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These are all
steps one can
take to build a
financially
stronger home:
1) Never
sign or do
anything with
money unless you really understand it. I've found that most people get into trouble because they only partially understand their own finances. A big example is adjustable rate mortgages. I often speak with people who have one and all they can really tell me is that "it can change." They almost never can tell me their margin, index, or how much the rate can change. Anytime you do something with money you should understand it completely or you should not do it. You should be able to teach what you are doing to someone else.
2) Have an
emergency fund.
Living paycheck
to paycheck is no way to live and also very
stressful. An emergency fund serves as an insurance policy against going into debt. It also "self insures" you against small problems so you no longer need to buy things like warranties which saves even more. It is a must have in any sound financial plan. It is well worth making sacrifice to get it in place. Working overtime, a 2nd job, or selling something all do the trick. Once you get it, you'll find it was well worth it. If you look down this page, you'll find the emergency fund sets you up for several of the other tips. Any size emergency fund is better than none, but an ideal one is 6 months of household expenses. I
recommend
putting your
emergency fund
in a money
market or
on-line savings
account which
pays a better
interest rate
than most banks.
3) Stay away
from all credit
cards. No
matter what the
deal, just stay
away from them.
0% interest?
You could have
negotiated a
bigger discount
if you had paid
cash. There are
so many traps
and tricks that
can hurt people
I could write a
book. Universal
default clauses,
double cycle
billing,
transfer fees,
revolving
interest, and
ridiculous
APR’s. If you
want to try and
earn points and
rewards for
always paying
your balance be
my guest once
you have over
$10,000 in an
emergency fund
and zero debt.
4) Never
finance or lease
an automobile.
Most people
think this one
is impossible,
but it’s not.
It’s one of the
best ways to be
financially
stronger. Here
is an example.
A typical
$20,000 car loan
at 9% interest
for 5 years has
a payment of
$415 per month.
Take $415 times
60 months and
you end up
paying $24,900.
In addition,
most cars will
lose over half
of their value
in 5 years
making that 20K
car worth a very
generous 10K
when the loan
ends. We’ve
already lost
$14,900. If that
same person
would have not
purchased the
20K car and
invested the
payment of $415
for 5 years and
got even a bad
rate of return
of 8% they would
made about
$10,400 in
compounding
interest. In
this case, there
was about a
$25,300 swing in
net worth just
over the car.
You always lose
big when you
finance
something that
goes down in
value like an
automobile. Even
if you have a no
interest loan
you still lose.
5) Surround
yourself with
good people.
You should
always work with
the best
insurance
agents, CPA’s, real-estate agents,
retirement
planners,
attorneys, and
of course you
should work with
me. (I had to say it) The
best person is
not always who
your family and
friends
recommend.
That is how many
people get in
trouble…they
trust someone
who Uncle Joe
recommended and
end up
forgetting rule
#1 above. I
have witnessed
family, friends,
and even family
attorneys give
outright
horrible
financial advice
so many times.
Choose the
person with a
proven track
record of doing
lots of
good business.
Whenever you
talk to them,
you seem to
always learn
something new.
This is because
the best people
are also great
teachers. They
teach people how
to make their
own correct
decisions.
6) Always
have a budget
and spend less
than you make.
This is a
no-brainer but
many still
struggle with
it. Remember
that you have
your income and
your outgo. The
difference in
the two is how
much you have to
either pay off
debt or invest.
Either one
builds your
worth. It is so
important to
account for
every dollar
coming and going
in order to
maximize the
amount you get
to keep.
7) Remember
to factor “risk”
into all your
financial
decisions.
Risk is what
most people
forget about
when making big
financial
decisions. The
reason why an
adjustable rate
mortgage starts
out lower is
because the
lender is
passing the risk
of market change
to the
borrower. It is
OK to take
risks, but you
better be sure
you can also
take the hit
that can come
with it. In
general, the
stronger your
home is
financially, the
more risk you
can take. This
is one of the
biggest reasons
for “the rich
keep getting
richer.” They
are able to take
more risks,
which result in
more rewards.
Trouble happens
when someone who
is financially
weak takes on
risk. An
example would be
doing an
adjustable rate
mortgage while
having no
emergency fund
or savings.
8) Always
review your
bills in detail.
Several years
ago, I decided
to read my phone
bill line by
line. I noticed
a $2 “wire
protection fee”
and was curious
as to what it
was. I called
the phone
company and was
told it insures
the phone lines
in my house and
it is something
people sign up
for, but I never
did. Someone
just decided
they would add
that to the
bill. I was
later refunded
that premium
from day 1 and
received about
$90 back in
addition to
getting it
removed from
future bills.
This led me to
review my other
bills and I
found similar
“add-ons” that
were not
necessary. If
there is any fee
on any bill that
you do not
understand, then
call and get an
explanation. I
have seen some
bills that say
“miscellaneous
fee.” In my
opinion that is
unacceptable,
but it happens
everyday due to
people not
paying
attention. Be
sure to read and
understand
all
of your
bills. If you
pay your bills
on-line or by
auto debit, be
sure there are
no fees
associated with
that.
9) Call your
service
providers in
search of a
better way.
When was the
last time you
called your
cable or
satellite
provider and
asked if there
are cheaper
channel
packages? Or
how about your
electric company
on things you
can do to lower
your bill? Make
it a habit to
review these
things at least
twice a year.
Competition is
fierce and
changes are made
all the time.
If you don’t ask
for a deal, they
probably won’t
tell you about
it. Be very
careful when
calling not to
get persuaded
into a more
expensive
option.
10) Manage
your finances
and bills like
it’s your job.
If I were to pay
you a salary to
manage your
household
finances you
would probably
have discovered
most of the tips
I have mentioned
on your own.
Every so often,
you must sit
down and get up
close and
personal with
every thing
related to your
money and manage
it like you
would something
at work. It is
a very healthy
practice that
can eliminate
bad habits.
11) Being
physically fit
has financial
advantages.
People who are
in shape have a
clear
advantage. They
are more
productive at
work because
they have more
energy. This
increases their
income
capacity. They
also enjoy lower
health and life
insurance
premiums being
at lower risk
for illnesses.
They don’t buy
cigarettes, and
by eating right
they usually
save at the
grocery, too.
Everywhere you
look they save.
Investing in
your health and
fitness is also
one of the best
financial moves
you can make.
12) Sell
your junk
instead of
throwing it away.
People will buy
just about
anything. I was
absolutely
floored the
first time I
tried a yard
sale. I thought
it would be a
waste of time
and thought
there is no way
people are
buying this
junk, but it all
sold. Old torn
pillows, a
broken mirror,
faded clothes,
you name it. By
mid-morning, I
was digging out
every piece of
junk I could
find because it
all kept
selling. I
could probably
shred my old
bills and sell
it as packaging
material at a
yard sale if I
wanted to. It
is amazing what
people will buy
sometimes. Ebay
and yard sales
are great ways
to make extra
money while
getting rid of
your junk.
13) Help
people in other
professions and
get rewarded.
Before I
got into
finance, I
worked in an
electronics
store. One day
an eye doctor
came in to
purchase a new
home theater. I
took really good
care of him, and
discounted the
products to the
best of my
ability. About
a month later I
visited him for
an eye exam.
That exam along
with my next 5,
and about 8
years worth of
contact lenses
and supplies
were free. I
saved hundreds
of dollars,
maybe thousands.
If you give, it
will come back
to you every
time. Over the
years I have
received
unbelievable
deals and free
stuff by always
helping people
in their
respective
professions.
Find out how you
can use your job
and talents to
help others, and
good things will
happen.
14) Pay off
your debts
before you
invest. I’m
all for
investing in
401K’s, IRA’s,
etc. but not for
someone swimming
in credit card
debt or car
loans. First
focus all your
money to ridding
yourself of high
interest
unsecured debt
and payments.
Once you get to
where your
mortgage is all
you have left,
and you have a
solid emergency
fund in place,
begin
contributing as
much as possible
to your 401K,
IRA, and your
preferred growth
investments such
as real-estate
or mutual
funds. Never
cash out or
borrow against a
401K to pay off
debt as the
penalties can be
severe. Also
remember to take
additional money
and pay down
your mortgage.
This can be a
really fun time
financially.
When you have no
debt payments
your income is
free and now you
can see it in
action.
15) Avoid
junk insurances
and warranties.
It is best to be
self insured.
By that I mean
have an
emergency fund
of 6 months
expenses. If
you have that,
then you won’t
ever need to
purchase
warranties on
anything.
Companies make
billions of
dollars on
add-on
insurances and
warranties. It is no different than gambling in a casino. Sure sometimes people walk out a winner, but in the end the house will always win.
Do you really
need to pay
additional money
to protect your
couch? Or pay
insurance money
in case you
don’t balance
your checkbook?
Protect only the
big things like
yourself, your
home, and your
cars. My
opinion is most
people should
have: health,
long-term
disability,
term-life (if
you have
dependents),
auto, and
homeowners. I
would avoid:
credit life,
whole life,
accidental
death, overdraft
protection, or
any form of
extended
warranty sold in
a retail store. If you
have junk
insurances or
warranties I
recommend you
look into
canceling them.
Many stores will
credit back any
unused portion,
so if even if
you bought it a
while ago, you
might get some
of it back.
16) Late
payments hurt
worse than you
think. If
you are late on
any bill that is
like handing
them a license
to charge you
whatever they
want. Late fees
and penalties
can be severe.
Additionally,
when late
payments hit
your credit
report, other
lenders to whom
you’re on time
with can flag
that and raise
their rates and
fees. Insurance
companies can
see it, and
potentially
determine you’re
a “riskier”
client and raise
premiums on
you. Potential
employers can
review your
credit report as
well, and that
late payment
could work
against you.
Being late can
start a vicious
cycle that is
tough to recover
from. If you
just cannot pay,
do everything in
your power to
avoid being
late. Ask a
friend, work
overtime, sell
something,
transfer a
balance, or do
anything in your
power to make it
on time.
17) Become a
good home
economist.
Running a cost
efficient home
can really
save. Use
coupons only for
necessities to
avoid spending
money on
something just
because you have
a coupon. Watch
the electric
meter, use of
gas, and use of
water wisely.
Like mom would
say, turn out
the lights
before you
leave. It might
seem so minor,
but when you
build it into
your lifestyle
you will save over time.
18) Learn
how to do small
jobs yourself.
There is nothing
wrong with
paying for any
of the services
I am about to
mention, however
learning to do
some or all of
them yourself
can save a lot
of money.
Examples
include: Lawn
care,
landscaping, oil
changes, hair
cuts, dry
cleaning, pest
control,
maid-service,
car wash,
pressure
washing, or
small home
repairs. I pay
for many of
these services
myself; however
what doesn't make
sense would be a
financially weak
individual with
debt and no
emergency fund
paying for
professional
lawn care.
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