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.

How Did I do with the “5 Year-End Financial Things To Do Before 2016”

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photo credit: ge_keoni

Original post is at 5 Year-End Financial Things To Do Before 2016 at MoneyNing.com

Almost 3 short weeks before the end of 2015, and we are all frantically looking for last-minute gifts and getting ready to fill our schedules with holiday parties.

Things we need to look at for the end of the year should be filled with joy and get us ready for 2016. based on the article at moneyning.com, see how I have done and currently doing.

1. Review Your Yearly Budget

Looking back through the year I made some terrible choices when it came to debt reduction. I didn’t do very well with investing my money as well.

I feel that being honest with myself in this next year is going to shed light on how I will truly be able to get out of debt. I have already set up automatic payments to get out of debt, and I will not change those automatic payment for any reason.

2. Max Out Your Retirement Contributions.

In October I was able to max out retirement contributions in my step IRA. that is currently where the bulk of my retirement money is sitting.

I’ve been thinking about adding to a Roth IRA this year, but I haven’t been able to find the funds to be able to do it. Currently, I don’t feel a rush to contribute to a Roth IRA . With the current tax rules, I have until April 15 to make that decision.

3. Donate to a Charity

I make monthly donations to the organization EQUIP  at www.iequip.org Which is an organization that has been Co-Founded by John C. Maxwell and Larry Maxwell.

Their vision is to “see effective Christian leaders fulfill the Great Commission in every nation.”

This doesn’t have to be your cup of tea, but this is an organization that I believe in.

4. Spend what’s left in your FSA

I don’t have money in a Flexible Spending Account (FSA), so this isn’t a problem for me. An FSA might be an option in the future, but I haven’t found out how it could fit into my financial plan yet.

5. Prepare for 2016

Currently I only have a W-2 Income and I don’t need to have a lot of paperwork.

To alleviate any problem of searching frantically for anything during tax time is to continually update and maintain account information as the months close.

Overall, emotionally and spiritually I feel more prepared for 2016 because I’m putting plans into place to pay off my debt, and take more steps to building wealth.

Two things I plan to take action on in 2016 are to

1. Reading more about Warren Buffet and Benjamin Graham so that I can take steps to invest wisely in companies that have depressed stock values that have a high probability to rise in the future.

2. Continue with my debt snowball

3. Raise my net worth over from negative to positive this up coming year. I only have $14,866 to go until my net worth is positive.

Net Worth November 2015

Stairway to Heaven - Kyle Gendary

pc: kylegendary

Here is my first real net worth update. It feels a little intimidating putting this out to the world.

I’ve read many articles and stories saying that people would rather speak in front of crowds instead of talk about their finances openly. Maybe it’s because they have  little bit of shame hiding within themselves to let out the truth.

Being able to talk about my net worth with real numbers is tough. I feel that it will keep me accountable for where I am at, and where I want to go in the future.

Net Worth 113015

Total Cash and Bank Accounts (+$857.06): This consists of two life insurance polices that I use as banks. I am able to freely loan from it. Annually there is a dividend that is given, and it grows at 5%.

IRA(-$3.90): My investments didn’t do too well this month. I’ve invested 70% it into a Vanguard total stock index and 30% into a total bond index. I’m glad that I get a dividend every month from the bonds, and a quarterly dividend from the stocks.

Credit Cards(-$2,586.16): I ended up borrowing money from my life insurance policy to pay off a balance transfer a while back. The terms of the loan made it more costly than I had hoped.

Tax (-$267.37): I ended up having to pay some tax to the federal government a while ago, and I am deciding to pay myself back for that. It also goes into my emergency fund.

With my current payment plan, this debt will be paid of by February.

Car (-$233.59): I’m paying myself back with interest on this loan. I’m excited because this allows me to put it back into my cash account.

Do I see my car as an asset? Not really. It doesn’t appreciate in value over time, and I don’t plan on selling this car or trading it in for another car anytime soon.

Student Loan (-$172.20): 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%.

You may say that it’s kind of dumb to have my money in a life insurance policy vs paying off my student loan. After running numbers, I’m actually getting more money back by having the money compound in my life insurance policy. (I’ll explain this more in a later post)

Misc Loan (-$3.24): This consists of money that was used in a bad way. This actually has some debt I paid off because I tried to do a balance transfer to see if it would work in my favor. In a short answer, it caused more headaches than I would like to admit.

I also used some money in my cash account to pay for the balance transfer on my credit card. I’ll be paying myself back on this as well.

Overall, the progress is going in my favor. Slow and steady, and having a specific plan will help me pay down these debts.

3 Reasons to Keep a History of Your Financial Information

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Working at my computer last night I found that I had added a duplicate bank account in the Quicken, and I didn’t know how to fix it. I spent about 45 minutes trying to fix the problem, and then I got frustrated. I had a bright idea , and I thought to myself “Quicken has a restore function, lets restore the system when I didn’t have this problem.”

Before I did the “Restore to a Previous Date” function, I decided to do a backup before any major changes. After the backup completed, I started to download all my bank information from their websites, and then I thought I was almost done.

I got to one of the accounts that I manually put into Quicken, and my heart dropped into my stomach. I thought I didn’t have the information. Luckily, I remembered that I just did a backup. It’s a good thing that I did because I forgot to download information for two accounts.

Two hours later, the restoration was complete and I learned three very important things.

1. Keep Good Records of Your Financial Information.

You never know when you’ll need fix a a problem with a computer program or when you’ll need to report records to your accountant. Having a good system to keep your financial information intact is a must.

Make sure you keep a lock box or an area designated in your home for your important financial records. You never know when you’ll need your social security information, life insurance policy, or passport.

For electronic records, properly have information saved where you can easily access it. Have a system of backing up the information once a month.

2. Money tells a Story

Your financial information tells a story of what you did in the past and what you spent your money on. Recently it reminded me of being able to take my father-in-law out for his birthday. It was fun and we had a great time trying new food.

It also tells you of the mistakes that you have made financially in the past like taking out student loans and not paying them back, or having invested in business deals that didn’t go well.

Your history is a learning tool. Learn from your mistakes and success and use that information to make better decisions in the future.

3. What You Spend Your Money on is what is Important to You

It took me a while to understand, but where and how you spend your money says a lot of where you spend your time. A great teacher said “Where your treasure is, there your heart will be also.

Rick Warren said “Here’s how you know what’s really important to people: Look at their calendar, and look at their bank statement. The way we spend our time and the way we spend our money says what’s really important to us.”