Financial Independence Part 3

We’ve all heard the saying “Don’t keep up with the Jones”. What does it really mean? You are fine with your sofa and all is well with your family. Then your friends gets this really nice brand new sofa that is gorgeous. Then you start to think, my sofa is older, starting to look its age, maybe had a stain in the corner, you start to rationalize that you need a new sofa too.

Just because someone else gets something new, you don’t necessarily need that too. That’s keeping up with the Jones’. All of these steps are hard to do. You have friends and family showing you their new things, marketing showing you the bright shiny items that you love to own, but do you need it?

Needs and wants are a hard subject to learn. You have to come to some balance of what you want and what you can afford. So in my example above, you can do some thinking – there are choices in etween the current sofa and the new sofa:

Current sofa
Clean the sofa
Buy a slip cover
Reupholster the sofa
Buy a second hand sofa
Buy a new sofa

See how many choices that I just wrote out between the current sofa and the cost of a new sofa. Some of these in between steps may work better with your budget. You don’t always need to have the latest, greatest new item.

If financial independence is something that you aspire to, then you need to work on all three of these steps, to get your finances in order once and for all.

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Financial Independence Part 2

This is part 2 of 3 of obtaining financial independence.

Spending less than you earn, sounds easy – but is it? The basic principle is if you earn $100 then you need to spend less than $100. That’s the general rule. But there are times in our lives that this isn’t possible. When you are just out of school and your rent, utilities and student loans are almost your whole paycheck, you may experience times when you are not working – in between jobs, can’t work for medical issues etc., these make spending less than you earn a challenge.

If you have been reading this newsletter, you know that my husband had been home from work after shoulder surgery and is not getting paid while he is recovering. So what is our household supposed to do to spend less than we earn? The answer for us is to reduce our expenses and to fund the shortfall with our savings. Luckily this was a planned surgery, so we had time to plan ahead to save. But this may not be possible for everyone. First, you have to have a savings to fall back on to get through whatever life throws at you.

Spending less than you earn is critical to financial independence, as you have to save on a regular basis, putting a regular amount from each and every paycheck into savings first – pay yourself first.

Here’s how to start:

Take a calendar out and mark your paydays.
Determine the amount that you want to save. It’s okay to start small ($10 a week) and then increase often.
Set up automatic system. There are two ways to do this – with direct deposit have your paycheck split by your employers so that the amount you want to save is directly taken from paycheck and deposited to your saving.The other way is to set it up with online banking and have a transfer from your checking to your savings.

There are some suggestions to making this work. Make sure not to link your savings account to your ATM card. You may want to have this savings account in another bank or credit union – not where your checking is located. You want to have access if you need the money but not have easy access to use if when you just want something. It’s too easy to transfer money without thinking.

So for that $100 you earn, you will want to save money first – pay yourself first, then live off the rest. The rest is what you pay your bills with, shop for your necessities and the money to have fun with. Yes, that’s a lot, but I know you can make it work. You want to be conscious of what and where you spend your money, so that you can make choices. Do you want to purchase that now or have that money saved for later? The choice is yours.

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Financial Independence Part 1

In honor of Independent Day/Fourth of July, I want to talk about many people’s ultimate goal of financial independence. According to Wikipedia, financial independence is described as “generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses”.

Yes, we all probably want this and therein lies the problem. How do we attain this?

There are some generally agreed upon principles that are good practices that we all should attain to:

Avoid consumer debt
Spend less than you earn/Pay yourself first (save)
Don’t keep up with the Jones’

These are all great suggestions and work really well, but what if you need to work on some of these steps. In my opinion it all goes back to budgeting. Budgeting is the road map of your finances. You can see where your money is going and then make the necessary steps to eliminate consumer debt, reduce your spending, save by paying yourself first and break your habit of keeping up with the Jones’. It may sound simple but it isn’t. So with this issue and the next three I will tackle these issues.

Today, let’s look at avoiding consumer debt. This can be difficult to attain. But on the other hand, this is so important – too important not to strive for.

There have been times in my life that I have had more debt than I would like to admit. Yes, this happens to me too. In my opinion, there are two steps to start on the path to being debt free. First, you have to stop creating debt. Yes, you heard me. You need to do whatever it takes to avoid adding more to the debt. With that said, you can’t put every extra penny towards your debt and not have an emergency fund. Otherwise, the next time an emergency happens and you don’t have a fund to fall back on, you will create more debt.

In May and June, my husband had surgery and was home from work for a month without pay. We only had about 6 weeks’ notice to plan for this. We got through this period with the help of the emergency fund and savings to cover the shortfall. This was the key to us being able to live and pay the bills. Without the savings to fall back on, we would have had to use credit cards and create debt. So you can see how having an emergency savings plays a big part in getting rid of debt.

Back to the debt. Second, there are many ways to tackle this. Start by taking an honest look at your all your debt. Make a list including how much you owe, the minimum payment, interest rate, etc. I understand this is hard, but it’s necessary.

Now make the plan. You can payoff the smallest debt first to eliminate one debt (gives you momentum). You can payoff the debt with the highest interest rate (saves you money). You can plan to get more money (bringing in more income) with many options to add to your payment. Take some time to brainstorm what will work best for you and then put that plan into action.

You’ll need to stop creating additional debt and to create or increase your emergency fund. Next issue, I will discuss spending less than you earn/pay yourself first.

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Saving For Retirement

We all want to save for retirement, but there never seems to be enough money left over to save. Does this sound familiar?

The first rule of saving for retirement is, if you are offered free money take it. If your employer sponsored retirement plan offers you matching funds, take it. Contributing to a retirement plan through your paycheck is a great way to get started on the path of regular automatic saving. The earlier you start this habit the better off you will become. On the other side if you haven’t done this, it’s never too late to start now. In this case, free money is a good thing

Next you want to manage your debt. Debt is the enemy to your budget, so you want to avoid it at all cost. I am not saying don’t borrow or use credit, what I am saying is to use it wisely. Don’t become a slave to your debt and that you live paycheck to paycheck trying to keep up with your debt payments.

Charge wisely and only amounts that you can pay off easily. If you find yourself with an emergency and you have to borrow money, evaluate your options and make the choice that is best for you and your budget. Pay back the debt as quickly as possible to avoid as much of the finance / interest charges as possible.

Lastly, gratification – are you someone who needs instant gratification? Do you buy without a payback plan? Look at the food cost (groceries, dining out, take out etc.), shopping, memberships, entertainment etc. These are the expenses, that where the instant gratification that can harm your budget. These are the first defense against the leaks in your budget. Plug those holes to have more money for your retirement.

Think about your finances then make a plan to implement these strategies one by one. Once you master one, start the next. Remember that your finances will not change overnight, be patient and remember it takes time.

Your Emergency Savings Account

What’s your emergency savings account look like? Suze Orman suggests that you have eight months of income in your emergency savings. Dave Ramsey and Jean Chatzky both say 3 to 6 months. Hello Wallet suggest that you think of emergency saving in three ways – minor emergencies, major emergencies and job loss. Bottom line, you need an emergency savings account.

As with any goal, start with a plan – then automate it. When we started our emergency savings, our goal was to save $1,000. That would get us through the unexpected small expense. We started by saving $20 per week to reach that $1,000 goal in one year.

Once you accomplish your goal, I would like you to about your next savings goal. Sometimes unexpected emergencies cost more than you expect, especially if you are a homeowner. I have always thought that the major repair emergency fund should be in the $5,000 range. So then we started on this goal. $100 a week gets you to $5,000 in a year. We divided this between both our paychecks. My husband gets paid weekly so he contributes $50 each week. I get paid every other week, so I put in $100. We then have achieved this goal of $5,000 in a year.

Remember, this is not a save for one year and done type of thing. You may need to use this money, so you need to replace what you use. You can never have too much money saved for the what if’s of life.

Different Types of Refinancing

We’ve all heard the word “refinance”, but what typically comes to mind is mortgages. Yes, you are correct. It also can apply to other areas of your finances such as car loans, student loans and credit cards.

As with any borrowing, you want to pay off the debt as quickly as possible. But sometime you cannot afford to purchase a car with cash, so you take a car loan. You may want to look into refinancing your car loan if you can get better terms – lower interest rate.

For student loans lower interest rate is probably not the answer. You may have several loans and several payments. It might be easier for you to keep track of and have only one payment per month, if you consolidate. Check out your options to determine if this is right for you.

Credit cards are a good example. You may be payoff debt and it may seem like it takes forever. It could if you have high interest rates. Refinancing a credit card balance to a lower or zero percent interest rate will help you pay back what you owe quicker and pay less in finance charges.

As with any financial transaction, do your research and compare all terms and conditions to see if this is the right move for you and your finances at this point in your life.

How to plan for a dog before buying a puppy

I am passionate about travel, but it doesn’t compare to how I feel about my dogs. Brownie has been a member of the family for seven years now. We rescued her at about 8 weeks when she was only 12 pounds, a far cry for her 70 pounds now. We love her just as much as any of our other dogs.

But owning a pet can be a budget breaker. Pets are expensive. You need to consider their day to day costs – food, supplements and services – which can range in price from affordable to “how am I supposed to pay for that?”

The Initial Costs

According to peteducation.com, the first year can cost between $500-$6,600 depending on how much you’re willing to spend.

You have the simple comforts and necessities: bed, leash, collar, food bowls, toys – these aren’t too expensive individually, but can add up when you’re buying them all at once.

Then there are your legal requirements, like puppy shots, license and tags.

You may also want to consider having your puppy neutered and micro-chipped. Thank goodness where we rescue the cost of puppy neutering is included, so it’s not an extra cost for us. If you rescue, ask to see if you can save too.

Finally, depending on the dog’s personality or medical issues, you may have other expenses. Brownie went through the teething stage, as puppies do, but she wasn’t interested in inexpensive items like shoes or pillows. She chewed the molding around the door so that we needed a carpenter to make the repairs. That was expensive.

The Costs Going Forward

According to the Pet Education, the annual costs can be anywhere between $300-$2,500.

Brownie’s annual vet check-up and shots cost about as much as a car payment and are due every summer along with her license. That’s not including any extra trips to the vet for illness, injuries, etc. All these need to be planned for.

Your homeowners / renter insurance can increase depending on your dog’s breed.

Lastly there is caring after your dog’s emotional and physical well-being. Do you need to have a dog walker while you’re at work or to board your dogs when you’re traveling? More costs.

Lots to think about. Besides just selecting the right pet for your family, make sure to plan the financial part, too.

What will your retirement income be?

Remember these?

You used to receive one in the mail around your birthday. If you are younger than 50, you probably threw it directly into the trash. (It’s much more interesting the closer you get to retirement.)

Now you can just go online

To see your Social Security statement, go to www.SSA.gov (If you have trouble remembering it, just think “ass backwards” then “gov”). You’ll need to set up an account with the typical personal details plus security questions to verify your identity. If you want added security, you can take it a step further and use information from a prior year’s W-2.

Why do you want to see it?

To verify your earnings. It’s a lot easier to correct errors when they are new.

To help you plan how and where you will live at retirement. You can see how much you will earn when it’s your time to collect. Is it enough to cover your mortgage payment? Is it enough to continue with your hobbies or cover basic expenses?

To help you decide when to retire. You will be able to determine your Full Retirement Age (based on year of birth). Currently, you can take your social security benefits early at age 62 with a lower monthly payout or wait as late as 70 to receive a greater payout.

Protecting your account

You can add extra security by having them text you a unique code every time you want to sign in online. In a surprise twist, setting this up initially involves them sending you a letter in the mail. It’s a process that takes 5-10 business days, but once it’s done, you can rest a little easier. I recommend taking this extra step, since everyone’s had their information compromised at least once or twice in the last few years.

I would suggest that you check your Social Security statement annually – either a month or so after you file your income tax or around your birthday. The important thing to do is to check it.

See My Vision Board for 2015

I always make time during the holidays to take an assessment of my life.

How do I feel about my life in general?
Am I on track with my long term goals?
Did I complete last year’s goals?
What should I add to enrich my life?
Where can I cut back to simplify my life?

I use that to determine what I want to accomplish so I can set meaningful goals for the year. I am a visual person, so I make an outward expression of my goals with a vision board. I love giving an outlet to my creative side, and a large poster is a great reminder all that I want to achieve.

Here are my steps to creating a vision board:

List what I want to achieve this year in different areas of my life. For example, I might set separate goals for my business, my personal life, family relationships, fun and recreation, and spirituality.

Next the fun starts: I look for pictures that reflect the feeling behind my goals. I also look for words in large and colorful type face. The image has to resonate with me to earn its space on my board. I use magazines, newspapers and images that I’ve found online. Then, I cut them out (or print them) and set them aside.

Then I arrange, and rearrange, the images on the poster board until I’ve achieved an overall image that speaks to me.

Finally, I glue everything in place and display it.

Now, this is the end result for my 2015 vision board.

Start Flexing Your Financial Muscles to Make Your Dreams Come True

Welcome to our very first Blog Hop for 2015!

This month we want to help you start the year off with a fresh start featuring articles, how-to’s and resources that have helped each consultant, blogger and business owner on the hop in their own lives and businesses. Get ready to be inspired for a fabulous year ahead of you as you move along through the blog hop.

You may just be starting the blog hop or may have come from Deb Brown at Touch Your Client’s Heart on Natalie Bradley’s Blog Hop. If you get off track at any time, the full lineup below will help you move along from blog to blog so you make sure to see and learn from all of the articles featured here today.

Start Flexing Your Financial Muscles to Make Your Dreams Come True

It’s the New Year and you may have goals related to your appearance and business, but what about financial fitness? When you strengthen your “core” you’re improving your center of balance, and your money is the main center of movement for your lifestyle. If it’s in balance, everything flows from dream stage to the “I can do it” stage.

So how can you start flexing? Try these exercises:

You may not be great at them at first, but just remember how you felt in your favorite exercise class the first time you tried it – a bit slow, out of synch, not sure what came next. Now you love it, and you’ll love these too because they feel good and get you what you want most: a lifestyle that serves you.

1. Keep your credit score as high as possible.

First get your credit score for free (CreditKarma.com, Quizzle.com, CreditSesame.com). Then, take little steps over the next 12 months to increase your score. This is a new exercise, so take it slow. You can do one small thing each month to improve your score: pay extra on a debt; earn a little extra income; or, check your official credit report for errors. Just like training your muscles, your task is to nudge that score higher over the course of a year. Patience and diligence will pay off and your higher score will reap big rewards in respect and savings when you enter into a new financial agreement.

2. Live under your means.

Yes, I mean spend less than you earn. I know it’s hard when everything you buy feels like something you need – so don’t go cold turkey! Instead, each month look around and see if there’s one thing that can be replaced with something cheaper. Have you tried the library lately? They’ve moved beyond print. You can borrow the DVDs for Game of Thrones, or download an audio book. Some people are saving $1,000 per year by disconnecting cable TV and replacing it with services like Netflix, Hulu and Amazon Prime. You may be able to get cheaper car insurance or move your phone service to a “friends and family” plan. You might find out that you love using your pressure cooker to make amazing soups from leftovers, or that you love having a vegetable container garden.

There are a number of ways to save that actually enrich your life, giving you a bigger benefit, and making you feel the opposite of poor. To find your biggest budget leaks, I recommend tracking your spending for a month. I offer a tracker when you sign up for my newsletter.

3. Having savings for times of need.

Again, take it slow. Just like you won’t get fit in a day, you won’t have a big savings account in a day. It’s all about moving a little money over on a regular schedule. If you receive a paycheck, you can have it deposited automatically. If you’re an entrepreneur, you can schedule a monthly transfer from checking to savings. Out of sight is out of mind. It’s just like hiding the snacks in the back of the cupboard.

I don’t want to to scare you, but without a savings, you are one step from financial disaster when the next unexpected expenses occurs. Having a savings account is a lifestyle and it’s one you want to work your way into.

Turn these steps into regular exercise and you’ll have healthy finances to support your dreams.

The next stop is Kim McDaniels at iBiz Design Duchess on Natalie Bradley’s Blog Hop! Thanks for visiting and I hope to see you again next month!

Natalie Bradley at Natalie Bradley Consulting
Cari Vollmer at PassionIntoProfit.com
Wendy Bottrell at Lifestyle Transformation
Janet Slack at Solopreneur.Biz
Vicki Heise at Live Your Healthy Life
Rochelle Togo-Figa at Speaking Breakthrough Strategist
Lisa Ivaldi at InsightClarityGrowth.com
Robin Hardy at Integrity Virtual Services
Sandra Gardner at Tall Red Poppy // Marketing, Magic, & Design Sanctuary
Deb Brown at Touch Your Client’s Heart
Jill Russo Foster at JillRussoFoster.com <<– you are here!
Kim McDaniels at iBiz Design Duchess
Sharon Lewis at Questiam Leadership Development
Chérie Ronning at Chérie Ronning, Consultant-Mentor-Speaker

Jill’s Financial Tracker and NearlyFreeTravel

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