Thursday, October 29, 2009

6 Simple Steps to $1 Million

provided by Investopedia

Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Stop Senseless Spending

Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.

That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere - this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses.

This doesn't mean that you shouldn't go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits.

Fund Retirement Plans ASAP

When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.

Unfortunately, retirement planning is an afterthought for many young people. Here's why it shouldn't be: funding a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later.

How much difference will funding a vehicle such as a Roth IRA early on in life make?

If you're 23 years old and deposit $3,000 per year (that's only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it's clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest - your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you've lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That's still a sizeable fund, but you had to contribute $160,000 just to get there - and it's no where near the $985,749 you could've had for paying much less.

Improve Tax Awareness

Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.

Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.

However, if you're not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return.

Own Your Home

At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren't sure where we want to live for the longer term. And that's fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.

Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)

Avoid Luxury Wheels

There's nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice - especially since this asset depreciates in value so rapidly.

How rapidly does a car depreciate?

Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.

In short, especially when you are young, consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you'll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.

Don't Sell Yourself Short

Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.

Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Bottom Line

You don't have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don't have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

Wednesday, October 28, 2009

FICO 781 - and payday is coming...all great news!

We pulled our credit reports for our annual check up and were surprised to see that we had a FICO of 781. And, while some folks focus on this..I look at the bottom line of our credit owed for our standing on credit. To me, it's not any ratio's or debt to credit is really how much do you make (income) and spend (expenses) and if there is a negative difference in the two, why are you spending more than that? That's called CREDIT!

I have to say, I differ a little with Dave Ramsey in that I do believe a FICO is important. In some fields of work, pulling your credit to ensure you are not a financial risk to the corporation is a norm. And, let's face it..until we are self-funded multi-millionaires, responsible credit will be a part of our lives.

Tuesday, October 27, 2009

Great Book Review - Boundaries

We have been reading a really great book entitled "Boundaries" by Henry Cloud. In our adult lives, we all need boundaries. We talk about them for our children all the time..we don't let them have candy after 6pm, they can't run in the mall, and on and on. But, as adults, we have the freedom to do as we choose...and, wouldn't you know it, there are no 7 years olds in debt...they are all adults!

This book can help with all aspects of really is a book about setting boundaries for yourself, your relationships, your family...and I bet after reading it..we all find that we need some boundaries on finances...just a guess.

Hope everyone is having a great week!

Friday, October 23, 2009

The I '"really don't like" AT&T Rant

In July 2009, we moved back home from Southern California to Northern California and while down there, we had AT&T U-verse which was very cool. When you finish with it, you simply take all the gadgets to the UPS store and they scan and mail it for you at no charge. Well, until 2 months later when AT&T sends you a letter saying that you returned 3 pieces of equipment and not 4 and here is your bill for $150.00.

So, I provide them with the tracking number...on 9/3/09. And, 2 a month and half later...they come back and say "yes, we confirmed the tracking number and got the box, but it was still missing the piece of us $150.00".

Each time I call, the person says "give me the tracking number and that should do it"...I explain I give it each time and get the same results...and the next word is "Well, that's weird"...tell me about it.

So, I finally had to go to the UPS store and get the serial numbers of what they scanned and provide those to AT&T...and when I called them yesterday to give them this...they said "All I need is the tracking number.." I try to be nice and reply...You have had that since 9/3/09...and each time you close out the case with "We got the box, but missing a piece of equipment, pay $150.00"

So, I apologize if any of you are AT&T customer service agents for U-verse. But, man...what a bunch of nuts! I wish I could get away with that at my job...give lip service, do nothing, etc.

On second thought...nah...then they could get ANYONE to do my job!

Have a great week...and RUN FROM AT&T!

Thursday, October 22, 2009

A call for encouragement for DiggingOutOfOurMess

Good morning, blog followers.

I want to ask you to heck out Mysti is in a very rough spot and could use encouragement and advice as she goes through this "season". We already posted some advice..and I know Mysti would appreciate encouraging words, lessons learned and advice!

Wednesday, October 21, 2009

What's with people and their dogs?

This is not a financial post..but just a random thought and venting!

What is the deal with people and their dogs?? I get that people love their dogs..I get that people treat their dogs as family..even a little human. We have, in our neighborhood and town, have people that think everyone is in love with their the point where they (I think) honestly believe that when their dog uses your yard as a restroom, you should be honored at the gift placed at your feet. I know, I sounds like a grumpy old man now, but c'mon!

In life, we all have to clean up the mess we make. We learned that in kindergarten along with not eating paste! In our financial life, we don't just get to leave the "dump" on someone's door - we work hard and clean it up! Wow - I did turn this into a financial issue :)

I wonder what the correlation between people who don't clean up their mess and their financial life...that would be interesting. If you tend to be more cluttered, are you more likely to be financially irresponsible? If you are a neat freak...are you more likely to have your finances in check?

OK..I am done :)

Tuesday, October 20, 2009

Free Blog Makeover

Mom's the word Free Blog Makeover contest is going on right now! Nan is such an inspiration to all the people trying to make their way through the blogsphere! I highly recommend following her blog and taking her very useful - and funny- advice! Thanks, Nan, for what you do in the community!


Monday, October 19, 2009

updated debt totals!

We have been at this thing called "Getting out of debt" for 14 1/2 months. We started out at a whopping $59,063.20 and, as of last week our current balance 10/15/09: $27,643.19.

It is hard to believe we have paid of $31,420.01 in what seems like a pretty short period of time looking back..but - boy- hasn't always been easy! And, quite frankly- it seems like a long way to go! But, month by month, a thousand at a time, we continue to see progress. We continue to be inspired to press on..and we continue to watch our money.

I think the hard part, right now, is that we feel like we have been doing this forever and we have a long way to go...and then when we get the debt paid off, that extra money goes to fund retirement accounts, college, and then start paying on the you never really get this "windfall" of cash that you get to start throwing your money around...and I guess that is the lesson in all this. Being fiscally responsible, or as I like to call it "Being a Fiscal Grown-Up" is a committment you make for the rest of your life...not just to get out of debt...for the rest of our lives we will be budgeting, saving, making trade-off's. But, oh how sweet when we hit retirement age, have a couple million in the bank and can really LIVE LIKE NO ONE ELSE! Now- I'm motivated!

Go get 'em!!

Friday, October 16, 2009

Oh happy day!

Friday's are just the best. Going out with friends tonight to an open field where our kids can run; Going to South Lake Tahoe tomorrow to watch the salmon; time with my beautiful family PRICELESS!

Money ain't is!

Have a wonderful weekend everyone~!

Tuesday, October 13, 2009

The flu hits the house and the budget

Well, none of us got more than the stomach flu...but having it run through a household of 5 people is horrible! Equally bad is the fact that no one wanted to go to the grocery store..much less think about cooking. So, with one day before payday..are robbing every category just to buy eggs and milk.

The plus side: No credit card was harmed as a result of the flu!!

Hope you are all having a debt-reducing good week!!

Sunday, October 4, 2009

Updated Debt Totals

Thank God it's Friday!!

Our new debt balance (as of last night) is $27,776.72 and we have paid down $31,286.48! This has been since 8/1/2008. Pretty incredible progress over 14 months, if we do say so ourselves.

Fall is here! A great time to reflect on a new season. And, all we can reflect on right now is the debt free season of our lives that seems to be as close as Winter!

We sincerely hope you are all enjoying your lives, making progress towards your goals and being blessed in the process!

Another Murphy Strike!

Yes, we have had another "Murphy Strike" in our home..this time the washer! But, this time, we struck back!

My wife has actually been looking at the front-load washers for a while on her "dream list" and well, Home Depot made that a reality.

The washer started out at $699.00..but do people getting out of debt have that to spend? NO! We spent $366.00!

$699.00 at home depot -minus- 10% GE rebate -minus- 10% home depot card discount (No, we haven't gone back to credit cards, the amount is sitting in our emergency fund ready to go, but who's turning down 10%?)-minus- $75.00 PG&E energy rebate - minus- $125.00 Water District rebate = $366.00

That's a whopping 52% off!

That's one big ol' coupon!

Happy Saturday everyone!