Training Plan: Endurance Cycling and Personal Finance

The following is a guest post by Troy Lambert from TroyLambertWrites. Enjoy! 

On March 11, 2016, I tore a calf muscle playing basketball with my son. I went up to shoot a three point shot, felt a sharp pain in the back of my calf like someone had hit me with a racquetball or stabbed me, and collapsed onto the court.

One week later on March 18th, I got married. It was the most expensive party either my wife and I have ever thrown, and it was a stretch to say the least. She has some health issues, and we took an unexpected and expensive trip to Seattle for treatment a little over a month before the wedding.

Financially and physically, we were at a low point. We needed a plan to get our finances back on track, and I needed to get back in the gym and on my bicycle. I didn’t know it at the time, but I would spend the last half of the summer training for a mountain bike race involving 53 miles of gravel road. Our plan for financial recovery and my training plan have some interesting parallels.

Moving Forward is Key

I’m a writer, and writing is a business. In both business and personal finance, we often hear that cash is king.

We ended the wedding with little cash, but with good cash flow. While physically injured, I had the potential for rehab and healing. That potential and our cash flow were more important than my actual strength or our financial position at the time.

Have a Plan

For our wedding day itself, we had a budget: planning a wedding is like starting a small business you plan to run for only one day and never expect to profit from. We suffered financial setbacks in that process, but managed to cut where we could.

Once we were past the big day, we needed a recovery plan. We needed to renew our savings and pay off any debt we incurred in the wedding planning process. However, just as in training for a cycling race, a general plan wouldn’t do.

• Specific short term goals need to be set. Whether those are miles for cycling or dollars for savings, these need to be reasonable and achievable, but aggressive enough that reaching your goals will not be easy.
• Milestones with a contingency plan need to be established. To successfully complete a race, you need to reach certain mile counts by specific dates set by your training plan. If you have not met them, you need to decide what that means, and how you will make them up, or reset your goals more aggressively. It is the same with savings and budget: aggressive milestones that stretch your income need to be set and established until you can achieve stability.
• Relax and Level Out. In every training plan you need to take days off for rest. During recovery from a financial setback, you need days off too, whether that is a date night out, or a family fun day where you allow yourself to splurge, at least a little. Once you have reached a certain financial or physical fitness level, adjust your plan to maintain your current level while allowing for growth at a more reasonable pace.

Having a plan is one of the most important keys to success. However, it is rare for things to work out exactly as anticipated.

Priorities and Plan B

Contingency plans are one of the most difficult things to do under any circumstances. Whether in endurance training, personal finances, or business, the issues are similar. You have to anticipate what could go wrong and determine what you will do if it does.

Injury. Injury can be physical or financial. Essentially this is a loss that impacts your ability to achieve the final goal. In finances this can be any monetary setback, from job loss to an unexpected car repair or hospital visit.

Theft. While injury is accidental, theft is loss intentionally caused by someone else with the intent to harm you. Not only does this hamper your ability to achieve your goal, but can affect your confidence in your skills.

Acts of God. During cycling training, there was a wildfire in our area that filled the air with smoke to the point where it was unhealthy to breathe. While there were indoor training options, none of them truly replicate mountain biking on gravel adequately. Financially, natural disasters can occur that you are not prepared for.

How do you deal with these setbacks? First, set priorities. What are the most important financial obligations you need to meet, and what can be pushed off until later? Do you need to dip into savings?

Second, deal with the issue at hand. Whether that is shifting resources to cover an injury, reporting and following up on theft, or dealing with insurance or whatever method you have in place to cover Acts of God, taking care of the problem before it gets any worse is essential.

Finally, reestablish a recovery plan. This is your path back to Plan A, and stability. This may look different than your original plan, as you may have learned things through setbacks.

Ready, Set, Go!

You set out on your financial plan with a goal in mind. Whether that was simply to have a cushion in savings, a dream vacation, or purchasing a new home, at some point you will have reached the starting line of your goal. In cycling terms, it’s race day.

The first part is probably uphill. Races usually start this way. The first part of vacation will be the outlay of money for plane tickets and hotels. The first few months of owning a new home will be filled with furnishing and fine tuning the space to make it yours.

Things even out at the top. Once you have passed the initial expenses or the first hill of the race, things get smoother, and moving at a steady pace is the most important thing. Slowing down means you won’t reach the finish as soon as you have planned, speeding up means you may run out of energy or money before the finish.

Finish Strong.  It’s likely this one financial goal is not your last, nor are you only going to ride in one race, then quit and stop cycling entirely. Each goal accomplished gives you confidence to move on to the next, so finish each as strongly as you can.

There are many things we could compare to personal financial planning, but if we think of it in terms of endurance cycling, it can help us think in terms of the long run. Always moving forward, having a plan, setting priorities and having a plan B, we will be able to achieve our goals and then some.

***Photo courtesy of https://www.flickr.com/photos/tejvan/5044111293/in/

Think Like You’re Self-Employed – Even if You Have a Job

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

Employees sometimes pigeonhole themselves into very tight niches. They focus on very specific tasks and skill sets, which can enable them to do their job more efficiently. But one of the problems with this approach is that it can result in a very narrow focus, that can result in them being passed over for promotions, or even subject to layoffs.

It might be better to think like your self-employed, even if you have a job. A self-employed person is always forced by circumstances to look at the bigger picture. That means being aware and prepared to deal with the bigger picture. That bigger picture focus can often expand opportunities, and produce new and valuable skills sets.

In truth, virtually every employee is really self-employed – they just don’t see it that way.

You’re a Self-Employed Person With One Client

Unless you’re in a union, you really are self-employed. But if you have a full-time job, it just means that you are self-employed with a single client. Yes, your employer is actually your client! You’re ability to earn a living is dependent upon your ability to deliver specific services, at a specific price. To the degree that you are successful, you keep your job, and even create opportunities for promotion.

Some people even have two or more jobs, which means – technically speaking – they actually have two or more clients.

This view of your employer as your client is more than just semantics. If you view your employer as a client, then you will want to keep them satisfied, so that they will see the value of your worth, and keep you as a service provider.

This is very different from the more common working-for-a-paycheck mindset that so many employees bring to the job. That’s often an attempt at earning the most amount of money, for the least amount of effort. Put another way – going through the motions.

But if you consider yourself to be self-employed, and you view your employer as a client, both the relationship and the work takes on deeper meaning.

In addition, viewing yourself as self-employed also tends to minimize the feeling that you are trapped. Since your employer is a client, the loss of that client at some point will simply mean that you move on to another client.

Take Ownership of Your Work

As a business owner, you would have to be prepared to stand behind your work. If you don’t, you will lose customers and clients. This is very different from the go-along-to-get-along thinking that often accompanies the more traditional view of work.

A business owner isn’t content to merely to get the job done, but also to make sure that his client is happy with the work performed. He knows that the client can always go elsewhere, so he carefully provides his products and services to keep the client coming back.

Still another aspect of self-employment is taking ownership of failure. The business owner takes responsibility for failure – after all, there’s no one else to blame. More important, she works quickly to rectify the problem, whatever it is. Mistakes are made, and obstacles are encountered, but the self-employed person always knows whose responsibility it is to make it all work.

This is vastly different than the efforts to deflect failure that commonly happen in organizations. But if you can become known as a problem solver – as someone who takes ownership of the situation at hand – you practically win by default. While everyone else is ducking for cover, you become the seen as the person who saves the day.

Developing a Keen Sense for the Bottom Line

If you’re self-employed, you’re always aware of profitability. For this reason, you will consciously work to do more of what’s most profitable, and less of what is least profitable. This is a critical concept in virtually any money-making venture.

Many employees don’t grasp that it works the same way in a large organization. Look around your company, you will probably notice that the people who move up the chain of command the most quickly are almost always people who are closely connected to profitability.

The more that you can do to either increase sales or decrease costs, the stronger your position in the organization will become. This is in no small part because management will recognize and appreciate that your goals and actions are more closely aligned with theirs than the other members of the staff.

Always be Building New Skills and Contacts

Self-employed people work in a highly competitive environment. Since there is strong competition for the client base in almost every business category, the entrepreneur knows that his skills and abilities must stand out.

That requires building new skills and contacts as a part of business-as-usual. Every skill that you acquire puts you in a position to fill or expand a different niche. Every contact that you develop becomes a potential partner, and an opportunity to network and synergize skills.

In addition, a network of capable contacts can give you the resources you need to get a job done that may be beyond your own skill set. This is a talent that every successful business owner must develop. It enables you to take on larger and more important assignments, and to complete them even if you don’t have the necessary ability to do them completely on your own. It represents the ability to leverage both people and skills.

Always Be Looking for New Opportunities

If you’re self-employed, you’re never “stuck” with one client. You are aware that there are other clients, and you are always open to the possibilities that they present. This can go a long way toward eliminating the fear factor many employees have in regard to their employers. If you think that your current employer is the only game in town – whatever the reason – you’ll work with a certain amount of fear. That kind of emotional state is never conducive to doing your best work.

As an employee, you may fear the loss of your job. But if you see yourself as self-employed, you’ll likely see the loss as inevitable – at least eventually. For that reason, you’ll always be on the hunt for new opportunities. You may even make it a practice to build a portfolio of potential opportunities. This is Self-employment 101 – the business owner is always aware that he can and will lose clients. For that reason, he’s always on the lookout for new ones.

In today’s hyper-competitive job market, having that kind of attitude is practically a survival skill by itself. It doesn’t mean that you are disloyal to your current client/employer, but more that you are aware of the uncertainties of the business environment that you’re operating in.

There’s one other benefit to the perpetual search for new opportunities. If you find enough of them, you may be setting yourself up to enter formal self-employment. If you identify multiple opportunities – that is, potential new clients – you may create a niche for yourself as an independent consultant.

In this way, thinking like you’re self-employed, even if you have a job, creates an eventual point of entry into actual self-employment.

Give it a try, and see what it does for your career.

How about you all?  Have you ever tried something like this to give your career a boost?  How did it work out for you?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/shimelle/877913815/

The Worst Financial Advice I’ve Ever Received

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

People love to give advice. It’s natural. On the other hand, not everyone should offer up advice about every subject, especially if they aren’t confident their advice is completely sound.

Before I started educating myself about personal finance in order to improve how I manage my money, I received some pretty crappy advice from other people who seemed pretty misinformed about personal finance.

There are several myths out there about personal finance that need to be debunked so I’ll start by sharing some of the worst financial advice I’ve ever received and what

Don’t Worry About Taking Out Student Loans Because They Will All Be Forgiven in 10 Years

One day one of my coworkers who is really into education told me this. She had just received her MBA and was a huge role model and inspiration to me. Luckily, I didn’t listen to her advice though. I took out some student loans to help me get through college and I didn’t really think about the debt until it was time to pay it back.

However, I refrained from taking out more student loans just for the sake of having more money and I attended community college for two years and applied for scholarships and financial aid to keep the cost of college low so I didn’t have to take out tons of loans. I attended a state school and avoided expensive degree programs but still graduated with just under $21,000 in student loans which is a fraction of what some of my peers graduated with.

Once I started learning more about student loan debt and took on some more personal finance writing gigs, my research led me to find out that not everyone qualifies for student loan forgiveness. Actually, only a select few do and they must meet strict standards like working a government-funded job for 10 years.

There are quite a few federal student loan forgiveness programs available for government workers, teachers, and doctors but since I don’t work in those fields and don’t plan on having student loans for 10 more years, I don’t really qualify for forgiveness.

Keep Your Car for Two Years, Then Trade It In For Another One

This unhelpful piece of financial advice came from another coworker and my own mother shockingly enough. When I graduated college, I couldn’t afford to pay for a new car in cash but I desperately needed one since my current car had broken down for good.

I remember asking around and researching car loans as often as I could to learn more about what I could potentially be getting myself into. I remember asking one of my coworkers how someone is supposed to pay their car loan off before the car breaks down for good and she smiled and me and said ‘never’. Her advice was to do what she had been doing for the past 10+ years and finance a fairly new car, then wait a year or two and trade it in to get an even newer car.

Her car had all the bells and whistles like heated seats and windows, built-in navigation and so on. The idea of having a car note for the rest of my life didn’t appeal to me so I chose to finance a cheaper car with the hopes of paying off the loan quickly.

When I went into the dealership with the intention to refinance my car loan for a cheaper rate, the sales reps suckered me into considering the idea of trading in my car for a newer car with a higher loan. Their argument was that my car’s value was depreciating every day and the newer car they proposed would last longer.

The huge problem was that trading in my car for a newer one would have added around $4,000 to my loan at the time. While at the dealership, I called my mom for advice and she actually seemed like she was on the car salesman’s side and wasn’t opposed to me financing a newer car that would potentially last longer.

Again, thankfully, I chose against this, ignored the sales pressure and just kept paying off the current car loan I had. My car is a 2010 so it’s not super old. I really didn’t see any value in buying a newer car when I was already in enough debt as it is. The truth is, all cars depreciate in value over time and there’s no way around that fact. You can’t beat the system by leasing cars and trading in your current vehicle. You will end up spending a boat load of money in interest. If you always have a car loan, you’ll never be able to truly enjoy the perks of outright owning your own car and getting to ride the wheels off it.

I ended up making extra payments to pay off my car loan last year and I’ve never looked back since then. It was the best decision I could have ever made.

Wait Until You’re Old Enough to Save For Retirement

Retirement is probably my weak spot when it comes to financial literacy. I still have many working years left before I can consider retirement so I used to refrain from learning anything about retirement.

Whenever I was interested or mentioned investing money into a Roth IRA I had a certain friend who would make comments about me worrying too much about the future.

“Why are you worrying so much about retirement when you have so much time? You sound like an old lady,” she once told me.

Now, I resent the ‘old lady’ comparison, but one thing she said was right. I do have plenty of time…plenty of time to get started with investing early that is. With retirement, the earlier you start contributing to your 401(k), Roth IRA, or any other retirement account, the better because you give your money more time to compound and grow over the years.

Yes, the market fluctuates, but it always consistently improves year after year which almost guarantees if you invest a lump sum amount today, your contribution will grow significantly over the next 10-20+ years.

By investing in retirement early in my 20s, I’m practically ensuring my chances of becoming a millionaire by the time I reach traditional retirement age. If I invest aggressively, I may even be able to retire early.

Once people reach the ‘old lady’ stage and start thinking about retirement, it’s often too late to grow their wealth. This is why I look forward to investing as much as I can while in my 20s.

Be Careful Who You Receive Advice From

This is my big takeaway after receiving some pretty bad financial advice over the years. Most family members and friends mean well and want to help, but it’s important to educate yourself about personal finance by utilizing credible resources that are available on trusted websites, at institutions like your bank, and from financial experts with a proven track record.

Yet and still, you shouldn’t always believe everything you hear and take the financial advice you do receive with a grain of salt. Most financial topics and issues don’t have a one size fits all solution because everyone’s situation is different.

How about you all? What is the worst financial advice you’ve ever received?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/87913776@N00/6928145100/

When is it Investing? When is it Gambling?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

With the stock market being at record highs, now is an outstanding time to pose this question. Market tops bring out excesses. This includes investors who are looking for easy money profits. But that’s not investing – it’s gambling.

In truth, your objectives and strategies will define whether or not you are an investor or a gambler. Let’s review some of the parameters that will help you to understand which.

When Is It Investing?

Investing places value on many of the following strategies:

Investing in fundamentals. You’re looking for companies with a strong track record of increasing earnings, strong brand loyalty, and solid financials. If the fundamentals are strong, the day-to-day price fluctuations are less important. The long-term deck is stacked in your favor.

Understanding that price does matter. You recognize that just because a stock is a good investment of $30 a share, doesn’t mean that the same will be true when the stock is trading at $60. Stock value must be considered relative to fundamental value.

Respecting risk. You have a keen understanding that stocks can fall in value as easily as they can rise. For this reason, you are highly selective as to what you invest your money in. You will always do your best to be invested in stocks that have minimum downside risk.

Building a balanced portfolio. This is really the process of investing around risk throughout your entire portfolio. You work to make sure that your portfolio is balanced between growth and income, as well as between various market sectors. While this may limit growth in bull markets, it also minimizes risks in bear markets. You’re willing to maintain that balance because you’re in for the long haul.

Having a long-term view. You understand that stocks fluctuate in value. For that reason, you absolutely favor investments that are likely to perform well over years, and not just the next quarter or two.

Understanding a sector, or the general market. You recognize the value of investing in different sectors, but you also know that sectors can fall out of favor. For example, you understand that just because energy is critical to the economy, doesn’t mean that it’s always a good investment. You also recognize that while you can’t time the market, there are better times to be buying than others.

Having well-defined investment goals. You’re not just investing to make money, but rather to reach specific goals. This can include investing to pay off your mortgage, pay for your children’s college education, start a business, or to retire. The existence of investment goals forces you to create specific strategies that enable you to reach those goals with the highest level of predictability.

Minimizing trading. True investors don’t trade. They invest in companies for the long-term. They recognize that trading is highly speculative, and subjects you to paying very high transaction costs, which lowers your overall investment return.

When Is It Gambling?

Gambling is more opportunistic in nature, and often includes the following practices:

Betting on trends. If a stock or a sector is doing well at the moment, you load up your money there. In fact, you’re on a constant lookout for trends that can be exploited for fast profits.

Following the herd. This can include jumping into popular stocks or sectors, but it can also involve investing primarily in rising markets. You wait for bull market trends to be firmly established before getting in, then often follow the herd by selling only after crushing losses. The emphasis on following the herd often sees you buying and selling at the worst possible times.

Ignoring yield. Not that growths stocks are bad investments, but you may ignore dividend yield in favor of the prospect of bigger returns from price gains. But though dividend paying stocks may grow more slowly, they’re often better long-term investments because they maintain the practice of returning some of the profits to shareholders.

Ignoring fundamentals. If you’re investing in trends or following the herd, the underlying strength of the companies may not be critically important. But while the trend may produce impressive short-term gains, it’s the fundamentals that make for the best long-term plays.

Timing the market. The problem with market timing is that it’s impossible to call with any real accuracy. And even if you get it right from time to time, it’s totally impossible to do with any consistency. Timing also ignores the underlying strength of individual investments, as it emphasizes price swings more than anything else.

Buying stocks on tips. Though you may not know much about a company, you’ll buy the stock if you hear about it from a source you consider to be credible. Or at least you buy and hope that the source turns out to be credible.

Looking for the quick hit. This is probably the most defining characteristic of a gambler. While an investor will develop a long-term strategy to earn steadily compounding returns over years or decades, a committed gambler is always on the prowl for a quick profit.

Investing in what you don’t understand. A gambler may not be terribly interested in specifically what it is he’s putting his money into – the main consideration is the potential of the stock to produce a positive return, and in the shortest possible time frame.

It may be that the main difference between investors and gamblers is emotion. While the gambler thrives on the prospect of a quick profit – even if it doesn’t happen often – the investor is mostly looking to remove emotion from the investment process. She’s more interested in steady, if unspectacular returns over the very long-term, to keep her portfolio moving steadily forward.

Both the gambler and the investor see themselves as investors, but guess which one does better over the long-run? That message may once again assert itself with the market flying so high as it is. Gamblers tend to be the biggest victims when record markets reverse.

How about you all? Have you ever seriously analyzed if you’re an investor or a gambler? What did you discover?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/101332430@N03/9677861633/

How We’re Teaching Our Kids Good Money Management Skills

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

As we work our way out of tens of thousands of dollars in consumer debt, we’re keeping our kids informed of nearly every step along the way. We’ve been open with them about our situation from the beginning of our debt payoff journey, from the starting debt numbers to the drop in debt, to some increases in debt due to family crises and the subsequent drop in debt again.

We’re keeping them involved in hopes that they choose to avoid debt and not make the same money mistakes that we’ve made over the course of our marriage. We’re using several different strategies in order to teach the kids good money management skills while they’re under our roof, hoping that they’ll bring those skills with them as they head out into the adult world. Here’s a list of some of the more important things we’re teaching our kids about good money management skills.

We Teach Them About Debt’s Consequences

When we first began our debt payoff journey, we sat down with the kids and explained the perils of our debt situation. We started with a sixty-five percent debt-to-income ratio and LOTS of consumer debt. We told the kids our debt numbers and how much in monthly payments we were paying each month. We also explained to them what interest was and how much of our monthly payments were going to the loan and credit card companies via interest each month.

When we first began our journey, our interest payments totaled nearly $1200 a month. The magnitude of that dollar amount and what other more fun things we could be doing with that money shocked them, just as it shocked us when we sat down and figured it out.

We want our kids to know how much an excessive amount of debt affects current and future wealth-building goals so that they work to avoid debt, especially “bad” debt.

We Don’t Let Them Borrow from Us – Usually

One of the house rules for our kids is that if they want something, they have to save for it. We want to teach them to get into the habit of saving for things instead of borrowing for things. Yet on occasion, if one seems set on borrowing money, we’ve let them borrow it.

This has only happened once, and with our oldest. She was taking an interest in archery and wanted a bow and arrow set of her own. The price? $257. This was not in our budget at the time, so after much pleading and negotiating we allowed her to use her birthday money ($100) to purchase the set and to borrow the rest of the money from us.

She was only twelve at the time so she didn’t have a job. The money she earned at the time came from her small allowance and other miscellaneous paid-for chores, as well as from Christmas money that year.

Madelyn hated every bit of the three months it took her to pay off her debt. We required fifty percent of her allowance each week, which meant her own spending cash was cut in half. We also required all of her Christmas money that she received that year to get the debt paid in full. It may sound harsh, but we wanted her to understand the feeling of bondage that debt can have, and at the end of the experience, she did.  She said, “I’m never, ever borrowing money again.” We hope she sticks to that promise.

We Have Them Help us With the Monthly Budget

Each month we show the kids our monthly budget so that they understand where our money is going that month. We also ask for their input about changes we can make to the budget that can help improve our situation. Not only does this help them to understand the restraints that debt brings, it helps them to understand why we say “no” to certain extraneous purchases. When they see where the money goes each month, they don’t complain when we’re not going out to eat or shopping frivolously for clothes or toys.

We Teach Them the Importance of Saving and Investing

Using online savings calculators and our own savings and retirement accounts as examples, we show our kids the results of saving money and the ups and downs of investing. We explain the benefits of saving, such as having money available for car and home repairs and other bills. We also encourage them to put a portion of their own money into savings.

I’m sure that each of our four kids will manage money in a different way, but we take comfort in knowing that we’ve taught them responsible money management methods and that we’ve taught them of the dangers of debt and the importance of saving. I have a feeling they’ll do much better than we have with money.

How about you all? What money management skills do you feel are important to teach to children?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/62030038@N02/8402437512/

Personal Credit Repair and Long Term Savings

The following is a guest post. Enjoy!

Lots of people don’t understand personal credit at all. They don’t know anything about their own credit histories, and they certainly don’t know what their credit score is if they even understand that concept at all. The thing is, credit history has a lot to do with how you’ll be able to save and grow your money over time, and a good credit score is essential for borrowing and employment opportunities that will give you the most advantages in life. Understanding your credit score is very important. We’ll show you how to improve it if it’s not so good, and we’ll explain why that’s important.

Your credit history is important because it tells a story about your financial life. There will be times in your adult life that you have to borrow money. You might want to buy a car, go to school, or buy a house. When you ask a financial institution to let you borrow the money you need to do one of these things, the lender will have to do some thinking about how much they trust you with their money. Your credit history tells them the info they need to know: whether or not you pay your bills on time, how much you rely on credit to live your life, etc. Your credit score wraps up all of this history into a single, three-digit number. Instead of reading your entire history, a lender just takes a peek at that number and makes their decision.

The end result is that you’ll pay either a lot or a little for a loan. If your credit score is bad enough, the lender probably won’t give you a loan at all.

As you can see, credit history is important. In order to save the most money on loans over the course of your life (and credit card interest, as well as a few other details), you’ll have to improve your credit score. But how is this accomplished? Credit scores, like we said above, reflect the way you use your money. If you pay your bills on time, don’t take out lots of loans in your everyday life (Credit cards and whatnot), and generally live beneath your means, you will appear to be financially responsible. This is great news for your potential lenders, and for your credit score.

As you establish long patterns of good credit and personal finance behavior, your credit history will have long stretches of excellent reports. As these excellent reports accumulate end on end, your credit score will rise. You can do your own research to find out specific ways that credit scores can be improved. There are a lot of details in this area, more than we can cover in a single post. But be encouraged, because no single step is that difficult. The hardest, possibly, is eliminating debt. Once that’s done, all of the rest of the procedures are pretty easy. In the end, you’ll have a great credit history and an awesome credit score, and you’ll see your financial life improve gradually as a result.

How to Confront and Overcome Financial Failure

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

Financial failure is something we all experience from time to time. Whether you manage your finances well or not, it’s natural to experience a budget failure or fail to meet one of your goals every now and then.

Financial failure is important because it teaches us very important life lessons through experiences we’d rather not relive. They key to coming out on top, is confronting your financial failure early on and overcoming it so you can continue on the path toward financial success.

Start with Confrontation

First assess your situation and accept the fact that you messed up. This is a crucial first step because it’s so hard for people to do. If you don’t accept your failure however, you can’t move on.

If you’ve been living above you means, accept that. If you’ve gotten lazy with your goals over the past few months and lost motivation, accept that. Whether you feel guilt, shame, or frustration, it’s better to acknowledge it so you can move past it and forgive yourself.

Find Out Where You Went Wrong

Sometimes it’s hard to tell when you’ve failed financially and what led to the downfall. If you set annual goals like I do, you may not see the results you’re looking for until later in the year.

However, if you realize your situation has changed and your goals now seem unachievable, you’ll have to realize that and make some changes.

For example, I originally planned to have all my student loan debt paid off by the end of the year. Once I realized that would not be possible since I wanted to pay for my wedding in cash, I realized I needed to make some changes to my goal. That’s not necessarily a financial failure as it’s more of a shift in priorities.

On the other hand, if you set out to save 30% of your income this year and that involved cutting back on expenses like dining out and you failed to do so, you need to identify what caused you not to meet that goal.

Maybe it was the fact that you got tired of budgeting some months or failed to meal plan and got tired of cooking. The convenience of restaurant food is very tempting and odds are there are some factors that led you to give in to that temptation and dismiss the other intentions you had for your finances.

Scratch Everything and Come Up With a New Strategy

Once you’ve confronted the issue and determined what led you to fall short, you’ll be ready to scratch everything and start over. This involves finding better ways to maintain your motivation and developing more realistic goals.

For example, a solution to your excessive dining out issue may be limit dining out instead of trying to cut it out completely. Track how much you spend on restaurant food each month and try to cut that number in half and assign that expense a budget category that way you don’t feel deprived but you’re still saving money.

Other financial failures may be more serious like messing up your taxes or having to pay more interest on your debt since you didn’t prioritize it and pay it off the previous year. It’s crucial that you come up with an effective and realistic game plan to bounce back from your financial mishaps.

Also, start tracking everything more closely and paying yourself first. Have weekly budget meeting either on your own or with your partner to make sure you’re staying on track. You can also team up with an accountability partner so you can motivate each other and track your progress.

I also take care of my financial priorities before anything else when new income hits my bank account. It’s not only fun but it also ensures that I’m staying on track with the goals I set for myself and I can avoid financial failure.

Continue to Educate Yourself

Financial education is the key defense mechanism to financial failure. I’ve made quite a few financial mistakes in the past and most of them were due to the fact that I wasn’t financially literate.

Yes motivation and realistic goal setting could have very well helped me succeed, but it’s hard to be motivated when you don’t understand what you are actually working toward. When it comes to my debt, I’m motivated to pay it off not just so I can say I’m debt free and be able to go on shopping sprees whenever I want.

I want to pay off my debt because I understand interest is eating up my hard earned money and debt is holding me back from other things I want to do with my money like save up for a home and invest. I understand that if I apply for a mortgage, lenders will look at my debt to income ratio and it will factor in what type of loan I’ll be able to get.

I want to retire some day, and I can’t do that with debt. If I pay off my debt earlier, I might even have extra money to put toward retirement so I won’t have to wait until I’m 65 to stop working. These are the true driving reasons behind wanting to pay off my debt aside from wanting a better life overall for myself and my family. All of these reasons help motivate me, but I never would have understood their importance if I didn’t educate myself about personal finance and continue to seek out more knowledge and information.

Read books and blogs, listen to podcasts,  talk to you bank, attend financial literacy events in your area, and do everything you can to learn more about how to manage you money so you can overcome financial failure and avoid it in the future.

Stay On Top of Everything

Your money issues could also be improved quicker once you become more alert and realize that you can make changes every single day as opposed to just once a year. If you want to refinance your debt, create a new budget, or ask your employer for a raise, you can do that at any time, not just in December or January when everyone is reflecting on their goals and plans for the year.

Try to view each month, week, and day as an opportunity for a fresh start, that way you have nothing holding you back from overcoming financial failure.

How about you all? Have you experienced financial failure before? How did you overcome it?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/86530412@N02/8226451812/

Making Early Retirement Happen When You Have Kids

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

Nearly everyone it seems is holding out for early retirement. But what happens when you have kids? It’s not impossible, but it is admittedly more difficult. You have to rearrange your finances and your timing to accommodate the raising of children. It can be done, but it requires more creativity.

Think of Your Kids (and Grandkids) as Motivation for Early Retirement

While most people focus on the financial costs of having children, the flipside is that you think of them as being one of your primary motivations for early retirement. If it will be possible for you to retire while your kids are still fairly young, that will give you more time to be with them, and to raise them the way you want.

It will also eliminate the career stress and the financial uncertainty that can go with the dual obligations of child rearing and having a career.

And even if you are unable to retire when your own children are young, your Plan B can be to retire early and spend more time with your grandchildren.

You May Have to Adjust Your Independence Date

It probably won’t be possible to early retire on your own specific timetable. You’ll have to work your independence date around your kids.

Much will depend upon how far along you are in the planning process, but you may have the need either to accelerate early retirement to be home with your children, or to delay it until they are emancipated.

Flexibility will be a critical part of your early retirement planning strategy when you have kids.

You Know Those Kids Who Seem to Have Everything? Yours Won’t

In every neighborhood (or classroom or extended family) there’s always that one kid, or family of kids, who seem to have everything. It might be the latest and the best bicycle, motorized Kiddy car, cell phone, laptop, sporting gear or clothing. Such a child or group of children have a way of “setting the standard” for just about every other kid in the group.

That’s a game that you will not be able to play with your own children. It’s an arms race for the best stuff, and it’s a very expensive lifestyle. If you plan to retire early, you’ll have to prepare your children to live more conservatively.

That’s not being selfish on your part either. A conservative outlook when it comes to finances is a life strategy that will benefit your kids throughout their own lives.

Preparing for College on the Cheap

It can cost well over $100,000 to send a child to a state college, and more than $200,000 for a private college. Those are options you may have to scale back on.

You might want to start your kids at a community college for the first two years. From there, you might encourage attendance at a state school to finish their undergraduate degree.

You should also encourage any efforts to get scholarships or grants. And even though it’s fairly unusual these days, there’s nothing wrong with having your kids participate in providing at least some of the cost for their own education.

Your Time WILL be More Limited

This is a limitation that there is no skirting around. While a childless person may be able work two or three jobs, 100 hours per week, your life will require more balance.

Though you may have to work more than the average person does, such as a full-time job plus a side business, you will have to allocate plenty of time for your kids.

No matter how important the goal of early retirement is, this is a challenge that you will have to meet successfully. The time that you don’t spend with your kids when they are young will be gone forever!

This will perhaps be the biggest challenge you will face as a parent preparing for early retirement. And there’s no sugarcoating the fact that you will have to make trade-offs. Only you can decide what the specific balance between work and child rearing will be.

Think carefully, because there’s no do-over when it comes to kids.

And So Will How Much Money You Have For Savings and Investing

There’s also no debating that children will leave less money available for savings and investment. Children mean higher medical costs, disposable diapers, a succession of clothing and toys, afterschool programs, tutoring, day care and higher-than-you-think costs for participating in high school sports.

All of that will be less money available for savings and investing. But you must view the money that you will spend on your kids as an investment in their future. That’s no less an investment than preparing for your own retirement.

Do As Much As You Can Before Becoming a Parent

If you don’t already have children, but you want to, you will help your own cause considerably if you can do as much retirement preparation in advance as possible.

This will actually have to advantages:

1. The more that you can do before you have kids, the more likely it is that you will retire early in their lives and have more time with them, and
2. The more that you can do in advance will mean less pressure later on, enabling you to spend more stress-free time with your kids, while still being on track for early retirement

Advance preparation will include minimizing debt, and frontloading as much retirement and investment savings as possible before your kids are born.

This will not only give you a head start, but it will also set you up in the right life patterns. This will be extremely important once your first child arrives. Having children very much puts you in a position where you are dealing with the unexpected. If you already have your early retirement plans in a row before they are born, you can continue to make progress even as you deal with the uncertainties that children bring.

A Scaled Back Version of Early Retirement is OK

If in spite of your best efforts, you are unable to reach your early retirement age goal as a result of having children, you can simply regroup.

No major financial milestones are ever achieved without building a healthy dose of flexibility into the plan. If you have to delay your early retirement by five years, that will be a small price for properly raising your children.

And even if you are forced to accept an early semi-retirement – in which you mostly scale-back on your career in favor of more time off – you’ll still be better off than you would have been if you never prepared for early retirement.

Early retirement is a worthwhile goal, but it should never be seen as more important than raising your children. It takes some real talent to balance the twin goals of child rearing and early retirement. But if you can, you’ll be well prepared for whatever life throws at you.

How about you all?  Have you or anyone you know planned an early retirement successfully?  What roadblocks have you encountered along the way? Do you have other strategies for planning for an early retirement not listed above?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/8058853@N06/2289540488/

4 Ways to Save Money on Moving

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life

Without proper planning – and even with proper planning – moving can cost a LOT of money. Between the prep work beforehand, real estate fees, moving expenses and getting adjusted in your new home, the costs can seem endless. Here are some ideas on how you can save money as you prepare to move from one home to another.

How to Save on Getting Your Current House Ready for the Market

A move to a new home often means you have to sell your current home. It’s important to maximize profits on the sale of your current home without spending a bunch of money you don’t need to spend. In order to make your house shine and save money in the process, try these tips.

• Stage your home yourself instead of hiring out. Most of home staging involves making the home look uncluttered and inviting. Check online sites such as Pinterest for home staging tips and do the work of staging yourself.
• Deep clean and organize your home. A clean, organized home where every corner has been decluttered will help the home sell for top dollar and will also cut down on moving expenses because there will be less stuff to move to your new home.
• Make inexpensive cosmetic repairs. This is another tip that will help you get top dollar for your current home. If you’ve got broken blinds, shabby curtains or ultra-worn furniture, seek out inexpensive resources for replacing or repairing them. A fresh coat of paint will do wonders. Freshly cleaned carpets (instead of replacing carpet) will make your home shine.

How to Save on Real Estate Transactions

Real estate transactions such as realtor fees and taxes can also add up when it is time to move. Try these tips for saving on selling your current home and buying your new home.

• Negotiate your realtor’s commission fee. While the regular fee for most realtors is seven percent, it’s not unrealistic to talk a realtor down to six percent or even lower if you have a good reason. What justifies a good reason for a realtor to lower his or her fee? A turnkey property, a higher end property or a home in a valuable neighborhood. The easier your home is to sell, the more likely a realtor will consider lowering their fees.
• Ask the seller of your home to pay some or all of your closing costs for your new home. By negotiating some seller paid closing costs, you can save several thousand dollars.

How to Save on the Actual Move

This is where things can get expensive. Moving companies often charge several thousand dollars to pack up and move a family from one place to the next. Here are some tips for saving.

• If you’re moving locally, consider doing the packing and moving yourself, either by asking for help from family and friends or by renting a large moving truck.
• Instead of paying for boxes, head to local grocery and department stores and ask if they have any boxes they’d like you to take off their hands. Many stores will gladly give you the boxes their inventory comes in for moving purposes.
• If you’re moving out of town, get estimates and references from at least three different moving companies, as prices and services can vary wildly.
• If you have to hire a moving company, ask if they’ll give a discount if you pack up your own belongings instead of having the moving company do it.

How to Save as You Get Settled in Your New Home

There are expenses to every part of moving, including when you’re settling into your new home. Here are some tips for saving money as you settle in.

• Get more than one estimate for local utility, cable, satellite and Internet provider companies before you choose your providers. Ask for new customer discounts such as the first three months free or a waived installation fee.
• Do any cleaning and painting yourself if possible, as opposed to hiring out.
• Know beforehand what other items you’ll need to settle into your new home, and work to buy them at reasonable prices. When we moved from the city to the country, we found out quickly that we’d need a chainsaw for tree limbs that fell during storms and a decent snow plow for our long driveway. Because we hadn’t foreseen those purchases beforehand and had to make them quickly, we spent more than we needed to.

Moving is listed as one of the top stressful times in a person’s life, but with some forethought and planning, you can help make your move less stressful and less expensive as well.

How about you all? What are your tips for saving money while moving? How do you keep moving less stressful?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/113026679@N03/14453910557/

What Should You Expect In Retirement?

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Although most of us are extremely busy leading our lives going about our daily routines, at some point, you might take a moment to wonder what to expect if and when you do ‘retire’.

Are there patterns that most people follow during their retirement years?  Are there similarities in things such as what we spend money on, how much we travel, amount of time spent with family, part time jobs or volunteerism activities.  Are there patterns that occur at different points in retirement – at different ages?

I’ve been retired now (or semi retired) since spring 2010.  I’ve observed some changes in the way I deal with retirement and have noticed changes in other retired folks that I know as well.

The Planning Years

Before you actually retire, you are probably spending at least some time thinking about finances after you leave the workforce.  How much do you need to save to quit work, how much can you spend after you retire, will your taxes be less (unlikely) or more when you do retire – all these can be ongoing concerns from the time you first start imagining a retirement.

Closer to the actual retirement date, you may spend time doing some analysis of current expenses to compare that to the income you anticipate drawing during retirement.  Of course you also need to add on any additional expenses that you may anticipate during retirement – moving, travel, health spending, new hobbies, etc.

I spent quite a bit of time in 2009 pouring through checkbooks and building spreadsheets of all our expenses for the past few years – then classifying them as required vs discretionary – to see where we would stand.

The Early Years

The early years of your retirement may diverge wildly from what other retirees do.

If you are healthy, active and well funded, these years may include multiple vacations, and/or more spending on entertainment such as concerts, tours, theaters and restaurants.  Some decide to pursue a dream – such as living in another part of the country or world, or selling the house and buying an RV, or pursuing more education or training.

You may decide to try to spend more time with family members, perhaps assisting with the care of your grandchildren or visiting out of town relatives or simply doing more with your spouse.

You probably are making adjustments to the absence of work related activities, associates and recognition.  You may be making related adjustments to the constant presence of a spouse – finding balance between the need for your own time and the time you share.

Most start these years with eager anticipation and many change lifestyles.  I dedicated time to learning how to build my website (FamilyMoneyValues.com) and finally achieving a life long desire to write and publish.  My spouse, after spending 30 years encased in a cubicle, has spent his retirement so far joyously working outside on our 6 acres.  A couple I know downsized from a luxury home to a luxury condo – not for the savings, but for the freedom from some of the homeowner chores.  They became snowbirds – relocating from the Midwest to the Southwest during the winter.  An aunt and uncle sold their subdivision home and went back to farm living – complete with vegetable gardens, fruit trees, cattle and cats.

Cautious retirees carefully track spending and income in their early years, until they are comfortable that their new levels of income will support their new lifestyles.  It can be difficult to adjust to varying amounts of income as opposed to a regular paycheck.  It is hard to anticipate what you can spend or what you will have to put aside for taxes when a good part of your income is paid out once a year at year end in the form of interest and dividends.

The Middle Years

After the initial thrill of not having to go to work every day wears off, retirees typically settle into a new pattern.  Spouses generally will have worked out new routines of living together and may have had an opportunity to deepen their understanding of each other (or on the other end of the spectrum, discover they are really incompatible).

On the whole, more than half of surveyed retirees report being well satisfied with life.

However, questions of self-worth may start to arise during these years, perhaps causing an interest in finding and supporting a cause – leading to volunteerism.  According to the National Institute of Aging’s Health and Retirement Study:

“People ages 60 to 69 at the time were most likely to have engaged in volunteer service, with one in three people in that age group having done so.”

To counteract feelings of worthlessness, some decide to take a more active role with grandchildren, or find a way to mentor others in an area of expertise.

Health issues may begin to plague us during our middle retirement years.    At a minimum, incidents of arthritis, hypertension and suspicion of cognitive impairment (you know – those ‘senior moments’) increase.

Some may find themselves slowing down, becoming less physically active due to depression, flagging interest in formerly enjoyable endeavors or health issues.

Loss of physical and mental ability can be disconcerting to us as we move through retirement stages.  Adjusting to fading eyesight and reduced hearing as well as increased difficulty in moving through the day can take awhile.  These signs of our impending mortality can make a person seek answers to the age old question of what happens when I die, or what purpose do I have on Earth.

The Later Years

As we age through retirement, we encounter more limitations and health restrictions to our activities.  However, in spite of that most of us continue to own our own homes.  The Health and Retirement Survey is finding that even among those 85 and older, more than half of the study participants (which were selected to be a broad spectrum of the American population) live in their own home.

Spending on health care typically rises during these years – whether from increased out of pocket prescription and doctor costs; more frequent hospitalization; or from the need for increasing daily activity care.

That Aunt and Uncle I mentioned above that moved to back to the farm in their early retirement years later moved (in their 80’s) to a smaller home across the country to get closer to a daughter and now have settled into a graduated retirement living center.  They are now in their 90’s and are in an independent living unit, but receive house cleaning, maintenance and cooking services.  They are set to be able to receive more care from the facility if needed as their bodies continue to fail.  For now, they still enjoy the center’s activities, their church and weekly visits to the daughter’s house – and both still drive.

A 93 year old mother-in-law, was moved to a senior living center closer to family.  Although still mobile and alert, her failing eyes (macro degeneration) and unreliable knees cause multiple doctor visits a month.  A decade ago, she gave up driving due to her eyes, so one of the kids escorts her around town.  She has a one bedroom apartment in a multistory center and gets maid, laundry and meals and maintenance as part of her rent.  She is active attending family events her many children, grandchildren and great-grandchildren generate, as well as participating in activities put on by the senior living center – such as morning exercise.

How about you all? What have you observed about the patterns of retiree’s?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/120360673@N04/13856204644/