Monthly Archives: May 2012

START FROM THE BEGINNING, PART II

We left off at phase I and phase II. Where phase I we are saving $1100 cash and phase II we attack the debt from least to greatest until it’s eliminated (except the mortgage). The battle of phase II will not be pretty and there will be countless days and nights where you wish you could go on a trip with friends or go out to eat every weekend, etc. But put those things on hold until phase II is complete. After phase II is completed we continue our momentum into phase III.

PHASE III: SAVE THREE TO SIX MONTHS OF EXPENSES

Make sure you are not contributing anything to your 401k, IRA, mutual funds, etc. at this point but remember the first line item, on the very top of the budget template I can provide you is the “charitable gifts” line item. Continue to give 10% through all the phases. In phase III you have conquered all your debts and now you are building your security when something happens to you or your family that forces you to take out $2500 to fix your A/C at the house or to get a new transmission in your car. (note that I said WHEN and not IF. We all no life throws us challenges). With a fund in place to cover the big expenses we are more financially and psychologically prepared to cover the cost. This phase will also take some time and patience to get to your three to six month savings but remember since you aren’t making any payment to any lenders, your momentum is still building and your savings goal will be accomplished in no time. You also already have the $1100 saved from phase I, so enjoy the head start. This phase is also really beneficial when it is time for you to leave the job you “like” and create or find the job you LOVE. In my recent blog, “DON’T FALL IN “like” WITH A JOB YOU DON’T LOVE” I mention how it takes time to save/prepare to transition out of the job you “like.” During phase III you will be saving/preparing for a dream or if you already are in the position of your dreams than phase III will still benefit you when Mr. Murphy affects you and your family.

PHASE IV: INVEST 15% OF INCOME FOR RETIREMENT

Now is the time you send human resources an email saying, “I’m ready to contribute again to our 401k!” If your company matches, than contribute at least the max amount the company will match. For example, if your company matches up to 7% then put 7% of your paycheck towards your 401k. HELLO FREE MONEY!!! So using this example we would have 8% remaining of your income to put towards retirement. Of course there are many Individual Retirement Accounts but I recommend contributing towards a Roth IRA. Now you have 7% of your income towards your 401k and 8% towards a Roth IRA. If you contribute $416.67/month (look familiar to a car payment amount?) towards your IRA with an average of a 10% annual rate of return over the next 25 years, you will have a smooth $557,458.37. Keep in mind you will be debt free including the mortgage while ALSO cashing in your Roth IRA at $557,458.37 and whatever the amount of value your 401k is. So approximately well over a million dollars in retirement after 25 years if you start now! DON’T RELY ON THE GOVERNMENT FOR YOUR RETIREMENT PLAN. I.E. SOCIAL SECURITY.

I’m very familiar with YOLO (You Only Live Once) and I believe there is a must to have balance in our life where we are enjoying the present but also preparing for the future. While we were ATTACKING phase I – III, there were times where people would remind me that “we only live once” or “Dave, what are you going to do with the money when you’re gone?” And at times I was like this stuffing envelope thing and this budget stuff is to demanding! But now we are just entering the days of Phase IV and we are able to enjoy the PRESENT even more than ever while also preparing for the FUTURE. Words can’t describe the relief we have and during this journey it has forced us to communicate our dreams to each other or to communicate what Shannon is cooking for dinner this week while we were attacking our debt (I love food, a lot). Communicating each month while preparing the budget forces us to be on the same page and if anything comes up during the month that affects our budget then we just re-group and compromise while we modify the budget. Stay focused during the first three phases regardless if you only have $2500 in credit card debt or you have $100,000 in student loans. As you know time flies so start now and being free from lenders is a huge step in changing your family for generations to come! It’s up to you. Much Love.

Contact a Endorsed Local Provider in your area to get the best advise for investing your money.

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DON’T FALL IN “like” WITH A JOB YOU DON’T “LOVE.

Well if you’re like most human beings that are dreading work and hope we don’t get bothered to much by those, un-educated co-workers that never understand.  On our way to work each morning we tell our friends how miserable work weeks are and you can’t wait until Friday.  I understand most are motivated to go to work so they can put a roof over the family’s head but that doesn’t mean you have to be miserable each morning.  And as soon as we get to work we hope this day flies by.  We hope to get the report done by lunch just to get it submitted and then dream a little more on how good life would be if you had won the lottery last Saturday.  Or if you’re pouring drinks for a living to provide for your family or pay for college but you will explode next time you have to put up with one more “bar situation?”   If characteristics similar to these are happening regularly then it is time we transition out of the job we like and fall in love with our “dream job!”  But before you just quit next time your boss frustrates you, you need to think and pray about your dream and think out your expenses.  This could take at least a couple of years.  In my recent blog, “START FROM THE BEGINNING,” I mentioned to trade down in-car so we can get out of debt faster and not be “slave to the lender.”  PROV. 22:7.  By getting out of debt it relieves us from a lot of expenses and allows us to save/prepare for the job we love.  Not only will it take some time to save/prepare for the job we love while getting out of debt but it will also take some time for us to consistently have the mindset to put in your best efforts at the job you like so that you can prepare your heart and work habits for the job you LOVE.

As a man of faith in Jesus, I believe it’s mandatory we spend time with our Savior so we can listen to what He wants us to do with our lives.  If it happends we have different opinions of our Savior, that’s fine but you must sincerely enjoy sharing your dreams with your spouse, mentor or a loved one.  Which will lead to constant communication.  And no team executes well unless there’s good communication.  So currently, My wife and I continue to save and prepare but also more important we ask God to help us find what we LOVE to do, that will also be a platform to glorify Him.  We look forward to see where He takes us but also looking forward to the journey Shannon and I take, with Him.  Much Love.

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START FROM THE BEGINNING

As someone who was “riding clean” in a GMC Yukon (nothing wrong with nice cars, if we can afford them by paying with cash) I completely understand the complications of letting go of your ride and getting into a vehicle that doesn’t take away from your paycheck. Once we let go of the urge of being comfortable in a nicer/expensive ride and we can become more comfortable in a ride that can get the job done, then you will really start to see the momentum building towards seperating yourself from being a “slave to the lendor.” Proverbs 22:7

here’s my email to request a budget template. davidschmidt3@gmail.com (I know, that sounds sophisticated). We can walk through the early stages on building your game plan that will set you up nicely for the near future and long term. But it will start by getting a new ride, unfortunately. Get you a 2002 chevy colorado or a F150, Honda accord, etc. but look at something that has around a 100k miles and that will last you 4, 5 or 6 years. Obviously the more in-expensive truck/car you find will be a quicker route to getting debt free but regardless find something that is in the $5-8,000 range (i’ll explain more below on what to do with your truck). More then likely you’re not bad with money and most people we’re friends with aren’t bad with money, we just don’t have a GAME PLAN aka budget. Let’s look at this the same way as we look at a body builder when he/she is training for a show, they have to follow a strict plan. When a electrician is doing his/her job on a small house or a big commercial building, they also has to follow a strict plan. And for people to execute there goals, we need a PLAN. We have to tell our money where it’s going instead of wondering where our money is going every time we swipe our card.
Another reason why I know you’ll love this plan is because of how you already enjoy GIVING. If you notice on the budget, the first line item is “charitable gifts.” In our budget we will GIVE %10 away every month. I can’t speak for you but my “giving” used to be based on, “Oh, I need to drop this 20 bill in the offering plate today and I’ll feel better for tithing.” Yes, the intentions are good but the word tithing means “is a one-tenth part of something.” And after being more disciplined with my GIVING this past year I am convinced it is very therapeutical in flexing our tithing muscle aka it really does feel good to give. Everybody does there “charitable gifts” different meaning sometimes I give my money to something outside of the church. aka a youth person wanting to go to a summer camp or just a person that I feel like could use the money that week. But enjoy that “charitable gift” line item just like you will enjoy your “blow” line item and don’t think about, “man if i didn’t give money away I’d get out of debt faster!” Yes, mathematically you’re right (see more in the “how to attack your debt” section below) but again it is very healthy to workout your giving muscle.
Your way of transportation. Check out online the trucks/car at your local car dealer in town and see what’s on the market. If you find something you like, go test drive it (be prepared to feel really awkward if you’re used to riding in nice leather lol) and when you find something trade in your truck for it. You’re immediately going to shave off around $20k of your debt depending on how much you owe. Obviously, your truck payment will decrease but don’t let your foot of the gas. By using the budget template you will instantly be spending less money each month because when your cash is gone from your entertainment, miscellaneous, blow and restaurant envelopes you will find yourself watching a good red box dvd and/or doing something with friends or by yourself that doesn’t cost money. i.e. going to beach or bike riding or shooting some hoops. (I know, those sound so horrible. ; ) But because of you telling your money what to do and knowing where it’s going; you will have money for grocery, bills, etc. but you will more importantly be able to aggressively attack your debt with a vengence.
With all that said, start with this. Begin filling in your budget for June. (It’s going to take you two or three months to get an accurate budget) and make sure you cover all your expenses. If you “take home” $600/week then you should have every single dollar of that $600 allocated to a line item. If you already have $1100 cash in savings then you will not need to add any money to your “emergency fund” line item, at this point (assuming you have debts). If you don’t have the cash then save up $1100 dollars for your emergency fund before you throw additioanl money at your debts. While we get out of debt your “restaurant” envelope needs to be next to nothing. The only time you see the inside of the restaurant is if you’re working. The more aggressive you attack your debts, the quicker you will be relieved from making debt payments and begin building wealth. I recommend putting in your numbers for each week. i.e. if your grocery budget is 400/month, put away 100/week in your grocery envelope. Once your budget is set for each week, go bye you some envelopes and construct you an envelope for each line item. On Monday of each week, withdrawal your cash from the bank for that week and go stuff your envelops to match whatever your budget says. I recommend only carrying around your blow, restaurant, misc. and gas envelopes. Keep all your other envelopes at your house. So now you have a plan for your spending each week and your giving and attacking your debt simultaneously.
How to attack your debt? Like I mentioned above mathamatically you could breakdown that by giving away 10% it will take you longer to get out of debt. True. You could also say, “I need to pay off my debt that has the highest interest rate since that’s costing me more?” Just avoid making it complex and simply ATTACK your debt from your least amount of debt to your greatest date. If your credit card balance is $1200, your new truck is $6,000 and your student loan is $10,000 then list your debts in that order, least to greatest. ATTACK your least amount of debt the most agressively while you are making the minimum payments required on your other debts. (If your truck payment is $220 then just pay $220 until your truck is your least amount of debt). Using this example, once you have completed paying off your credit card then you will throw whatever amount you were paying on your credit card and add that to ATTACKING your $6,000 truck note. So now you have the amount you were paying towards your credit card plus the amount that you were previously paying towards your truck. Yea you got it, once your credit card is paid off (AND CLOSED AND CUT UP!) and your truck is paid for then you will throw all that money you were paying towards those debts to aggressively ATTACK your student loan. This process will take some time, discipline and self-control (especially if you have a partner! lol) but training for anything else you have to have those some characteristics. Once your debt’s paid off you will have no obligation towards any lendor and then your savings is kicked into high gear! It’s like a huge pay raise. All the money that one time was paying towards debt is now applied to savings/investing! I’m going to stop for now but I’m going to summarize the TWO phases we just went over below. There is a total of six phases in your plan you need to adopt and we will go over those phases next time. As always stay in touch with any questions or concerns (850-685-0631). Much Love.
Phase 1: Save $1100 CASH.
Phase 2: ATTACK debt from least to greatest until eliminated.
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DRIVEWAY DREAMS***

23MAY

Ever since the day my conscience could speak to me, I was full of big dreams and wanted to make a lot of money while accomplishing my dreams.  During the elementary days I was dreaming in my driveway, also known as “Driveway Dreams” that I just hit the game winning shot of the NBA finals, then later in life during the high school days I was still dreaming in the same driveway but only to hit the state championship game winning shot.  My point is, my dreams motivated me and pushed me to work hard so that one day when I was in position to execute my dream shot, I would make sure to knock down the big shot.  Unfortunately I was never able to be in the position to shoot a game winning shot for the state championship (even though Vegas currently has the over/under on the amount of “game winning shots”  I took in my driveway or pick up games is at, 23,109.5.) but during those “Driveway Dreams” from elementary to high school, it lead to hours, days, weeks and years of hard work that developed into being able to have the mental and physical toughness to accomplish many other things in my short life that were at one time ranked below my “Driveway Dreams.”  Do you remember a few of your “Driveway Dreams?”***

We all at one point had “Driveway Dreams.”  Yours might have been performing a guitar solo at a sold out Madison Square Gardens or kicking in the game winning goal to win the world cup or even finding a cure for cancer or dancing in the nutcracker.  At some point we’ve all been motivated by a “Driveway Dream.”

As years continued to stack on top of each other, I had no path or no clear vision on what my dream was but I just knew I needed money to do it.  My “Driveway Dreams” were modified from great achievements in basketball to dreaming of becoming wealthy and successful while consuming cold beer with a college buddy.  And as a few more years pass after college, I realize the “Driveway Dreams” are just, dreams if I don’t begin making a plan at some point.  And that’s all they were, just dreams.  A dream without a plan will always be just a dream.  And every time I was dreaming I knew in order to make money I had to get money, right?  I had the understanding; I first had to build on my credit so hopefully one day soon my credit was good enough to borrow more money to support whatever my money-making scheme was going to be.  Sound familiar?  (don’t act like you and your college buddy never dreamed of becoming wealthy).  So let me make this clear, I thought in hopes to become more wealthy I thought I had to pay a bank $475/month for transportation (I must have a car right?), payoff my credit-card balance each month to build credit (but I’m earning skymile points), and take out a small loan only to make the payments on your debt, so that one day since the bank likes me I will be able to take out a bigger loan to add more risk.  Sounds like a lot of risk?  And now after typing those last few sentences it sounds even more ridiculous that at one time I thought “getting ahead” was making a continuous payment to a debt.  Those are moves we take to establish and grow your credit score, right?  Not sure if these characteristics are familiar in your life but they kept floating around in my life for over 5 years, until I decided to kick them out.

Looking forward to following the Lord as he directs my family that consist of my wife for 8 months (that is also 7 weeks pregnant, YAYYYYYY!!!!) and myself.  Hope to see you readers back for next Wednesday’s blog on how our family is striving to achieve our current “Driveway Dreams.” Your prayers and accountability is greatly appreciated during my family’s journey.    Cya o.o.o

*** Driveway Dreams –  Time period in your life when you first started having dreams, up until the most recent time you dreamed.  Either by yourself or with a significant other.

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