Net Worth December 2015

Ice PondsPhoto: Salt Sand and Smoothies

This month was a little rough. I ended up spending a little bit more than I expected. There were a few expenses that came up that I didn’t plan for, but it seemed to work out alright.

Total Cash and Bank Accounts (+$1,900.88): I get a small amount added to my life insurance policy every month. This month it was $59.08. I also was able to get paid on a few days of vacation time and sick leave that I didn’t use this year. This was added to my monthly balance.

The extra added will be used to pay down some of the expenses that happened this month.

IRA (+$18.73): My investments did alright. I ended up getting a dividend payment from Vanguard for both my bond index and total stock market index. I look forward to seeing how the stock market will pan out now that the Federal Reserve has raised interest rates. I plan to re-balance my portfolio at the end October 2016.

Credit Cards (+$1,629.61): I had to get my car sensors repaired, and my wife needed a laptop for her business. These two expenses added up to over $1,500. I also invested in purchasing Shun Knives that I got at 65% discount of the MSRP. These knives I plan to hold on for the rest of my life.

I plan on sticking to my plan of paying down my accounts in order from highest interest to the lowest.

Tax Loan: (-$270.71): I should be done paying off this debt by the end of February at the rate I am going. I’m excited to check this debt off this list.

Car (-$235.53): Slow and steady will pay this one off in time.

Student Loan (-$129.53): This is by far the hardest thing for me to get rid of. It’s also going to be the last thing I’ll end up paying off. The interest rate on this isn’t too bad at 4.47%.

Misc Loan (-$3.27): This account isn’t a big deal for me to have sitting around. It is a loan from one of my life insurance policies, and I don’t pay any interest until my premium payment is due.

I will reveal my plan paying minimal interest on my life insurance policy in a later post.

Overall Net Worth (-11,631.57) Increase (+929.04 or 7.4%) So far so good growing my net worth with only cash. I don’t expect January to do very well with my IRA at the rate the stock market is going.

3 Reasons to Not Fund Your Adult Child’s Lifestyle

Makua BeachPhoto: Nolan K.

As the new year comes upon us, we are making resolutions to save money for ourselves and our children. Saving money and spending less is the 3rd most common New Years Resolution.

When Andrew Hallam, in his book Millionaire Teacher, says that parents are often inspired to set aside money for their children’s future when investing for the future. Setting aside money is very different than encouraging a child to earn, save and invest. He further says that giving money promotes weakness and dependence. Teaching money lessons and promoting the struggle promotes strength, independence and pride.

Thomas J. Staney and William D. Danko, in their book The Millionaire Next Door, call giving your adult children money “Economic Outpatient Care”. They state that “many parents feel compelled, even obligated, to provide economic support for their adult children and  their families.”

There are a few downfalls to giving your children money for the sake of spending.

1. It Builds Dependence

The families that give money, that is given to be used to be spent and not invested, develops financial dependence. The children who also develop this dependence have less net worth and their annual income is also less. “And, in general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.”

2. Spending Becomes an addiction.

Children who receive the money are looking for the next injection of money to maintain their lifestyle. It becomes a hamster wheel lifestyle because they continually require income to cover their needs. They are unable to buy their happiness and they are more motivated by showing off their new toys than becoming better or learn new skills to accumulate wealth.

3. They’re trapped by Mental Accounting

In behavior economics, people will create mental accounts for money. A study, stated in the book Why Smart People Make Big Money Mistakes, suggests that we will spend $50 we are given as a bonus more easily than $50 we have been told was owed to us in salary, but mistakenly withheld.

It’s the same money, same person giving them the money, but you are more like to spend one check than the other. This is the same thing that has happened to the children. If they are freely given money, they will spend it without any thought of saving.

I hope this inspires you to teach your children how to to save and invest in their future instead of having you support them financially.

 

I Challenge You to be Awesome in 2016

Hidden GemPhoto: Josiah William Gordon

2015 comes to  a close and it is the first day to 2016. A new year always brings excitement and fear all at once.

I’m excited because a new year makes you think of new beginnings and letting go of the past. We start setting goals about getting stronger and eating healthier, and we all feel like we can get a jump start on the new year.

One thing is that only about 8% of people are successful in achieving their New Year’s Resolution. I feel that one of the reasons is that people who look to goal setting are really setting long term tasks to finish other than actually setting long term goals. What’s the difference between a long term task and a long term goal?

A long term task is something that you can give a breath of relief when it’s done. An example is paying off your credit card debt. Tasks are not motivating to your soul, and you don’t find any joy in the journey. You will ultimately find relief from completing the project.

A long term goal on another hand is something that you will always strive to achieve, and in the process it will give you joy while on the road to attaining it. For instance, instead of paying off your debt, the ultimate goal is to be financially free, or not having to worry about money in retirement. Goals are activities where it causes you to continually grow.

Margee Kerr Ph.D. wrote an article on Psychology today on “Forget New Year’s Resolutions” says that saying that you might want to focus on why you were awesome and what you feared in 2015 to jump start 2015.

Here is a list of questions from her article. I challenge you to be awesome this year.

Margee Kerr

The Gift of Review

aloha bonespc: alohabones

Those who cannot remember the past are condemned to repeat it – George Santayana

As the year comes to an end, it’s good to review the year to find out how well you have done. Not only financially, but also with all of your other goals. My pastor said over this weekend, that “we must learn from the things we have done in the past. We get older, but will we get wiser?” It’s up to us to make that decision to be wiser as we get older.

Looking to the Past

I can tell where I am going by how I have been setting myself up in the past. There are questions that help me look back at the year are:

1. What were the high points this year?

  • Starting this blog to get my ideas out to the world. This has allowed me to be creative and start to put my ideas down to start a financial program of paying back debt.
  • Understanding that my passion is to share the ideas I have on personal finance to help people learn from my mistakes and victories.
  • Being honest with my financial circumstances, and making the changes to correct my mistakes.
  • Helping my co-workers start the process of tracking their expenses.
  • Setting up the payment plan on my debt.

2. What experiences do you wish you could have changed?

  • Start the blog earlier because there is value in what I have to share.
  • Stop feeding the fears and worrying about what other people would think of my ideas
  • Going through with a balance transfer on a card that is currently in use. (such a bad idea)
  • I wish I didn’t take money out of my retirement account to pay off debt because the compounding effect in the future would have been more than the interest I would have paid on the debt.
  • Start reading books on the stock market earlier, and invest in Vanguard index funds

3. What advice would you give to yourself at the beginning of the year?

Don’t try to beat the system of paying back your debt. There is no magic bullet to pay off your debt faster with limited resources. The overall best ways best ways to pay off debt is the debt avalanche (paying debt off with the highest interest rate first). There are ways to save a little bit more interest, but sometimes taking that extra bit of effort or chance might not be worth it.

4. What were the three biggest lessons you learned in this past year?

1. Read more, and retain the information. There’s nothing wrong with reading a book for enjoyment, but if there’s a lesson to be learned, take notes. Spending 30 – 45 minutes a day reading is a good habit to cultivate better ideas for the future.

2. If you have a bad feeling about a situation, especially financially, don’t go through with the deal. My brother wanted to buy two sets of high end knives that would have cost me well over $4,000. He could purchase for 65% off of the Manufacturer’s suggested price and resell them.

I thought it was a good idea at first because the knife sets were going to be discontinued, but there were circumstances where it did’t make sense. (I’m also not very educated in how sales in knives work.) He was a bad communicator when it came to the sale of the knives, profit margins relied on too many factors to make a profit, and there didn’t seem to be that great of a demand for the knives. So overall, I didn’t go through with the deal, and I feel better about it.

3. Setting up an automatic repayment plan for your debts and saving is by far one of the greatest tools you can have to build wealth for the future. Once it’s in place, do your best not to change the payment. It forces you to keep the “promise” of payment to yourself or your creditor.

I hope that you find some of these insights interesting, and that you can learn by asking yourself these questions as well. Please like and share if you found this interesting. I’d love to hear from you as well.

Merry Christmas

Merry Christmas

From my family to yours. Merry Christmas, and have a great day with your family.

Goal Setting 2016 – Part 3 Brain Storming Goals

SulepPhoto: Sherwin Ulep

In this series we’ve covered how to set goals and why you should set them. Where do you go from here? How do you know what goals to set? How do you even know what you even want?

This is where we get to pretend we’re in Disney’s movie Aladdin, and we get to have Genie as our own personal scoffer. You’ve just gotten out of the Cave of Wonders, and Carpet lands in the desert. You get a minute to look around, and you glance over at at Genie, you get your thoughts together, and you tell Genie, “You know, I kind of know what I want, but I’m embarrassed to tell you what I really want. I’m afraid of what other people will think of me.”

Genie tells you, “Well kiddo, Do you want the best things in your life? You better let me know what you really want because that’s the only thing holding you back. What I want you to do is to write down all of the things you want and all of the things you want to do for the rest of your life. It doesn’t matter what other people think because it’s your life, and it’s up to you to live it the way you wan to. I only have one rule. You have to write out all the things you might want in your life 3 minutes or less.”

He sets a timer and you start writing anything that comes to mind. As you begin to write Genie keeps telling you “Not enough, Still not enough! Think bigger!” Keep going until your time limit is up. (if this reference doesn’t make sense to you, go watch it on Netflix.)

Now go do it. Really, set a timer for 3 minutes and write down as many things as you want in life, the goals you want to achieve, the places you want to go, and even the things you wan to eat. After time is up you may have a long list or a small list. It doesn’t matter how long your list is, just as long as you have things on there that will excite you to get up out of bed to achieve. You won’t have to achieve everything the list and that’s alright. The exercise is for you to get out of your own way, and to let go of all of the thoughts that have been holding you back in your life.

A few of my goals

  • Have a positive net worth by December 2016
  • Find a blog / business mentor
  • Set 1-2 hour a night to creatively write and read between 7:30 PM and 9:30 PM
  • Go to Crossfit Monday, Wednesday, and Friday.
  • Become more educated on stocks by reading at least 1 new book a month
  • Have over $100,000 in investments and cash in 5 years. (Crazy at this point in time because i’m about $40,000 debt)

The goals follow the SMART criteria. Just as quick recap they are

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time-Bound

I’ll go over breaking down your goals into specific categories and how to take action in the next post. See you then.

Part 1 SMART Goal Setting
Part 2 Why You Should Set Goals

Goal Setting 2016 – Part 2 Why You Should Set Goals

Turtle

Photo: jonahkalaikai

Goal setting gives you an idea of what you want to achieve in the future (as long as it aligns with your values, which is a whole different topic all together). It also allows you to create smaller goals to make sure that you’re on track to your overall goal. You want to see progress along the way. If you’re unable to see progress, you will no longer be motivated and stop reaching for your goal.

Mindtools.com says that “By setting sharp, clearly defined goals, you can measure and take pride in the achievement of those goals, and you’ll see forward progress in what might previously have seemed a long pointless grind. You will also raise your self-confidence Add to My Personal Learning Plan, as you recognize your own ability and competence in achieving the goals that you’ve set.”

A Caveat

You don’t want to have too many goals because you’ll run yourself ragged. There is only so much that your mind will able to handle. Essentially, starting a new goal is like starting a new habit. There has been research that says that your self control is an exhaustible resource and you will get tired from overexerting yourself mentally.

In the book Switch: How to Change Things When Change Is Hard by Dan Heath and Chip Heath, it says that “the bigger change you’re suggesting, the more it will sap people’s self control. And when people exhaust their self-control, what they’re exhausting are the mental muscles needed to think creatively, to focus, to inhibit their impulses, and to persist in the face of frustration or failure. In other words, they’re exhausting precisely the mental muscles needed to make a big change.”

 

 

Part 1: SMART Goal Setting

Goal Setting 2016 – Part 1 SMART Goal Setting

kapua5

Photo by Kapua

American philanthropist Elbert Hubbard realized that many people failed in their endeavors. They failed not because they lacked intelligence or courage, but because they did not organized their energies around a goal.

Goal setting can be complicated if you don’t know what you’re looking for in your life. One of the top reasons why people are unable to achieve their goals are listed at lifehack.org on the  “Top 10 Reasons Why People Don’t Reach Their Goals“, by Robert Chen, is creating vague goals.

A person doesn’t know what to achieve, if he doesn’t know what he is trying to achieve. This might be common sense at first, but try to think of a time when you wanted to become more fit. What exactly does that look like? What does the being fit mean to you? It rises it so many questions that you don’t know what you’re trying to achieve. Being fit is like saying I want to save more money in the future. What are the actions you can take now to save more money? Exactly how much do you want to save?

In my research of habits and goal setting, one of the easier acronyms to keep your goals actionable is using the SMART goal setting technique. I use this technique to make sure  that my goals don’t leave me in a direction where I cannot achieve them or have a gray area of what I’m looking to do.

SMART stands for

  • Specific: Pick a specific area for improvement.
  • Measurable: quantify, or at least suggest, an indicator of progress.
  • Attainable: Is the goal something that you can achieve?
  • Relevant: Is the goal going to fulfill you as an individual
  • Time Bound: When will you complete the goal?

Next post will be examples of what I will be planning for 2016. See you soon.

Key to wealth: Tracking Your Expenses

HighOnHI

photo by: HighOnHawaii

Can you tell me what your income is? Not your annual gross income, but your net income. Do you know about how much you spend on non-essential expenses?

A Gallup poll from June 2013 says that 32% or one out of three people “prepare a detailed written or computerized household budget each month that tracks income and expenditures.”

If you’re the one out of the three good for you. If you’re, not listen up.

Where is it all Going?

A poll from SunTrust Bank  noted that almost a third of Americans making over $75,000 a year are living paycheck to paycheck. 44% of the people polled, blamed their situation on lifestyle purchases such as dining and entertainment. Tracking your monthly expense allows you to know where you are spending on lifestyle purchases.

Write It Down

If you’re not making it a habit of tracking expenses, you’re making it a habit not to.

Start at the beginning of the month and keep an account on excel or in a notebook so that you can make sure that you log anything that you buy for that day. This is so that you can keep a running total of what is going on in your financial life. When you get paid make sure that you add on to that list too. As the month goes on, make a financial health check and see how well your doing. You might find out that you’re spending too much during that part of the month, and you’ll be able to make the necessary adjustments.

Build a Lifestyle

It doesn’t matter how much or how little you make, the reason why you’re living paycheck to paycheck is the same reason. If you’re spending money on things you can’t ever remember buying, you won’t figure out what where the problem lies.

It’s important to keep in mind that this exercise is to allow you to make better decisions about your money. As you get better at tracking, you’ll figure if you like to “Treat Yo Self!” more than you like to save moeny for a later date. It’s about creating financial awareness and creating positive money habits.

I look forward to writing about the different types of budgets in the future.

4 Things to Plan for Before Doing a Balance Transfer

ThreeIfBySea

Photo credit: threeifbysea

In my experience there are advantages and disadvantages of getting a balance transfer. Of course you can save interest on higher end of the card if used correctly, but there are things to take into consideration before you go through with the credit card balance transfer.

1. Introductory Rate Period / Balance Transfer Period

In balance transfer, you will have an introductory rate period / balance transfer period.  You will need to make sure that you pay off your transferred balance before this period ends. If not you will be charged the current rate on remaining balance on the card. The balance can be anywhere from 10.99% to 19.99%. Typically the balance transfer period will be anywhere from 9 months to 15 months.

The interest rate free period is to lure new customers so that they use their credit card. This is so that the credit card company can collect interest on the balance of the card.

2. Plan to Pay off the Balance

Make sure to have a plan and stick to it. You will want to take your balance transfer amount and divide it by months when the 0% rate is active. This is so that you can stay on track to take full advantage of the balance transfer period.

If you don’t plan your payment schedule, you may end up paying more interest than you had thought. If you don’t feel confident that you can stick with the payment for 9 to 15 months don’t go through with the balance transfer.

3. Fees

Fees can come in different ways when completing a balance transfer.They can come as a minimum fee of say $10 and or a percentage of anywhere between 2% to 4% of the balance transferred. It also can be a combination of the two.

To make sure that you’re getting a good deal on your balance transfer, make sure you calculate the fees that you may incur and what you would have paid by paying down the credit card normally. You can easily go to Bankrate.com and use one of the credit card calculators to find out how much interest you would pay on your credit card.

4. Will you be Using the Card?

If you plan putting using the credit card you are that the balance transfer is going toward, think again.

Generally you lose normal benefits that you have with your credit card. The one that is most important to me is the credit card grace period. This is  where you are not charged interest if you pay your balance off in full every month on normal expense.

Another kick in the pants is when you make a payment on your credit card. Your payment will go to the balance transfer first before being used to pay the principal amount on your most recent purchases. This means that you will be charged interest on your purchases, and the interest will continue to grow as long as you have a balance on your “transferred amount”.

Side note: If you do have an personal loan or a debt that is not on a credit card, you can still do a balance transfer. All you would need to do is enter your checking account information and the credit card company would send a check to your checking account. I recently did this and received the funds after about two weeks.

Be careful before you take advantage of a balance transfer. Until next time.