Saving & Investing

Start early and be consistent.

Cash is King

Cash is king, but you still have to rule over the process.  That means opening a bank account with no charges for using ATM, at least not your bank's ATM, free checking, no hidden fees and no fees to use a teller.  These kinds of accounts are out there.  It just requires research.  If you can't find any, reduce the number of times you go to the ATM.  Plan your budget in advance and withdraw what you need and nothing more. 

Maybe It’s Time to Start Taking Care of Ourselves

Over the past several years there has been a lot of talk about the dire situation that Medicare and Social Security are in and what the impact will be on those of us in our forties, thirties and twenties. We will be left without a security net, without the protection of government funded health care when we are elderly.  Oh what will we ever do? What will happen to us? How shall we survive?

I guess I have to say that maybe this is a good thing. Maybe it is time to take away the “safety net,” that has become a crutch.

One of the defining principles of Debt Free Living is Planning Ahead, and we are not just talking about the weekend or next month, or even this year’s vacation. Planning means being ready for all future events, be that a lay off or retirement. Being ready for our future means that we do not have to rely on anyone to take care of us, whether that be in our old age or in our times of ill health. True it is nice to know that if I were to become disabled tomorrow I would have something to fall back on for tomorrow, but why not plan ahead for myself.

There are a number of ways to plan ahead for retirement and for health concerns. We can invest in IRAs and 401k accounts as well as HAS and flexible spending accounts. Being ready for tomorrow is a true sign of someone who is Money Conscious.

Medicare, Social Security Will Go Bust Sooner: Report

Getting Out of Your Financial Hole

Below is a reprint of an article that we wrote for a local Denver newspaper. Even though the article is now two years old, it seems that things have not changed much when it comes to the economy and the financial outlook of many Americans. Enjoy!

-- You know when Prada has to reorganize their debt that times are tough. Not even The Devil would recognize them. The financial crisis of 2008 and 2009 has hit the wallets of everyone if the rich are not buying their Prada! Where does this leave the rest of us?

Many reaped the benefits of the sizzling economy from ’04 to ’07, from home values to stock market appreciation. Problem is that not everyone was the beneficiary of that economy. Many pay checks were not going up 5% to 10% a year, but our spending habits sure did. 

Now that this ugly step sister of an economy has slapped reality across our face like Alexis Carrington, how do we get straight . . . er, get our finances in order?  It’s time to assess our financial picture.  Boring!  It’s much more fun to spend like Paris Hilton, but we don’t want to be as empty as Paris. 

The following three steps will get us started on that Yellow Brick Road to financial freedom:

1.       Know what we make

2.       Know what and where to spend

3.       Have a plan to get out of debt

Step 1: One fallacy many of us believe is that if we make $40k a year, we can spend $40k a year.  Wrong!  Remember taxes, health insurance, our retirement savings, and we better have one, as Social Security as we know it won’t be around too much longer!  Many items are deducted from our pay even before we receive it, so the easiest way to determine how much we can afford to spend is to look at our pay stub; specifically our net pay.  If we are paid weekly, take that net pay and multiply it by 52, then divide it by 12. If we are paid twice a month, simply multiply the net pay by 2.  That’s how much we can spend on a monthly basis. Here are a few examples:

                Take home $875 every two weeks = $875 x 26 / 12 = $ 1895 per month

Take home $1700 twice a month = $1700 x 2 = $3400 per month

Step2: Now that we have this total, what do we do with it?  We spend it all, of course, and often even more by using our credit cards and going further down the rabbit hole as a result. It’s time to learn how to consciously spend. Our first focus should be on essentials or things we can’t live without; mortgage/rent, insurance, groceries and clothes within reason.  If we have anything left over, yeah us!

What happens if we are in the red? We are spending too much and it’s time to make some adjustments. The fact is that most of us really don’t know where our money goes. It’s time to dump our unconscious spending habits. Part B of the second step, which is a good thing to do even if we are in the black, is to come up with a strategy for our spending. Here’s where we learn the difference between a need and a want. No matter who we are, we can cut back a bit on our wants. Our suggestion is to use our take home pay as a spring board. Subtract 10% and then use the other 90% for our expenses.

Step 3: Plan, plan, plan! This is the essential step to paying off our debt. If we begin every pay cycle with a plan, then we will surely get out of debt. Here’s where the 10% we subtracted above comes into play. It’s time to put it to work by paying off our credit cards. Turn that 10% or more if possible, into a regular expense. Just like the rent check, this payment must go out! Actually it’s best to set this up as a direct deposit or automatic bill pay from our bank. Establish the check to be sent on each pay day so we won’t forget or put off our payment.  The final and most crucial part of the plan is to cut up our credit cards and trash them. To not do so is like putting make-up on in a blue bathroom. You never look any better. 

Getting out of debt is as easy as 1,2,3 if you follow the simple steps outlined above. Take a little time and create a plan, get out of the red and you too will see that debt-free is the new black! "