Showing posts with label good financial decisions. Show all posts
Showing posts with label good financial decisions. Show all posts

I received an email from a gentleman on behalf of Liveperson.com with some great news for SingleGuyMoney readers. Do you have personal finance questions you would like to ask a personal finance expert? Well here's your chance.

What: Financial Chat with personal finance guru, Jean Chatzky.
When
:
Thursday April 2nd from 3-4pm Eastern Standard Time.
How
:
Logon to http://www.LivePerson.com/?BanID=47083

The Liveperson homepage has a link to the transcript for the last chat it hosted with Jean Chatzky.


If you haven't heard of Jean Chatzky, she has an impressive background. Jean has written for SmartMoney, Money magazine, New York Daily News and served as the featured money coach on Oprah. Jean has also written several books including: The 10 Commandments of Financial Happiness, Make Money Not Excuses, The Difference and Pay It Down.

Image courtesy of Tom Ruette

Thomas Stanley, the author of "The Millionaire Next Door" has made a career out of studying the wealthy and found that most millionaires don't live the way you think they live. Stanley's definition of a millionaire is someone who has assets of at least a million dollars, not including houses and cars.

One of the most common traits of millionaires is that they live well below their means
. I think one of the biggest causes of the current housing crisis is that people were trying to "live like the Joneses" and bought a lot more house than they could afford. If you are making $100,000 a year, you probably should not be buying a $300,000 home. Surprisingly, as a whole, more millionaires live in a $300,000 home than those that cost over a million.

Believe it or not, most millionaires are actually frugal
. They saved money and became millionaires by making cost-conscious decisions when it comes to big ticket items. They don't always buy the biggest home, the most expensive car or send their kids to the most expensive schools. Most millionaires don't drive a Mercedes, BMW, Porsche, or other expensive cars.

As a society, we are so quick to equate wealth with possessions. I admit that I am guilty of doing this myself. Consider this: the next time you are sitting at the traffic light and there is a BMW or Mercedes to your left and a Toyota Camry to your right,
don't be so quick to assume that the person driving the BMW is the one with money. The person driving the BMW probably has a car payment the size of a mortgage payment and may be struggling to make the payment whereas the driver of the Toyota Camry may own his vehicle free and clear and is using his money to build real wealth and not just an appearance of wealth.

Let's start living like millionaires in 2009. Let's start living a frugal lifestyle and use our money to build wealth. If you are about to purchase a home, think about what you can truly afford, not what the bank will lend you.

I'm not saying you should deprive yourself of the occasional splurge. If there is something that you want to buy (excluding a house or car), go for it. Just make sure you've saved the money and are not relying on a credit card to finance the purchase (unless you pay in full each month).



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I had the frustrating experience of going through the car buying experience this past weekend. This car was not for me but for my cousin who turned 18 on Friday. Yep, this is the same cousin from this post. He has been at his job now for a year and a half and managed to save over $8000 (I'm so proud of him). He came to me because he wanted to buy a car and wanted to make sure he made a wise decision. I was more than happy to help him out because I didn't want him to make the same bad decisions I did when I bought my first car at 18.

The first thing we did was sit down and discuss what his price range was and how he would pay for the car. Normally, I would have told him to take the majority of his savings to pay for the car in full but make sure he leaves himself enough money for an unexpected financial emergency. This time though, I went a different route. You see, since I wrote the "
I Want to Be Rich Like You" post, he has become a father. He has a beautiful three month old baby boy. Granted, I wish it had not happened but what is done, is done. We've had numerous discussions about it and he knows I will be on his back to make sure he is taking care of his responsibility. Seeing as how he has this additional responsibility, I wanted him to only use a small portion of his savings. We decided on a price range of no more than $10,000 and he was going to be putting $2000 as a down payment; the rest would be financed. He has no other debt and can handle a small car loan comfortably. I told him he could always make extra payments to pay off the loan early. I usually would be against financing a car but in his situation, we felt that needed to pay a little more to be sure he had a good, reliable car to transport his son. Since he did not have enough saved to pay for the purchase in full while still leaving himself a hefty emergency fund, his next best option was to finance the purchase.

We did research online for safe, reliable and fuel efficient used cars and decided on him purchasing a used Nissan Sentra or used Honda Civic. Knowing what we were looking for and the price range, we headed off to search for the vehicle. We went to about 15 car lots until we found the perfect car for him. We found a used 2006 Nissan Sentra with less than 23,000 miles with an asking price of $12,900. The car was exactly what he was looking for so we sat down to wheel and deal with the salesman. I won't go through all the negotiation details with the salesperson but we ended up getting the car three hours later for $9600.

Since he had no credit history, he needed a cosigner. His mother took the responsibility of cosigning the loan because this was one thing I was not willing to do. (Have you watched any of the tv court shows about people cosigning loans and having their credit ruined when the person they cosigned for did not pay the loan?).

Had he gone to the dealership alone to purchase the vehicle, he probably would have paid about $4000 more for this vehicle. He had never purchased a vehicle before so he did not know you could negotiate the purchase price. That was a savings of $3300. He also did not know about all the junk fees the dealer adds to the purchase. I was able to get them to waive the document fee for a savings of $489. The dealer also added in a charge for vehicle etching (basically, this is a charge for putting the vin # on the glass). Since this was a used vehicle, this charge had already been covered by whomever originally purchased the vehicle. This was a savings of $239.

As the title says, knowledge is power. Since he did not know what he was doing, he was smart enough to find someone who did. Unfortunately, I had to learn the hard way and made all the same mistakes myself with my first car. These days, if I am not sure about something, I find someone who knows better than I do or I do research until I am better able to make a decision.




I went back and forth about it and I wrote about it on the blog. Yesterday, it finally happened. Chase Auto Finance is no longer a part of my life (as soon as the check clears and I get my title).
I wrote the check and put it in the mail yesterday for the full payoff of my auto loan. I've never written a check that big before and it was really hard. My hand was shaking the whole time and I think I smoked about three cigarettes before I finished writing the check. I had my buddy come over and drive me to the post office just to make sure I got that check out of my hands before I changed my mind. It's now safely stored in post office's outgoing mail bin with a destination of Chase Auto Finance's retail payoff department in Fort Worth, Texas

I'd originally said that I wanted to wait until I would have at least $20k in liquid funds remaining after I paid off the car loan. I didn't wait that long. After writing a check for $22,895.52; I have around $17k remaining in my savings account.

I should be happy about this but I'm not. I feel like Murphy is lurking around the corner with a huge financial emergency that will wipe me out and cause me to take on additional debt.

Why did I decide to go ahead and pay it off? I got tired of swimming against the current. Trying to build wealth while still paying interest is counterproductive. While it's true that my net worth is increasing, I feel the $555.91 car payment I was sending to Chase can be used to help build my net worth even faster. It will also help me breathe a little easier every month.

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There are a couple of "wants" that I've been itching to purchase lately. These things are not necessary and will not increase my standard of living. I must say that I've been pretty good about not splurging on crazy things for the past few months.

I could just whip out the credit card and make the desired purchases. But then, not only would I have to make payments to pay off my balance, I'd also end up paying finance charges and helping to make the credit card companies richer. I no longer pay more than I have to for the convenience of instant gratification.

I've decided I will wait on my purchases and do it the right way. I'm going to save and pay cash for my items. Paying cash will make my purchases much more enjoyable.

What do I want to buy and how much will it cost?


Maui Jim - Mauna Loa Sunglasses
Retail Price: $359.00
Flexible, Flexon Temple, Adjustable Nose Pads, Corrosion Resistant, Polarized




Apple Iphone
Retail Price: $399.00

I drool when I see this phone. I have been considering switching my cellular phone provider to AT&T as my employer is a partner and employees get 20% off the monthly service charges.


I'll need roughly $758, not including taxes, to complete my purchases. I've already setup a subaccount at ING to hold my SSA funds. If you don't have an ING account yet, click here for an easy $25 referral bonus. Just open the account with $250 and you'll get the bonus instantly. I'll get $10 to add to my "special savings account" for referring you. Already have a ING account? Consider Revolution Money Exchange - Like Paypal but without the fees. Sign up and get $25 instantly.

One all the bills have been paid, my regular savings account has been funded, my retirement accounts funded, debt payments and extra debt payments are completed, the remaining funds will be directed to my SSA (special savings account).


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We're a quarter of the way through the year and I haven't updated you guys on how my goals are going. With the poor economy, it is even more important to have a plan for your finances and track every penny.

The last time I posted about my financial goals was back at the end of December 2007. Things are moving along slowly but surely on the financial front.

My main financial goals for 2008 are:

  • Increase my Net Worth to at least $75,000. As of yesterday, I'm at around $70k. The stock market will have a big effect on this number. I am currently down about 5% in my 401k and down 11% in my brokerage account. I am sticking to a strict budget to manage my cashflow. If you want to start a budget but aren't sure where to start, consider taking advantage of the free trial at Mvelopes to get some ideas on how it works. Be sure to cancel before the end of 30 days so you won't be charged.

  • Increase my Freedom Account balance to $5000. I was doing pretty well until I had to borrow money to pay for repairs to my rental property. I also paid for my landlords insurance policy for the year and paid my auto insurance in full for 6 months.

  • Increase my Rental Property Account balance to at least $1500. Right now, the account has about $94 in it. Here are some $25 ING Referrals that I am using to help build the account balance back up. If you use one of my referrals to open an account, I will get a $10 bonus for referring you. Be sure to open the account with at least $250 to get the $25 referral bonus. If you don't have $250 to open an account, you can use this link instead.

  • Decrease my non-mortgage debt to less than $40,000. This one is moving pretty slow. I am tempted to take money out of savings to pay off the car loan but with the slow economy, I never know when my job might decided to "reduce the workforce". Right now, I am right around $45,000.

  • Increase my credit scores. I would like to have at least a 720 credit score with all three bureaus. So far, I am 2 out of 3. I'm not sure what is going on with Experian but I keep hovering around 700.
Have you heard of Revolution Money Exchange? Like Paypal but without all the fees. Sign up by April 15, 2008 to get the $25 bonus.
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If you are a follower of the teachings of Dave Ramsey, you probably already know or have heard about the 7 Baby Steps to start you on the road to financial independence. If you are not familiar with the 7 Baby Steps, Patrick over at Cash Money Life gives a great explanation of each step.

No More Debt is not an official part of the 7 steps but it is certainly an important step on the ladder to financial independence.

If you were drowing in a pool, would you want someone to pour more water on you? If you were trying to lose weight, would you eat more food? If you were driving along and saw that you were about to hit the car in front of you, would you speed up? The previous questions have one common theme; don't do things that can make a bad situation even worse.

Taking on additional debt while you are trying to get out of debt is a prime example of making a bad situation even worse. If you are trying to get out of debt, you don't want to continue to borrow your way into a deeper hole.

Here is my story:

One of the biggest obstacles for me when I first started trying to get out of debt, was trying to pay down debt but at the same time, I was adding on more debt. When I would pay off a credit card, I would apply for a new card and run up the balance or do a balance transfer with the intent of paying the balance off before the intro period expired. When the into period expired, not only did I not pay the balance off, I'd run up a balance on the card that I'd use the balance transfer to pay off. Every time this happened, this pushed me farther away from my goal of being debt free. It was not until I made a promise to myself that I would not take on any new debt that I started to finally start to see my debt decrease.

I promised myself I would no longer continue to finance a new car every two years like I used to do. My goal for my next car is to pay CASH and not take any more car loans. It can and has been done and I can do it too. I will no longer make purchases on my credit card that I could not afford to pay in full the next month. The only thing I plan to ever finance again is a home. A home is something I can not readily pay cash for. I can make a large down payment but it is hard to pay 100% in cash.

By making the above promises and sticking to it, I was able to pay off all my credit card debt. Make a promise to yourself today...NO MORE DEBT!

Stay tuned to the M-Network for more great posts covering the 7 Baby Steps of the Journey to Financial Peace.

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I have a credit card from one of the big home improvement stores. When I bought my first home four years ago, I figured I needed a credit card from one of the big home improvement stores in case I needed emergency repairs or supplies for my home. Knowing then what I know now, I would have setup a special savings account for home repairs.

I bought several things over the first two years with the promotions the stores would run. Make any purchase over $299 and pay no interest for six months or twelve months. Of course, I would never pay the balance off before the promotion ended and would end up paying more interest than I saved over the course of the promotion.

When I decided I wanted to get out of debt, this was one of the cards I paid off first. I've had a zero balance on this card for over two years. I've used the card since I've paid if off but promptly paid the balance in full the next month.

Lately, the big home improvement store has been sending me 2-3 coupons a month advising I can save 10% since I am such a valued customer. This is nice but the only way they will let me save 10% is if I use my credit card and I can only save up to $200. If I am such a valuable customer, why don't they let me use whatever method I want to pay for my purchase?

And why can I only save up to $200? Where do these coupons end up? In the shredder along with my pre-approved credit card applications.

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GREAT! Every since I paid off the remainder of my credit card debt, I feel alot better about my finances. It seems as if a huge burden has been lifted. I advise anyone that if you pay off your debt, you will feel much better about your finances and life in general.

If you need more reasons to pay off debt, consider this:

  • Better Cash Flow. Working on my budget for December, I had to figure out what to do with the extra $400 I am not sending to the credit card company. This is great problem to have.
  • Better Financial Flexibility. It's nice not having to try and figure out how to stretch your paycheck to cover all of your monthly obligations.
  • Higher Interest Rates. Your lenders will charge you higher rates because they will see you as a greater credit risk.
  • Interest Savings. Don't let the credit card companies get rich off you. Save the interest you would be paying to a credit card company! Invest and make it work for you.
  • Better Credit Score. One of the major components of your credit score is the amount of debt you are carrying. Carry less debt, the higher your credit score. My credit scores before I paid off my debt are 707 Transunion, 706 Experian and 694 with Equifax. I'm looking forward to see how my credit scores increase.
  • Reduced Availability of Credit. If you are looking to purchase a home, the amount of debt you carry will affect the amount of the mortgage you are able to qualify for.

I can't believe how much of a psychological boost paying off debt gave me. My next loan to tackle is my car loan. Once I get this paid off, I will be in a much better position mentally and financially. I also never plan to finance another car, if I do, I plan to put at least 50% down and finance for no longer than 3 years.

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