5 questions to ask in a “Keeping up with the Joneses” world

The spirit of envy can destroy; it can never build. – Margaret Thatcher

I believe the lack of contentment is one of the prime factors that prevents people from ever building long-term wealth. The need to “keep up with the Joneses” is a sure way to mediocrity because there is never an end. The finish line is always moving. You will always be able to find someone who has something newer, nicer, fancier than you have.Keeping Up With The Joneses

All of us are tempted from time to time to wish we had something our friends or neighbors have. The question we need to ask though when we start to feel those feelings of envy is why? What is the deeper need or emotion that is driving our desires?

Do I have a legitimate need?

In some cases we have a legitimate need. My neighbor comes home with a new car and I wish I had a new car too. If I can see the road passing by through my rusted out floor board and the only time I can get up to the speed limit is if I am going down a really steep hill, then it just might be that I really need a new car too. I’m exaggerating, but once in a while we are envious of our neighbor because we have a real need. If so and I have the ability to upgrade without adding a bunch of debt or doing damage to my savings, then I should feel free to go ahead and do so.

Just be really, really careful with this one. One thing that we are very good at is justifying what we want. Is it really a need?

If it is not really a need then why do I want this item so much?

Am I looking to improve my self-esteem through stuff?

This is a tough one. Sometimes we achieve our sense of self-worth through stuff. I think often this can be a real trap for guys. Sometimes guys view money as a scorecard. One-upping my neighbor means I’m “winning” the money game.

Perhaps you grew up in a home where money was always scarce. As a result accumulating possessions in some fashion has become a very real symbol of your success.

Looking for self-worth through your possessions is a very dangerous game. Possessions come and go. A fire, a hurricane, a tornado and all that you have worked to build can vanish in a heart beat. Even if it doesn’t disappear, you will never find satisfaction through things, because there will always be something better on the horizon.

He who loves money shall never have enough. The foolishness of thinking that wealth brings happiness! The more you have, the more you spend, right up to the limits of your income. Ecclesiastes 5:10-11

A better source for our self-worth comes from the relationships we build, the lives we change, and the people we love. The ultimate source of our self-worth is knowing that we were valuable enough for Christ to go to the cross for us. No possession can ever compare.

Is it a matter of pride?

Closely related to self-worth can be pride. If I have the biggest house, fanciest car, nicest clothes then it makes me feel like I am just a little better than my neighbor.

Instead of being motivated by selfish ambition or vanity, each of you should, in humility, be moved to treat one another as more important than yourself. Philippians 2:3

There is a difference in working hard and having a sense of accomplishment and pride in what we have accomplished versus a pride that says we are better than another. When we suffer from pride, the real root issue is a failure to understand that all we have, all of our abilities, and all of our possessions really belong to God. None of our accomplishments would have been possible without him.

Am I seeking happiness through stuff?

Sometimes we try to medicate our unhappiness by buying more stuff. I suspect most of us have fallen into this trap from time to time. I know I have been guilty of this. I have the Best Buy receipts to prove it!

Unfortunately stuff never satisfies. Sure we get a brief rush walking out of the store with our new purchase. We may even enjoy a few days of happiness. But it never lasts. Soon there will be another item we want.

The real issue is we are treating the symptoms and not the cause. What is the real reason behind your unhappiness? It probably not a lack of stuff. Until you address the cause of your unhappiness, medicating it with buying things will be a wasted effort.

Do I lack patience?

I have heard it said that many people spend the first couple years of their marriage building the same standard of living as their parents, except it took your parents 35 years to achieve it.

Our society is very much a microwave society. The easy credit provided with credit cards has made it possible for us to have pretty much anything we want at any time we want. There’s no need to save. 90 days same as cash. Take it home now. Worry about paying for it later. This is a recipe for financial disaster.

Am I doing harm to myself (financially) by trying to one-up my neighbor?

It makes little sense to fall deeply in debt trying to keep up an appearance of false wealth. Yet, this is what we often do when we play the game of keeping up with the Joneses.

Here’s a good rule of thumb. If you can’t pay cash for it. You can’t afford it.

Be honest

These are hard questions. Be honest with yourself. Really consider your motivations.

The next time you are tempted because your neighbor or co-worker just showed up with the latest and greatest, I challenge you to consider these 5 questions before going out to make that purchase. There is nothing wrong with buying things. I don’t believe we are called to live as paupers and it is ok to enjoy some of the fruits of our labors. Just honestly consider these 5 questions to help make sure your possessions are a blessing and not a curse.

What motivated the last major purchase you made?

Best of the week – May 23, 2015

Here are some articles that caught my eye this week…

5 Basic Banking Lessons to Teach Your Teen

Your teen doesn’t have to have a degree in finance, but it is critical that you teach your children some basics of banking and handling money. I think one of the reasons that many young people struggle with money is not that they are irresponsible. It is simply that no one has ever shown them basic financial skills.

How to Invest Better By Paying Less Attention

Sometimes I think this might be one of the most important keys to successful investing. Don’t get me wrong. I do think that one attribute of being a good citizen is staying informed about what is going on in the world around us. You have to remember though that bad news sells. This is especially true when it comes to investing. You can bet the day the market tanks that it will lead the news that night. But when it bounces back the next day? Hardly a mention. If you base your investing strategy on the latest news reports you will either be too scared to ever start investing or you will end up selling at the worst possible times.

7 Inexpensive Ways to Enjoy Summer

Enjoying summer doesn’t have to put a dent in your wallet.

How to know what that job pays

It is tricky knowing how to negotiate salary when you are offered a new job. Particularly, if you are unemployed you don’t want to do anything to jeopardize getting the job. At the same time remember that if you have been offered the job, chances are your new employer wants you as much as you want them. Future pay increases may be limited by company policies or general economics, so negotiating that initial salary may be your best chance to get your pay in line with what the position is worth.

27 Ways to make money for stay-at-home moms

These might not make you a millionaire but they might help you earn a few extra bucks to build your savings or get that debt snowball rolling.

11 Retailers Where You Can Negotiate a Lower Price

I have a confession. I’m not very comfortable with negotiating. It’s interesting. I have no problem negotiating at a car dealer because it is expected there. But negotiating other places is very uncomfortable for me. How about you? Have you had success negotiating at retail establishments?

An important financial lesson from the racing world

While I am not a huge racing junky, I do enjoy watching an occasional NASCAR or Indy car race.racing This weekend many of us will take some time to watch drivers traveling almost 230 MPH make their way around the Indianapolis Motor Speedway for the Indy 500. It is a Memorial Day tradition.

The skill of the drivers just amazes me. I can’t even begin to imagine driving well over 200 MPH with a concrete wall a few inches away to the right and a car to my left so close I could almost reach out and touch it. How they can navigate a 500 mile race, lap after lap just inches from disaster, is an incredible skill.

When I watch them drive I think about driving through a construction zone at 45 miles an hour next to a concrete barrier and I can’t even conceive of doing the same thing at more than 4 times the speed.

Keeping your eyes on the destination

So how do you guide a vehicle through a turn at 200 MPH without killing yourself? The key is you have to keep your eyes on where you want the car to go. If you look at the wall you will hit it. If you look at the car beside you, you will drift down into it. The key is to always keep your eyes on the destination.

There is an important principle here for our finances.

Getting out of debt is hard and I guarantee that the moment you commit to trying to get out of debt, Murphy will show up to test just how serious you are. In addition, you probably didn’t get into debt in a week or two. You won’t get out of debt in a week or two either. But sacrificing to make those extra debt payments month after month can get discouraging after a while. Just like that driver completing lap after lap you can easily be tempted to take your eyes off what is ahead and focus on the difficulties that surround you.

3 ways to keep your focus

So how do you keep focused on where you are going when you are tempted to let your eyes wander?

Know your why

Why do you really want to get out of debt? What do you hope to be able to do? Where would you like to go? What do you plan to do with the extra money? These are important questions. Without having a why that is driving you, it is very hard to commit to lasting change. Maybe you dream of traveling. Perhaps you wish you could quit your stressful job, but you can’t afford to because it pays too well, or maybe you wish you could quit to stay home with the kids but right now you need two incomes just to make the payments. Maybe you’d like to be able to move to a nicer neighborhood. Perhaps there is a cause you wish you could give to but you have no extra money. Or maybe you are just tired of sleepless nights wondering how you will pay the bills.

There are no wrong answers for why you want to get those debts paid off, but the important thing is understanding your reasons. Those reasons are the destination that will help you stay on track when you start to feel discouraged.

Make it visible

I’ve heard of people who print their debt snowball list and place it on their refrigerator so that they see it everyday. Each time they pay off a debt they mark it off with a big fat red marker so that they have a very visual reinforcement of the progress they have made.

If you are trying to pay off your house make a drawing of the floor plan of your house on a piece of graph paper. Each time you pay off another $1,000 color in another block. Have a little celebration each time you get another room completely paid for.

Or perhaps you just need a reminder of that why. Maybe you dream of taking a trip to Hawaii. Find a picture of Hawaii that you love. Blow it up and hang it where you see it everyday. Dream of quitting your job to stay home with the kids? Put a picture of them on your bathroom mirror so you see it every morning and to remind you of why you are sacrificing to pay off debt. Whatever your “why” was, put a reminder out somewhere that you will see every day. It will keep your eyes focused on your destination.

Track your progress

Track your monthly progress. When we were getting out of debt I kept a very simple spreadsheet that listed all our debts. Each month I simply added a new column with the remaining balance on each one.

The problem is that as you are struggling through month to month it is sometimes hard to see the progress you are making. That was certainly true for me. Many times I wondered if the sacrifice was worth it as it just didn’t feel like those balances were going down much. When I would start to get discouraged, I’d simply take a look at that spreadsheet and look back 6 months or a year and I could see that we really were making progress. The encouragement that spreadsheet gave me was a big factor in our ability to stick with it until that last debt was paid off.

Staying focused on the destination

Just like that race car driver needs to keep his eyes on where he wants the car to go, keeping our focus on the destination will go a long way toward keeping you on track getting out of debt. Know your why, keep it where you can see it and track your progress. Accomplishing anything good takes patience, discipline and sacrifice. Don’t give up. The  finish line is worth it.

What is your “why”?

Photo credit: glovsky225 (creative commons)

Best of the week – May 16, 2015

Here are some articles that caught my eye this week…

The Secret To Happiness… And Why It Has Nothing To Do With Money

I believe money is a multiplier. If you are greedy, having money will just make you even more of a miser. If you are generous with the little you have, wealth will enable you to be outrageously generous. If you are not happy today, having more money will not make you happy.

Advantages Of Mutual Funds

I believe in mutual funds. I understand why some folks are hesitant about investing in the stock market. Stocks do go up and down, and more often than not the bad days make headline news while the good days are buried deep in the financial section somewhere, so we are left with a perception that stocks are dangerous. And I will agree that it is very risky buying stocks in single companies. Even great copanies sometimes run into difficulties and sometimes go out of business. The beauty of mutual funds though is they provide a very easy way to own pieces of hundreds of companies at once. While one company in the mutual fund may be going broke, chances are there are others who may be having their best year ever. By spreading the risk over hundreds of companies, your have a much safer long-term investment.

52 habits of my debt free life

How many of these habits can you relate to?

Have a Costco or Sam’s Club Membership? Here’s How to Get Your Money’s Worth

We have had a B.J’s Wholesale membership for many years and have saved a great deal of money by shopping there. The key though is in knowing prices. Not everything is a good deal. For some things the price isn’t much different than you’d get at the grocery store, but other things are significantly cheaper. The other key is making sure you will actually use what you purchase. Warehouse clubs are notorious for selling the 10 pound jugs of mayo. It may be a great deal per ounce, but if you only use a fraction of it before it goes bad you really didn’t save.

This Mom Created a 5-Figure eBay Business in Her Spare Time

If you need a little extra income to get your debt snowball rolling, save for someting big, or just to create a little extra margin each month, selling some stuff on E-Bay is one way you can do it. I have played around with E-Bay some in the past. I do agree that you can make money selling on E-Bay, but I will say it is not a magic bullet. It takes time and effort and one of the keys is finding the right things to sell. You want to find items that will allow you to make enough profit to make it worth your time. That said there are many people who have built very nice little side businesses selling on E-Bay.

Only 4% of the Poor Become Rich

If you want to achieve different results, you need to learn different behaviors. One way to do that is to find a mentor who can help guide you. The good news is there are many ways to find a mentor. Finding a successful person you can physically meet with is great, but if you don’t know someone who can help you there are many other sources of mentors. Books, blogs, classes, podcasts, tv and radio. All of these are great ways to find people who can help you change your thinking.

Learning from 401K millionaires

In business you often come across something called “best practices”. Basically a best practice is a technique or a method that has shown over time to be the best way to achieve a stated goal.401k millionaires

We can do the same thing in our personal lives by taking an area where we would like to improve and study what successful people have done. For example, if you want a better marriage, find an older couple that have been together for 50 years and talk to them about how they stayed together for so long.

Fidelity investments is the largest manager of 401k plans in the US. As a result they have amassed a huge amount of data about the habits of 401K investors. Last year they published a study of individuals who had amassed a balance of more than a million dollars in their 401K and had an income of under $150,000.  These are people who had accumulated a very large balance and had done so despite not having an enormous income.

In the study they identified 5 traits that were common across these 401k millionaires. If we want to be successful too, it would be wise to consider the “best practices” followed by these 401K millionaires.

1. Start saving early

The first key to building a million dollars in your 401k is to start early. Time is your friend when it comes to investing. You can still build wealth if you start later in life, but it is much harder. If you start right away at the beginning of your working career, it really isn’t that difficult to build up a substantial sum of money over a 40 year working career.

When we are in our 20’s though thinking about retirement is often the last thing on our minds. Shortly after I started my first job, I had an older co-worker call me over to his office one day. He showed me examples of how even investing a relatively small amount starting in my early 20’s could turn in to hundreds of thousands of dollars over the course of my life. I had already started putting some money in the 401k we had at that company, but I really appreciated the encouragement he gave me.

2. Contribute a minimum of 10% to 15%

It stands to reason that if you are going to build wealth, you have to be saving. You can’t put $20 in here or there and hope to have millions of dollars. Dave Ramsey recommends saving 15% of your income for retirement. Brian Preston of the Money Guy show recommends 20% if possible. Fidelity’s data indicates that these 401k millionaires they studied averaged 10-15%. One of the real benefits I see in workplace retirement accounts is the money comes out of your pay before you even see it. If you had to write a check for 15% of your income, many people would find that pretty difficult. But when it comes out before you ever see it, it is much easier to save.

This is also why it is so important that you get out of debt and stay out of debt. When you are swimming in payments as many folks are, it is very difficult to have anything left over to save. Second, this is why it is important to have a spending plan. If you don’t have a plan for your money, I guarantee you’ll get to the end of the month and wonder where it went. To be able to save consistently, it has to be a part of your plan.

Saving 10 to 15% over a lifetime is not easy. It takes discipline and intentionality.

3. Meet your employer match

If your 401k has an employer match, make sure you are saving at least enough to get that full match. For example my employer matches 50 cents on the dollar up to the first 6% I contribute. So for every dollar I put in up to 6% of my wages, they’ll throw in another $.50. That’s amounts to a 50% return on my investment before I ever even get started.  It is free money! Don’t miss out on it.

Think of it this way. Suppose you were called into a meeting at work. At the end of the meeting, your boss said, “Oh, by the way, when you walk out of the meeting you’ll see a table outside the door. There are stacks of twenty-dollar bills on it. Feel free to help yourself to a stack as you leave.” How many of us would say, “Nah, that’s ok. I don’t really need it.” Not very many. And yet in essence that is what we do when we don’t take advantage of an employer match.

The last thing I will say is if you work for an employer that does not match funds you save, don’t lose heart. It is a nice little boost to your savings if they do, but if they don’t it doesn’t mean that you can’t still save a very healthy little nest egg over the course of your working life.

4. Consider mutual funds that invest in stocks

The first key to saving is you have to do it. The second is you need to be saving in the right things.

The temptation is to put your savings into conservative options that are unlikely to lose money. You worked hard for that money and you don’t want to lose it. I understand that. But, you also have to understand that while you are unlikely to lose money, you are also unlikely to make much money. The amount of money you make is directly tied to the risk you take. The real problem is you still need to account for income and taxes. If you aren’t earning at least 5-6%, you are really losing money when it comes to actual buying power.

But what if the market goes down? What if we have another year like 2008? I guarantee it will. There will be many years where your investments lose money over the course of your lifetime. But there will also be years where you make money.   A couple of years ago I had a year where my 401k was up over 30%. Can you expect that every year? Of course not. 30% is not a typical year but then neither are awful years like 2008. I believe history has shown there will be many more years where you will make money than you will lose money and so over all if you look at a 40 year working career having money invested in stocks will serve you very well.

One final note before moving onto the last item. Many 401k’s have the option of investing in your own company’s stock. They might even provide incentives for you to do so. Generally, speaking investing in your own company’s stock is a very risky thing to do. The problem is what if something terrible happened and your company went out of business? You now have lost your job and your life savings. That’s just too much risk to be that dependent on one company no matter how great your company is.

 5. Don’t cash out when changing jobs

We know that the years of spending a 30 year career with one company and then retiring with a gold watch and a fat pension are pretty well over. Statistics show that most of you will work for many different companies and perhaps even work in completely different fields over the course of your working lifetime. The question is what do you do with that old retirement account when you leave your company?

Let’s consider young Bob. Bob gets a job right out of college and spends 3 years working for Big Corp, then he gets a better job offer from another company. Bob, being the bright guy that he is, has managed to save $10,000 in his old 401k. At this point Bob has a couple of options. He could roll this over to an IRA that he controls and continue to let it grow, or he could cash it out.

If he decides to cash it out, first he’ll have to pay taxes on the money and second since he is not 59 1/2 he’ll get hit with a 10% penalty for an early withdrawal. By law his 401k provider will withhold 20% for taxes. So when Bob cashes it out, after taxes and penalties he’ll only get $7,000. Still that’s tempting. After all, $7,000 would make a really nice down payment on that new sports car he has had his eye on.

Now let’s consider if Bob instead rolled it over to an IRA. Just for the sake of argument we’ll say it was invested not particularly well and only made about 6% (in reality over time the market has averaged almost twice that.) And finally we’ll say Bob never added another dime to it. He just left it alone for the next 40 years until he reached retirement at age 65. Bob would now have $102

A couple final notes

Two last things I want to say. First you may be saying well that’s great if I was 20 and just starting out but I’m 50 and heading into the home stretch and I haven’t saved anything. Am I doomed? No, of course not. It may not be possible to be a 401k millionaire. But you can still start saving today. For many people, their 50’s are their highest earning decade. Start saving today. You can’t change your past, but you can change your future. You might need to work a little longer. You may not amass millions. But if you start today you’ll be far better off in retirement than you would be had you done nothing.

Lastly, if you are younger, am I saying if you follow these steps you are guaranteed to be a millionaire. No. There are no guarantees in life. I do believe strongly though that following these five 401k “best practices” will serve you very well. And what if we are half wrong? You’d still be entering retirement with over $500,000!

If you are reading this and you are in your 20’s think carefully about these five steps. I know retirement may be the last thing on your mind, but a few small wise choices today will make a huge difference in your life down the road. And if you are older but have a young person in your life, share this article with them. Just like that older co-worker that pulled me aside many years ago, you might just change someone’s destiny.

What steps do you need to take today to have a chance to be a 401k millionaire?

The question that might change your life

The Question that might change your lifeIn John 5 we have the story of one of the many miracles of Jesus recorded in the gospels. In Jewish lore it was believed that occasionally an angel would come stir the waters at the pool of Bethesda. They believed that after the waters were stirred, the first person to touch the waters of the pool would be healed of whatever ailed them. As a result it was a gathering place for many who were crippled or invalid. This particular story contains a twist that seems a bit odd.

Some time later, Jesus went up to Jerusalem for one of the Jewish festivals. Now there is in Jerusalem near the Sheep Gate a pool, which in Aramaic is called Bethesda and which is surrounded by five covered colonnades. Here a great number of disabled people used to lie—the blind, the lame, the paralyzed. One who was there had been an invalid for thirty-eight years. When Jesus saw him lying there and learned that he had been in this condition for a long time, he asked him, “Do you want to get well?”

“Sir,” the invalid replied, “I have no one to help me into the pool when the water is stirred. While I am trying to get in, someone else goes down ahead of me.”

Then Jesus said to him, “Get up! Pick up your mat and walk.” At once the man was cured; he picked up his mat and walked. John 5:1-9

Did you catch the odd question Jesus asks?

Do you want to get well?

Jesus, what kind of question is that? Does he want to get well? Well, of course he does! He’s waiting at the pool. He has been an invalid for most of his life. Of course he’d want to get well, wouldn’t he?

To sign up or not to sign up

This story came to my mind several years ago. At the time I was single. Hoping to find someone to share my life with, but to that point I had not found the right special lady.

I had stumbled across a web site called Christian Matchmaker. This was before the days of sites like Match.com, E-harmony, Christian Mingle, and a host of other popular sites we have today.

As I contemplated signing up and giving it a try, a host of objections came to mind. It probably won’t work. What will people say? What if it does work? What if I did find someone, but they lived far away? And on and on it went in my mind.

It was about that time I stumbled across this story from the gospels. Do you want to be well?

This question has more relevance than we realize. Many times we are faced with areas of our lives that we wish were different.

It might be a serious physical issue like the man at the pool of Bethesda. It might be a relational issue like I was facing. It might be a financial problem like the things we talk most about here on this site.

When we are faced with an area of our life that we wish was different, we are really faced with the thought of change.

Change is hard

Sometimes it may seem easier to just stay where we are as opposed to doing what it takes to change. Dave Ramsey often jokes we are a little like a toddler with a dirty diaper. “I know it smells bad, but it is warm and it is mine.” The line usually gets a laugh, but we recognize there is a grain of truth in it.

Change means facing the unknown

We are like that toddler sometimes because staying where we are is more comfortable than facing the unknown. It means learning new things. Often change means doing things we have never done before. That can be a little scary.

Change may be risky

Sometimes change means taking a risk. Perhaps a part of getting your finances in order requires you look for a new job. But what if that new job doesn’t work out? What if I change careers and find out I don’t like it? People tell me I should be investing, but what if the market goes down and I lose my money?

Change means facing down your fear

Any time we face change, chances are that little voice of doubt will start whispering in our ear. What if? What if? What if? Fear will always stand up and try to convince us to just settle for what we have always done. Fear will try to tell us to do what we have always done. Fear will tell us we aren’t good enough or smart enough to change our lives.

Choosing changescan0001

So back to my story. I was faced with the question did I really want to take a chance and sign up on that web site, or should I just continue with the status quo. Like that man lying there by the pool, did I really want my life to change? I decided to ignore that little voice that was whispering all the things that might go wrong and go for it.

The good news is a couple years after signing up on that web site, I was walking down the aisle with the lady I had always dreamed I might find some day. This summer we will celebrate 15 years together.

Not such an odd question

The truth is the question Jesus asked that man by the pool wasn’t really as odd as it might have seemed. Too often we choose to stay in our current circumstances instead of doing what it takes to change, because the known (even when it is painful) is more comfortable than the unknown. We spend years complaining about our lot in life, but in reality we never really try to take the steps needed to change it.

My challenge for you today is if you currently have areas of your life that you wish were different, financial or otherwise, take courage. Step out and try something new. Ignore the voice of doubt, and make some changes. You won’t regret it.

What area of your life do you need to change today?

Love your family through the major events of life

Marriage and divorce.

The birth of a new child or the death of a loved one.

Starting a new job or perhaps losing one.

Buying a new home.

These are major life events that can significantly change our lives. Many of these events also can have financial implications, but whether it is through the joy we share in a new marriage or the birth of a child, or the debilitating grief we feel after the death of a loved one, it is easy to forget about the things we need to take care of.

The saddest stories are the wife that finds out after her husband’s passing that his first wife gets the life insurance proceeds because he forgot to change the beneficiaries or the brothers who haven’t spoken in 10 years because of hard feelings caused by a surprise in their mom’s will that she hadn’t shared, or a host of other possibilities that can occur when we don’t take care of details.

If you have recently had a major life changing event whether happy or sad, consider whether there are any of these items you need to review.

Insurance

Life insurance

This is so important. Have you checked your beneficiaries lately? Who will benefit if you pass away? Has anything changed that would require you to adjust your beneficiaries?

Another important consideration is the amount of life insurance you have. You should have enough life insurance to make sure your family’s needs are taken care of if something should happen to you. This should be at least 10-12 times your income plus enough to cover things like possibly paying off your mortgage or funding your children’s college. You need to periodically consider, especially after a major life event, if you still have the right amount of insurance.

Health insurance

Do you have the right coverage? If you have recently gotten married or had children, did you make sure you took care of whatever paperwork was necessary to have them added to your policy?

Homeowners insurance

When you buy a new home, your mortgage holder will require that you have insurance coverage on the home, but those coverage needs can change over time. Have you made significant upgrades that would change the value of the home? Do you still have sufficient replacement coverage in the event of a disaster? Most policies no longer offer full replacement coverage, so you need to review your policy to make sure you have enough insurance.

Retirement accounts

Do you have retirement accounts either at your workplace like a 401K or 403B or outside of work like an IRA or perhaps an annuity? Like life insurance, it is critical you regularly review your beneficiaries, especially if you have recently experienced one of the life events mentioned above.

If you have started a new job recently, have you investigated what workplace retirement account options your new employer provides? Especially if your employer provides matching funds, workplace retirement accounts can be great ways to save for retirement because the money generally comes out of your check before you ever see it.

If you have recently lost a job or changed jobs, don’t forget about those old retirement accounts. In all but very rare cases you should roll those old retirement accounts into an IRA that you control. An IRA gives you much more flexibility in how you can invest the money and it also simplifies your life. If you have changed jobs frequently, the last thing you want is to have a dozen different retirement accounts to try to keep track of. By rolling them into a single IRA you will be able to manage them better and will reduce the chance of forgetting about money that you should have coming to you.

Wills and trusts

A 2007 study by Harris Interactive showed that 55% of Americans had no will. While death is not something we like to think about, the truth is the mortality rate for humans is pretty close to 100%. If you die without a will, there are state laws that will determine what happens with the things you leave behind, but do you want a state law making those determinations?

If you have recently married or divorced, you need to review your will to make sure it accurately reflects your wishes.

Perhaps most importantly if you have recently had children, you need to make sure you have a will! I can’t stress that enough. If you die without having a will, a judge will likely determine who will raise your children. You don’t want to leave such a critical decision to the courts.

If you have young children you may want to look into having a trust created with any life insurance proceeds or other money that you leave to them. By having a trust you can make plans for when they receive the money and/or what it can be used for.

Review who you have named as the executor of your will and who you have placed in charge of any trusts you may have set up. Our relationships change over the years. People move into and out of our lives. It is important to review who you have named to these important positions occasionally just to make sure it still reflects your desires.

Lastly, I will strongly urge you to make sure your loved ones know the contents of you will while you are still alive. Too often family relationships are damaged or destroyed because of misunderstandings or unfulfilled expectations on what will happen after you pass. Love your family well enough to makes sure your “stuff” doesn’t destroy them.

Your legacy drawer

Lastly, you really should have a place where you keep all of your important records, insurance policies, account information, etc. Some people call this a legacy drawer. By having this information laid out for your loved ones, you make a difficult time a little easier, as they will know where to find critical information.

Many of these key life events may affect the information that you save in that legacy drawer. While you are reviewing these other items, take a few moments to review what you have documented in your legacy drawer.

A part of loving your family

Part of loving your family well is making sure you take care of the details. When we go through those major events of life like marriage and children, job changes, and other life changing events, often those details change. As you experience the joys and sorrows that these events bring, make sure you don’t forget to take care of the changes they bring.

A great new resource to help you find a quality used car

I believe one of the things that keeps many people from ever really making significant progress financially is car payments. According to a CNBC report the average new car payment in 2014 was $471. Add to that the fact that many households have not one but two cars with payments sitting in the driveway, it isn’t hard to see why many people struggle when they have nearly $1,000 a month going out the door in payments.

But, at the same time most of us need transportation to get to and from our work as well as just leading our daily lives. So what is the alternative? Well, I believe that a quality used car can provide effective, reasonable transportation without killing our budget.

Finding quality

But the key word in that last statement is “Quality”. Buy a lemon and all those savings could disappear in an avalanche of repair bills. So, how do you improve your chance of finding a quality used car particularly if you are like me and aren’t very mechanically inclined?

In the past I have used sites like Consumer Reports or JD Power to try to research vehicle quality. Sites like Edmunds.com and Kelley Blue Book provide a wealth of information about used vehicles. One problem though with some of these sites is they don’t go back that far. With the average age of used cars on the roads being a little over 11 years, it can be more challenging to find reliability info on older vehicles.

The Long-Term Quality Index

Recently, I discovered the Long-Term Quality Index web site. This site was created to address this very problem. The site was created by Steve Lang and Nick Lariviere. They have gathered data on hundreds of thousands of used cars across America over the last 2 years, and expect that by the end of 2015 they will have data on more than a million cars. The data goes back to models more than 20 years old.

For each vehicle they provide data on the following:

  • They have developed an overall reliability score that you can use to compare models.
  • A distribution that compares the average mileage as compared to the industry average.
  • The vehicles are rated based on the number of issues they have experienced with the engine, transmission, and overall powertrain.
  • Finally, the total defects found for each year’s model is compared with the industry average for that year. This can provide very insightful information as it is very easy to see when manufacturers were improving quality as well as when they made changes that did not work out so well.

Research is the key

One of the keys to getting a good deal in almost anything, and particularly when it comes to vehicle shopping, is gathering as much information as possible. The person with the most information will almost always come out ahead on the deal.

Yes, there are lemons. But there are also many great used cars that will provide you with solid, quality transportation for 200,000 miles and more. If you do your research, it isn’t so hard to find one of these vehicles. The Long-Term Quality Index web site is another very useful tool to have in your tool belt when it comes time to look for your next vehicle.

What tools do you use to research your next vehicle purchase?

Book review: The Millionaire Mind by Thomas Stanley

One of the authors that has deeply affected my understanding of financial matters and wealth is Thomas Stanley. His book The Millionaire Next Door helped me understand that financial success has little to do with how much you make and everything to do with how much you keep vs. what you spend.The Millionaire Mind

Sadly, Dr. Stanley was killed in a car accident a few weeks ago. In honor of his life I decided to pull one of his books off the shelf that I had purchased a while back but had not had time to read.

How do millionaires think?

The Millionaire Mind was the sequel to the The Millionaire Next Door.  In the first book Dr. Stanley looked at the actions of millionaires and found that most millionaires don’t live the stereotypical life that we see on Lifestyles of the Rich and Famous. In fact, many millionaires live quiet, modest lives so much so that they might be your next door neighbor and you wouldn’t even know it.

In The Millionaire Mind, Stanley delved into the thought processes behind those millionaires. How do they think? What is important to them? How do they view common everyday parts of life?

The millionaires surveyed

Stanley surveyed 733 millionaires as a part of gathering data for this book. On average these millionaires had a net worth of just a little short of 10 million dollars.

Contrary to what you might expect most of these millionaires did not arrive with a silver spoon. Less than 2 percent inherited their homes or any significant part of their property. Only 8 percent inherited more than half their wealth. 61% never received any inheritance at all.

So these are people who for the most part started with little to nothing and built substantial fortunes. Understanding how these millionaires think would clearly be helpful in understanding how we can be successful too.

The key success factors

Stanley surveyed these millionaires on a wide range of factors to discover what they felt was most important in enabling them to build wealth. You might think that high degrees of intelligence or education or a specialized knowledge were keys to building wealth. In fact these traits ranked fairly low. So what were the top factors?

  1. Being honest with all people
  2. Being well-disciplined
  3. Getting along with people
  4. Having a supportive spouse
  5. Working harder than most people

So the keys to becoming a multi-millionaire according to those surveyed? Integrity, quality relationships and discipline and hard work.

Education

While most of the millionaires surveyed were college graduates, few graduated at the top of their class. On average these millionaires graduated from college with a 2.92 grade point average and had an SAT score of 1190.

It was interesting that many millionaires noted that because they had never been the best students in their class, some had been told by teachers or other mentors at some point in their education that they were unlikely ever to be successful. Those comments became motivating factors that pushed them toward where they were.

Because they had to work harder for their academic degree than their counterparts for whom everything came easy, they learned the discipline of hard work and how to press on through discouraging circumstances. Those lessons paid off later in business when they suffered setbacks. They had the perseverance to press on. Their counterparts that had been at the head of their class were more inclined to give up when faced with similar obstacles.

Courage

Courage was another key for these millionaires. While they were not gamblers, they were willing to take a calculated risk when they saw an opportunity.

Because of this attitude many of those surveyed were self-employed. While some may see self employment as risky, they viewed relying on their abilities as less of a risk then working for a larger company where they had less control.

The also were much more likely to focus on the positives that could come from success as opposed to the negatives of failure.

Many of the millionaires surveyed sited a strong religious faith as a significant factor in helping them to have the courage to prevail in hard times.

This is not to say that the risks they took always came out to their benefit. Many had suffered financial setbacks. But they had an uncommon belief in their abilities to handle any situation.

Vocation

The millionaires in the survey understood well their strengths and weaknesses and credited choosing work that enabled them to maximize their ability.

It is very hard to succeed over the course of a lifetime in a vocation that is not well suited to our particular talents. These millionaires understood this and sought out work that they enjoyed, that invigorated them, and that matched the unique skills they had been born with.

Marriage

92 percent of the millionaires surveyed were married and only 2 percent had been divorced. On average these millionaires had been married 28 years. One of the highest rated factors in their success these millionaires cited was having a supportive spouse. How did these millionaires choose so well when they were looking for a person to spend their life with?

While physical attractiveness was not an insignificant factor, it was not a high-ranking deciding factor that led these millionaires to choose their mate. The top 5 factors that they indicated were most important were:

  • Honest
  • Responsible
  • Loving
  • Capable
  • Supportive

Finding a spouse with these qualities played a major role in their success.

Economically productive households

These millionaires were frugal but that doesn’t necessarily mean buying things cheap. They understood quality and took good care of their possessions. For example they did not buy the cheapest shoes they could find. 70% of them indicated that they had purchased high quality shoes and had them resoled on a regular basis. While they paid good money for their shoes initially, in the long run they actually saved money by taking care of them.

These millionaires were also very careful with their time. For example most regularly grocery shop with a specific list. They didn’t spend an hour or more aimlessly browsing the grocery store. They went in with a list and purchased what they needed. This was partly due to a desire not to spend wastefully, but even more so it was about saving time. They understood the value of time and took every effort to maximize it when they had the opportunity.

Their homes

One of the striking characteristics of these millionaires when it came to purchasing their homes was their patience. They looked for homes in well established neighborhoods that were likely to appreciate in value. They resisted the temptation to succumb to house fever. They were tough negotiators and were willing to wait until they found the deal that they were looking for.

Few of these millionaires ever built their own home. Once again they understood the value of their time. Building a home requires a great deal of planning and follow-up. They prefer to use their time in ways that bring them value as opposed to babysitting contractors.

Their lifestyles

Much of their lifestyles were based around relationships more than possessions. For example, golf was the most common sport played, in large part because of the relational nature of golf.

Charity was an important part of their lives but interestingly, not just after they acquired wealth. For many of these millionaires volunteering and giving had been a large part of their lives from the time they were young.

They chose to build friendships with other affluent people who would help push them to accomplish the things they did. They also made it a practice to surround themselves with high quality advisers to help them in important areas.

Pursue The Millionaire Mind

I believe that one of the keys to success in any area is studying what successful people do and then trying to incorporate those practices into your own life. Certainly that is true in financial matters and that is one of the things I appreciate about the work Dr. Stanley did, first in The Millionaire Next Door and then in The Millionaire Mind
.

If you want to understand how millionaires think, reading The Millionaire Mind
is a great place to start.

10 ways to get free or nearly free books for your Kindle

I love to read. In fact I have joked that my house might collapse if all of the books were suddenly removed as all of the overloaded bookshelves stacked to the ceiling might be what is supporting my home.free Kinle books

A few years ago I discovered the wonders of Amazon and e-books. While I don’t have an actual Kindle device, the great thing about Amazon is they provide apps for Apple and Android devices. You can also read them on your PC and if that doesn’t provide enough options they also have a cloud reader you can use to read books from your web browser.

Personally, I use the Android app on my phone and it works wonderfully. The great thing is I almost always have my phone with me so if I am waiting for an appointment, standing in a long line, or have a few spare minutes elsewhere, I always have a book nearby.

The good news is there are several ways to find free (or nearly free) books for your Kindle. Most of these sources also provide options for a Barnes and Noble Nook or other e-readers.

E-mail lists

There are several e-mail based services that provide lists of free or cheap books. Most of the books available from these services range in price between free and $2.99.

Simply go to the site and register for a free account. There are a large variety of categories and you select the categories that interest you. Each day they send you an e-mail with selections from those categories.

http://www.bookbub.com

One of the first one that I stumbled across was BookBub. This is still one of my best sources for books.  They have one of the widest selections of categories and often have selections from well-known authors.

http://www.eReaderIQ.com

My second favorite service is eReaderIQ. One additional option they provide is the ability to import your wishlist from Amazon so that they will notify you if one of the books on your list goes on sale. They also have an extension for the Chrome browser that you can use to check prices against Amazon to make sure you are getting the best price.

http://www.eBookSoda.com

eBookSoda provides fewer categories than BookBub but they still provide a nice selection of inexpensive books to your e-mail each day.

http://www.BookLemur.com

Book Lemur just changed their service slightly. They still send a daily e-mail but instead of including the list of books on sale, the e-mail provides a link back to the Book Lemur site where you can view your daily list.

http://www.freebooksy.com

FreeBooksy is a bit unique in that all of their selections are free each day, but otherwise it works similar to the other services. I’ve noticed though that they seem to have fewer well-known authors.

http://www.EarlyBirdBooks.com

The last e-mail service I use is Early Bird Books. They generally have a smaller selection of books each day. If you like classics though they frequently have at least one classic book available in the daily list.

Kindle Daily Deals

Amazon also provides many daily deal subscription services. Among those is the Kindle Daily Deals. The highlighted daily books are usually not free but are generally fairly inexpensive.

3 more sources for free books

The library

Each state’s library system may be different but in Ohio where I live, in addition to being able to check out physical books, you also have access to the Ohio Digital Library. Books can be signed out for 3 weeks at a time. There are limited copies so you might still be on a waiting list for popular titles, but you will be notified when your turn comes up. The checkout process works in tandem with Amazon so the sign out process is very similar to buying a new book. They also provide epub versions that are compatible with other readers.

Amazon Prime

If you are an Amazon Prime subscriber, then you have access to the Kindle Lending Library. Using this service, you can checkout and read many Kindle titles for free.

Classic books on Amazon

Lastly, if you enjoy reading classic authors there is a large selection of classic literature available for free. These are books for which the copyrights have expired. But if you enjoy reading books by authors like Charles Dickens, Jules Verne, Victor Hugo, Mark Twain, Edgar Allan Poe, Jane Austen, and hundreds of others, you can easily find great choices for free in the Kindle store.

Two cautions

Be aware that authors often will discount or offer for free the first book in a series. This is good in that it allows you the opportunity to get a taste of the series for little if any cost. The downside though is if you really love the first book, then you may have to pay the full retail price for subsequent books in the series. Or if you are fortunate you might be able to get them through the library.

Second, if you are a real book lover you may wake up one day and realize you have a lifetime worth of books that you have accumulated. As a book lover you may be saying, “So what’s the problem?”. Personally, I am hopeful that God will allow me to live long enough to make it through all of the books I have to read. I believe that if He grants my request I stand a good chance of living to be at least 120. Seriously, though it is easy to accumulate a large number of books for little cost. Personally, I have gotten much more choosy about the books I purchase. I simply have more books than I’ll likely ever get to.

The bottom line is if you love reading, e-books provide a great alternative and you can build a sizable library of wonderful books for almost no cost.

What sources do you use to get free or cheap books?