Whether to rent or buy your home is a serious question. There is no correct answer. It depends on your financial situation. In many cases, renting can be the better decision. Sometimes, renting can be less expensive than owning the same house. Take into consideration the total cost of ownership, which can include mortgage insurance (if you don't put 20 percent down), insurance, property taxes, maintenance and repairs.
Some other good advice from Schwab:
Don’t buy a home primarily as an investment. Even if you live in an area where prices typically have appreciated, you can’t be sure that will continue. If financial return is the primary consideration, other types of investments, such as stocks or bonds, might be better for you. Owning a home is as much a personal investment as a financial one. Before you commit, assess your job stability and desire to stay in a particular location. As a rule of thumb, unless you plan to own a property for at least five-seven years, buying may not work in your favor from a financial perspective.
Run the numbers. Whether it’s better to rent or buy depends on a lot of different factors—rent and home price appreciation rates where you live, how long you plan to stay in your new home and your tax bracket are some examples. There are a number of online resources and calculators that can help you plan for and figure out the overall costs of renting vs. buying.
Choose a house that fits your budget. If it will be a stretch from day one to make monthly mortgage payments—and don’t forget property taxes, insurance, maintenance, and repairs—home ownership could become a real headache in the event of a job loss or financial setback. Look for a house that fits comfortably within your budget, or consider renting in your desired neighborhood instead.
Plan to put down at least 20%. If you’re saving to buy a house, you should aim to save at least 20% of the purchase price. If your down payment is less than 20%, your lender will probably require you to carry private mortgage insurance (PMI). That means you’ll pay monthly PMI premiums in addition to your mortgage payments until your loan-to-value ratio reaches 80%. In general, the higher your down payment, the easier it will be to qualify for a mortgage loan and negotiate the lowest rate.
The overall market just didn't indicate much of a direction this week. The SPY (ETF that tracks the S&P 500) opened and closed within last week's open and close. For the week, the S&P 500 fell 0.2% while the Dow and Nasdaq each inched 0.1% higher and the Russell 2000 finished flat. The two-year U.S. Treasury yield closed the week at 2.60% and the 10-year finished at 2.75%.
Housing weakness is a cause for concern. Keep your eye on this (I found the report on Seeking Alpha). This may signal trouble in both economic growth and the markets. (What I like about Seeking Alpha is their very comprehensive and flexible system for email alerts. I even get my broker's articles via this system.)
Good news: U.S. will become net energy exporter in 2020s. The EIA released its Annual Energy Outlook for 2019, which includes projections out to 2050. Some of the key takeaways include the projection that the U.S. will become a net energy exporter in the 2020s, due to surging natural gas and oil production. The U.S. has been a net energy importer since 1953.
Most brokers or financial management firms will advise you to be fully invested "year in, year out." Even my own broker, Schwab, recommends this. In a recent article, they recommend:
Is market volatility keeping you on the sidelines? History and context make a strong case for investing in stocks, provided you maintain a long-term perspective.
Equities have historically outperformed other asset classes and also provided the best defense against inflation.
Diversifying your investments and staying invested long-term are essential for minimizing stock market risk.
The article goes on to explain that long-term, the market has out-performed cash investments, such as savings and money market accounts, as well as bonds. What is long term. 91 years! There are many studies that show even for 20 or 30 year periods, this is true. The stock market is the way to go. But there is a problem with this advice. I've had two full-blown analysis of my financial and portfolio. The first analysis, done by Personal Capital, indicated that I didn't have enough money in equities (stocks). The adviser recommended about 80 percent in stocks, with some gold and bonds thrown in. "You can plan on 4 percent a year," he says.
The problem with this "you can't time the market" advice is that, while no one has a crystal ball, you can get in and out during trends. The other adviser took a different approach. Using a 200-day moving average, the firm uses a 3 percent rule to be in or out of the market. Run by Ken Moraiff, the author of Buy, Hold and Sell, he had clients out of the market during the 2008 to 2009 bear market, and is currently out of equities. While I liked his approach, his target earnings for my account was also 4 percent. The problem is my self-managed portfolio returned about 9 percent a year, and I'm pretty conservative. So why should I pay someone else 1.25 percent a year when I can do better? The problem with riding bear markets: You need to ask yourself if you can handle a 50 percent decline in the value of your portfolio. I'll bet the answer is no. But if you miss most of it, you'll do better long-term. There are many different strategies for investing. From dollar cost average to diversification models, there are a lot to choose from. My point is that being fully invested, even with proper diversification, is dangerous. Learn how to identify trends and feel good about being in a money market fund. Schwab currently pays 2.3 percent on its fund. Here's a couple of videos to help you along:
After last night's win over the Kansas City Chief's in the AFC championship game in OT, New England Patriot Tom Brady will go to his 9th Super Bowl, the only player in the NFL to do so. Here's a video for a view into his mindset, what has made him go from a below-average QB in his first two years in college, to one of the most successful players of all time. When this video was produced, he'd been to the Superbowl 6 times and won 4. He currently has 5 Superbowl wins.
Some ideas about trading. Trading stocks and other assets such as futures, is different than investing. Trading has a very short-term outlook. But these ideas can also benefit the investor, who looks at long-term wealth-building for retirement and other purposes. It's OK to be both, but my suggestion is to only "trade" about 10 percent of your total portfolio.
Trading should be boring, like factory work. If there is one guarantee in trading, it is that "thrill seekers" get their accounts ground into parking meter money.
Amateur traders turn into professional traders when they stop looking for the "next great technical indicator" and start controlling their risk on each trade.
If you focus on the money, you will start to impose your will upon the market in order to meet your financial needs. There is only one outcome to this scenario: you will hand over all of your money to traders who are focused on protecting their risk and letting their winners run.
The best way to minimize risk is to not trade. This is especially true during the low-volume -chop and slop- found during the afternoon trading session between 11:30 AM Eastern and 2:30 PM Eastern. If your stocks are not acting right, then don't trade them. Just sit and watch them and try to learn something. By doing this you are being proactive in reducing your risk and protecting your capital.
There is no need to trade 5 days per week. Trade 4 days per week and you will be sharper during the actual time you are trading.
Refuse to damage your capital. This means sticking to your stops and sometimes staying out of the market.
You should never let one position go against you by more than 2% of your account equity. This means if you have a $50,000 trading account, you should never let one stock turn into a loss of more than $1,000. This means if you max out your 2 to 1 margin account and buy 2000 shares of a $50 stock, you must have a stop loss of 50 cents. That is tight and bound to get hit. Do yourself a favor and buy 400 shares of this $50 stock and use a $2.00 stop to start. That is only an $800 dollar loss and gives you room to trail your stop up to break-even before you are taken out on a wiggle. Is there ever a time when it is okay to take more than a 2% portfolio loss on a position? NO! Never means exactly that. This is a maximum loss by the way. Setting up your plays for losses of 1% of your equity is even better.
Use daily charts to get an idea of the 30-day trend, hourly charts to get an idea of the 1-day trend, and 5-minute charts to establish your entry points.
Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.
Look for opportunities NOT to trade.
You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of failed breakouts).
1. Excessive/Frivolous Spending 2. Never-ending payments 3. Living on borrowed money 4. Buying a new car 5. Spending too much on your house 6. Treating your home equity like a piggy bank 7. Living paycheck to paycheck 8. Not investing 9. Paying off debt with savings and the big one: 10. Not having a budget and plan. Read the details here: Top 10 Most Common Financial Mistakes
Protecting America's national home Immigration has been ingrained in the American consciousness from our earliest days, as many people left foreign lands to make a new life here. While President Trump did not invent the concept of making America great, his call for protecting that greatness stands in sharp contrast to those who see nothing special in our nation at all. But when you consider that so many have come together to make this place their home, a wall with a door that opens to those we want in not only makes sense, its purpose is clear.
The market considered and reconsidered comments from Jay Powell yesterday as it seesawed in a tight range. Finally, stocks gained momentum into the close. The session underscores the fact there has been a shift in urgency and a growing belief the train is leaving the station. On that note, we are a long way from everyone jumping on board, especially a lot of Wall Street firms that panicked in December lowering their outlook for 2019.
We have entered a new era that is redrawing political battle lines. The widespread use of new communication technology has changed how Americans interact with one another and what they interact about. This can be seen most clearly in the fight between social justice progressives and free speech advocates on online platforms such as YouTube, Facebook, and Twitter. This fighting has cracked the traditional left-right political spectrum.
Stocks tipped slightly into the red on Friday to break a five-session win streak, but clinched a solid week of gains in which the Dow rose 2.4%, the S&P 500 added 2.5%, the Nasdaq jumped 3.5% and the Russell 2000 rallied 4.8%. The week was also the calmest in three months, as the S&P 500 did not post a move greater than 1% in either direction during any day, the longest quiet period for traders since early October.
In the bond pits, the two-year U.S. Treasury ended the week at 2.55% and the 10-year yield settled in at 2.70% following a market-friendly consumer inflation report posted on Friday. WTI crude oil snapped a nine-day winning streak with a 1.9% decline on Friday to $51.59/bbl.
Next week's big events include the Detroit Auto Show and the Super Bowl of retail conferences.
Don't let the short-term rally fool you. Pay attention. In 2008, when the market went into bear territory, there were 10 straight days of gains before moving down again. Not saying this will happen again, but be vigilant.
'Over 90 percent?' Liberals eyeing White House vie for title of highest tax raiser
The story goes on to read:
Democrats eyeing bids for the White House also are competing to see who is willing to go the highest in raising taxes.Rep. Alexandria Ocasio-Cortez, a New York liberal who is too young constitutionally to become president, nevertheless set a benchmark when she suggested in a “60 Minutes” interview Sunday that rates for the wealthy could top out at up to 70 percent.Julian Castro, an Obama administration Cabinet official who has announced a testing-the-waters presidential committee, quickly jumped on the bandwagon by telling ABC News that it’s time the wealthy be tapped for their “fair share.”“There was a time in this country where the top marginal tax rate was over 90 percent,” Mr. Castro said in praising Ms. Ocasio-Cortez’s vision. “Even during Reagan’s era in the 1980s, it was around 50 percent.”Sen. Elizabeth Warren, a Massachusetts Democrat, who also has formed a presidential exploratory committee, hasn’t committed to a high-water mark, but she too spoke approvingly of major rate hikes.“Look, there was a time in a very prosperous America — an America that was growing a middle class, an America in which working families were doing better generation after generation after generation — where the top marginal rate was well above 50 percent,” Ms. Warren said on CNBC in July. “Ninety percent sounds pretty shockingly high. But what I’m trying to get at is this is not about negotiating over specific numbers.”
Ocasio-Cortez’s Fiscal Plan Will Lead To Giant Tax Hikes On Middle-Class & Lower-Income Americans
You'll have to read it to believe it, because it refuses to acknowledge real-world economics from the Democrats, at least the far-left socialist variety.
Brian Riedl of the Manhattan Institute opines in National Review about AOC’s proposed tax hike on the rich. He starts with a very appropriate economic observation.
A common liberal retort is that the economy survived 91 percent income-tax rates under President Eisenhower and 70 percent tax rates through the 1970s. That does not mean those policies raised much revenue. Tax exclusions and high income thresholds shielded nearly everyone from these tax rates — to the degree that the richest 1 percent of earners paid lower effective income-tax rates in the 1950s than today. In 1960, only eight taxpayers paid the 91 percent rate. Overall, today’s 8.2 percent of GDP in federal income-tax revenues exceeds that of the 1950s (7.2 percent), 1960s (7.6 percent), and 1970s (7.9 percent). Those earlier decades were not a tax-the-rich utopia.
But chances are, Warren and Ocasio-Cortez won't make it even to the primaries. One can only hope.
Once you have your emergency fund of $1,000 -- and I prefer and recommend $2,000 -- it's time to think about investing long-term for the future. And of course, you've gotten rid of your consumer debt: credit cards, shopping store installments (furniture, etc), and that pesky car loan. But you can start small even as you're working on those goals. The sooner your start, the more wealth for retirement you'll have. For example, if you're now the young age of 25 and invested $5,000 a year for 10 years, and then stopped, based on an 8% annual return, you'd have $615,000. If you wait until you're 35, and invest keep investing each year until you're 60, you'll have $431,000. (There are plenty of retirement calculators on Google search). If you're just now getting started, and don't have much -- or any -- money in your investment account, there are tools to help you out. Don't worry about how old you are now. The key is to get started. Now. Phil Town explains some apps that will help you get started in just seven minutes. (Note: I don't use his brokerages. I have used Schwab for 25 years and have been happy with them.) But the video will give you ideas. Also check out Mint, instead of Penny.
Several times I've had the idea -- or the wish -- that if I could just move to another locale, another state, another country, another planet -- beam me up Scottie -- my life would improve. Not that my life was all that bad. Yes, I had some terrible times, but maybe geographic change might be just what I needed.
I think this is the case for most of us: A new start. In my case, the military made the choices for me, whether I wanted to or not. In my first 21 years of active duty, I was assigned to 11 different bases. But I brought all my shit with me. Since retiring, I've lived in four different cities. And sometimes, besides the hassle of moving, it has been fun, most of the time. But still, I brought myself along. But I many times believed that my current challenges might be different, better, solved, if only I could make a fresh start. Maybe do better by my kids, save one of my marriages, but life doesn't work that way. Life is hard. How you react to it makes the difference. I thought (wished) I could get a better start. Improve myself, have better relationships, get a better position, have more fun.
The problem is, as always, I came along with the ride, with all my existing baggage, without really changing myself.It wasn't until I was about 35 -- possible even later -- until I started to get a clue. And I didn't do it alone. I was 40 before I got my college degree: A B.S. in psycology, of all things. A new city, meanwhile, is the geographic version of a crush, enticing and full of untested promise. So we wind up believing that the simplest way to get a fresh start is to pick up and move to a new place, where we might find a more challenging job, get out of debt, start dating a nicer boyfriend or girlfriend, take up yoga and finally begin self-actualizing And yet there are some big problems with the geographic cure -- starting with the fact that we tend to overestimate how happy we’ll be in a new environment. In one study, psychologist Daniel Kahneman, author of Thinking, Fast and Slow, found that midwesterners expected residents of southern California to be happier with the place where they lived, especially because of the climate and cultural opportunities. In reality, both groups ranked themselves the same in overall life satisfaction. Hope is good. But action is better. So the next time you travel to a tempting new destination, think about what it is that appeals to you so much about the place, and channel your wanderlust into efforts to find the same qualities within your hometown. If you can’t get over how beautiful nature is when you’re on vacation, maybe you just need to schedule more local campouts into your weekends. If you spend 70% of your vacation Yelping the next meal, become a food booster in your hometown by trying every restaurant and shouting out your favorites online.
And if you do move, commit to your new town as fiercely as you can. But don’t expect it to fix you. Even the healing power of pizza smells can only do so much. So take some thought before you uproot your life and move. I'm not saying not to do it, just have a reason.
"Here's the big challenge of life: You can have more than you've got, because you can become more than you are."
That's the challenge.
"And of course, the other side of the coin reads: Unless you change how you are, you'll always have what you've got." But of course, if you want to move, for the right reasons, why not? Just make sure you're moving for the right reasons. While not directly related to a geographic fix, I find this video by Ashton Kutcher and inspiration and good advice. There are many others such videos, and if you seek (and you shall find). But I like Ashton's message, and the work he does outside of acting. (Includes excerpts from some of his performances at the end.)
The wall is not about morals, or money. It's about a temper tantrum by Democrats who do not want Trump to get his way. What immoral principles that Nancy Pelosi says are we violating? Though Nancy Pelosi represents San Francisco and idiots environs, she has said a lot of dumb things*; this is off the top. Immorality: "The state of quality of being immoral, wickedness." Her use of the word doesn't even fit the dictionary definition. It's all politics. Sadly, many will believe her, especially her lunatic base in San Francisco.
Walls are immoral, but only because Trump wants
The world's earliest known civilization was also one of the first to build a defensive wall. During the 21st century B.C., the ancient Sumerian rulers Shulgi and Shu-Sin constructed a massive fortified barrier to keep out the Amorites, a group of nomadic tribesmen who had been making incursions into Mesopotamia (1). Let's name a few others: Great Wall of China, the Alamo, fences around the average American home (and not just American; get out and visit the world), so they must serve some "immoral" purpose. Thousands, if not millions more. The Washington Times: Why should the U.S. build a better wall on the southern border? House Majority Whip Steve Scalise offered a clear and candid rationale during a Fox News appearance this week, telling host Mark Levin that 10 known terrorists are captured each day trying to breach the border. U.S. Customs and Border Protections also informed Congress that 3,029 people were apprehended in one day this month — deeming the occurrence a crisis.And yet, Pelosi said on Jan 5, 2019 is reported to have said: During the White House border-security meeting on Wednesday, Homeland Security Secretary Kirsten Nielsen presented a report on current conditions at the southern border. New Speaker of the House Nancy Pelosi told Nielsen, “I reject your facts.” To which Nielsen responded, “These are not my facts. These are the facts.” Fox News’ Lukas Mikelionis said the statistic that pushed Pelosi over the edge was, “border officials along the U.S.-Mexico border had apprehended about 3,000 people with terrorist ties and 17,000 criminals last year.”' When I envision Nancy Pelosi’s strong reaction to hearing about what is the reality of the situation, I picture her as the Wicked Witch of the West in “The Wizard of Oz” in the scene where Dorothy throws water on her and she shrieks, “I’m melting. Ahhhhh.” I suppose she has to do this. The Democrats must maintain their denial in order to justify their opposition to the wall. Pelosi added, “The crisis is not going away -- it is getting worse. The status quo in funding & authorities for #DHS is irresponsible & makes our country less secure. Kicking the can down the road is not the answer. I look forward to engaging with Members who want to.” Sen. Dick Durbin (D-IL) also attended the meeting and later told Bloomberg that Nielsen’s presentation was not credible. He said, “It was preposterous. At a time when we have the lowest level of apprehensions at the border — stopping people from coming in illegally — the lowest level historically, she is saying that we have all these terrorists and criminals and all these people on their way in.”
Maybe that's because we have more barriers than ever before, not open borders.
Vicky Alvear Schecter wrote in Medium | Poltics on Dec. 27, 2018 using her headline above. I thought it was pretty well written -- at least she made an attempt to keep her liberal bias out of it -- regardless of a few illogical fallacies. But she does make an attempt, in an effort to avoid her liberal bias, as she ponders "...in order not to be accused by bias, I explained that I would only use conservative sources to prove my point." To me, that's bias to start out with that premise. And I believe her premise is that she is against the wall. That's her stance. But she makes some good points, but some are skewed, even though she attempt to take a "conservative" approach, even by citing some "conservative" sources in her footnotes. Here's the first problem: if she wanted to avoid bias, why not just stick to the the historical facts as written (when you can find them without bias), and not concern oneself with bias. "I must reject that because it might have a liberal bias, not conservative." What is that anyway? Everyone has a bias of some sort. Recognizing that is the first step in allowing yourself some rational analysis. Otherwise we've descended into a cold civil war where everyone with different ideas (opinions) battles the "other" side. She had 11 points in her article. So we begin. 1. Walls don't work. She cites the example of the Berlin wall, which Khrushchev erected to keep people inside East Germany, not the other way around, as well as being a politicl statement against the West and JFK. According to The Telegraph, more than 1,000 died trying to flee East Germany, trying to get across that wall -- to the West. Another point she dramatically makes: "More to the point, do we really want to model ourselves after communist East Germany?" Does she understand the political and social framework of East Germany during the 1950s through the 1990s? Not only do we not want to model ourselves after their society and political structures, nor be under the military thumb of the Soviet Union, it's one of those questions that die before they are even spoken. And it indicates that she -- like more modern and younger Americans -- just what happened in Germany and the Soviet Union before they were even born. I spent time in Europe from 1986 though 1991, and I can tell you, that is one dumb question: Do we want to model ourselves after East Germany? Of course not, and building a wall of some sort has nothing to do with any of these failed ideologies. One other question: If walls don't work, then why down through history has humankind built so many walls? For 10,000 years, the walls have gone up, from the Great Wall of China, to the little wall around my farm. Must be something to them. I smell I book deal in this topic. 2. Most illegal immigrants are over-stayers. No use for quotes, for "overstayers." Either they are, or not. Of course a wall is meaningless here. If you are invited legally to visit the United States, and overstay your welcome, no wall well help. But she says 58% overstay their legal visas and permits. She does not cite her sources of information. According USA Today:
More than 600,000 foreign travelers who legally entered the United States in 2017 overstayed their visas and remained in the country by the end of the year, according to Department of Homeland Security data released Tuesday.
That figure represents only 1.15 percent of the more than 52 million foreigners who legally entered the U.S. through air and seaports in 2017, and is down from 1.25 percent the year before. But it marked the second straight year that more than 600,000 visitors stayed past the expiration of their visa, turning them into undocumented immigrants at risk of deportation.
It's vitally important to allow legal immigrants into the country. But please don't make up the facts. This has nothing to do with a "wall," but sensible immigration policies, which have not been addressed since Reagan (or maybe Clinton) was president, and even then when he and the Congress do did not work out long-term. "We'll give them amnesty, but we'll secure the border too." Another broken promise, which if you've noticed, is a commune est of Washington politics. 3. Walls have little impact on drugs.This is probably true. Walls might serve as a deterrent, but with no wall, it's easy for drug mules to traverse the border, and the little guy gets the worst, as well as the legal land owners along our 2,000+ mile border. Cartels and smugglers will take the least past of resistance. So while a wall might not stop he flow of drugs, why don't we legalize drugs so that the big money has no influence? Victoria states most drugs come among legit carriers via tractor-trailers and sea-borne containers. Didn't President Trump just speak about strengthen our port security? And my Libertarian leanings say that if drugs were legal, but criminal money would be eliminated, if not reduced.
California fires from 2018.
4. It's environmental impractical. She cites the danger of extreme weather. Logic follows we shouldn't build anything at all. Yes, walls and all sorts of structures are prone to that infallibility. Maybe we should prevent people from building on the seashore in hurricane prone areas. Hurricane alley, anyone? Or in California, the triple witching state: floods and landslides, fires and earthquakes. Why not build it better? A non sequitur argument. See more photos on my photo album. 5. A wall would force(s) (sic) the U.S. government to take land from private citizens.I'm not going to do a survey here with local citizens, but the amount of documented damage that happens without the wall would alleviate some of this. There are many documented stories of landowners who have their properties trashed beyond belief. Let's just say the U.S. government, as well as local governments, use eminent domain all the time. Razing homes to build shopping malls in New England, and the AT&T stadium in Arlington, TX, are just two examples. I'm against eminent domain in general, unless it follows strictly according to the Constitution, but courts over the last few decades have taken great liberties with this. 7. Border patrol agents say, “Walls are meaningless without agents and technology to back them up.”This is a non-argument, which cherry-picks the "facts." From the Washington Times in 2018, "Border Patrol agents overwhelmingly support Trump's wall in new survey" Of course you need agents to back up a wall. Duh! 8. Where walls have been built, there was no discernible impact on the influx of unauthorized aliens. You mean illegals. If I'm "unauthorized" it means I don't belong in an area where I should be. Illegal means breaking the law. There are laws on the books against illegal aliens. There are two sides to this argument, I can find points on both sides. But with thousands of miles on unprotected border, shouldn't we have some barrier? 9. An unintended consequence is that a wall blocks farm workers from EXITING when their invaluable seasonal work is done.If we had a sensible immigration policy, this wold not be an issue. But Congress won't get off their ass due to political reasons. Points 10 and 11 talk about cost. With every government project and costs analysis, throw a dart at a chart. I worked in the government for 25 years, and have yet to see an accurate estimate of cost analysis. In my opinion, we need to do something. These "facts" taken from "conservative" sources, are a good start to the conversation. But we've talked about it for 40 years. It's time to take action.
In general, what I've understand about New Year's resolutions is that they don't work for most people. Since I'm like most people, I don't bother with resolutions. If I don't really have any goals set, then why would they work now. What's more important is to always have written goals: short-terms (daily and weekly), mid-term (monthly) and long-term (yearly). use the steps below to get started -- not just started. Make them a habit.
Most resolutions fail about the third week in February. But new habits to replace old habits take a bit longer. Plan for at least 66 days. Not sure where that number originated, but 60 to 90 days seems to be the consensus.
Here's some goals passed on to me by an instructor at the Online Trading Academy. So hats off to Larry Jacobson, in my opinion one of the great instructors, thought I haven't met a bad one yet at the Academy. His points are excellent, but I've re-written them slightly to suit my own experiences.
1. CREATE A MONTHLY BUDGET. No one likes to do this, but it is the one singular important thing you can do. And make it a habit, not just an exercise you'll do for this year. All you need to do is sit down an track your daily expenses. The first line of your budget must be savings. Pay yourself first. Doesn't matter how much, but your goal should be at least 10 percent of your pay, minus taxes. (Some gurus says gross income, before taxes, but net income, after taxes is more attainable at first. But start somewhere now, even if it's $20 per payday.)
Start daily, then once you get in the habit, weekly; maybe in six months to a year you can do it monthly, like I do. I use some online tools like Mint or Personal Capital to help take some of the drudgery out of it. If you don't do this, nothing else matters, in my opinion.
2. HAVE AN EMERGENCY FUND. Larry Jacobson missed this, but I'm sure he meant it in his savings step #6. You MUST have an emergency fund, without fail. Ramsey suggest $1,000, which is a good start. But in today's world, it's a little low.
When Ramsey wrote this first book in the 1990s, this $1,000 is now about $1,700 in today's dollars. My goal would be $2,000 at first. Then, as you can, keep funding this emergency fund until you have three-month's take home pay (I've attained 12-months and I sleep like a baby. I don't care if my $3,500 A/C unit blows up. I got it covered. Unemployed? Not worries there either. And don't forget to refund if you have to use these funds.
And don't use this unless it's an true emergency. A big-screen TV doesn't count. NOT HAVING AN EMERGENCY FUND CAN HOLD YOU BACK MORE THAN ANY OTHER FACTOR.
3. TAKE INVENTORY OF YOUR BAD DEBT. Namely credit cards, installment credit (like retail stores or that stupid loan for a TV or furniture) and car loans. Repeat after me: Consumer debt is bad; it is holding you back. Your mortgage, should you have one, at this point is not included at this step. More on that later.
List your debts by highest balance, and then highest interest rates. There are two schools of thought on this. Pay the highest interest rate off first, making minimum payments on your other debt until the rest are paid. Or as an alternative, which Dave Ramsey is in favor of, and is the method I used, because it involved a psychological factor, is to pay off the lowest balance first. This tends to create a reward. Then use that payment to start on the next. Post these on your refrigerator and cross them off as paid. I paid my car loan off last, then put that payment into a special bank savings account (or you could use a money market fund), and then pay cash for your next car (don't buy brand new.)
Being debt-free is on the most liberating financial things I've ever done. In 2010, I owed $84,000 (without a mortgage). Four years later I was debt free. I haven't look back since.
4. HAVE A FINANCIAL PLAN – There is nothing worse than being charged late fees on top of interest. Make a point of identifying the dates that all your expenses are due and make sure to pay them in plenty of time to avoid any unnecessary fees. You should also use your financial calendar to help you determine how and when you will be paying off your highest interest-bearing balances: A month, a quarter, or a year? If possible, automate your payments as much as you can.
5. CREATE A FINANCIAL ROUTE. Or as I call it a Financial Plan. We all live very busy and hectic lives, but it is extremely important that you put aside at least one hour a week to review all your finances. Ideally, you should do this with your spouse, partner or significant other. The more you work as a team and hold each other accountable, the faster you will reach your overall financial goals. I set aside every Saturday AM as I'm ingesting my first dose of caffeine. Once you're in the habit, it doesn't take long at all. You might find areas we're you need to improve or take corrective action.
6. BUDGET AT LEAST 10% TO YOUR SAVINGS OR INVESTMENTS – Imagine when you were very young and a wise parent or grandparent told you that if you saved $.20 out of every dollar you earned for the rest of your life, you could retire at an earlier age, and you could enjoy your financial freedom.
Sadly, if you never received this sage advice you must take it upon yourself now to set aside at least 10% of your monthly income toward your emergency fund, savings or retirement account(s) so you too can one day reap your own financial freedom.
You don't need to start at 10% if your budget if you can't afford it or are using excess cash to pay off debt come first, but start somewhere. But just do it. Best to do both, but the emergency fund comes first. After I became debt-free, I was able to contribute 20% to my retirement and savings accounts. And then add a $1 to each weekly or monthly paycheck. Watch it grow. Certainly you can find a $1 each payday. If you get paid weekly, this will create a $2,366 cash emergency fund. I read on some blog that it's OK to have a credit card for emergency funds. I'll be blunt: Don't be that stupid.
7. TURN YOUR DREAMS INTO ACTION – To help you plan and reach your financial goals sooner, you need to take action NOW! A simple way to accomplish your dreams is by attaching dates underneath your dream board photos. This simple change will create the urgency you need to get off your butt and take action toward achieving your financial goals. Remember, dreams are for bedtime, goals are for success. Review them often. Make them visible; don't hide th em away in a seldom read note-book.
At the Academy, we call this creating your "Why." This is why are you taking this effort. Have a lot of whys. Brainstorm it and prioritize. Or as Matthey McConaughey says, it find your Hill. Don't stop climbing your hill. 8. MANAGE YOUR NET WORTH – To help you calculate your net worth, you must first take an inventory of all your assets (cash, investments, real estate, collectibles, patents/licenses) and your liabilities (your outstanding balances: mortgage, car loan, credit card debt, etc.). You current net worth (positive or negative) is determined by subtracting your liabilities from your assets. If the value of all your assets is greater than the total of your liabilities (e.g. debt), you have a positive net worth. Your long-term financial goal should be to have a large enough positive net worth that you can live off your assets. Make a resolution this year that you will do what is necessary to achieve a positive net worth. I use a spreadsheet on a monthly basis, but I also use tools like Mint or Personal Capital to track this. These tools help my budgeting exercises and are actually kind of fun. It helps to see what progress I am making. If you're not making progress, it will help identify areas you need to improve. 9. BECOME A STRATEGIC, NOT AN EMOTIONAL SPENDER – Before you begin doling out your hard-earned cash on the next must have product or service, ask yourself the following strategic question: ‘How will this product or service contribute to my personal finance goals?’ You should never emotionally spend money without first researching and asking yourself ‘why do I need this product or service in the first place?’ Emotional spending to alleviate some emotional void in your life is never a wise idea. Make a point this year to cut out any unnecessary spending and re-direct that same money to your debt-reduction, savings or retirement account(s). No impulse buys, ever. Always wait a day or two at least. Even if the salesperson says the sale is only for today, I'll bet you my next paycheck there will be another sale, and soon. 10. EARNING MORE MONEY IS NOT AN EXCUSE TO SPEND MORE MONEY – Just because you get some extra zeros at the end of your paycheck, does not mean that you should add extra zeros to your debt. So many people talk themselves into believing that if they just earned or got more money in their life that would solve all their financial problems. But the reality is…unless you have a plan to create good financial savings and spending habits, you will just continue to spend more and more, getting yourself into even great financial debt.
11. CHANGE YOUR LIMITING BELIEFS ABOUT MONEY – Most importantly, you need to stop listening to your own limiting beliefs about money. The only reason you are broke is because your life is broken. You have to start telling yourself, ‘I can save money!’ ‘I can be wealthy and have financial freedom!’ The only one holding you back from achieving your financial goals is YOU!
If you'd like to know more, please visit my Get Inspired Page. One of my favorite "mentors" is the late Jim Rohn, who was a mentor to successful people like Tony Robins, among many others.
May the new year bring you peace of mind. But don't wait. Do it now.