Author: Money Maroon

Friends

Friends Influence Your Success And Wealth

Money Maroon

Show me your five closest friends and I can provide a very accurate description of you. The fact of the matter is that the friends we have not only tells us who we are generally. Our friends influence who we are and who we will become. Yes, those closest to you will impact who you will become. Peer pressure  in proximity is strong, so is the influence of mentors and leaders. Choose your friends wisely because they will influence not only your career success but also the wealth you will attain in the future.

Friends

We may deny it, but those around us have the power to influence us. We are constantly picking up on cues from those around us. These cues subconsciously inform and shape our behavior. These behaviors over time become habits, and our habits determine who we become. The influences of our friends are not only behavioral. Who we have around us affect our world view, the way we think and the way we feel about ourselves. As such, our success and in a sense our wealth in life will come down to the people we choose to spend our time with.

Think for a second about the company kept by your financial heroes. Now, contrast this with the financially illiterate and those living on the edge. The friends kept by these two groups are diametrically oppose.

At this moment, consider who are your closest friends. Think of their attributes and how these friends have affected your life. What habits do these friends have that you want? Also identify attributes that you do not wish to adapt? Mostly, do you need new friends? 

Success

To be successful, be around successful people. If you want to be in shape, hang out with those who are healthy. If you want to be happy, surround yourself with happy people. We become those who are around us.

If you want to build wealth and become financially independent, do not have a circle of people around you who are struggling and lack financial discipline. Instead, associate yourself with positive, focused people. Be friends with those who are committed to constant improvement and the pursuit of the best in life. Have friends who will facilitate your journey to wealth and financial independence.

Choose Your Friends Wisely

Remember, while you may not be able to choose your family, you do choose your friends. To be friends with another person, you must agree to have this individual in your life. And while the decision to cut people out of your life may be difficult, tough decisions must be made for you to achieve your goals. 

Be the CEO of your life and demote or fire your friends as needed to achieve your goals. If not, do not be surprise when your ambitions, goals and position in life are at the same level as those around you.

Choose your friends wisely

Conclusion

Show me your five closest friends and I can provide a very accurate description of you. The fact of the matter is that the friends we have not only tells us who we are generally. Our friends influence who we are and who we will become. Yes, those closest to you will impact who you will become. Peer pressure  in proximity is strong, so is the influence of mentors and leaders. Choose your friends wisely because they will influence not only your career success but also the wealth you will attain in the future.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Start A Business Now

Money Maroon

There are many reasons to work a 9 to 5, however, there are many drawbacks. As such, for your sanity, it may be best to start a business. With technology today, starting a business is easy. On the other hand, growing a sustainable business is difficult. It is important not to over look the fact that most businesses fail, however, the rewards of starting a business may negate the risk of failure. The fact of the matter is, no one will pay you the way that you would pay yourself.  Also, no one will work as hard for a company as you will for your own company. So take a chance and if it makes sense, start a business.

Being An Employee

Being an employee and working a 9 to 5 job has its benefits. At times you can have a stable pay check, health insurance and depending on the position, a retirement fund. What do you not have, control. Someone else controls if you will be fired, someone else controls if you will be promoted and also the type of work that you will be doing.

You do not want to be in a situation of having the rug pulled from under you. It is a story that has been seen repeatedly. We have all heard it. An employee works hard, but because of situations that are outside of their control, this could be economic or a reorganization of an organization, they are laid off. On the other hand, it may be a situation of an employee not getting promoted because of favoritism or bias. Let us not forget about the potential toxic environment and company culture. Would you like to have control over your progression or have others in control of your advancement?

As an employee, you may do as much as required but you may never get promoted. This happens to so many individuals. They have put in all the work and have made the sacrifices, taking time away from family and dedicating it all to work. More often than not, many of these individuals are elevated to a certain position but never higher. They are often fed corporate speak and given a carrot to chase. To bypass these issues, start a business.

Open sky
The sky is the limit

Start A Business

Start a business. It does not matter what the business is. If you do not have the funds, start small. If you have the funds, use your current employment to fund the begining of your business. Be an entrepreneur and start a business.

The reason for starting a business is that at the very least, working for yourself will eliminate a number of the issues that employees encounter. Further, there are plenty of benefits to starting your own business. You will be working for you. If you put the work in, you can succeed. It is your payday. Instead of building an empire for someone else, you are working hard to build your empire. Just remember, for the names of companies, a majority of them are the last names of the founder or his/her family. Stop building their legacy and start building yours. There is no greater motivation than doing something for yourself and your family.

It Will Not Be Easy

For any business, the first few years will be difficult. You will need to put in the work. However, the payoff can be huge. Once you have a product or service that others want, hire the right staff, have the correct systems and processes in place, you will have all the free time that you need. Essentially, you will have allowed your business to run itself.

Again, let us not forget that most small businesses fail. However, the lessons learned in starting a business, leads to the starting of another business and another. Of course, diversify and do not put all your eggs in one basket. As best as you can, identify the risks of starting your own business and take steps to mitigate these risks.

Roses
Hard work does pay off. Smell the roses

Conclusion

There are many reasons to work a 9 to 5, however, there are many drawbacks. As such, for your sanity, it may be best to start a business. With technology today, starting a business is easy. On the other hand, growing a sustainable business is difficult. It is important not to over look the fact that most businesses fail, however, the rewards of starting a business may negate the risk of failure. The fact of the matter is, no one will pay you the way that you would pay yourself.  Also, no one will work as hard for a company as you will for your own company. So take a chance and if it makes sense, start a business.

Start a business and take control of your life. Starting a business may be the best thing that you will ever do.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Retirement plan

Do not Become Someone Else’s Retirement Plan

Money Maroon

No matter how hard you work or how much money you earn, you are only a few bad choices from finding yourself in the poor house. Sometimes, the decisions that we make are in view of perceived obligations. For example, many financial decisions are made in view of obligations to family and friends. On your path to financial independence and early retirement, do not become someone’s retirement plan.

Focus On Your Retirement Plan

As the statement goes, put on our oxygen masks first before the person next to  you, including family. This also applies to your plans for retirement. You may be able to make head way in saving toward your retirement by living below your means, saving, and investing. However, it is also easy for a family member or two to constantly ask, manipulate or steal what you have saved. The stories are easily available if you perform a simply search, and should serve as a warning.

What Is Yours Is Theirs

There are so many stories of an individual or a nuclear family making progress by living below their means, saving and investing over time. As this family rises and increases their wealth, it is only natural for families and friends to notice, and notice they will. We can try all we want to hide success, but others will notice how you live your life. While you may try to be the millionaire next door, your close family knows better. While you may drive the standard car and live in a standard house, your family will be well aware of your job and will likely have researched your salary. It is only a matter of time before assumptions are made with regard to your wealth. With assumptions, it is common for others to begin to think that what is yours is also theirs.

As knowledge of your life is shared by family and close friends, you will be seen in a different light. When financial hiccups occurs, you become their bank. If they are having issues with housing, they will show up at your door. If you do not take steps to stop the initial requests or actions, you will pay for it later.

Of course, the proximity to family and friends will matter. The closer you are to those with a specific personality type, the faster the devolution into others thinking that what is yours is theirs. The further away you are, the less interaction and the less issues you may have.

Blocking retirement plan
Do not allow others to block your financial flow

Reason Does Not Matter

It really does not matter if you and others all had the same opportunities. It does not really matter if you choose to live below your means while others live it up. You may sacrifice all you want to maintain your life and that of your family, but it is simply human nature for those around you to think and believe that what is yours is also theirs. Especially when others believe that you have more than you need or that you do not deserve what you have.

What To Do

The fact is, you must learn to say no. You cannot become someone else’s retirement plan. You must stand up for yourself and your family. Others may claim that you are mean, but you must put your oxygen mask on before others. You cannot find yourself bank rolling other peoples lives, especially if these individuals do not understand how hard you have worked for what you have. 

It is all around us. Others have nice cars, vacations and homes that dwarfs the size and costs of yours. However, these are the first to reach out for aid and have a deep seated belief that what is yours is theirs. When times are hard, why do you have so much and they have so little, even though when times were good they had more than you and in effect wasted it.

We are not saying that you should be selfish and not help others. Help others and give. Success is not achieved alone and in isolation. What we are saying is, know what you are doing. Know the consequences of your actions. Know what saying yes today will mean for tomorrow. Do not become another person’s retirement plan. Know when to say no.

Conclusion

No matter how hard you work or how much money you earn, you are only a few bad choices from finding yourself in the poor house. Sometimes, the decisions that we make are in view of perceived obligations. For example, many financial decisions are made in view of obligations to family and friends. On your path to financial independence and early retirement, do not become someone’s retirement plan.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Be a rich dad

Rich Dad Poor Dad In Your Life

Money Maroon

Rich dad poor dad is a personal finance book by Robert Kiyosaki, where the rich dad accumulated wealth due to entrepreneurship and savvy investing, while the poor dad went to school and worked hard all his life but never obtained financial security. In our own lives, particular with family and friends, we can also see rich dads and poor dads. We can also predict how decisions that are made will play out in the future. The fact is, the financial mistakes of the past tends to repeat themselves. Be a rich dad.

Poor Dad

Poor dad could be potentially your brother, sister, a friend, or you. He is that person who did everything correct it may seem. He went to school, got a job, got married, have kids, have a car, and have the coveted house. Poor dad has the picture of the American dream. A dream that poor dad will spend the rest of his life working to pay off. For poor dad, everything on the surface looks good. For poor dad, so long as the economy keeps on going well and he is not fired from his job, all is well. Poor dad makes just enough money to pay the required bills to stay afloat.

The problem for poor dad is that life does not always continue the way that you wish. Every so often there is a recession. Every so often employees are let go in view of downsizing. The problem for poor dad is that when things hits the fan, poor dad will fall behind. If all goes according to plan, at best, poor dad can continue  living as is and work until his 60s or 70s and hope he has enough for retirement. At its worst, If there are any change in the economy or poor dad’s employment status, poor dad will fall behind and become financially ruined.

rich dad poor dad

In the world of rich dad poor dad, I rather not be poor dad.

Rich Dad

Rich dad could be your brother, sister, a friend, or you. He is that person who did not necessity do everything correctly in view of the norm. However, Rich dad is an entrepreneur. Rich dad may not have done well in school, but has excelled outside of school. Rich dad has started and have failed at a number of business ventures. He may be operating a profitable business or one that is losing money currently. But one thing is for sure, Rich dad is taking a risk and operating a business.  Rich dad is his own boss. Rich dad may not have the picture of the American dream, but has the potential to achieve it in terms of striking it rich as an entrepreneur. For rich dad, the dream of owning a successful business is just out of reach. For rich dad, the stress and uncertainty is worth the freedom and control that could be attained.

While life is not a bed of roses for rich dad, at worst his current business fails and he is ruined, but he went for it. The fact is, even if rich dad fails, it is likely that rich dad will start another business, because this is who rich dad is. Rich dad understands that being an entrepreneur comes with risks. However, the risk of being your own boss and controlling your future instead of handing it over to another is worth it.

At best, rich dad becomes widely successful and financially independent.

The In-between

For rich dad poor dad, you need not be 100% of either. You can take characteristics of both to ensure a stable and successful life. How about going to school, excel and being conservative yet entrepreneurial in your approach to money such that you can have a stable financial life. How about increasing your upside to avoid market fluctuations and the feelings of your boss by also starting your own business. Not every business will be successful, but when thinking about your family, would you rather be subjected to the whims of a boss or control your own destiny?

Note that both rich dad and poor dad are smart. Rich dad takes smart risks in business, poor dad is book smart but is conservative with regard to business. Rich dad and poor dad have different mindsets. Notice also the differences between the upsides and downsides of rich dad versus poor dad. Who would you rather be?

What many have notice over time is that you can do both. It is great to have the security of a somewhat stable biweekly paycheck working as an employee, but you can also start a business on the side. Yes, a side hustle that may one day become your main hustle.

Conclusion

Rich dad poor dad is a personal finance book by Robert Kiyosaki, where the rich dad accumulated wealth due to entrepreneurship and savvy investing, while the poor dad went to school and worked hard all his life but never obtained financial security. In our own lives, particular with family and friends, we can also see rich dad and poor dad. We can also predict how decisions that are made will play out in the future. The fact is, the financial mistakes of the past tends to repeat themselves. Be a rich dad.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Just say no

Now, Just Say No

Money Maroon

When was the last time that you suck it up and just say no to your children? As we move toward the next year, again we enter the season of spending. One of the major driving force behind the excessive spending during this time of the year is the effort to please our children. However, spending money that you do not have not only hurts you, it also hurts your children. By saying no and living within your needs, you will be teaching your children delayed gratification, self control and impact their future for the better.

Saying One Thing And Doing Another

It is always amazing how the same folks who announce that they do not have the funds typically have the latest and greatest. It is amazing how the co-worker who is struggling financially has the required funds to take a vacation. It is also interesting how not only do they have the latest toys and gadgets, but so do their children. Where are they getting it from? 

Let us not speculate. However, it does offer an interesting view into other people’s habits. This is not new, the act of saying one thing, yet doing another. With this in mind, why are we surprise when our children act in a similar manner?

Just Say No To Your Children

It is always difficult to tell our children no. It is difficult for us to punish them. However, at a certain point we must perform our roles as parents for their growth and development. Just as you work with your children with their school work, teaching them how to play a sport or how to be a contributing part of society, so must we say no when it is required.  Financial literacy should be apart of their development.

In the holiday season, just say no. Whenever you are asked to spend what you do not have, just say no. We understand that this is easy to say but difficult to do. This is especially the case when your children have friends who are receiving the new and latest toys. In some cases we satisfy our children’s wants to prevent a tantrum or a melt down. For many parents, it is also a matter of ensuring that their children fit in socially. However, if we are teaching our children to have what others have no matter the cost, financially and otherwise, are we really doing them a service?

If our children’s friends have the newest and most expensive phones or other electronic devices, should your children also have those items? If you cannot afford it, you must have a conversation with your children. It may be the most opportune time to discuss money and how money works.

saying no
saying no

Think Long Term

If we are purchasing material items that we cannot afford, we are not only putting our financial future in jeopardy. Our acts are also putting our children’s financial future in jeopardy as well. We are essentially teaching our children that they can purchase things that they cannot afford.  Do not be surprise by our children’s decision to put things on credit and overspend in the future. Note that our children are watching. Our children model their behaviors after what they see and hear. Believe it our not, we can have a huge influence on their future spending habits. Consider the current state of finance today, it is no wonder we have so many finically illiterate folks. 

Let us make our children’s financial literacy apart of what we are teaching. Let us act as parents. Like with school and so many other tasks, we are the parent and not your children’s friend. Let us aim to try and find a way to teach them such that they can in the future be better than we are. Let us give them the tools to make better decisions.

Conclusion

When was the last time that you suck it up and just say no to your children? As we move toward another year, again we enter the season of spending. One of the major driving force behind the excessive spending during this time of the year is the effort to please our children. However, spending money that you do not have not only hurts you, it also hurts your children. By saying no and living within your needs, you will be teaching your children delayed gratification, self control and impact their future for the better.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Empty piggy bank

If You Are Feeling Broke, It’s Ok

Money Maroon

If you are feeling broke, know that it is ok. The feeling of not doing enough or that you are behind as compared to others is a normal. As human beings, we are hard wired to compare ourselves to others. It is natural. It is also natural to feel like you are not where others are when you look at their material possessions. But keep in mind, you are typically only seeing what others are willing to show you. You are not seeing what is going on behind the scenes. Many engage in fake it till you make it and  project a wealthy facade, but are in tough financial straits. Focus on you and do not concern yourself with what others are doing.

Empty wallet
It’s ok to feel broke…. but are you?

The Story

You have likely heard a similar story, but here we go. Around the corner is a neighbor who has one of the most beautiful homes, with an up-kept yard and with hedges always cut. This neighbor has two kids, a dog and two luxury cars which are replaced every few years. The neighbors are very social in the neighborhood, for gatherings, they are the life of the party. These folks take vacations each year to exotic locations, essentially these neighbors are the envy of the neighborhood. They are the picture of the American dream. They exude confidence, money, success and privilege.

Eventually, you may begin to notice some cracks in the happiness of your neighbor and this goes one of two ways. (1) They may stop attending certain events and may downsize the cars and eventually note that they are moving because of work. (2) If they chose to keep up appearances, eventually you or another neighbor may begin to get inquiries about who lives at their home. Typically, these are the early signs of someone hunting for your neighbors assets. It may be their cars or a boat in the back yard. Eventually, one or both cars will be towed away and repossessed. Sooner or later, a sign will be placed on the home that it is in foreclosure. 

It is amazing how often this story plays out.  Keep this story in mind when you begin to think or feel broke or inadequate as compared to others.

You May Not Be As Broke As You Think

The events above is typically shocking to all and will be the subject of much gossip. Some may enjoy seeing this fall from grace but many will be left reflecting on their previously perceived short comings. The fact is simple, you only see what others want you to see. If your neighbor has luxury cars you have no idea if they are leased or owned. You have no idea if they had previously won the lottery, you also have no idea if they have inherently wealth or are up to their eye balls in debt. The moral of the story, do not compare yourself to others.

Live your own life and stay in your lane. Be happy for those who are doing well or appear that they are doing well. Know what you are doing and focus on your financial goals and not what others are doing. It is ok to feel broke, it is normal to compare yourself to others. But do not act in a manner to compete with others. Live your life. Stay in your lane.

Do You

If you are pursing early retirement, do so. While it is difficult not to compare yourself to others, keep focus on your goals. If your aim is to save 50% or more of your income, understand that you may then not have the nicest cars, fashion or take the same vacations as someone who do not save as much as you do. Just remember that we are all on different paths. You may feel broke or inadequate, but your bank account may say otherwise.

Whenever you feel financially inadequate, take a look at your assets. Look at your bank account and know that you are one day closer to your financial goals.

Conclusion

If you are feeling broke, know that it is ok. The feeling of not doing enough or that you are behind as compared to others is a normal. As human beings, we are hard wired to compare ourselves to others. It is natural. It is also natural to feel like you are not where others are when you look at their material possessions. But keep in mind, you are typically only seeing what others are willing to show you. You are not seeing what is going on behind the scenes. Many engage in fake it till you make it and  project a wealthy facade, but are in tough financial straits. Focus on you and do not concern yourself with what others are doing.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Wealth takes time

Wealth, It Just Takes Time

Money Maroon

We all would like to be rich and wealthy today, now, at this second, but this is not typically how it works. There is a reason why the average retirement age is in the 60s. Building wealth is one of those things, it just takes time. Building wealth does not typically occur overnight. It takes small steps over time, typically a long period of time. I will be blunt here, it typically takes decades.

It Just Takes Time – No Short Cuts

Wealth takes time. This is the truth. There is really no get rich quick schemes. Some get lucky by taking elevated risks, and the rest build wealth over time. Of course, the more risk, the higher the rewards. But with more risks come bankruptcy and depending on the activity, jail. It is a fact, and you may not want to hear this but generally, it just takes time to build wealth. Short cuts may only get you short term gratification, but not a sustainable award that will last in the long run. This has been shown over and over again.

Wealth Calculator

The time it will take to build sustainable wealth can be generalize using a wealth calculator. Select your favorite wealth calculator and see for yourself. Even with a 10  to 15 percent year over year increase in the stock market, which is highly unlikely for a long period of time, if you are starting with nothing and contribute a small portion monthly, it will take you multiple decades to achieve 1 million dollars. This is the simple reality. It is hard to hear, but it is the truth.

We Fail Because It Just Takes Time

The length of time that it takes to build wealth is the reason we all do not achieve our dream. This is the reason so few of us actually achieve the goal of financial independence and true wealth. It just takes time. Many of us are simply not patient enough to diligently save, invest, and live below our means consistently for an extended period of time. If we were able to do this, the rewards at the finish line are truly worth it. Your financial freedom is worth it.

Mortgage As An Example

Another example of our financial reality is a mortgage. Most typical mortgages are 15 or 30 year mortgages. Why is this? The reason is a simple one. To accumulate and pay off the large sums that is typically a mortgage, for example for a home mortgage, takes time. Unless you are coming in with money, it is highly unlikely that you will pay off your mortgage in 5 years. Think about it, in today’s world, it will typically take the average American  5-7 years to pay off a car loan, which costs significantly less than a home.

Do Not Keep Up With The Jones

It is normal to look at what others are doing. It is also ok to wonder if you are being too conservative with your finances, especially when others are purchasing bigger homes or nicer cars. But you do not know how leveraged or over leveraged these individuals are. Further, your situation is different from others. It is important to stay in your lane and maximize your situation. Work on you. 

Know that there are no short cuts. To achieve financial independence, it just takes time. Save, invest, and live below your means.

Amazon prime day
Think before you spend

Conclusion

We all would like to be rich and wealthy today, now, at this second, but this is not typically how it works. There is a reason why the average retirement age is in the 60s. Building wealth is one of those things, it just takes time. Building wealth does not typically occur overnight. It takes small steps over time, typically a long period of time. I will be blunt here, it typically takes decades.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Buy The Dip

Buy The Dip And Hold

Money Maroon

Here, we are not giving financial advice, but this blog provides a great platform to share ideas and discuss experiences. One of the many back and forth that are debated is whether or not to invoke the buy the dip strategy versus the typical dollar cost averaging. But there is an in-between that we should not overlook. If you have a dollar cost averaging strategy, consider integrating a buy the dip and hold strategy.

Dollar Cost Averaging

To quickly summarize, dollar cost averaging is an investment strategy where the investor invests the same amount  across a set period of time. For example, investing the same amount each month regardless of whether or not the price of the stock increases or decreases. This can reduce the impact of volatility on the overall purchase. 

With dollar cost averaging, you are not buying an asset when it is on one end of the spectrum, high or low. Here, the attempt is to control volatility as it averages out over the period of your purchase. Dollar cost averaging works very well, as the market is expected to go up over the long run. Further, dollar cost averaging echos the mantra of “it is not timing the market, it is time in the market.” But what about buying the dip?

Buy The Dip

Unlike dollar cost averaging, buy the dip is the purchasing of an asset only after it has dropped in price.  Here, the general belief is that the new low price is a bargain. Therefore, profits will be gained as the asset price increases over time. This strategy is the classic buy low and sell high. 

If you are employing buy the dip, your threshold for the dip is important. If your threshold is a 5% drop in prices, you may potentially miss a 4% drop in price followed by a 10% increase.  A second issue with buy the dip is that you are essentially trying to time the market. Not many are successful at this. In fact, overtime, you are proven to fail. It is really difficult to know when a market has hit the bottom of its fall.

While there are drawbacks with buy the dip, if you do your research and are lucky, buy the dip can be very lucrative. This is especially true in a bull market or a fast recovery following a significant drop in the market. In view of the pandemic drop in 2020 and the recent bull run, no wonder this strategy is so popular.

Buy The Dip And Hold

There is another option besides dollar cost averaging and buying the dip. You may buy the dip and hold. If you have a dollar cost averaging strategy, it may be wise to integrate a mini buy the dip strategy. Meaning, if you invest $500 each month on the 1st of the month, consider having a date range from the 1st to the 5th to invest. In that 5 day period, invest when the market is down. If this strategy is repeated over time, the incremental gains that you may obtain could add up to be of substantial benefit. A half of a percent gain here, a third of a percent gain there for twenty to thirty years. This could be the difference between living on a budget and financial independence.

Money on trees
Money over time

Conclusion

Here, we are not giving financial advice, but this blog provides a great platform to share ideas and discuss experiences. One of the many back and forth that are debated is whether or not to invoke the buy the dip strategy versus the typical dollar cost averaging. But there is an in-between that we should not overlook. If you have a dollar cost averaging strategy, consider integrating a buy the dip and hold strategy.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Net worth

Do You Know Your Net Worth?

Money Maroon

We are often hung up on how much someone is making, the car that they are driving and the house that they are living in. Rarely do we consider their net worth, or ours for that matter. This may be because net worth is much harder to determine from just looking at someone. The fact is, the most flashy among us typically have the least wealth. If you know and focus on your net worth instead of material things, you will make decisions to ensure that your net worth gradually increases over time. Knowledge is power!

Know your net worth
Know your net worth!

Do You Know Your Net Worth?

On a basic level, your net worth is equal to your assets minus your liabilities. Unsurprisingly, the younger you are, the more likely that your net worth will be zero or below. But this does not mean that you should keep the full picture of your financial situation in the background. Knowledge is power!

If I asked what is your salary, it is likely that you would be able to provide the answer. If I asked you for an estimate of your credit card debt, mortgage balance or student loans, I am certain that you can provide an estimate. What happens if I asked about your net worth? Could you provide an estimate? I figure the answer is likely no.

It is important to know your net worth because with this information, you can knowledgeably plot your financial path forward. If you do not know what your current financial situation is, how can you plan your financial future? How can you determine how and where to allocate funds? The fact is, you cannot plan your financial future without knowing your net worth. 

What Happens When You Do Not Know Your Net Worth?

Have you ever heard the following scenario: A family having the largest home on the block, having two or more luxury cars and who goes on vacations yearly, goes broke in view of the smallest of financial hiccups. How does this happen?

It is always a shock to see someone with the largest home on the block, who has the best suits, the luxury cars and the yearly vacations go broke when they lose their job. This is surprising but it should not be. You see, the people who are watching and growing their net worth are not spending big on cars, homes and vacations. It is really not the case. If you are spending so much on these things, it is much harder to grow your wealth. You are more likely to grow your debt. With increase debt, your chances of living pay check to pay check increases, no matter how much money you are making.  This is where the house of cards related to a fake wealthy facade will begin to crumble. 

Eventually, the debt will overcome your take home pay. If you are unlucky enough to lose your employment, the house of cards will fall at an accelerated pace until you go into foreclosure, lose your cars. At some point, the facade of being fake wealthy will disappear.

Focus On The Big Picture

The problem with not knowing your net worth is that you are likely not making informed financial decisions. You are making financial decisions based on an incomplete view of your finances. For example, the problem we all typically run into is our focus on salary. We all aim to maximize our salary but may not be paying attention to the costs that potentially goes with it. Think about it this way, if your salary is $100,000 with no retirement contributions from your employer vs a salary of $95,000 with $10,000 automatic contributions to your retirement by your employer. Which do you choose? Are you seeing the bigger picture?

Further, in some instances, it may be beneficial to pay off debt based on the interest that is accruing rather than investing/saving. But without a complete picture of your finances, are you making the right decisions? Knowing your net worth provides a constant check and awareness of where you are financially. Knowledge is power!

Conclusion

We are often hung up on how much someone is making, the car that they are driving and the house that they are living in. Rarely do we consider their net worth, or ours for that matter. The fact is, the most flashy among us typically have the least net worth. If you know and focus on your wealth instead of material things, you will make decisions to ensure that your wealth gradually increases over time. Knowledge is power!

See your complete financial situation and make decisions that will provide financial security.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Back to school

Back To School And On The Money

Money Maroon

It is that amazing time of the year again. Each year, we all enter this phase of transition from summer to fall. As the leaves change, so does our routine. Here comes the back to school rush. Throughout the country, the months of August and September play a seminal role in getting the school year started. With this transition comes the expenses of new school gear and traditional school supplies. Do not forget about the disruption to your typical schedule and the added traffic of school buses and frantic parents trying to get their children to school. Yes, back to school here we come. But do not allow the new school year to affect your financial goals.

Back to school
Keep your eyes on your financial goals

The Relief And Stress Of Back To School

For parents, it is that time of the year where life becomes less stressful in some respects, and more stressful in others. In one aspect, the kids are out of the house (covid permitting) and you know where they are. They are being housed in a school for at least about 7hrs. The kids are also being kept on the education treadmill of learning and developing new social skills. 

On the stressful side of back to school are the expenses of extracurricular activities and the friends that that your child will make and who will have influence over time on their lives while you are not there. For their friends, you as a parent has to establish your home, what is expected of your children and that should guide them. On the expense side, it is also your choice.

The expense associated with your child’s activities is a choice that you are making. You are the parent, it is not your child’s choice, it is yours. If you sign your child up for an expensive sport, do not complain, it is your choice. If you have to leave work early to attend an event, again, it is your choice. When you are making a decision to live within your means, save, invest and grow financially, your kids are apart of your house and how you allocate funds on their behave will significantly influence if you will achieve your financial goals.

Just Starting Out

From kindergarten to 12th grade, you as the parent are generally financially responsible. After that point, the guide rails are gradually taken off. For those with kids going into kindergarten, on a financial level it may be your first introduction to the early school supplies which at this point may include clothes, shoes, and electronics. But for many on the financial front, this is a blessing. Gone are the days of paying for private pre K which can cost more than $20,000 per year. Now you may have public schools to contend with that are free if you are not continuing with private education.

This is not the time to find a place to spend the funds that you had previously used for pre-k. Now is the time to find new investment opportunities, save and build wealth. This can be in the form of investing in the stock market, saving to fully fund your emergency fund or continuing to use the money for your child by having a 529 plan or something similar. Now is the time to save, because if your child pursue higher education, you will pay one way or the other.

If you are continuing with private education, then you will be spending more as you move from pre K to kindergarten. It is not uncommon for such cost to come close to or above $30,000 per year. If you have made the decision to enter private school, it is a choice that while expensive it is one that can be beneficial to your child based on where you are located. However, be mindful of the expense as it accumulates over years.

Returning To School

If you have a child who is returning to school, they will likely be thrilled. Thrilled because they are heading back to school after spending the summer with you. Now they get to jump back into the routine and to see their friends. By going back to school, they are essentially returning back to their lives. For children in this category, back to school is something that they have been looking forward to all summer.

But even for you, it is important to keep an eye on the expenses. Again, if your child is returning to private school, ensure that the expense fits within your plan. If your child is returning to public school, be mindful of the environment and opportunities that they are returning to. Whether public or private, pay particular attention to the extracurricular activities that your child will be involved with and the related cost. You want a developed adult at the end of the journey, but not a situation that will put you in financial difficulties for the future.

What ever the situation that you find yourself in this year, do not allow this transition back to school to take you off your financial path. If financial independence is your goal, maintain this goal and live below your means, save, invest and repeat.

Conclusion

It is that amazing time of the year again. Each year, we all enter this phase of transition from summer to fall. As the leaves change, so does our routine. Here comes the back to school rush. Throughout the country, the months of August and September play a seminal role in getting the school year started. With this transition comes the expenses of new school gear and traditional school supplies. Do not forget about the disruption to your typical schedule and the added traffic of school buses and frantic parents trying to get their children to school. Yes, back to school here we come. But do not allow the new school year to affect your financial goals.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com