contest.  They are simply keeping up with the teenage Jones’s.

Unfortunately, this upbringing sets the teenagers up for failure later in life.  They are taught that at no matter what expense, they must appear to be keeping up.  This is proven by their average credit card debt of over $5,000 for age groups 25-34 year olds.  Had they been taught the value of the dollar at a younger age, perhaps the frivolous spending would have stopped.

The worst part of this ridiculous spending spree is, that age is not a factor.  The statistics are similar for just about all ages.  Many books state the same.  The more you make, the more you simply spend.  Doctors, lawyers, and the like are all chasing their tails with the fast food burger flippers just on a different scale.  If you earn $20,000 per year, maybe you spend $10,000 on keeping up with the Jones items.  If you’re making $100,000 per year, your simply spending $50,000 on most expensive Jones items.

I don’t know the Jones’.

Many people have the ability to carry the perception of being well off for long periods of time.  However, eventually, the jokes on them.  The charade is over and all that is left is the consequences of leading this type of lifestyle.  The result is usually a lifetime of debt.  I like to refer to this as chasing your tail.  You can chase it all you want, but your never going to catch it.

What you need to realize is, you need to stop buying items you don’t need on credit.  If you don’t have the cash, DON’T BUY IT.  Its that simple.  You need to learn to sacrifice for the better long term goals.  Take a serious look at your spending. Tell yourself, you don’t know the Jones’.

Here are a couple of quick tips

1.  Learn to budget and search for bargains.  If you can’t pay cash, don’t buy it.
2.  Do not give children credit cards.  They do not have the financial foundation to handle them.
3.  If you have credit card debt, call your provider to negotiate a lower rate.
4.  Pay off small balances first, then tackle the larger ones.  Remember, always pay at least the minimum though.
5.  Once you’re out of debt, don’t go chasing your tail again, stay out of debt!

I am confident that we can agree that simply put, you must spend less than you make to build wealth.  Whether rich, poor, or somewhere in between, if you often spend more than you make, you will never accumulate wealth.  Although this concept may be equally as important as some of the things listed below, it is not the number one reason people fail to build wealth over their lifetimes.

Reason No. 9:  Procrastination

Many people fail to invest in their own financial future until it’s too late.  While you are young, you have a excellent opportunity and a definite advantage over the older folks because you have time.  The reasons behind not starting young vary quite a bit and are wide ranging.  Also, age seems to have an effect on why you fail to save.  While young, people in their twenties are just entering the workforce and tend to indulge themselves with the hottest trends, electronics, cars, etc.  Once you hit your thirties, maybe a young family is preventing you from putting away as much money as you would like.  At this point you may be living check to check and this is where debt problems stem.  Forties hit and you may have children in college or unforeseen medical expenses.  By the time you hit your late fifties, it is already probably too late.  Compound interest no longer has time to grow as much as it would have had you saved earlier.

Reason No. 8: Lack of Discipline

Most people find it difficult to save because they constantly buy, and very seldom, save.  It is much easier to say yes to your impulses.  Those who are able to say no, are going to have a much easier time building wealth.  Most are lead by advertising and the ease of being able to swipe a credit card.  The “I don’t need to pay for it now” ideas kick in.  Worry about it now, not later.  Until you find the power to say no, you will never get ahead.  Stop trying to keep up with the Jones’.

Reason No. 7:  Inadequate Protection Against Unexpected Expenses

Life unfortunately throws a lot of curve balls at us throughout the years.  May it be a water heater, car repair, or medical expense, these can all put a damper on your financial well being, and quickly.  Implement an emergency fund to cover these unexpected expenses so you don’t fall back on using credit.

Reason No. 6:  Poor Debt Management – Borrowing too Much

Lack of patience can cause you to turn to credit to get what you want NOW.  Again, learning to say no now, will save you tons of money in interest payments as well as buying items you may not have really wanted to begin with.  When using credit, unless you can afford to pay the item off in full at the end of the month, the item can end up costing much more than the original sticker price.

Reason No. 5:  Failing to Adjust How You Live

When people are used to a certain lifestyle or are used to spending, it is very hard to break the trend.  Try to find a way to break the routine. Otherwise, you will never change, and never seek the financial freedom you were looking for.  Don’t be afraid to try something new.

Reason No. 4:  Lack of Foresight

Winners have the ability to look beyond the immediate and into the future.  Although some may see your visions as dreams, don’t forget you need to have a vision to make your dreams come true.  You are not going to win the lottery.  Set a goal and create a path to help you get there.  Look into the future, find what you want, and plan how you will get there.

Reason No. 3:  Using Time Poorly

You’ve heard it a million times, time is money.  You have a choice to spend your time on watching TV all day or taking a look at how you will finance your future.  No one is going to knock on your door and give you the magic formula needed to plan for yourself.  Once time has been wasted, it’s gone.  Use it to your advantage.  Plan what you desire.

Reason No. 2:  Failure to Plan

My old man said it best, if you fail to plan, you plan to fail.  It couldn’t hold more true.  If you don’t plan what you want, you have essentially removed all hope of ever getting where you want to be.  According to polls, only 5% of people plan and only 2$ have their plans written down. Planning and writing your goals down can be a great motivator.  Everyday when you get up and look at your goals, you are setting the mindset that the reward is later and you can and will stick to the plan.  If you don’t have a plan or goals, how can you succeed?

Reason No. 1:  Lack of Knowledge

This should actually read lack of willingness to gain knowledge.  Most people give up after reading one thing they don’t quite understand.  Make an effort to read more about financial literacy.  This subject can be found in countless books and online websites.  The knowledge is there for the taking.  It is up to YOU to take in and process it.  This will help you find what is best for you.  No one, including financial advisors, have a better picture of your financial future than you.  Turn off the tube and read a book.

Stop living paycheck to paycheck.
Stop blaming your financial problems on anyone and everything besides you.
You are the only one that can control your future.
Find motivation to plan the rest of your life and stop living like a sucker!

For Average Joe’s Automatic Investing is the Only Way to Go

When it comes to money and saving, us averages Joe’s tend to procrastinate more than with anything else.  The “I’ll start saving tomorrow” idea isn’t going to work.  Unless you are one of the fortunate ones that manages to do this without thinking about it, automatic investing is the way to go.

You can setup automatic investing for almost any type of account.  401K accounts are among the easiest, IRA accounts, regular savingss accounts, education 529 accounts, and so one.

401K accounts are the easiest.  You set them up with your employer and the money comes right out of your check.  If you start doing this immediately when you start your new job, its almost like the money wasn’t there to begin with so you don’t miss it or even realize it was ever there to begin with.

Roth IRAs, traditional IRAs, and brokerage accounts can be setup online with any major discount brokerage firm like Fidelity or eTrade.  You can set how often the money is transferred, it could be weekly, bi-weekly, or monthly.

Standard savings accounts, including online accounts (which typically have better rates than local branches) can also be setup for automatic saving.  You can have either the bank setup the automatic transfers from your checking to your savings accounts and in many cases you can even setup your direct deposit with your employer to automatically transfer a portion of your check to your new savings accounts.

Education 529 savings plans also usually offer a automatic investment option.  These work very similar to the IRAs and brokerage accounts.

Keep things simple.  Setup your automatic investing and savings.  Its one less thing to think about for your financial well being.

One of the top reasons for divorce is financial disagreements.  When you tie the knot, you are also tying in your partners financial habits as well as debt.

Before you wed, it should be a top priority to discuss your financial goals, among other things.  Many times, one partner will spend much more frivolously than the other.  This can lead to long term problems when it comes to financial planning.  One partner may have long term goals such as when they want to retire, how they will finance their children’s education, and so on while the other partner can barely finance next week.

Merging your finances

When it comes to merging your finances after you wed, the thought should be whats mine is yours and whats yours is mine.  Keep in mind this can include both debt and savings.  Put yourself in the situation before you tie the knot.  Get a joint checking account for starters.  See if you can both manage to stay on track and keep the account in good standing.  Also, you should both be able to agree on where the money goes.  How much you should spend on things like entertainment and dining out as well as the usual bills should all be discussed.

What to about debt?

Whether you like it or not, once you’re married, your spouse’s debt can become your debt.  Once again, both of you, together, should figure out a way to tackle the problem and make a decision before getting married.  Many times, couples will not see eye to eye on this.  The debt free partner will say, I have accumulated any debt so I’m not paying yours off.  If you are planning to be together for the rest of your life, this is an issue that needs addressing.  The debt doesn’t go away when you marry.  When you discuss this, don’t take the position “Your debt will ruin us.”  If that is the approach you take, it most certainly will.

Check Your Spending

So your soon to be wife is constantly nagging about your wild spending and then comes home with a $400 purse.

If this sounds familiar, your right.  This is the second most common reasons couples fight.  Most of the time, one of the partners get labeled the spender and the other the saver even though they actually spend about the same, they just spend differently.  The amount of small purchases by one partner may seem negligible, since they carry a low dollar amount while the other partner may spend much left often but on larger items like TVs or computers.  At the end of the day, they usually spend about the same.  Perception needs to be put aside.  Check the reality, the bank statements.  Most purchases should be budgeted for and agreed on by both partners.  Make sure you keep it fair though, one partner shouldn’t always decline what the other wants.  The fellas out there are never going to want a $400 purse and the ladies are never going to want a 65 inch TV to watch the football game.  Well, at least most of the time.

Hidden Money

Couples should not keep financial secrets.  They can come back to bite you in the backside.  Again, this goes for both sides of the equation.  No one wants to find out you have been racking up a credit card bill without the other partner knowing.  The other side of the coin, no one wants to find out you have $50,000 in savings the other didn’t know about.  While an extra $50,000 sure is nice to find out about, but what was the reason for concealing it?