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Budgeting, Real Estate, Saving

Save $10,000 by avoiding Private Mortgage Insurance

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“A simple fact that is hard to learn is that the time to save money is when you have some.” —Joe Moore

Saving money is the cornerstone to building wealth.

Granted you have to have some to actually save some of it.

Regardless, the time to save is when you have it.

An ever better way to save money is to avoid doling it out in the first place. If you can slash or cut out expenses entirely, you can accumulate more wealth faster.

Buying a home is one of the reasons why people save money because buying one is expensive.

If you read my post, Home Buying:  Survival of the Fittest Wallet; then you understand what I mean about home buying.

Home Buying: Survival of the fittest wallet

Every dollar that you do not have to send out ultimately stays in your wallet.

A great way to save on money you spend on your home is to eliminate the cost of mortgage insurance, which is known as PMI.

What Is PMI?

Private mortgage insurance is something lenders use to protect their investment in your home. Until you own it or have put down a reasonable down payment, the bank wants to protect its property by making you pay insurance on it.

Most lenders require PMI if a homebuyer does not make a down payment of 20% of the home’s purchase price – or, in mortgage-speak, the mortgage’s loan-to-value (LTV). This LTV ratio is in excess of 80% (the higher the LTV ratio, the higher the risk profile of the mortgage).

Meaning if you owe anywhere above 80% of the home’s value, then you are considered risky and are a candidate for PMI.

For example, if you purchase a home for $250,000 and are unable to put down 20% ($250,000 x .20 = $50,000); thereby, owing more than $200,000 to the bank, then you would need PMI.

And unlike most types of insurance such as automotive or renter’s, the policy protects the lender’s investment in the home, not yours.

However, PMI makes it possible for people to become homeowners sooner because they can put down less than 20% such as 5% and still purchase a home.

FROM RENTER TO HOMEOWNER 

PMI allows borrowers to obtain financing if they can only afford (or prefer) to put down just 5% to 19.99% of the residence’s cost, but this ca be costly.

The home will now come with an additional monthly cost.

Borrowers have to pay their PMI until they have accumulated enough equity in the home that the lender no longer considers them high-risk.

Homebuyers who put down less than 20% of the sale price will have to pay PMI until the total equity of the home reaches 20%.

This means you have to pay 20% of your home’s value or have enough equity to build to that amount before PMI is no longer required. This can take years.

And your heirs also get nothing out of this.

Unlike most insurance policies, all proceeds go to the bank. The heirs get nada, zip, zero, nothing.

The lending institution is the beneficiary. PMI only helps the mortgage lender.

It is also not cancelled automatically.

You have to draft a letter to the lender explaining that the LTV of the home is now 80% or less. This usually requires getting an appraisal done. This could take months!

Or the other hand, if you wait until it automatically cancels, you would have to hit 22% equity. That is a full 2% higher than the 20% that is mandatory!

Meaning you essentially paid 2% more or $5,000 that was not even required!

Some lenders even request that you pay for a certain time period. So, if your home goes up in value and just absolutely skyrockets, you could zoom past the 20% minimum needed, but still be on the hook to pay.

How fair is that?

It’s like that scene out of Wedding Crashers, “I earned those miles.”

It would be not good at all. I earned those miles.

Now let’s talk the cost of PMI.

HOW MUCH IS PMI?

PMI acts just like the Red Hot Chili Pepper’s song Give it Away, in that you are giving this money away to insurance companies and that’s it.

PMI can cost on average between 0.05% and 1% of the entire loan amount annually. In some cases, maybe even more.

This means if you purchase a home for $250,000 and owe 1% annually for PMI, you will have to fork over $2500 per year. This equates to $208 monthly!

The more house you buy, the more the cost goes up.

If it takes 5 years to build up enough equity in the home to stop paying PMI on a $250k mortgage, that would mean paying $208 x 60 (months) = $12,480! And that money is burnt. You cannot get it back.

Did I also mention that as of 2018, PMI is no longer tax deductible?

That’s right. Insurance is just in case. And in this case, that is like throwing out two hundred dollar bills out your car window once a month!

So, you have to find a way to roll up those windows and plug that money leak.

HOW YOU CAN SAVE $10,000 BY AVOIDING PMI

You have to find a way to keep your money in your pocket and not the insurance companies.

Better yet, find a way to not only keep it, but make money with it.

Putting that $208 into stocks over the course of 10 years could net a return of over $37,000 with an 8% return!

If you can avoid PMI all together, you could save yourself over $10k!

For example, let’s say you have to pay $250 per months for 4 years, that is $250 x 48 (months) = $12,000.

In order to save $10,000, you would need to eliminate paying $208.33 a month for 4 years, that is $208.33 x 48 (months) = $10,000!

HOW TO AVOID PAYING PMI

There are a few ways to avoid paying PMI and they are the following:

  • Put down a 20% down payment.
  • Lender paid mortgage insurance (LMPI) where the cost of the PMI is included in the mortgage interest rate for the life of the loan.
  • Get a piggyback mortgage where a second mortgage or home equity loan is taken out at the same time as the first mortgage.
  • Find a lender willing to forgo PMI.

The last one is a little tricky.

There are not many places I could find that allowed this. However, there are some financial institutions that will offer a 100% conventional mortgage without PMI. You will just need to do an online search in your state.

So, there you have it.

I have showed you several ways to avoid PMI.

Now, I have saved you $10,000!

What is my fee for this service?

Only for you to share this with someone else.  And by doing so, help them save $10,000 as well.

She then takes a bow and says thank you for taking the time to read this post. I’ll be here all week!

Investing, Saving

Earn Money with High Yield Savings Accounts

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Don’t save what is left after spending; spend what is left after saving. – Warren Buffet

If you take a look at your bank accounts, you will notice that the rates on your savings accounts are minuscule.

On average, savings rates are a paltry 0.01% APY.

That means you are not even earning 1% on the money you have stashed away in most big banks.

This meager 0.01% APY is not doing anything for you.

If I put my hard earned money into a bank, I want something for it. These rates are almost no better than sticking your money under a mattress!

However, don’t do that. If the house ever catches fire, your money also goes up in smoke and is not FDIC insured.

I once heard a real estate mogul say that many years ago there was a time when interest rates were paying 10%. He was able to double his money every 7 years!

Now, that is fantastic.

However, this is not the case anymore.

Although, there are some banks that are willing to pay a fairly decent rate for the opportunity to house your money.

I found a few from doing an online search.

So, here is how you can earn money from placing your money in a high yield savings account.

WHAT IS A HIGH YIELD SAVINGS ACCOUNT

A High Yield Savings Account is a savings account with a variable rate typically higher than retail brick-and-mortar banks.

These banks are usually online and offer no physical bank that you can visit.

However, you can deposit your money online via electronic funds transfer.

Access to you funds may include a combination of wire transfers, checks, or ATM withdrawals. But this is not always the case.

For example, American Express® Personal Savings accounts are not meant for everyday spending. Therefore, debit cards, ATM cards, or checks are not provided. Transfers have to be done online. And transferring funds online can take anywhere from 1 to 3 days to complete.

Therefore, you should only deposit money in these types of accounts that do not require you to need access to these funds immediately or for daily spending purposes.

THE RULE OF 72

This rule allows you to estimate how long it will take for an investment to double at any given interest rate with the “Rule of 72”.

Knowing this will allow you to make a more informed decision before placing your money in any investment or savings vehicle.

You must also pay attention to the type of account you put your money into. For instance, a money market account or Certificate of Deposit (CD) will pay you more than a savings account.

Stocks pay you he highest rates of returns and give you the biggest bang for your buck!

The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent.

With the Rule of 72, If you use the formula, that equates to 72/9.8 = 7.34 years to double your money.

However, many banks are paying 1% or less!

Therefore, if your savings are earning only 1%, this means you money will double in value in 72 years.

That is 10x longer than if you had invested your money in stocks.

BANKS WITH HIGH YIELD SAVINGS

After doing a short search online, I found the following banks with high yield savings:

  1. American Express National Bank – 1.90% APY
  2. Ally Bank – 1.90% APY
  3. Barclays Bank – 1.90% APY
  4. HSBC Direct – 2.01% APY
  5. Synchrony Bank – 1.90% APY

HOW MUCH YOU CAN EARN

This amount can vary based on how much is deposited.

Of course, the higher the deposit amount the higher earned in interest.

You can use this money for anything you want or simply keep it invested and let the interest keep compounding on the amount you earn.

Please be advised that you still have to report this as income on your taxes. The bank will supply you with a form for tax purposes.

Now let’s show you the money.

We will use the 2.01% APY as our rate.

If you deposit $15,000, into an accounting paying 2.01% APY, you will get the following:

If you deposit $25,000, into an accounting paying 2.01% APY, you will get the following:

If you deposit $50,000, into an accounting paying 2.01% APY, you will get the following:

SKY’S THE LIMIT

All yeah! Let’s stack that paper!

Unless banks start putting a cap on the amount you can deposit, you can pretty much do this until you feel you have deposited enough in savings.

The point of using a High Yield Savings is to grow your money while you sleep.

That’s right. You can earn money just for breathing.

Merely allowing it to sit in an account paying less than 1% will not beat inflation; being its customary 2-3% rate per year.

At the very least, your money can keep up with inflation and not fall so far behind.

The goal is to always beat inflation.

Your money will have less purchasing power as inflation does its thing.

Therefore, it is your job to finds ways to keep the money train going by figuring out how to earn more, invest more, save more, and ultimately beat the inflation monster that is coming out every year to a theater near your wallet.

Banking, Credit Cards, Financial Freedom, Investing, Retirement, Saving, Wealth

Avoid paying interest and get rich

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If you use a credit card, you don’t want to be rich. – Mark Cuban star of “Shark Tank”

According to CNBC, Americans have an average credit card balance of $6,375 and owe a record breaking $1 trillion in credit card debt, which is the most ever recorded in history.

Investing that money instead could net you anywhere from $50,000 to $200,000, depending on how long you invest it and getting a return on investment of around 9%.

And that does not include an employer match or if you invest more. You could save and invest your way to a small fortune thanks to compound interest.

Here are some ways to avoid paying interest.

MAKE IT AUTOMATIC

I’m sure to many of your out there this is not new advice. However, how many people are actually doing this is another story.

Setting your bills up on automatic payments is a great way to avoid missing payments.

Credit card companies can levy a hefty fee for missed payments. The most recent I read was $38! Forget that. I rather use that money for gas or some other function. Anything is better than paying fees.

In addition, credit card companies can ratchet up your interest rate to 29.99% for missing a single payment!

That means almost near perfect timing of paying all bills.

The closest you can get to doing this is to make all your payments automatic.

Set up everything you can on autopay.

You can put the gym membership, cell phone, utilities and insurance payments on a credit card. Then set up automatic payments with your bank to pay that credit card off at the end of every month and you’re done.

PAY DOWN YOUR DEBTS

Paying off high interest debt is a must on the road to wealth.

Every dollar you spend towards interest cannot work for you compounding interest instead.

Think about it. If you pay $700 per month servicing debt and pay 50% of that in interest, that money is gone. Dust in the wind my friend.

If you can do the polar opposite, investing the entire $700 and earning interest instead, you have a clear path to building wealth over time.

That is the equivalent of $8,400 a year you are investing as opposed to using that amount to pay debt in which $4,200 goes to principal and the other $4,200 in interest and that money you never see again.

CONSIDER BANKING WITH A CREDIT UNION

If you read my posts, about the Unbanking of America and New Banking Rules: clear a check payment in a day, then you understand where I’m coming from.

Many may not know this, but credit unions are not allowed to charge more than 18% on loans or credit cards (unless you default).

The savings gain alone from not having to pay some credit companies 22-27% interest is huge!

You could save anywhere from $50-150 bucks or more per month with a lower interest rate. That’s another $600-1,800 per year!

Just something to consider.

REFINANCE YOUR MORTGAGE

If you can lower the interest rate on your mortgage, you can save $100’s or $1,000’s of dollars a year.

In addition, if you can change your repayment period from 30 years to 20, 15, or 10, then you can save a ton of money.  Maybe not tons of money monthly or right away, but over the life of the loan.

For example, a $250,000 mortgage at a 3.92% rate over 30 years will cost $425,533. You reduce that to 15 years and total output is $331,058. That is a difference of upwards of $100,000!

If you take that $100,000 and put that into index funds, you could have anywhere from $600,000 to $1 million dollars over 30 years with a minimum 6% return on investment.

Many folks will buy at least 2-3 homes in their lifetimes. If every new purchase resets your debt-free mortgage clock by 30 years, then you are likely to spend most of your working years in debt.

I hate to be the bearer of bad news, but this is actually the norm for most people.

You do not want to be normal. You want to be different and extraordinary because that gets results.

If more folks put down 10-20% and got 15 year mortgages, you would be better off in the long run.

Paying on one item for 30 years is a long time.

A lot can happen in 30 years. Heck, a lot can happen even in 10 years!

Retire that debt ASAP or as fast as you can.

You can build an in-law suite, swimming pool, and remodel the kitchen after the debt is gone and the home is paid off.

People used to have mortgage burning parties, after paying off their home. Let’s try to bring that back shall we.

I have recently read in the news personal finance experts expressing their concerns over mortgage payments that Americans are making.

Most wanted the debt paid just before you retire. Others said get rid of it in your 40’s. Like around age 45. Why you ask? Since, this is the point where you are halfway through your career, it is best to spend the second half of it working toward building capital to fund your nest egg.

That is excellent advice.

Basically, you spend the first 20 years paying off all you owe, and the last 20 years building up your retirement accounts you will need in your golden years.

SUMMING IT UP

All you have to do is follow these four steps and you can avoid paying interest or at least a whole lot less of it.

Remember these 4 steps:

  1. Make it automatic
  2. Pay down your debts
  3. Bank with a credit union
  4. Get a 15 year mortgage

Sounds pretty simple right?

Well, you would be surprised by how many people are not doing any of the things stated above.

Therefore, if you can start doing even one of these things now, you are well on your way to building up your bank account.

And in the illustrious words of Porky the Pig, “That’s All Folks!”

 

Careers

Jobs that pay $70,000 a year

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“I have learned that to be with those I like is enough.” – Walt Whitman

It also seems that, at some point, a certain amount of money is enough.

Don’t agree? Well, at least an author at Forbes agrees with me.

According to one Forbes article, at a certain point, the amount of money you have has no connection to how happy you are.

If you read my last post, Why the Rents shouldn’t pay your rent, then you know earning a decent salary is a must have.

I know. Easier said than done. You have a better chance of catching a fly ball at Yankee Stadium, than getting an entry-level position with a $70k starting salary.

However, bear with me.

I did some research and after a little digging found jobs (or companies) that pay a minimum of $70,000 a year.

Why is this post about $70,000 you ask? Great question. I will answer that here.

CEO PAYS ALL EMPLOYEES MINIMUM $70,000 SALARY

If you remember, just a few years ago, there was a CEO that read people are happiest when they make about $75,000 a year.

Well, he took that theory and ran with it.

He cut his own $1.1-million-dollar salary and gave every employee a minimum $70,000.

For some employees, this doubled their salary.

He made international headlines. This happened around 2015.

A follow-up article on the company showed that it did indeed help his employees and the company has grown. It doubled their amount of clients.

It seems doing good things, sticking to your convictions and principles attracts people and money to you.

Therefore, this article is about finding that happy sweet spot.

That my friends, is at about $70k.

WHAT TYPES OF JOBS ARE PAYING $70,000?

I did a search on online including indeed and other job sites. I just searched for jobs that pay $70,000+ salaries.

Here are some jobs that I found.

  1. Sales Representative

$75,000 – $90,000 a year

Job description: Selling automobiles.

Education level: Previous sales experience preferred.

  1. Compliance Specialist

$72,457 – $92,689 a year

Job description: Responsible for investigation and enforcement of ethics laws and regulations.

Education level: Bachelor’s degree

  1. Computer programmer

$71,385 a year

Job description: Computer programmers write code to create software programs.

Education level: Bachelor’s degree.

Median hourly pay: $34.32

  1. Radiation therapist

$74, 984 a year

Job description: Radiation therapists treat cancer and other diseases in patients by giving radiation treatments.

Education level: A formal training program must be completed, with many programs leading to a bachelor’s or associate degree.

Median hourly pay: $36.05

  1. Plumber Mechanic

$75,000 a year

Job description: Commercial and residential plumbing installation.

Education level: 5 years of experience.

  1. Financial analyst

$74,360 a year

Job description: Financial analysts guide businesses and individuals to make investment decisions.

Education level: Bachelor’s degree

Median hourly pay: $35.75

WHERE CAN YOU FIND THESE JOBS?

If you are looking for a job that pays $70,000, just do an online search.

Better yet, go to the website of a place you would like to work for and see what type of salaries they are offering.

Look up job titles and see what is the typical pay for that profession.

If the goal is to make $70k, then you have to start applying to jobs that offer that pay.

A starting salary of $70k may not always be possible, but with additional education or training it can be.

HOW DO YOU GET A $70,000 A YEAR JOB?

You have to have opportunity and be prepared.

Before you start college, do a little research.

Look for jobs that pay $70k or more.

Your search may turn up the following professions:

  • Physician.
  • Lawyer.
  • Software development manager.
  • Pharmacy manager.
  • Software architect.
  • Engineer.
  • IT Manager.
  • Finance Manager.
  • CPA.

When you know what a job pays, then you can start to decide what career path you want to be on, if the goal is to earn a certain income.

You are best not chasing the money, but pursuing a passion such as cooking, mechanics, computing, baking, sewing, or sports.

Do what is of interest to you. That way you are never bored and are involved in labor that you want to actually do.

Still not sure where to start?

Ask yourself: What do you do with most of your time now?

Can you turn that into a career?

Whatever it is, would you do it for free?

If the answer is no, then you probably should not make that your job and how you earn your living.

And once you figure out what it is that makes you tick, all you have to do is apply yourself.

Go to your local library and look up careers that interest you and what type of education and training you need.

Seek out a mentor.

Find someone that is already doing what you want to do and ask if you can take them out for coffee and to interview them.

Ask questions. Seek answers. They say those who seek shall find.

When you go to job sites and see what you want, then just hit apply.

Prepare a good resume.

Pick out a nice suit or dress for that interview.

It is well-documented that those who come in well-dressed are more likely to be offered the job.

Look up salaries ranges for the field you are in.

In addition, review interview techniques.

Here are some typical interview questions:

  1. “Tell me a little about yourself.”
  2. “What are your biggest weaknesses?”
  3. “What are your biggest strengths?”
  4. “Where do you see yourself in five or 10 years?”
  5. “Out of all the other candidates, why should we hire you?”

Prepare yourself as best you can for when that opportunity arises, you are ready.

They say forewarned is forearmed.

Practice your responses at home. Practice, practice, practice. Do your reps.

So when the times comes, you are not so nervous. Be confident. Confidence is key.

Then when that job offer comes through, you can say without any reservations: Yes, I accept!

College, Financial Independence, Saving

Why the Rents shouldn’t pay your rent

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Financial independence is the ability to live from the income of your own personal resources. – Jim Rohn

Reading headlines in the news about how boomerang kids are returning home in droves is quite alarming.

When I was growing up, I saw lots of young adults leave home and never return. They got jobs and worked their way up to where they were trying to go.

However, a couple decades have changed all that.

One of the biggest culprits: student loans.

The cost of college has outpaced inflation. Therefore, it is now up to families to find affordable ways to get a college degree.

Otherwise, your kids may just end up back in your basement, or worse, in their childhood rooms that they could hardly keep clean when they were debt-free teenagers. Gulp!

The reason that so many millennial’s need parental assistance in paying their rent is because they shoulder the bulk of the $1.4 trillion in student loan debt.

However, borrowing or taking out deposits from the bank of Mom and Dad is not a good idea and can have lingering consequences for the parents as well as the kids and future generations.

Here are the reasons why young adults should stop relying on their parents and become independent as fast as they can.

FINANCIAL INDEPENDENCE WILL TAKE LONGER TO REACH

We are living in a time when more people discuss this phenomenon called FIRE (financial independence retire early).

Although, this should be taken with a grain of salt, as many people will need to save 50% or more of their income for a decade or two to make this dream a reality. And that is not always possible or feasible to do, to say the least.

That being said, the decision is always yours whether or not you retire at 42 or 62. The point is to be able to one day have the option to retire.

When you lean on your parents (the Rents) to pay your bills, it can delay the transition into adulthood.

I have noticed when people have no safety net, they are a lot more resilient and cautious about what they do and spend.

For example, to rely less on Mom and Dad later in life as an adult, you could do the following:

  • Live with a couple roommates
  • Pick a smaller apartment to live in (say 700 square ft.)
  • Go without a car or at least buy a smaller, more affordable one
  • Commute to college and save by not paying room and board; therefore, requiring less or no student loans

It seems to be the people that get off their parent’s payroll ASAP are the ones that are able to become financially independent the fastest because they have no other choice.

When the only option is self-reliance, then you learn to live lean really quick. And low fixed expenses are how you will be able to start saving money.

A SUBSIDY SHOULD HAVE LIMITS

For those that may not know, right now the Direct Stafford Loans offer a three-year subsidy (you may have to ask your loan servicer if your loan has this feature) for students entering repayment.

Those funds give graduates time to find suitable employment and create a budget for their lifestyles in order to repay what they owe.

This cushion is a great way to help young people get on more solid financial footing.

What you may or may not have noticed is that there is a three-year window and then it closes shut.

And do you know why? It is because when you offer people a crutch, then unless they have the drive, perseverance, determination and the will to be self-sufficient, they are likely to use the crutch forever.

You have to limit aid, otherwise, people come to rely on it for all their days.

This includes the funds from your parents.

Get off their bankroll as fast as you can, or you may come to depend on it for the rest of your life.

Let’s be honest. Nothing lasts forever. Even milk, has an expiration date.

You would rather have the option of saying no than hearing the words: We’re cutting you off.

RELYING ON SELF GETS BETTER RESULTS

I know that having help is at times necessary to keep a roof over your head. I would not tell parents not to help their children. I am asking children to tell their parents, that they no longer would like their financial assistance.

Therefore, you become the adult or hero in your own life and story.

If you read any number of stories about the rich and successful, you will notice that many did not pull themselves up by their bootstraps, but had just enough help to get things running and then go it alone.

When you allow someone to write you a check, you are also giving them some form of say so in your life. This de facto control you are giving up every time you cash that check, has far reaching and lasting consequences.

You may want to live in SoHo, but the parents say they are only willing to pay for something closer work or at a specific dollar amount. Thereby, giving them more control over your life.

When you write the check, you have all control. You say when, where, and how much.

No need to wait on anyone to give you the green-light or hand you the money. You can make decisions for yourself and might I add, faster than if you had to wait for help or other form of assistance.

Thereby, causing you to not miss opportunities because you can say yes without having to check in with anyone else.

You can say yes to that job, internship, business opportunity, apartment lease, car purchase, or vacation.

Just something to think about.

INDEPENDENCE IS ATTRACTIVE

Independence, especially financial independence, is attractive.

When you are an adult, you do not have to tell anyone you are one.

They can see it in your actions.

Are you out at the bar every night? Or are you at home, working on that new app your developing to earn enough money for a down payment on a house?

Do you spend with reckless abandon? Or are you cognizant of what you are spending, and where your money is going?

People are drawn to confident people. It is an attractive quality. They say like attracts like.

Nothing exudes confidence like someone who is in control of their money and time.

Are you looking for a partner? If so, ask yourself what qualities are you looking for in one.

For instance, do you want someone who buys everything in three’s, likes to lease cars, and maxes out their credit cards every month?

If the answer is no, then you may want to make sure you are not doing any of those things as well.

Everyone wants to date up, but they forget that they too need to get themselves together in order to attract someone worthy of their time and vice versa.

When you are independent, people want to be around you. You attract jobs, opportunities, people, and money when you have your own.

GENERATIONAL WEALTH INTERFERENCE

The New York Times has reported that 40% f people in their early 20s receive financial assistance from their parents.

Parents are paying for everything from rent to car insurance.

According to CNBC, this is what parents are paying for.

The problem with this is that every dollar that parents give their children, is money that is not working for them in building their financial house and keeping it secure.

If parents have the money to give their children for a down payment or college education, then I am all for it. By all means, help the kids out.

However, what many kids may or may not know is that Mom and Dad cannot afford some of these expenses.

It is one thing to help someone with a one-time expense, like a down payment on a home.

It is another thing entirely to help pay someone’s rent or mortgage every month with no end or deadline in sight.

Many baby boomers are going into retirement unprepared. Therefore, they usually do not have the funds to give the kids or grand-kids because they need that money themselves.

How do I know? Well, I ask people. And many have said that their are finances precarious and funds are limited. Many give until it hurts. However, it not just hurts them, but also their heirs.

The Sandwich Generation is a generation of people who care for their aging parents while supporting their own children.

By not taking or limiting financial help from parents, it limits the help you may need to give your own parents when you are raising your kids.

Let me share with you this story for some perspective.

I read an article about a man who decided to become writer. While he did pretty well for himself, the family still struggled financially.

This is what happened during the course of their lives:

  • His wife quit working and became a stay at home mom
  • Their daughters were given the option to go to the private colleges of their choice, even though the family could not truly afford it
  • His father helped them pay for college for the kids; thereby, making him forfeit any future inheritance for him or his children for the sake of present conveniences
  • They also paid for their two daughters weddings out-of-pocket, with empty pockets
  • His wife has been out of the workforce so long she is unable to find reasonably paid work
  • He works 7 days a week
  • They have no savings and NO RETIREMENT

From the example above, you can see how paying for present pleasure or not planning for expenses can harm you and your family down the line.

This is scary stuff. Their inability to say no and set firm limits on what they were willing to spend has caused long-term consequences. They may have to rely on their children for financial assistance in their old age as opposed to passing on wealth.

I urge you to reconsider.

Let this post be your wake up call.  A call to arms, if you will. A call to financial arms. To arm yourself with financial knowledge, so that nothing can stop you from working toward your goals and building a solid financial future; independently.

Budgeting, Saving, Wealth

How to give yourself a $6,000 a year raise

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“To hell with circumstances; I create opportunities.” – Bruce Lee

When I read headlines and reports talking about how 75% of Americans are living paycheck-to-paycheck, or 30% do not have enough to cover a $400 emergency, I get concerned.

Especially, when credit card debt is reaching record highs and as of the writing of this article, credit card debt in the United States stands at $1 trillion.

I do not like to see so many Americans cash strapped.

I want to see people funding their dreams, buying homes, and starting businesses.

Although, those things take time to build, it is very possible to do over time. However, it gets harder to do those things when you have debt.

I have read lots of books and articles online that gives the following advice: ask for a raise.

Easier said than done. Why not ask for a pony, while you’re at it?

They say ask and you shall receive, but this is not always the case. More and more, I hear about how jobs are downsizing or cutting expenses. That’s code for slashing wages and human capital.

These things happen all the time. It is a business decision. Like a family trying to balance their budget and manage their household finances, a business has to do the same.

I have asked for lots of things in life. And, why not? All people can do is say yes or no. I have had to deal with rejection plenty of times. All you need is someone to say yes once. If you hear 100 no’s, then finally get to that one yes, it could possibly change your life.

I do not wait for people to hand me anything. Nobody owes me nothing. I work for what I want. I have learned to create my own opportunities. And you can do the same. Just work with what you’ve got.

Wages have been stagnant and quite frankly flat. It is becoming more difficult to move up an income bracket. While you’re trying to climb that economic ladder, it may not always come with a corner office, higher pay, and bonuses.

Truth be told, a raise may not do but so much for your finances. After taxes, you bring home less than the actual raise. And what’s even worse, is that many people do lifestyle inflation, where they slowly increase their spending due to lifestyle creep from making more money.

Burning through large amounts of cash is not good for your wallet. If you want deeper pockets, you have to make some changes to your behavior.

In order to give yourself a yearly raise of $6,000 ($500 per month), you would need to grow your income by $250 and cut your expenses by $250 or some combination of both, if not one or the other.

Here are some ways to give yourself a raise that don’t require you to quit or get promoted.

SLASH EXPENSES

Cutting expenses is like giving yourself a tax-free raise. Every penny you save stays with you.

You need to find creative ways to spend less. When you reduce the outflow you can increase your cash inflow and cushion.

Most people, I have noticed, that get into trouble with their finances tend to be the ones who have high fixed expenses.

Keep your expenses as low as possible. Then you do not have to worry so much about or even depend on getting a raise, bonus, promotion, inheritance, or any type of financial windfall.

For example, I decided to quit going to restaurants for about 2 months. My average bill would be about $30. If I give a tip 10-20% every check, that means paying $3-$6 every time. Eating out just 4 times per month, meant paying $12-$24 or $25-$50 over 2 months alone! That is $300-$600 a year.

That does not include the cost of food. The $2 delivery fee, the extra container of rice, or springing for the extra tuna roll.

Don’t even get me started on going out in groups to places that just so conveniently can’t split the check. You usually end up paying more than your fair share to say the least. Basically, you are subsidizing someone else’s alcoholism.

I now call the restaurant ahead and ask if they do check splitting. If not, I try to just order at the bar.

You are the controller or should we say comptroller of your destiny.

GO TO COLLEGE

Increasing your knowledge is usually a great way to earn more money. Although, education is not an equalizer (some may profit more from going to the Ivy League than others), you can still qualify for more prestigious jobs with a little more book smarts.

You can job hop your way to a higher salary. Even I have done this. I have noticed I have gotten a raise or promotion by applying for another job as opposed to asking for one. But that’s another story.

However, I do not recommend going into a ton of debt to do it. I suggest you find ways to go to school affordably such as monthly payment plans to pay-as-you-go, going online (which is cheaper that traditional brick and mortar), or seeing if an employer will offer tuition benefits.

If your employer pays, $1,500 a semester and you go for 2 semesters a year, that is an annual savings of $3,000.

LEARN A TRADE

Go to any barber shop or hair salon on a Saturday morning and take note how many people are there.

Having a skill can earn you some serious bread.

If I have to pay the plumber or electrician one more copay, I may start looking up how to fix the plumbing myself on YouTube.

By this point in my life, I am sure I have paid enough to hairstylists, washer repairmen and manicurists to put at least one kid through college or at least pay for a semester. That’s no joke.

If you have any type of skill or hobby that you can monetize, do it.

I read online that a woman who dresses in costume and does displays is making six-figures. You read that right. Putting on a wig and some tights is allowing her to pay the mortgage and save for retirement.

Think walking those dogs are beneath you. Think again. You can earn $40 bucks a day. Just doing this on the weekends could net you $80 x 4 = $320 a month. Pass me the leash.

OPEN A ROTH IRA

A Roth IRA has no upfront tax benefits, but the savings gain down the line is second to none. All the investment gains will not be subject to taxation in retirement.

Since, the money in this account is funded with after-tax dollars, you will be able to enjoy this account without having to pay the man. Sign me up please!

So when your peers are paying taxes on their 401(k) withdrawals, you could be going to the ATM getting out that $600 max withdrawal without paying Uncle Sam for the convenience.

PAY DOWN YOUR DEBTS

Paying off high interest or anything charging you interest such as personal and auto loans, credit cards and student loans is money in the bank.

Every dollar you do not give the local banker stays in your bank account.

If you pay $200 monthly to service your credit card debt, getting rid of this money drain means having an extra $2,400 a year back in your pocket. That can be put in your Roth IRA and then you are working towards turning every dollar into two.

LIVE ON CASH

It is hard to part with cold, hard cash. Swiping is easy. Work on handing every person you meet the money to pay for expenses, even to buy a postage stamp, and you will start to feel the sensation of giving away a small fortune.

SET UP AUTOMATIC PAYMENTS

The late fees from not paying on time are astronomical. A one-time missed payment on a credit card is regular $30 or more. Miss a payment on 3 credit cards in one month and that’ll cost you $100 bucks!

Over a years’ time, that is $1,200. Just in fees. Save that money automatically into your savings account instead.

DELEGATE TIME-SUCKING TASKS

By paying a nominal fee to others, you free up precious hours to find ways to make money.

The trick is to pay for services that are not particularly pricey and expensive. You then use the hours you would have put into cooking, cleaning, or doing laundry into making money during those hours instead.

RENT OUT YOUR HOME

These days you can rent out just about anything. Over 30 million people have used Airbnb. Most rentals I have seen can charge anywhere from $100-$300 a night.

You could rent out your place and make $500 a month. Or who knows how much. Sky’s the limit here.

FORGO VICES

Forget the lottery tickets, tobacco, concert tickets, expensive shoes, and beer runs.

You could save anywhere from $40-$200 a month. That’s $480-$2,400 dollars a year.

SUMMING IT UP

There are many other ways to save or cut expenses. You just have to be willing. From just some of the examples I provide, someone could save anywhere from $100-$600 dollars a month. That is between $1,200-$7,200 a year.

If you can find a way to bring in $500 more a month, whether it is an additional income or slashing expenses, that is like giving yourself a raise of $6,000 a year!

Whenever, I hear someone say I can’t live without my weekly happy hours I say to them: can’t or won’t.

There is usually always something you can do. Break it up into small tasks, if the bigger task seems too daunting.

Just focus on getting your monthly or daily savings rate up. You can do it.