Financial Goals

March 29, 2011

If you’re like most Americans, simplifying your life may well be a treasure-trove of opportunity just sitting there waiting for you. I first learned this truth back in the late 1980s when I lived out of a suitcase for over a year. What a wonderful surprise that turned out to be, as it opened my eyes to how much of what I had accumulated and surrounded myself with were things I did not need. That, in turn, caused me to re-evaluate how I had been spending the hours of my days, of my life.

How many things do you own that you don’t really use? What do you do every day, week, and month that you’d rather not do? Do you live far from your job and commute hours each day, leaving you tired and with too little time for your family or for yourself? Look at the things you do out of habit and the things you’ve been convinced to do by others. Is each thing you do, each thing you own, really worth the time or money you are trading for it, really adding to the quality of your life?

If you’re like most people, you probably can benefit greatly from simplifying your life. Time and again you will find that less is actually more, and the rewards of simplicity outweigh the rewards from whatever you were doing or owning before. You’ll discover that simplifying doesn’t necessarily mean doing without, but living a less stressful, more balanced life. It means having more time for the things that really do end up making you happier. And it sure won’t hurt that you’ll probably end up with a lot more money by doing so.

So, take a few minutes to think about who you are and what you have been doing. How complicated has your life become over the years? Take a moment to think about simplicity and how to incorporate that simplicity into your life. When you do, you just might discover that living simply could gain you a world of abundance you never knew was available.

by Ted Hunter

February 27, 2011

Everyone wants to be both debt-free and financially secure, but how do you prioritize the two? Is it best to hold-off with aggressive saving until you are debt-free? Or is having a savings cushion more important than getting rid of debt? It’s critical to pay down your debt, but it’s critical to create a plan that will build your bank accounts as well. To be smart about accomplishing both goals, you need to carefully prioritize your saving and debt-reduction efforts. Unless you have a very good reason not to, I recommend that you adhere to the following priority sequence:

1. Stop using credit cards and pay only the minimum payments until step four is reached.

2. Aggressively save for an emergency fund starting with at least one month’s expenses. This will create a cash cushion for emergencies rather than needing to pull out the credit card.

3. If an employer will match contributions to the company 401(k) plan, save the amount necessary to get the full matching dollars.

4. Allocate 50% of savings to an emergency fund, and 50% to debt reduction until four to six months’ of living expenses are covered in the emergency fund; four months for a two-income family, six months for one income.

5. Now focus on eliminating all debt except for home and car loans.

6. Build up annual savings until the maximum tax-deferred savings allowed by IRS guidelines is reached. Once you reach this point and are saving as much as you can pre-tax, throw a party and reward yourself with something very special. You’ve earned it!

7. Pay off any car loans, then start saving $250 a month in a new car fund.

8. Increase saving to at least 15% of pre-tax income. Save for home ownership If not currently in a home. Homeowners should also accelerate mortgage payments and continue until it is paid off. Also, during times when fixed-interest rates such as CDs have fallen below 3.5%, be aware that making extra mortgage payments provide a better after-tax return on your money.

9. Families with children might want to start a specific education fund based on the child’s abilities, needs and desires. (Please read “Paying for an Education” in chapter eight of Money Smart to see if this is something you should do.)

Small monthly changes can have a huge impact on savings and debt reduction, especially when you follow the right sequence. Be smart in setting your priorities and your Spending and Saving Plan will put you on the path to financial freedom in no time

by Ted Hunter

January 31, 2011

For many American’s debt seems like a way of life. For over fifty years the relentless message that debt is “normal” and “acceptable” has brainwashed the public to believe that to achieve the American Dream it’s okay to go into debt. Nothing could be further from the truth. These have been tough times for many hard-working Americans who still unfortunately believe they must borrow to live. But let me be clear, you absolutely must live within your means to succeed financially and to insure a good quality of life –there is just no way around it.

Most who have a debt problem falsely believe that something will happen in the future to solve it and all will be well. A common assumption is that income will grow faster than spending, but that is very seldom the case. Even those that end up making more are by then usually well conditioned to just keep spending more, and end up going deeper into debt.

Debt reduction and eventual debt elimination are very achievable goals. My debt elimination plan has three key elements: attitude, action, and persistence. Of course it can feel overwhelming to start a debt reduction plan, but once a plan is in place and early efforts begin to turn out results, momentum and the feeling of success build. Not only will debt be eliminated; the money that is saved will reduce stress, increase enjoyment of daily life and create financial stability. When does debt elimination begin? Today! Start today with these steps:

Openly admit you have a serious problem, one that you must solve.
Every member of the household must agree to reduce spending until your family has solved this problem for good.
Immediately stop all borrowing! Do not borrow any more money for any reason other than for a true emergency, such as a job loss or large unexpected medical bills. Not one penny, not for any reason. The minute you stop taking on new debt you are absolutely on your way.
Cut up every credit card and every department store charge card. No exceptions! Use only a debit Visa or MasterCard tied to your checking account for your non-cash purchases. For your cash purchases, take a pre-set amount of money from the bank every week or every two weeks.
Make no new purchases of significance until your debt is eliminated.
Write down every single expenditure, every day for thirty days. It only takes two or three minutes a day and the results can be quite amazing. Well before the month is up, your mistakes, problems, and most importantly, the solutions, should start becoming clear.
Buy and read Money Smart. You will learn a lot that will help you, especially when it comes to the Rules of Money, the Rules of Spending Wisely, and of Investing Successfully. Once you stop breaking the rules of money and start spending wisely you will find that the results can be nothing short of amazing.
Have a written Spending and Saving Plan that you follow and update monthly. Money Smart walks you through this process step by step with advice along the way.
If you’re still not making enough progress, go back to writing down every single expenditure, every day and stop using your debit card. Make cash envelopes for each spending category on your spending and saving plan and start doing all your spending in cash.
Understand that you almost certainly make enough money. The only true exceptions to this are things like loss of your job, being hit with huge medical bills, or having a large family depending on you, and you are the only breadwinner. If your income is not enough to cover your lifestyle, adjust your lifestyle.
If you need to repair your credit and feel you cannot work things out on your own, contact the National Foundation for Credit Counseling (NFCC) at www.nfcc.org. The charges involved will be very modest and fair and they will work with you regardless of the level of debt involved.

Getting out of debt is a very achievable goal. Over a million people do it every year, and this is the moment to add your name to the list. Eliminating a sizeable amount of debt takes time and discipline but whatever temporary sacrifices you make will be well worth it for a better tomorrow.

by Ted Hunter

January 10, 2011

There are periods of time where there is almost no reliable way to invest money; where the risk of losing money is just too high. So, how do you invest in an uncertain market? Choosing not to invest is usually the best investment choice during such difficult financial times. Unfortunately, not investing in any of the traditional options (like U.S. stocks, overseas stocks, real estate, commodities, fixed income) is a good-looking alternative in the short term. The stock market is about 20–25% overpriced and major yet-to-be-resolved problems in real estate, jobs and in government debt make investing at this time unreliable.

Given these elements, the best bet is to be primarily in cash for now—no-load money market funds and very short term CDs. Temporarily taking a defensive position and saving as much as possible is likely to turn out a lot better than the losses involved if the stock market drops. Sometimes it’s best to be patient and wait for the next opportunity. For now, making the choice not to invest may be your best investment.

Read more detailed advice and my current take on the stock market, real estate market, and more in my Market Evaluations section of www.MoneySmartOnline.com.

by Ted Hunter

December 27, 2010

Do you spend every raise you get? Do you spend a little bit more than you make on a monthly basis? About half of all families live at or above their means. The secret that every financially successful person knows is this: the key to turning family finances around is living below your means. Making this simple lifestyle choice is an essential step to controlling personal finances.

What exactly does that mean? Living below your means simply means living on less money than comes in each month and saving any extra money instead of spending it on an increased standard of living. The difference can be dramatic, especially if you are currently in debt. You don’t have to make a lot of money to do this, you just have to spend a little less than you make. Once you begin chipping away at your debt, you can begin to increase your ability to save money. You start to control your money instead of it controlling you.

It doesn’t have to be a well-kept secret. Live below your means, almost every financially successful person does.

by Ted Hunter

November 10, 2010

What are your hopes and dreams, your goals and desires? A strange question to ask when my focus is helping people achieve financial freedom? It’s not, and in fact, it is probably the most important question you need to answer if you truly want to reach your money goals. What matters most? Is it spending time with family and friends? Traveling the world? Owning a great home? Don’t make the mistake of spending money on low priority whims, trading away the things that matter most–it’s just not a trade worth making.

Take your time answering and really consider your answers. Identifying hopes and dreams can be difficult, but you are very unlikely to get the things you wish for unless you first identify what they are. Think of it this way, every expenditure you make is a trade that requires you to give up something else and it’s critical to become consciously aware of the trades you are making. Only after you have clearly identified what it is you want from your life can you make good decisions regarding money and the role you want it to play in your life. When you know what you truly want, you can avoid trading it away.

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