Financial Independence

Paying Off Student Loans Is The Key To Freedom

Paying Off Student Loans Is The Key To Freedom

Money Maroon

Let’s face it, in the current education climate, student loans are here to stay. While there are some talks of reforming higher education in the United states, it is unlikely that post-secondary education will be cheaper over time, or free. While there may be some loan forgiveness in the future, a complete forgiveness of all student loans is unlikely. If you have student loans, know that there is a light at the end of the repayment tunnel. Paying off student loans can be the key to freedom.

Student Loans Are Here To Stay

In today’s world, no matter your level of education above high school, whether an associates degree, bachelor degree or a professional degree, it is highly likely that you will graduate with student loans. It has become a fact of life. This is why it is so important to think about paying off student loans. Do not fall into the trap of thinking about your student loans only following graduation. It is important to be well aware of the costs and benefits of taking out student loans before you borrow a dime.

Be Strategic

If you are strategic with your education experience, your student loans can represent the ultimate investment in yourself. It may potentially be a way to a higher paying job and life long experiences. However, student loans can be a life changing burden and a huge economic cost. Student loans can be a detriment or an accelerant to a great financial future.

Once you have accumulated your loans and have graduated, one of your biggest expenses going forward will be the monthly cost to repay your student loans. For some, this will rival mortgage costs or a car payment and can be financially crippling. In many cases, your student loans will be the barrier to freedom. Freedom to choose where you want to work and the type of work you will be doing.

Paying Off Student Loans 

With regard to your job after graduation, having a mountain of student loans can limit your decisions and opportunities significantly. Do you take a job that will help in paying off student loans at a very fast rate, take a job that pays less but is what you want to do, and if you are lucky, you will be able to do both (the perfect job). For most, the perfect job that is high paying and also focused on what you want to do is a rarity when you leave school. So the decision is frequently, (a) do you take the high paying job that may not be in your specific area of interest, or (b) earn less but enjoy your job.

Paying Off Student Loans  – Short Term Pain For Long Term Gain

While I do believe that life is short and you should enjoy your time on this planet, I would not advocate for taking the lower paying job, if it pays significantly less. Taking a high paying job that speeds up your time to freedom could be beneficial. Financial Independence takes time, the earlier you start the faster you will get there. Taking the job that accelerates paying off student loans should be considered in view of the future implications.

Do the math, if you did not have a student loan payment, how much money would you need per year to be able to live comfortably? I am not talking about living in a lap of luxury, I am talking about having a home for your family and being able to take care of your necessities and  reasonable wants. I can almost guarantee that the amount is significantly less than what you may have thought.

Conquer the ball and chain of student loan that is holding you back

By obtaining employment that allows you to pay off your student loans at a faster rate, you are able to decrease your time under the thumb of a student loan payment. Whatever method or tricks you use to pay off student loans, your future will be the winner. By paying off student loans, you are able to achieve freedom, not  total financial freedom, but the freedom to move from a high stress job to one that you like and find fulfilling. The freedom to get your time back. The freedom to move locations, because a high paying job is not needed for you to survive.

Be Proactive

Instead of waiting on what the government may do with regard to student loans, be proactive and make progress in removing the ball and chain that is student loans and conquer life’s challenges. In any case, if you are aggressively paying off your student loans, if a certain amount is eventually forgiven by the government, that forgiveness will only accelerate your time to freedom from student loan debt.

Conclusion

Let’s face it, in the current education climate, student loans are here to stay. While there are some talks of reforming higher education in the United states, it is unlikely that post-secondary education will be cheaper over time, or free. While there may be some loan forgiveness in the future, a complete forgiveness of all student loans is unlikely. If you have student loans, know that there is a light at the end of the repayment tunnel. Paying off student loans can be the key to freedom.

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Start investing

How To Start Investing Now

Money Maroon

On the journey to financial independence, you will need to save and invest. Once you have saved for your emergency fund, the question is, how to start investing? You start by first investing in yourself. Whether this is by investing in your education to obtain a better job/career option, or doing your due diligence to make appropriate decisions. Investing in yourself is the key to success.

Investing in your future is an extension of investing in yourself. Once you begin to look to the financial markets, when asking how to start investing, look to learning more about the opportunities that are available to you. Educate yourself.

How To Start Investing For Retirement

No matter your age, you should begin thinking about your retirement and related investment options. In thinking about your retirement, you will no doubt hear about traditional IRAs, roth IRAs, SEP, roth 401Ks, 401Ks, 403Bs, 457Bs and TSPs to name a few. Do not simply get lost in the alphabet soup of different retirement plans. Do your due diligence. An investment in your retirement plan education is invaluable to your financial future.

Your retirement plan will depend on (1) whether or not you are an employee vs self-employed and (2) whether or not the retirement plans are employer sponsored or self controlled. It is incumbent upon you to fully understand the plans  that are available to you, their contribution limits, mandatory withdraw, age of withdrawal, tax position and penalties associated with early withdraws. It is also incumbent upon you to take advantage of any matching benefits provided to you. For example, a 401K match. 

The 401K match provides free money from your employer and is a sure-fire way to achieve financial independence early. Employer 401K match can come in a variety of shapes and sizes. In one instance, the employer will match a portion of your contribution up to a limit. Typically, this limit is represented as a percentage of your salary. Further, an employer may match your contribution if you contribute or irrespective of if you contribute. If your employer provides a 401K match only if you contribute to your 401K, ensure that you are contributing at least up to that threshold. An employer 401K match is free money. Take advantage.

How To Start Investing – Brokerage Account

After establishing your retirement accounts, it is time to begin thinking about other investment options. For example, brokerage accounts. Brokerage accounts are investment accounts that allow you to buy and sell investments such as stocks, bonds, mutual funds, and Exchange-traded funds (ETFs).

There are a number of different brokerage firms where you can set up a brokerage account. These brokerage firms are well known and include Fidelity, Merrill, E-Trade, TD Ameritrade, Robinhood and Vanguard to name a few. Essentially, the brokerage firm is an intermediary that holds your brokerage account and act as an intermediary between you and the investments that you buy and sell.

Once you set up a brokerage account, which is usually free, you will be able to deposit money into that account that you can use to buy investments. Once you begin investing, you can buy and sell investments through your brokerage account. Do your due diligence prior to trading on the different platforms and understand the risk associated. Knowledge is power.

Investing In Education

Once you have done your research and have established your own investment plan, begin thinking about your legacy, your children and their future. Think about a 529 plan. By contributing to a 529 plan, you are able to offset some or all costs associated with a college education. In many States, two 529 plans are available, an investment plan or a prepaid plan.

  • The investment plan allows you to contribute by buying and selling shares offered by the State or the State’s agent (similar to investing in the stock market).
  • The prepaid plan is based on the cost of attending a college. Here, you are prepaying the cost of attendance.

While 529 plans are not deductible on your federal tax filings, many States allow you to deduct a set portion of your 529 contribution from your State tax filings.

How To Start Investing – Caution

Once you have educated yourself and have made the decision to invest for yourself, with a financial planner or with an advisor, you will begin using different investment accounts to your advantage. Pay special attention to the fees and the taxes associated with each account.

One of the biggest item that you should pay attention to is the fees associated with your retirement accounts and the investment options. Whether that is the fees charged by an investment fund, your advisor or related financial professional. 

It is important to remember that over time, fees can cripple your financial growth. While paying 1% of your total investment per year may not seem like a lot when you begin investing, Think long term. Project the number of years until retirement and also the amount of funds that you will have in that account. Paying 1% in fees each year can be a significant detriment to your financial growth, imagine if you are paying more. As always, do your due diligence and think long term in your financial decisions.

Conclusion

On the journey to financial independence, you will need to save and invest. Once you have saved for your emergency fund, the question is, how to start investing? You start by first investing in yourself. Whether this is by investing in your education to obtain a better job/career option, or it is doing your due diligence to make appropriate decisions. Investing in yourself is the key to success. Continue investing by educating yourself about the financial markets, plan and execute your plans.

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Video Summary

Rags to riches

Write Your Rags to Riches Story Now!

Money Maroon

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream of winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. 

The Money Game

No matter how much or how little money you may have today, to build sustained wealth, you must spend less than you earn. This is the only way that you will save. Saving is important because it allows you to build up an emergency fund, it allows you to become prepared for the unpredictable. An emergency fund makes financial emergencies routine life events.

Further, by saving, you are able to have money/funds/assets available such that you are able to take advantage of financial opportunities. 

For example, if the stock market falls, do you have enough money in reservers to ride out the downturn? Are you able to buy stocks at the bottom of the market? In such a situation (financial down turn), many do not have enough in reserves to ride out a market downturn and therefore sell at the bottom of the market and realize financial losses.

If home prices fall, are you able to take advantage by purchasing real estate? When interest rates are low, are you well positioned to borrow at the lower interest rates?

Saving, and having money/funds/assets to take advantage of financial opportunities is necessary to write your own rags to riches story.

Invest In Yourself And Journey From Rags To Riches

With your savings, not only are you prepared to take advantage of financial opportunities, you are also able to invest. You may invest in any vehicle that brings value, for example real estate, the stock market, and yourself. Saving alone will not allow you to complete your rags to riches story, you will need to invest such that your money/assets make money on their own. You will need to invest such that your money works for you instead of you working for money.

On a basic level, any investment that you make after doing your due diligence is an investment in yourself. However, making an active and purposeful decision to invest in your education is a must. Your investment may be in education to increase your knowledge in your field of study/profession or in financial literacy. 

As your money/assets grow, so must your financial knowledge.  If not, you risk regressing and losing what you have worked for. Do not forget, there are equally many riches to rags stories as there are rags to riches stories. You must purposefully manage your money/assets and understand how money works to maintain and grow your wealth. Your financial literacy is important.

The Element Of Luck In Your Rags To Riches Story

Luck is essential but hardly recognized
Luck is essential, but hardly recognized

Luck is essential, but one of the least recognized component of a rags to riches story. Let’s face it, many hate to admit that luck played a role in getting from rags to riches. Most want to attribute all their riches to their own hard work and dedication. This is false. Many toil their entire lives and remain in poverty. While hard work plays a role, luck and the people around you also contribute to your success.

Luck is a matter of being in the right place at the right time. Luck is the convergence of resources and opportunity. What you will notice as a constant theme throughout life is that the harder and smarter you work, the luckier you will be. The harder and smarter you work, the more opportunities will be open to you; the luckier you will be; the more you will find that you are in the right place at the most opportune time. 

Luck requires preparation. You must be ready when the opportunity presents itself, otherwise, your luck will turn into a life changing missed opportunity.

Write your own rags to riches story by playing the money game, investing in yourself and being ready to act when an opportunity presents itself.

Conclusion

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream about winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. Journey to financial independence and write your own rags to riches story.

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Video Summary

Write your rags to riches story!
Crushing student loan payment

Student Loan Payment: Attack And Pay Off $200,000

Money Maroon

Once you graduate, you typically have six months before the first student loan payment is due. If you are close to graduation or a recent graduate, it is time to pay attention to what you owe. If you are already into your student loan payment period, it is time to take control. This is a guide to paying off $200,000 in student loans. In this post we assume that you are not participating in the federal loan forgiveness program. We further assume that you want to turbo charge paying off your student loans.

Student Loan Payment: You Do Need A Job

First, secure a job that pays a living wage. Following graduation, you typical have six months before beginning the student loan payment journey. As such, securing a job that pays a reasonable wage will reduce the financial stress associated with student loan payment. Keep in mind that although you have six months to begin student loan payment, you may begin paying back your loans early.

As an example, while in school, you can work and pay down your student loans as you go. This can save a tremendous amount of money as you are able to cut down the interest compounding on your student loans. If you are able to pay down the principal of your student loans while in school, this will further reduce your debt load. For those who are employing or who have employed this tactic, great job. If this ship has already sailed, let’s move on to knowing what you owe.

Student Loan Payment: You Must Know What You Owe

Before graduation, shortly thereafter or now,  begin to review all your student loans. Take a look at how much you owe and the interest rate for each loan. Let me rephrase that, know how much you owe and the interest rate for each loan, write it down. Order your loans from highest interest rate to lowest interest rate. In doing so, you are identifying the loans that will cost the most. The aim here is to attack and pay off the loan having the highest interest rate first, thus reducing the total cost of the loan. The first step is to identify the target loans.

Student Loan Payment: You Must Know Your Minimum Payment

To take control of your student loan debt, you must appreciate your monthly payment. Note what your minimum student loan payment will be for each loan per month for the term of the loan. Next, add together all your minimum payments per month. This is the minimum payment due for your entire student loan debt load per month. Know this number. Ensure that you have structured your life in such a way that you are able to make these monthly payments. It is important to note that the plan is not to pay the minimum student loan payment for the standard 10-year period. However, it is good to know early what these minimum payments are.

Debt Avalanche

Now the plan. Now that you have reviewed all your student loans and you know the total minimum student loan payment per month, it is time to implement the plan. Attack your loan having the highest interest first. Look at your budget, and determine how much additional money you can dedicate to your student loans each month. This amount will be a sum above your minimum payments. The aim is to dedicate this amount (additional money) to your highest interest rate loan while making the minimum payments on your other loans each month. Once your highest interest rate loan is paid off, you can thereafter dedicate the additional money + minimum payment of the highest interest rate loan you just paid off to the loan having the second highest interest rate while maintaining minimum payments for your other loans.

Implementation And Example

As an example, if you have 3 loans, loan 1 having an interest rate of 5%, loan 2 having an interest rate of 4.5% and loan 3 having an interest rate of 4%. Using the above method, you would pay your additional money to loan 1 each month. For loan 1, you would pay loan 1’s minimum monthly payment + the additional amount. For all other loans, you would pay the minimum monthly payment. Once loan 1 is paid off, your additional amount + the minimum monthly payment for loan 1 + minimum payment for loan 2 would be paid to loan 2 while maintaining minimum payments for loan 3.

Using this method, mathematically, you would be paying off your debt more quickly and with less interest.

Additional Tip

Additional  tip,  most loans provide a reduction in interest rate if you sign up for automatic payment. Prior to signing up for automatic payment, ensure that you are able to afford the payment amount. If you are, sign up for automatic payment. This will also reduce your total payment and reduce your payment timeline.

Conclusion

No matter where you are with regard to your student loan payment, it is time to take control. By reviewing what you owe and attacking your student loan having the highest interest rate, you will pay off your student loans more quickly and with the least interest cost. By taking control of your student loan situation, you can turbo charge your student loan repayment and pay off $200,000 in student loans. 

Paying off debt is essential on the journey to financial independence. Start attacking your student loans today.

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Video Summary

Money Beyond

Saving The Next $50,000, You Can Do It Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

The Plan – Saving The Next $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices. 

However, by the time you begin saving the next $50,000, you have already made changes and can now use the momentum that you have build up saving your first $50,000 and further optimize your strategy. Because of the habits formed saving your first $50,000, saving the next $50,000 will be easier to achieve.

Your Emergency Fund

By the time you are on the path to saving the next $50,000, based on your lifestyle, your emergency fund may now be fully funded or very close to being fully funded. This is a huge step and should provide comfort for you and your family. Saving 3 months, 6 months, or one year of expenses in your emergency fund is a huge step and you should feel very proud of yourself for achieving this milestone. Further, you should be motivated by the fact that you can do it. You can do this. The steps taken to financial independence is paying off.

You got this
You Got This!

Once you have achieved a fully funded emergency fund, do not stop saving. Continue the same habits. Do your homework, research and optimize your plan. Achieving financial independence takes time and consistency.

Once you have fund your emergency fund, instead of putting money into an emergency fund, you are now able to contribute that money to another area of your plan. Will you be contributing more to retirement, paying down debt if you still have debt, or invest?

Contributing To Retirement

Once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Now that you are saving the next $50,000, begin to increase your retirement contributions, especially if you have already paid down debt. In the year 2020, your contribution limits for a 401k is $19,500 (catch-up contribution limit for employees aged 50 and over is $6,500). The contribution limits for an IRA is $6,000 ($7,000 if you’re age 50 or older). As such, you are able to put away $25,500 ($33,000 if you are aged 50 or older).

On the path to financial independence, by consistently contributing to tax advantaged retirement accounts, it is possible to join the 401k millionaire club.

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

Remember, the best way to obtain a 16-18% return (the average interest charge on a credit card), is to pay off your credit card debt.

It is advisable to pay down debts having the highest interest rate. This will lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of paying the least balance to highest balance. The method used here is up to you. Which method will motivate you to pay down your debts faster?

Paying down debt in the early stages of your journey to financial independence typically provides the greatest early return. Paying down debt yields exponential benefits as it frees up funds for contributing to retirement and investment accounts such that you are able to take advantage of the power of compounding.

Ride The Wave – Saving The Next $50,000

As you are able to fund your emergency fund, pay off your debts, and contribute to your retirement, you will begin to have more funds available to further your race to financial independence. The funds that went to your emergency fund can be used to pay down debt, contribute to retirement fund, and/or invest.

Do not feel the need to “reward your self.” You do not want to fall into the trap of lifestyle creep/lifestyle inflation. You do not want to raise your standard to living as you earn more/have more disposable income. There are lots of folks who save the same amount when making $100,000 as they did when they were making $50,00. If you follow this path, this will be a detriment to your ultimate goal of financial independence. 

As your income/disposable income increases, the amount you save/invest should be increase as well. Live below your means, and journey to financial independence.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

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The first $50,000

Saving The First $50,000 Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating your first dollar milestone over time. For many, saving the first $50,000 is at the top of the list. Of all the incremental $50,000 gains that  you will achieve, saving the first $50,000 is the most difficult. Saving the first $50,000 is the most difficult because it  includes taking the biggest step on your journey to financial independence — taking the first step.

Begin Now – Saving The First $50,000

If you are like most, once you decide to begin the journey to financial independence, you likely do not yet have an emergency fund or an active retirement account. If you do have such accounts, it is likely that they are underfunded. As such, the path to accumulating your first $50,000 will be the most difficult because it represents the beginning of a new journey. 

Accumulating your first $50,000 will require a change in mindset and the implementation of new and at times, foreign concepts. To take your net worth from zero or negative to $50,000 will take time and effort. Time and effort makes any task difficult.

Below is a basic review of the difficulties that will be faced.

Your Financial Situation

Begin saving the first $50,000 by taking stock of your financial situation. What is your revenue and expenses over a period of time, for example a month? Are you saving? Can you increase revenue and decrease expenses? What is your debt load and how will you reduce it?  

Based on the answer to these questions, devise a plan to journey to financial independence. Devising an appropriate plan that gives you a high likelihood of success will take time. The more time that goes into your planning, the higher the likelihood that you will succeed on your journey. 

After designing your plan, you will need to implement the plan over the long term to achieve your goals.

The Plan – Saving The First $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices.

Think of a diet and how difficult it is to stick to such a plan over time. At times, it may take multiple attempts before breaking through and having success. To achieve success, you must start.

Your Emergency Fund

Now that you have a plan, how will you begin to bulk up your emergency fund. To obtain additional funds to support your journey to financial independence, will you be increasing your revenue, reducing your expenses or both? 

Saving more is always more difficult than it sounds. This task is never straight forward. When contributing to your emergency fund, you will also need to consider your retirement fund and also paying down debt. 

First, how will you increase income (Revenue minus expenses)? Will you increase revenues, decrease expenses or both? Will you first build your emergency fund or will you do all three (fund your emergency fund, pay down debt and contribute to retirement) together? This decision is situationally dependent, but very important to consider. For example, if you are receiving a 401k match from your employer, there is no reason to loose this free money. As such, you should contribute to your retirement account at least to the amount matched. Further, to ensure that your credit is not destroyed, it is best to keep your debts current by paying at least the minimum.

With regard to your emergency fund, how many months of expenses will you keep in your emergency fund. Will you contribute 3 months, 6 months or a year or more? This is dependent on your situation. Do you have a family or are you single? For your emergency fund, it is important to place your money where it is easily accessible, however, you must also consider where you will be able to obtain a reasonable interest rate. In effect, stay away from brick and mortar banks if possible, as online banks provide high yield saving accounts that will provide, while low, a significantly higher interest rate as compared to brick and mortar banks.

Contributing To Retirement

As noted above, once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

It is advisable to pay down debts having the highest interest rate. This will infact lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of, least balance to highest balance. 

Essentially, by beginning this journey, you are increasing your net worth by incrementally reducing your debts while increasing your assets.

As you can see, because you are not only accumulating funds, but you are also paying off debt, accumulating your first $50,000 will take some time. Even if we simplify and include all savings and investments (including retirement) apart of your first $50,000, saving the first $50,000 will take some time and be the most difficult. Nonetheless, by consistency implementing your financial plan over time, you will achieve your goal.

Congratulations – Saving The First $50,000

While the journey will be long, you will achieve your goal of $50,000. But keep in mind that this is only the begining of the journey. Because of the plans, strategy and patterns that you now have in place, of the series of $50,000 that you will save, this will be the most difficult. As you move to save $100,000, you will arrive at that point a lot faster.

Consider that less of your funds will go toward debt payments and debt interest payments, you will potentially have a higher revenue (raises as you become more experience), your investments will grow over time and you will be comfortable and more knowledgeable about money generally. This all adds up to a snow ball effect with regard to your financial growth and accumulation over time.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating your first dollar milestone over time. For many, saving the first $50,000 is at the top of the list. Of all the incremental $50,000 gains that  you will achieve, the first is the most difficult. Saving the first $50,000 is the most difficult because it includes taking the biggest step on your journey to financial independence — taking the first step. Take your first step today.

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Chasing

Chase Solutions Not Money

Money Maroon

Who wants to be poor? I have never heard a single person seriously state that they want to be poor. At some level, we all want to achieve a standard of living where we and our families have our needs covered without financial stress. Another portion of us wants more. Achieving financial stability such that wants and needs are easily achieved is a dream most of us  have. To achieve financial dreams, especially if you are entrepreneurial, chase solutions not money.

Chasing Money

With regard to your current profession, is your work your passion? Does your job make you happy? Do you continue to work at your current job for financial reasons only? If money was not a concern, would you continue on your current professional path?

Many of us choose careers not because of the difference that we will make, but for the traditional high standard of living and potential wealth associated. Many of us stay in positions for this same reason, even when we hate our jobs. We are not here to judge why anyone is on the professional path that they are on, but if wealth is your objective, it is best to stop chasing money. 

Chasing money will keep you in a 9-5, salaried position. Chasing money will keep you working until your late 60s or longer. In some instances, chasing money will generate wealth, but you will be miserable. Think of the lawyers and doctors who are wealthy but absolutely hate their jobs, are alienated from their families and are struggling to cope. Chasing money will keep you from your potential of being both happy and wealthy.

Chasing Solutions Not Money – Profession

By chasing solutions, we mean finding a problem and driving towards a solution. In a professional scope, the underlying purpose of solving a problem is the fire that will burn to get you through the difficult times. The difficult times may be years of schooling, personal issues or unexpected disasters that occur in life. With a purpose, your drive will be maintained irrespective of the financial reward. Whether your drive is servicing a specific community or a specific cause, finding a problem and presenting a solution will greatly increase your rewards, financial and otherwise.

Chasing Solutions Not Money – Entrepreneurial

If you are an entrepreneur and you are aiming to build wealth, it will all fall into place once you identify a problem that is worth solving. There are many issues that we all collectively encounter on a daily basis. Identify these problems and present your solution. Once you identify the problem and a possible solution, ask yourself if the identified problem is worth solving. If it is worth solving, this is a business idea.

Is The problem Worth solving

In determining if a problem is worth solving, from a business standpoint, you need to determine if you can earn from solving the problem. Does the problem rise to such a level of needing to be solved? Will someone pay you to solve this problem? If someone will pay you to solve the problem, how much and is it worth your time? If you have identified a solution to a problem, but someone will only pay you a dollar to solve the problem, this venture may not be worth it. Whether or not the venture is worth your time will depend on scalability.

Is Your Solution Scalable

Is the venture of solving the identified problem scalable? Let’s face it, if I solve a problem that is of low value to others and non-scalable, then I will either loose money or get stuck in a job that will not grow over time.  None of these options are good.

Now, if the venture is scalable, you have a business. For example, our example above where we are paid a dollar by each customer to solve a problem. If this business is scalable, if you are able to build your business to reach one million customers, that is one million dollars. If the problem being solved is one that is reoccurring, you have the potential for a million repeat customers. When you chase solutions, not money, your wealth will seamlessly grow.

Conclusion

No one wants to be poor. At some level, we all want to achieve a standard of living where we and our families have our needs covered without financial stress. To achieve financial dreams, chase solutions not money. On the journey to financial independence, stop chasing money, chase solutions to problems and watch your wealth grow.

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Video Summary

Build wealth by chasing solutions

Accounting

You Do Not Need To Make A Budget

Money Maroon

When we hear the word “budget,” most immediately think of a rigid system of not only an itemized estimate of income and expenses, but also writing down and tracking each transaction as they are made. As you can imagine, implementation of these ideas could be very burdensome for many. The thought of itemization and keeping track of every expenditure contributes to why so many individuals do not take the first step to know their financial position. I am here to tell you that while having a detailed budget is recommended, it is not needed. Yes, you do not need to make a budget. Your first step to financial independence is getting a general understanding of your revenue and expenses.

What Is A Budget?

A budget is a financial plan for a defined period of time. Typically, a budget will include an itemized estimate of revenue and expenses over a period of time. For example a week, month, a year or a period of time in between in the future. The aim of any budget is to give a financial projection for a period of time in the future. It is a financial roadmap.

Following A Budget

The hard work of a budget is not only the act of sitting down and tediously making a detailed budget. The hard work of a budget comes following drafting and finalizing the budget. Hard work is the act of sticking with the budget. The hard work is tracking your spending, and ensuring that you are staying within the confines of your budget. Essentially, a budget is your guardrails and your aim is to stay within these guardrails.

The Problem

The issue that is commonly seen with budgets is the fact that many do not get started. If you are not getting started on making a budget, there is no hope of sticking to a budget. With regard to a rigid budget, many find itemizing over a period of time very cumbersome. Further, tracking spending becomes burdensome for many. Because most do not sit down and draft a budget, they do not get a true picture of their financial situation. They  remain clueless about their total revenue and expenditure. They are unable to reap the benefits of knowing what they are spending on and how to stop if necessary.

The Solution – You Do Not Need To Make A Budget

You do not need a formal rigid budget. Yes, you do not need to make a budget. Generally, what is needed is a general understanding of what you are taking in and what you are spending over a period of time. This is the first step. A deep itemized dive can come later.

Many who do not have a set salary have no idea how much money they are making per month. I am talking to those who are hourly workers, get tips, or commissions. Further, those with salaries may know what they make each year in total, but how much do you take home each pay period? Surprisingly, most do not know this total. If you do not know what you are taking home, how can you consistently save, invest and build wealth?

The Solution – Get A General Overview

Sit down and take 5 minutes to consider how much you are taking in each month. Look at one or two pay stubs and use a calculator if needed. Think of your average commission or tip per pay period. Only 5 minutes required. 

Once you have an idea of how much you are taking in on average, consider what you are spending.This will require another 5 minutes. Note your recurring expenses (mortgage/rent, car payment/maintenance, cable/internet, electricity) + what you spend each workday multiply by 20 (coffee, transportation, lunch) + weekend expenses multiply by 4. This will give you an average of your expenditure per month. That is it folks. This 10 minute calculation will give you a general understanding of what you are taking in and what you are spending monthly. Is your spending greater than your income? Do you have money left to save or invest? Can you pay yourself first?

Now, with these numbers, you are ahead of the game. It is clear on average what you spend and what you are bringing in each month. You now have the power to take control. You can decide to cut back on spending, earn more, decide if you need to sit down and make a formal detailed budget, or if you want to track spending to further optimize.  

By performing this exercise, you are able to obtain a high level view of your financial situation. From this vantage point, your next step may be to make a budget, to track your spending, and/or implement a financial plan. This exercise can serve as the basis for your next step.

The Benefit

At times, when we give general advice we introduce rigid concepts, for example, budgeting. It is important to know what to do, but it is more important to start doing. One of the first step on the journey to financial independence is getting a general overview of your financial health. A simple review of your income and spending will provide this general overview. From this jump-off point, you can take the next steps on your journey.

While You Do not Need To Make A Budget, Having One Can Be Beneficial

Budgets are great because they serve as a guide. Even if you go over, a budget gives you an idea of what you are over spending on. Budgets give you that answers to the question, why are you in debt? Further, a good budget also have the potentially to provide a roadmap out of debt. However, when you are beginning your journey to financial independence, you do not need a budget.

Conclusion

When we hear the word “budget,” most immediately think of a rigid system of not only an itemized estimate of income and expenses, but also writing down and tracking each transaction as they are made. As you can imagine, implementation of these ideas could be very burdensome for many. The thought of itemization and keeping track of every expenditure contributes to why so many individuals do not take the first steps of knowing their financial position. I am here to tell you that while having a detailed budget is recommended, it is not needed. Yes, you do not need to make a budget. Your first step to financial independence is getting a general understanding of your revenue and expenses.

Follow me on Twitter @JoToFI_com

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Video Summary

man wearing brown suit jacket mocking on white telephone

I Hate My Job: Staying At A Job That You Hate

Money Maroon

On the journey to financial independence, many sacrifices must be made. In today’s article, we will discuss one of the many sacrifices that is made to achieve financial independence: staying at a job that you hate. We stay at jobs we hate for many reasons including financial and non financial. While we aim to achieve financial independence, we must balance our financial desires and our health. Staying at a job that you hate can lead to many detrimental effects, including eventual loss of your job, mental break down, self medication and addiction.

Reasons We Stay At A Job We Hate – Debt

There are many non-financial related reasons that will lead you to staying at jobs you hate. However, when you look at financial reasons, paying off debt tends to be at the top of the list. This is of no surprise. 

Debt
Are you staying at a job that you hate to pay down debt?

Student Loans

At the current costs for college and thereafter potential graduate school costs, it is highly likely that college graduates entering the work force are doing so with tens of thousands if not hundreds of thousands of dollars in student loan debt. Many professions do not pay a salary that is enough to pay off student loan debts within a year or two. As such, it takes many years even decades to pay off student loans. Now add life events and the period for paying off student loans are further extended. By extending the period for paying off student loan debts, many are unable to leave a job they hate.

Consumer Debt

Aside from student loan debt, many also have consumer debts. Consumer debt may include credit card debt among other debts such as auto loans and mortgages. Credit card debts may have been accumulated over time when you were younger and not attuned to your financial future. Auto loans and mortgages may occur as we grow with family.  Consumer debt is a sure-fire way to keep working – such that you can service your debts. Consumer debt is a reason many are staying at a job they hate.

Financially Supporting Your Children

For those who have children, many have the belief or a self impose obligation to pay for their children’s college expenses. As noted above, it is of no surprise that many leave college and graduate school with tens of thousands if not hundreds of thousands of dollars in student loan debt. 

It is important to note that you are not responsible for your child’s student loan debt, unless you want to be. Generally, it is not your obligation. It is important to ensure that your financial life is in order before helping your child. Simply put, your children have more time to develop wealth and financial independence than you do. Any shock to your financial situation can detrimentally affect your financial future. However, your child is in a position wherein their financial health has a better chance of recovering. As in the airline videos prior to take off, in case of emergencies, put your oxygen mask on first before assisting your child. In the same vain, handle your financial situation first before tending to your child’s.

Reasons We Stay At A Job We Hate – Achieving Financial Targets

We also stay at jobs we hate to generally hit financial targets. It is not only paying down debt, but also accumulating wealth. We may hate our jobs but, we also understand that a high paying job where we work long hours and where we are completely miserable may be bearable for a period of time to save and achieve a financial target. However, the sacrifices that are made here must be balanced. The misery of a job should not defeat or overcome the person. 

Reasons We Stay At A Job We Hate – Golden handcuff

Golden handcuffs refers to financial  benefits that encourages highly compensated employees to remain within a company or organization instead of moving from company to company. In simple terms, a high salary and benefits make it unmanageable  and mentality impossible to leave your miserable job. Essentially, you have become so used to the money, the glamor, power and the title that no matter how miserable the job is, you will continue to do it because you cannot imaging not having the benefits of the job. Golden handcuff is a major reason you may consider staying at a job that you hate.

Reasons We Stay At A Job We Hate – Fear

Many will not leave a job because of fear. Fear can paralyze and in many cases it does. Some takes the saying “a bird in the hand is worth two in the bush” to the extreme. That is, some would rather suffer for something guaranteed (the current job) than take a risk and move on. 

Others also take the saying “the devil you know vs the devil you don’t” to an extreme. Many will succumb to the feeling that it is safer to deal with a familiar miserable situation (the current job) than risk taking a chance, finding a new job and be happy.  Fear may lead you to staying at a job that you hate.

Reality

In many cases, it is less safe to stay at your current job if you hate it. Eventually, your displeasure, misery and unhappiness will show at your job in your interactions with others and/or your work product. Even if you are able to bottle up your misery,  the miserable situation can cause a lot more pain than you think. For example, mental pain and anguish may bleed over into your life outside of work. This can lead to depression, drugs, alcohol and related health problems.

How Do We Get Out Of These Jobs Faster

To open the door and unchain yourself from a job you hate, live below your means, save, invest and repeat. These actions will increase your discretionary income and allow you to achieve goals faster.

Further, what good is it to live 50 years of your life in misery because of your job. Take the chance after doing your due diligence and search for what you want and go after it. This approach may delay when you become financially independent, however, you will be in a better place mentally. Mental stability will impact your family and future in unimaginably beneficial ways.

Conclusion

On the journey to financial independence, many sacrifices must be made. In today’s article we discussed one of the many sacrifices that is made to achieve financial independence: staying at a job that you hate. We stay at jobs that we hate for many reasons including financial and non financial. While we aim to achieve financial independence, we must balance our financial desires and our health. Staying at a job that you hate can lead to many detrimental effects, including eventual loss of your job, mental break down, self medication and addiction.

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Video Summary

Covid19

Pandemic And Financial Stability

Money Maroon

If Covid-19 has brought anything to the forefront, it is the fact that life is short and can end at any moment. Further, you may spend your last weeks, days, hours and minutes alone and without family. As we grapple with our new reality during this pandemic (Covid-19), the importance of financial stability has never been clearer. The pandemic’s effect on financial stability is unimaginable.

Pandemic And Financial Stability: Job Losses

The most obvious effect of the pandemic relates to job loses. As we have shut down economies to contain the virus, close to over 50 million Americans have filed for unemployment. This is in the United States alone. 

It has been reported that about 39 percent of households earning $40,000 or less has reported job loses. Over time, it has become very clear that the poorest households are being impacted the most by the pandemic, not only with regard to job losses, but also in contracting the virus. 

The pandemic’s impact on the poorest families is predictable. Think of those who are delivering your food, working the register at your favorite stores, bags your grocery and perform occupations that cannot be accomplished via a web based service at home. These individuals tend to be at the lower end of the economic scale, most likely to have health issues and limited access to health care. Together, this leaves a situation where low-income communities are more likely to be exposed to the virus, have higher mortality rates, and suffer more economically.

To look more globally, beyond the United States, the world bank estimates that Covid-19 could push about 49 million people into extreme poverty in 2020. Therefore, for those who were in the worst financial position, the pandemic has only made it worst, a lot worst. Simply put, the pandemic’s effect on financial stability has been devastating for the most vulnerable.

Pandemic And Financial Stability: Who Stays At Home

Mom at home during pandemic
Who stays at home during the pandemic?

An additional impact of the pandemic is on the family, specifically in view of child care. Yes, the pandemic’s effect on financial stability, is an impact on the family! As we have watched many members of families spend their final moments alone, or hear repeated stories of the virus wiping out multiple members within a family, the family generally is a major topic with regard to the pandemic and financial stability. Especially as the school year approaches.

As the pandemic rages on, many families have been forced to make a difficult choice, especially if they have school age children. Who will stay home/watch the kids? Do you and/or your spouse continue to work long hours and neglect your children that is now out of school or do one or both of you cut back?  

These are some of the most pressing questions at the kitchen table for those with children in elementary school and younger because of the attention required. But even for those older than elementary school age, if your kids are home, you still need to direct your attention to them to ensure that they are doing what they should. For example, your children attending on-line classes, paying attention during their video classes and staying on track.

For single parents, matters are even worst. Do you quit your job to stay home with your children when your employer requires your physical presence? With bills to pay, including mortgage or rent, how do you decide?

If you are without kids, how are you mentally coping with working from home without human contact? Generally, how are you separating work life from home life? Are you currently experiencing burn out?

Pandemic And Financial Stability: Money To Be Made

Not everyone has been detrimentally affected by the pandemic. There are some who were prepared and are trying to take events in stride. Many expected a dip in stock prices and took advantage. Others had an emergency fund and were able to better handle a job loss and transition to another. Still, there are others who have actually profited from the pandemic. Think of Jeff Bezos, Netflix, and entrepreneurs who are pushing forward services that are needed in today’s Covid-19 economy.

Pandemic And Financial Stability: Increased Saving Rates

An interesting effect of Covid-19 is the converging circumstances and their effects on the savings rate. With the government paying certain benefits, the United States have increased its general savings rate. Basically, with economies shut down and no where to eat out or spend discretionary funds, many individuals are socking away an increase percentage of their paycheck (if they are able to keep their jobs).

Bifurcation

In view of the above, what we are seeing is a bifurcation in societal finances. In one case we have individuals who are profiting from today’s current situation  and becoming more financially secure. On the other hand, others are struggling with the basic necessities. In every downturn or national event, this is always the case.

It is incumbent on each and every one of us to prepare ourselves for unforeseen hardships that may lay ahead. While no one could have predicted Covid-19 and its effects, we know this will not be the last time we have such a financial shock. Make the sacrifices now to be able to better whether financial shocks. The pandemic’s effect on financial stability is profound, but we can protect ourselves if we plan ahead.

Pandemic and our choices
We are at crossroads

Conclusion

If Covid-19 has brought anything to the forefront, it is the fact that life is short and can end at any moment. Further, you may spend your last weeks, days, hours and minutes alone and without family. As we grapple with our new reality during this pandemic (Covid-19), the importance of financial stability has never been clearer. The pandemic’s effect on financial stability is unimaginable. However, we can protect ourselves if we plan ahead. Journey to financial independence.

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