Best of the week – April 25, 2015

Here are some articles that caught my eye this week….

What Do Credit Cards and Mosquitoes Have in Common?

I love the analogy and it fits even better than I thought when I first saw the title of the article. Credit cards are dangerous in many ways, but probably the most important is the fact you just don’t really feel like you are spending money. Add to that the fact that you don’t get the reality check of the bill coming due until a month after you have spent the money, it is so easy to find yourself in over your head before you even realize it.

102 Things to Do on a Money-Free Weekend 

Having fun does not have to mean spending money. Some of the most memorable things in life cost nothing at all.

What is Your Retirement Number – The 4% Rule

What would you say to someone who was embarking on a trip, but hadn’t really decided on where they were going?  The plan was to just get in the car and start driving and hopefully, they’d end up where they wanted to be. Sounds like a pretty crazy way to get somewhere, doesn’t it? But that is kind of what we do when we never stop to think about what kind of life we want to live in retirement. Hopefully, you are saving at least some money for retirement, but if you haven’t considered what lifestyle you want to live in retirement, then how do you know if you are on track to get there? Blindly hoping that maybe you are saving enough? Not a good plan, but unfortunately, it is what most people do.

7 Tips to Avoid Becoming an Affinity Fraud Victim

You are probably familiar with identity fraud, but you might not have heard the term affinity fraud. Affinity fraud occurs when you are taken in by someone you know or represents a group that you are affiliated with. It is especially dangerous since it is coming from what you thought was a trusted source. The bottom line though is there is no magic to wealth. If someone is promising you unbelievable gains or if the offer seems too good to refuse, it probably is. Remember “Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.” Proverbs 13:11

30 Ways to Shave the Cost of Laundry

Not doing laundry is not an option, but having clean clothes doesn’t need to cost an arm and a leg.

Living on Less Than $28,000 A Year: Managing the Money

There are several keys in this article to getting by with less. Have a plan. Prioritize. Be willing to say no to yourself. Really understand the difference between needs and wants. And maybe most important if you are married, lots of communication.

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?

Best of the week – April 18, 2015

Here are some articles that caught my eye this week…

What Does Lunch Really Cost?

I believe often times we don’t get ourselves into financial trouble because of the huge mistakes. Sure there are cases where a major hospital stay with no insurance or a prolonged job loss or other major trauma absolutely destroyed the family finances. For the most part though I think those are the exception. What is most common are the little choices we make day after day. We don’t think they are significant because the dollar amounts are small and so we don’t pay attention. But small decisions compounded over weeks and months and years can have a dramatic effect on our success.

The secret science of shopping: Why we buy what we do

Some fascinating studies detailed in this article. Retailers spend millions of dollars studying how to make us part with a little bit more of our money. There is nothing wrong with buying things we want. It is important though to understand the factors that motivate us to buy.

How I Earn Extra Income By Renting Out Extra Space

If you are looking for a little extra money to get that debt snowball rolling, make ends meet, or maybe to save for that special purchase, one way you can do it is by renting out extra space you may have. People have been doing this for many years and it is still one excellent way to bring in a little more income.

The American Dream Trap: Is Your Stuff Putting You In Debt?

I had a pastor once tell a story about the time that a well-meaning friend gave them a new king size bed. But they had a queen before so that meant they had to buy a new bed spread, which didn’t match the old curtains, and the new bed needed more pillows, and, and, and…. He said that “free” bed cost me a lot of money. So often that is true of our possessions. When you add up the real cost of that item, it is often far more than the price on the sticker. If we aren’t careful the never-ending chase for stuff will lead us down a path of debt and ultimately bondage, because we trade away our freedom when our mailbox is full of payments.

The Bank Can’t Foreclose On You If You Don’t Have Debt

Debt is a thief. It steals your peace. It steals your freedom. It steals your future. Don’t believe the lie that you must live in debt.

A Late Start on Retirement Savings Is Common, and Costly

Often times when we are young the last thing we are thinking about is retirement. It seems so far off that we think there will be plenty of time to start saving later. But time can be our friend or our enemy. Have the wisdom to start early. Even a little saved from a young age can turn into a life changing total when you get to retirement age. If you wait until later though you can still save to have a  comfortable retirement, but it is much more difficult.

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?

Your financial problems are probably your fault and 3 reasons why that’s a good thing

“The victim mindset dilutes the human potential. By not accepting personal responsibility for our circumstances, we greatly reduce our power to change them.” Steve Maraboli

“It is all my fault.”

Those are 5 words that we really don’t like to say. I’d much rather blame someone else for my problems. Accepting that my biggest problem is the guy staring back at me in the mirror is uncomfortable and a little painful.

It’s much easier to blame my nasty boss who refused to give me a raise or the tough job market or that lemon car that “forced” me to have to buy a new one or any of a host of other circumstances that were beyond our control. And so we go through life wishing for something better but convinced that the world is conspiring against us.

In reality, while occasionally things happen that we completely beyond our control, most often the things that cause us hardship were things we could have avoided. It might have meant doing something we didn’t really want to do, but we did have options.

The good news is the fact that if it is your fault, that is actually a good thing, and here is why:

1. It means there is hope

If the world is conspiring against you and there is literally nothing you can do about it, then life is hopeless. Barring getting that lucky winning lottery ticket or the big inheritance from my long lost uncle, I’m just destined to financial failure.

But if I admit that my problems may have been at least to some degree my fault, then that means there is something I can do about it. If I learn to make better choices I can turn my situation around. I’m not waiting for someone else to rescue me; I have the ability to change my life. There is real hope in that!

2. It is an opportunity to learn

If I admit my problems were my own doing, then I have the opportunity to learn from my mistakes. I can improve. I can change the behaviors that got me where I am by learning new skills. But if I am simply a victim of circumstance there is nothing to learn and no chance to improve myself.

3. Without change even if someone rescues me I’ll just end up in the same position.

If I am simply a victim and my only hope is for some one or some thing to bail me out, and the miraculous does happen, what are the chances my life is really changed? If there is no change in what got me into financial trouble, then any miracles are only temporary.

I think this is one reason that so often lottery winners end up losing it all in a few years. While the winnings may provide them a temporary taste of prosperity, without changing behaviors they slowly slip back into their old habits. Those habits are what left them in a position of need and those habits will gradually lead them back to poverty.

It is only when I admit my errors, learn from them, and change the behaviors that led me to financial struggles that I have hope of living a better life.

Examine yourself (even if it hurts)

While it might be easier to blame some else for your problems, when you do that you are also giving up control of your future. By accepting the responsibility for where you are, you open the door to hope, growth, and a better future.

If you are struggling financially, I urge you to take some time and really look at your past decisions as honestly and unemotionally as possible. Understand that is a difficult thing to do. Consider where your problems stem from. Yes, your car was about to die and you did need to get another one, but did you really need that $40,000 SUV because it was safer, ir would a $10,000 used one have sufficed just as well. Are there some stores that you can’t walk in to without walking out with 3 bags of stuff? Why do you have trouble saying no to yourself? Is it because you need more self discipline? Or perhaps you are medicating some other hurt with spending?

There are many ways that we get ourselves in trouble. Some are obviously our fault, others maybe less so. Without taking the time to reflect though on what part we have played in our difficulties regardless of how painful and uncomfortable that may be, we won’t have the hope for a better future.

Take control

Author Andy Andrews says remember the next 5 years will pass regardless.  The question is where do you want to be in 5 years? You can determine you are a victim and you will wake up 5 years from now in much the same place you are today.  Or you can decide today that you want a different future . Learn from your mistakes in the past. Make the changes you need to have a different future and 5 years from now you will be much closer to the life you desire.

I don’t know what circumstances you have faced. Perhaps you have had some bad breaks. Sometimes life does seem a bit unfair. Your past doesn’t have to define you. You can start today to build a better future.

 What mistakes have you made that have contributed to where you are financially?

The real secret to building wealth

If you watch late night cable you’ll find a lot of infomercials that promise they have the secret to building wealth. Google the secret to building wealth and you’ll find thousands of entries. Many people think there is a some secret that only the wealthy know.

So how does one really become wealthy?

1. You have to learn to live on less than you make

It may seem obvious that you can’t build wealth when you are spending more than you have coming in, but evidently it isn’t because this is exactly what many people do.

You will never be able to save any significant amount of money when you are living a deficit month after month. So what does that mean?

First, you need need to have a spending plan, otherwise known as a budget. Without a plan money will disappear and you’ll never quite know where it went. Without a plan you may not even know if you are spending more than you have coming in.

Second, you might need to cut some spending. It is a balance. Sure you need to live your life. But the more margin you can create the more you can save.

Third, if you can’t make ends meet but you don’t have much spending to cut then you need to find ways to increase your income. Short-term that may mean a part time job. Longer-term it may mean taking steps to pursue a different career path.

The bottom line is you will never build wealth when you are spending money as quickly as it comes in.

2. Be passionate about eliminating debt

Step 2 goes hand in hand with step one. When members of the Forbes 400, that is the 400 wealthiest people in America, were surveyed about the keys to building wealth, 75% indicated the most important key was to live a debt free life.

It can be difficult enough to live on less than we make. When a significant part of our income is going out each month in debt payments, it can be almost impossible.

Debt is a thief. It will steal your peace. It will steal your security. And it will steal your ability to build long-term wealth.

3. Save early and often.

The most important key to saving money is, you have to actually do it!!

The earlier you start the easier it is. Assuming a 10% rate of return, a 20 year old need save only a little over $100 a month to have a million dollars at age 65. Wait until 40 and that same person would need to be saving $770 a month to get to a million. Time really matters.

This is not meant to be a discouragement if you are older. You still have a choice. You may need to save more. You may not be able to build as large a nest egg. But you can do something.

The most effective way to save is a little by little over a long period of time.

4. Interest rates really matter

Let’s say you were able to save $200 a month from age 20 to age 65. If you did that you would have saved $108,000 of your money. Now let’s see what impact interest rates have.

  • Let’s say you put it in a savings account earning 1% interest. In 45 years you would have earned about $29,000 in interest so your account would be worth $136,910.
  • Suppose instead you put it in some long-term CD’s and made about 2.5% instead. Now over 45 years you would earn over $92,000 in interest, giving you a total of $200, 529.
  • Maybe you decide to invest the money conservatively in some bond funds or conservative stocks and earned a 6% return. You are getting a little more than double the interest rate but your interest earned isn’t double. It is more than 4 times as much, at $433,000! So now you put in a little more than a hundred thousand but at age 65 you have $541,219.
  • Finally, let’s say you invested your money in a well diversified stock portfolio. The S&P 500 has averaged just under 12% over the years. At 12%, you would have earned 3.5 million in interest! So your total investment is now worth $3,650,923.

Here is what many people don’t understand. You work hard for your money and you don’t want to lose it. You watch the news and there is always some “expert” talking about the coming crash. So you decide to be safe. But if safe means you are only earning savings or CD rates the problem is you really aren’t even out running inflation. By playing it safe you are actually losing money.

Now I understand that you can’t count on making 12% every year if you were to invest in quality mutual funds. Once in a while that “expert” will be right and your investment will lose money. Some years you may not make much at all. But some years you might make 20 or 30%!

The point is we are saving for the long-term. You only ever lose money on your investment if you cash it in when it is down. If you are saving over a period of many years, when those down years hit, you have plenty of time for things to bounce back.

The key is to understand risk. How much risk are you willing to take. That largely depends on how much time you have. Just be aware that not taking enough risk will cause you to lose money as surely as taking too much risk because everything you make will be consumed by inflation and taxes. The trick is to find that happy medium where you are comfortable with the risk you are taking and you are taking enough risk to build wealth over time. Just remember that as we saw in the examples above a couple percentage points in interest can mean hundreds of thousands of dollars over the course of a lifetime.

5. Avoid the tax man where you can.

The final principle to remember is to do the best you can to avoid taxes. I am not suggesting you ever do anything illegal. Integrity matters. I also believe that as an American we live in the greatest country in the world and our government does provide many services and protections that make my life better and I have a patriotic duty to pay a reasonable amount for those benefits. But, I also believe in making sure I don’t pay taxes that are unnecessary.

Long-term investments are one place where you have a great opportunity to save on taxes through things like IRA’s and 401K’s. The benefit of programs like these is they allow your investments to grow tax deferred or in the case of the Roth IRA tax free.

This can make a huge difference over time. We have seen previously how the length of time and the amount of interest you earn on your savings can make a radical difference in the amount of wealth you build. If you can protect a quarter to a third of that money from the taxes by saving it in a tax advantaged account like a 401K or IRA, you can make sure those dollars continue to make more and more money for you instead of for the tax man.

The real secret to building wealth

The real secret to building wealth isn’t some program or technique that only the privileged few know. The real secret is actually pretty boring. It is simply paying attention. Living and spending conservatively. Being careful to save. And repeating that day after day, month after month, year after year.

A couple of my favorite proverbs are:

Greedy people try to get rich quick but don’t realize they’re headed for poverty. Proverbs 28:22

Lazy hands make for poverty, but diligent hands bring wealth. Proverbs 10:4

There’s no secret get rich trick. It doesn’t exist. Wealth comes from hard work and sustained diligence over time. This is actually good news. If it was a secret or if it required a special skill that only a few have then it would be closed to most of us. But the truth is all of us have the ability to build wealth.

Book Review: The Money Saving Mom’s Budget by Crystal Paine

One of my favorite money-saving sites that I enjoy following is the Money Saving Mom. Crystal Paine and the crew of people who write for her provide tons of money-saving tips to help you save in all aspects of your life.The Money Saving Mom's Budget

One of the things I appreciate most about Crystal is her story. She talks about the early days of her marriage when her husband was in law school and they were living on almost nothing as they were trying to get him through school without piling up a mountain of loans. I love the example they set of sacrificing deeply for a time so that later they could live the life they dreamed about. Crystal and her husband are very successful today, but it is because they were willing to work very hard and sacrifice to get where they are now.

So often in our society today, people want it all and they want it now. They are unwilling to make the sacrifices necessary to get in a position where they are financially on solid ground. Credit has made it easy for those with a microwave mentality to have whatever they want when they want it. But that comes at a heavy price when the bills start to come due.

 The Money Saving Mom’s Budget

In her book, The Money Saving Mom’s Budget, Crystal walks through many of those things she learned back when they were living on next to nothing.

Budgeting

I have always liked Dave Ramsey’s approach to budgeting for two reasons. First, he teaches that you need to do a unique budget every month because every month is a little different. Some things like your rent or mortgage may be the same, but other things like birthdays, non-monthly bills like insurance, school activities, subscriptions, etc. vary from month to month so you need to plan each month for what will be happening that month. The second thing I like is that he gives you permission to not be very good at it if you are just starting.  If you have never budgeted before you probably really have no idea how much you spend on things like groceries or eating out or gasoline. As you are getting started if you are wrong about your guesses for a category, you just have a mid month budget meeting and make adjustments. Over time your “guesses” will become better and better because they are based on past experience.

Crystal takes the same ideas but takes them one step further. She suggests phasing into the budget process by just starting with just one category the first month, Food. Food is often the category where we have the most control and the most ability to save. Let’s face it, there is probably not much you can do quickly to change your mortgage costs. But there are many things you can do to affect your spending on food. And if you are unaccustomed to budgeting, focusing on just one category makes the concept less daunting.

The next month she suggests you add a few more categories for a bare bones budget and then by month 3 you can take the plunge into a full-fledged budget.

I think this is a helpful approach, especially for those just getting started because it is a gradual approach and puts the focus immediately on a category where budgeting can probably provide you with the most benefit.

Use cash

Crystal strongly encourages the use of cash, especially when getting started. There have been many studies that have shown that we spend less when we use cash. Plus, the beauty of cash is you can’t overspend. When the cash is gone, it is gone. You have to stop spending.

I know from personal experience how powerful this advice is. We used to use a debit card for grocery spending and I was absolutely convinced our spending would not change a bit if we used cash. I thought we were already very careful about what we spent. We shopped sales. Used coupons. I thought we had pretty good control over what went into that shopping cart. Then we decided to give cash a try, and I found I was completely wrong. Using cash did change the way we spent our grocery budget, and the truth is the things that were eliminated were things I really haven’t missed anyway.

Eliminate clutter

Crystal has a complete chapter on the benefits of eliminating clutter.

When you are first attempting to get your finances under control it can be difficult to find the extra margin you need to move the needle. One great way to do that is to sell some stuff to get the process started. Most of us have enough stuff sitting around that we never use that could be sold to get a pretty good jump on getting some debts paid off.

The other benefit of de-cluttering is organization. Have you ever been late paying a bill because you lost it? Have you ever had to buy an item that you know you already had, but you simply can’t find it? These are signs that you probably need to get more organized with your stuff.

Saving at the grocery store and when eating out

There are three chapters in the book devoted to ways we can save on the food we purchase. There are sections on using coupons, playing the drugstore game, maximizing sales, and many other techniques you can use to make your grocery budget stretch as far as possible.

Gain back control of your life

If you feel like your financial situation is a little out of control, The Money Saving Mom’s Budget is a good place for you to get started learning the tools you need to take back control. It is relatively short and Crystal does a good job of presenting the information in a clear easy to understand fashion.

One final note on the book. Crystal is donating all proceeds from the book to Compassion International. Compassion is a wonderful organization that helps children in under developed countries with their physical, spiritual, and educational needs. So by purchasing the book you will not only get financial wisdom to help better your life, you will also be contributing to the needs of impoverished children in other parts of the world.

I think Crystal is doing some great work and I encourage you to check out her web site and this book.

5 Financial lessons from Mr. Spock

As a  long time Trekker, I was saddened last week by the death of Leonard Nimoy. So in honor of Mr. Spock, here are a few of his more famous quotes from the series, with a little financial twist to each one.spock

“After a time, you may find that having is not so pleasing a thing after all as wanting. It is not logical, but is often true.” – Star Trek:The Original Series, “Amok Time”

The problem with stuff is that it rarely provides real happiness. We think if we only had that this or that, then we’d be happy but it isn’t really true. We may be happy for a few days but the problem is there is always another thing we want just around the corner. It never ends.

This is also the problem with impulse purchases. We see something and we want it. Then two days later we see it sitting on the table at home and wonder what we were even thinking.

Next time you are tempted to make an impulse buy, I challenge you to wait at least 24 hours or better yet maybe even a week. If you still want it and it fits in your budget then go ahead and buy it. But I suspect more often than not you’ll find you didn’t really want it that much after all.

 

“Insufficient facts always invite danger.”  Star Trek: The Original Series, “Space Seed”

When it comes time to make a purchase, the person with the most facts almost always will come out ahead in the deal. This is another problem with impulse purchases, because usually by their very nature you will not have had time to do any real research.

If you are planning to make a purchase, especially larger ones, take the time to do a little investigation first. Shop around so you know what a fair price is. Search for reviews online. Amazon is a great place to do this, even if you choose not to buy it there. Ask friends or family.

Take your time. If you have done your research so that you have a good idea of a fair price and you know the quality of what you are buying, you are much more likely to get a great deal on an item that will serve you well.

 

“In critical moments, men sometimes see exactly what they wish to see.” – Star Trek: The Original Series “The Tholian Web”

This is true in so many areas of our lives. It can be especially true of financial matters.

On some level we kind of know we have a mess, but we’d really rather not face that. So we continue on with what we want to do. Retirement? We’ll worry about that later. New car? Well my neighbor just got a new one so I have to keep up. Had to buy this bigger new house, because there is a chance they might have a missionary come speak at church some day and well I could let them stay here since I have those extra bedrooms I never use.

And on and on it goes. We are very good at rationalizing our poor decisions. If we try hard enough we can find an excuse for almost anything.

The truth is for many we never really make lasting change until we reach the point where the pain of staying where we are is greater than the pain of changing.

 

“Live Long and Prosper” – Star Trek:The Original Series, “Amok Time”

This is the greeting from one Vulcan to another that perhaps became Mr. Spock’s most iconic phrase.

It is what I wish for you my readers as well. But how does one do that?

The secrets of financial success really aren’t that complex.

  • Have a plan. When you let life happen to you, you will always get to the end of the month and wonder where your money went. A spending plan or a budget is simply deciding ahead of time how you will spend your money so that you spend it on what matters most to you.
  • Live on less than you make. You can never reach prosperity by spending more than you have coming in.
  • Save. Little by little over a long period of time. There are no get rich quick schemes. You build wealth gradually over time by consistently saving and letting the power of compounding interest work for you.

 

“The needs of the many outweigh the needs of the few, or the one.” Star Trek: The Wrath of Khan

If “live long and prosper” isn’t Mr. Spock’s most famous quote, this one probably is.

The bottom line is that it isn’t all about you. It is good to build wealth and there is nothing wrong with enjoying some of the blessings God has given you. Our Heavenly Father loves us and I think it gives Him joy to see His children enjoying the gifts He has given them.

But that is not the only reason He blesses His children. We are most often blessed so that we can be a blessing to those we come in contact with. After we have met our basic needs and a few wants within reason, the purpose of building wealth is it gives us the opportunity to help those who have been less fortunate.

It is very hard to lend a helping hand to one who is drowning when we are sinking up to our necks ourselves. And yet that is where so many people find themselves. If you see someone in need, but you are up to your eyeballs in debt and having difficulty paying your own bills, there is little you can do to help.

By making wise financial choices and building wealth over time we have the opportunity to look around, see the needs of the many, and lend a helping hand.

Photo credit: geraldford (Creative Commons)

Underestimating the price of integrity

The supreme quality for leadership is unquestionably integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office. – Dwight Eisenhower

Brian Williams has been in the news much lately, though not for the reasons that he would have wished. Williams claimed that during the US invasion of Iraq many years ago, he had been on a US helicopter that was shot down by ground fire. It turns out that was not entirely accurate. While he was on a helicopter in Iraq, the one he was riding in was not hit by ground fire.

As a result, Williams has been suspended for 6 months from his job as anchor for NBC’s Nightly News. The fallout from the scandal has continued as he has had to resign from other positions he held, had speaking engagements canceled, not to mentioned suffered perhaps irreparable damage to his reputation.

Integrity matters

Williams is hardly the only famous person to suffer for a lapse of judgement. Almost 15 years ago George O’Leary Integritywas hired as head football coach at the the University of Notre Dame, one of the most prestigious jobs in all of college football. Five days later he was forced to resign after it was found he had lied on his resume about an academic degree he really didn’t have.

Pete Rose was famously banned from baseball many years ago when it was discovered he had bet on baseball games. Despite knowing this was considered a cardinal sin of the baseball world, he chose to break the rules and threw away a career, a passion and a spot in the baseball Hall of Fame.

Incredibly, Lance Armstrong won an unprecedented 7 consecutive Tour de France titles. Add to that overcoming cancer and becoming a world famous fund raiser for cancer research, and he became one of the most famous and respected athletes in the world. Yet it all crumbled when it was discovered he had cheated through doping to win those titles.

My point here isn’t to cast stones at Williams or O’Leary or Rose or Armstrong. The point is integrity matters. Seemingly small decisions can change the course of our lives, ruining a lifetime of hard work.

Living a life of integrity

The book of Proverbs has much to say about integrity.

The integrity of the upright will guide them, `But the crookedness of the treacherous will destroy them. Proverbs 11:3

Whoever walks in integrity will be delivered, but he who is crooked in his ways will suddenly fall. Proverbs 28:10

Whoever walks in integrity walks securely, but he who makes his ways crooked will be found out. Proverbs 10:9

What is the price of your integrity? How valuable is your reputation?

It might be tempting to exaggerate the truth just a little to make ourselves look a little better. To cut a few corners or bend the rules just a little to gain an advantage.

We make little choices that we don’t think have much impact. But in truth when we do that we are selling little bits of our integrity.

In his book, The Millionaire Mind, Thomas Stanley studied a group of deca-millionaires. That is those with a net worth of at least 10 million dollars or more. He studied what characteristics were most common among these people.

You might think that for some one to amass that kind of wealth that a high degree of intelligence or education would be the most common traits. What Stanley found though was the most common characteristic among these deca-millionaires was actually exceptional levels of integrity.

The cost of integrity

For Williams, O’Leary, Rose and Armstrong these mistakes may have literally cost them hundreds of thousands if not millions of dollars.

For you, the stakes may not be that high. You may never have the earning potential and endorsement opportunities that they had, but a lack of integrity can still do great harm to your finances.

Think about it. If you were looking to hire you and you found some “exaggerations” on your resume, would you go through with the hire? Or would you wonder what other half truths might there be that you had not yet discovered?

If it is time for promotions and you were the one making the decisions, do you promote the person who has shown themselves trust worthy or the one you have to watch closely because you are never quite sure what they are doing behind your back?

Now I know that there are exceptions. You may know someone that has tried to cheat the system and seemingly got away with it. But I think those who do that are usually found out eventually. Honesty and integrity almost always win in the long run. You can see that in the study Thomas Stanley did. There is a reason that integrity was the number one character trait of those deca-millionaires he studied.

Priceless

But more important even than financial considerations, what is the value of a good name? What is it worth to be  known as someone who can be counted on? Is there a price for your integrity?

We can spend a lifetime building a good name, but sadly we can throw it all away in a few moments with a lapse of integrity.