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.

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

Goal Setting 2016 – Part 1 SMART Goal Setting

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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.

Personal Finance in Paradise – Debt Elimination Series: Part 3 – 5 Step Plan of Attack toward Debt

Wailua Falls. Kaua'i

Photo by: thisworldexists

In this final step of the process. This is where you plan your month before you start it. This is like an architect who begins the process of building a house. You start with blueprints and then you begin the building process with raw materials to start the foundation. Your budget and debt snowball is the blueprint and the building of the house are the actions you take to get out of debt (budgeting).

You can do this on Microsoft excel or a notepad.

Step 1 Income: Start your month with your first paycheck and have this at the top of your sheet.

Subtract your fixed expenses first. This will let you know how much get to spend for the rest of the month. Then subtract the amount you may need for variable expenses. This will give you the remainder that you can spend on anything that may come up.

At this point, every time you make a purchase subtracted from your paycheck amount. This is going to keep a running tally of how much you can spend for the month. This will keep you from going over budget

Step 2 Fixed Expenses:  Find out what your monthly recurring expenses are.  They are typically savings, cell phone, subscriptions, donations, student loan payment, car payments, health and life insurances. It’s best to know theses expenses before you get caught in a crisis. You will probably end up having to use your credit card to pay for these expenses, and then get further into debt.

Savings is first on the list because your goal will be to live the remaining money. Trust me, you will be able to make better judgments throughout the month with the rest. You can start saving with 1% of your income. Get your feet wet, and over the months, you can increase the amount you save by 1 more percent.

My car insurance is paid every six months, so I take the total amount and divide it by six. It helps me to break down the payment into smaller manageable amounts instead of having to come up with $360 in one month.

For instance, if you have a car insurance to in January for $360 you would take $360 divided by six to get $60 dollars which would you will put away in either a savings account or leave in your checking until it becomes due in January.

Step 3 Variable Expenses: Like I said in the previous post, we are bad at estimating our true expenses. What we want to do here is get a general idea of what we may be spending in each category of non reoccurring expenses and then add 25%. It’s better to overestimate than underestimate your expenses.

These are things like groceries, gas, and other miscellaneous expenses that you may come up with over the month.

Remember for the categories, like groceries, make sure to add what you spent as an expense, and then subtract from what you had set aside for groceries for the month.

Step 4 Tracking: Take your notepad and and pen, and every time you use your debit card, credit card for use cash, will write down the expense. What you are doing is keeping a register of the expenses you have during the month.

The act of writing your expenses will keep you accountable to yourself. It also makes you think about what you’re buying. For instance, will I need this extra water bottle? Will this handbag be worth it in the future?

Step 5 Make Adjustments: If this is the first time you’re making a budget, you will make mistakes and overestimate expenses. This it took me a few months to get a handle of what I could pay for variable expenses. It’s a learning process and the more you track, the more practice will get by doing it.

Let me know your thoughts and if you have any better ideas please let me know.

See you soon

Personal Finance in Paradise – 3 Steps to Achieve Your Goals (which helped me pay off $35,000 in debt)

Stairway to Heaven  pc: @ricahyokoi

The New Year is coming around and about time when I personally start thinking about my goals for the the next year. I feel it’s always good to update yourself on how you are doing on your goals. Another good habit is to continually make new goals as you complete others that you have finished.

One of my goals is to go to the CrossFit box here in Honolulu at least 2 to 4 times a week. Sometimes I don’t go because I’m not motivated. It’s good for me, but at the same time we all go through the love-hate relationship at the gym.

My current financial goals are to payoff at least $10,000 of debt, which will also increase my net worth by $10,000.

In my studies and my own personal practice, there are practical ways to reach your goals, which are easy to do and also easy not to do. when I was able to pay off $35,000 of my debt, before I was married, I followed the following steps:

1. Define Your Goal

This is where you decide what you really want. My goal was to get rid of debt, and I had choices to make. Like I said above, my goal is to pay off $10,000 of debt. This is attainable and specific.

A good outline is using the SMART criteria for goal setting. It’s a good way for you to gather your thoughts, and to know the general idea of where you are going.

Specific – target a specific area for improvement.
Measurable – quantify or at least suggest an indicator of progress.
Assignable – specify who will do it.
Realistic – state what results can realistically be achieved, given available resources.
Time-related – specify when the result(s) can be achieved.

2. Plan what what small steps you’re going to take

Define the most important tasks that you can make so that you can get to your goal.

Be specific  with what actions you are going to take. Some people call this having a black-and-white goals, meaning that there will not be any gray area of what you can and cannot do.

For instance if you’re going to pay off a specific amount say $650 a month to your credit card bills. there is no gray area, it is a specific number and you know what you’re going to have to do.

3. Define your “Why”

Getting to your goal is easier when you know what you’re trying to achieve and why it is good for you. My why was getting to travel to Taiwan, and be able to fly around the country with friends.

This is the motivator for you and only you. There will be trials that you will go through reaching toward your goal. Getting on to the road of wealth creation is a marathon. Sometimes you just want to quit.

4. Take Action and Celebrate the Small Wins.

People find it more motivating to be partly finished with a longer journey than to be at the gate of a shorter one.

Once you start, you’re already that much closer to the finish line than you might have thought.

For your money this is where you track your expenses when you make them, and to enter it into a program like Quicken where you can see what you have done with your money. This allows you to have a history of what you’ve done, and it lets you know where you have spent your time.

It’s also writing down your expenses at the end of the day. It’s a transitional habit because you become more aware of what you are spending your money on, and you know you have to be accountable for tracking where every cent and dolalr goes.

While I’m Crossfit, and I’m looking at the countdown timer to see how much longer I have until the clock with hit 00:00 or counting the reps until I’m done with the workout, I celebrate the time passing by  doing another rep or seeing the clock tick away. I know that I’m almost done with the workout no matter how grueling it can be.

The steps are easy to do and also easy not to do. at least, for me, it gives you a framework of setting goals and achieving success.

Personal Finance in Paradise – Veteran’s Day – How You Handle Your Money: Mindset

How mental accounting affects your spending

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It’s Veteran’s day!

I want to thank all the veterans who have served our country. Thank you for being able to protect the freedom we take for granted and are able to take part of today.

Let’s talk about how we label money affects our buying decisions as some of us shop online and at the stores.

The Scenario

Let’s say this morning you wake up and start the day off great with a good breakfast, and you even got to sleep in. Then you go online and start shopping at your favorite clothing store site. You see a great looking shirt that you think you would look great in, and you buy the shirt on credit. For the moment, it makes you happy, and you don’t give it a second thought because you can just pay it off later.

Later in the day, you go on a hike with a few friends and you have a blast being in the sun. On the way home, you see your favorite coffee shop, and you haven’t had anything to eat since breakfast. You remember that they the best coffee cake. You and your friends decide to go take a peak. Once inside, you find that your favorite barista is working. You ask him to make a large iced caramel macchiato. You have a few laughs with the barista, and he gets your name wrong again on your cup. You pull out your credit card again, and you notice you have a dollar and some change in your wallet. Feeling generous, you place the money in the tip container as you leave.

Then in the evening, you take it easy and you go to a movie with your friends. You have a great day celebrating veterans, sharing some laughs, and enjoying life. Then later in the month you get your credit card statement, and you are confused on why you spent so much. What happened?

Mental Accounting

Why did we decide to go out and spend more money than we wanted? We’ve fallen victim to mental accounting. It is a concept where we treat dollars differently depending on where it comes from and how we have labeled the use of that money. The difference is that when we pay for merchandise with cash or with checks we see immediate consequences. The obvious answer is that that we have less money to spend.

We place less value on money we put on credit cards because we do not see the immediate consequences. At the same time, we don’t see that buying merchandise on credit is more expensive because of the interest that gets charged when we use the card.

Small Amounts of Money

People who have harder time holding onto small amounts of money, like putting small amounts into tip jars, have a harder time saving money. It’s because that the money we have wasn’t labeled for anything important. I”m not saying that you shouldn’t be grateful and tip your barista, it’s that if money isn’t labeled for a specific use, we will find a way to spend it.

Takeaway

To get around mental accounting, place money in accounts that are labeled for a specific purpose. For instance, a savings account, which was marked for the down payment of a house. We would be placing a higher value on the account because it limits what we are willing to do with the money.

Pre-spend money before you have the chance to spend it yourself. Let me say it this way, have your money sent over to a savings account, or investment account before you have a chance to see it in your account. Psychologically it’s much easier to set your money aside this way than by writing a check to your savings or investment account.

Track your spending at the end of the day, and keep a list of your expenses.

Have a great veteran’s day. Please feel free to comment, and let me know if there’s anything you want me to talk about.

Personal Finance in Paradise – How to develop a Financial Plan

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“If you were to show me your current financial plan, would I get so excited by it that I would go across the country and lecture on it? If the answer is no, then here’s my question: ‘Why not?’ Why wouldn’t you have a superior financial plan that is taking you to the places you want to go?” — Jim Rohn

Many of us have never been taught how to develop a financial plan, and we walk through life guessing what is the next financial move that we should make. It’s possibly the main reason why people are live paycheck to paycheck.

It took me a year or two of research and testing to figure out what I wanted in my life. One thing I recommend is the worksheet from Missouri State University which is provided in the link. The worksheet is a good start point.

The process

1. Determine your current financial situation

One of my mentors told me that your net worth is your adult report card. We lose sight of how we are doing financially, and one way is to measure how we are doing is by looking at your net worth. My financial plan started out with me being $66,500 in debt in 2007 and no savings. I started to track every purchase, and it helped me to clarify where I wanted to go in the future.

Begin with how much you have saved up (in savings accounts, Roth IRAs, and other investments), and then subtract your liabilities (all of your debt from credit cards and loans). Begin tracking your expenses and organize your financial records.

2. Develop your financial goals

I wanted to get out of it the fastest way possible and not lose any of the activities that made me happy. I asked the following questions. It helped me find out where I wanted to be in the future.

  • What do you want for the future?
  • What do you want to achieve?
  • Do you want to save a certain amount of money a month?
  • Where do you want to travel?
  • What are your financial values?

3. Identify alternative courses of action

Seeing that my purchasing behavior and spending got me into trouble, I knew that the behavior was the first thing to change. I thought to myself “there’s nothing wrong with making mistakes with money. Learn from the experience and move forward.”

Remind yourself that there is no reason to beat yourself up over the situation that you’re currently in. Your circumstances can change. It’s a learning process and it’s alright if you don’t know everything now.

4. Evaluate alternatives

Because the $66,500 price tag was looming over my head, there needed to be a major decision to be made. How much could I put toward paying down the debt. After running numbers in my budget, I decided to put $1,250 a month to the debt and that was the first thing to come out.

Of course I had to give up a few luxuries like being able to eat out often. As I learned and searched for alternatives, I gained respect for money, and relearning delayed gratification. The choices you make now get will get you closer to your goals in the future.

Weigh the costs of the choices that you make. For instance, Can I make steady payments of $650 to my debt per month? What better choices can I make with my money so I can get to the $650 goal

5. Create and implement your financial action plan

After I decided to take action, all the stress and emotion was taken out of the decision making process. It ended up becoming a game of how could I make better decisions to pay the debt down faster.

Once you have made a few decisions on what you want, and the direction you want to go, it’s time to make that plan work. This is the testing phase to see if you are able to work with your plan, and if it will work for you. The hardest part of gathering all the information and planning is complete.It will be hard at first, and the process will be worth it because you are beginning to change habits that you didn’t know you had before. You are on the road to becoming better with money.

6. Review and revise the financial plan

Your first plan isn’t going to be your last. As you move along in life, your financial situation is going to change. My financial situation changed many times over the years. Yours will too. Trust in the process, adjust when you have to, and restart from the beginning when you have to.

For more detail go to wikiHow to get deeper into the planning. Let me know if this helped you, or if you have any suggestions please let me know. See you again soon.

If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us. – Jim Rohn

10 Things Americans Waste Their Money On

Dave Ramsey posted a while ago 10 Things Americans Waste Their Money On, and they are:

  1. Credit Card Interest
  2. Deal Websites
  3. Appetizers
  4. ATM fees
  5. Overdraft Fees
  6. Speedy Shipping
  7. Designer Baby clothes
  8. Unused gym memberships
  9. Premium cable packages
  10. Daily coffee trips

I agree that some of these are wasteful, for instance #1 and #4.  There shouldn’t be any reason why you should be paying fees on things you could get for free.

My personal experience with the top ten are

  • Credit Card interest – Since I have a balance transfer on my credit card, the company is trying to have me pay interest. I will be paying the remaining balance this month so that I won’t have to deal with that anymore.
  • Deal websites – I don’t shop on deal websites, but I do occasionally take part on deals when it comes to getting cheaper quality clothing. I like to shop at H&M or take advantage of workout clothes from Hylete.
  • Appetizers – If and when I go out with my wife or friends, sometimes I’ll order an appetizer as my main dish. It comes out faster and it’s generally cheaper than a whole meal.
  • ATM fees – I don’t pay these ever.
  • Overdraft fees – I have an overdraft account that helps me speed up the process of paying down my debt.
  • Speedy Shipping – normal shipping is fine for me. I’m not in a rush for immediate gratification.
  • Designer baby clothes – I don’t buy these
  • Unused gym memberships – I go to Crossfit a 3-5 times a week. So my membership is fully used.
  • Premium cable packages – My wife pays for Netflix, and I tend not to spend too much time watching TV.
  • Daily coffee trips – I don’t drink coffee

What do you think of the list above? How do you compare to what Dave Ramsey thinks people waste their money on.

Personal Finance in Paradise – Reason Why I started this Site

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I created this site because there are may people who are being taken advantage of in the their personal lives when it comes to money. I’ve read and learned, through my own experience, that personal habits and the way you think about money has so much to do with how you have a relationship with money.

It’s been on my mind and my heart to begin a site to let others know that, if you’re in a bad financial situation, it will get better in the long run. The current stress that you’re going through is temporary. My own experience has shown, through reading and dealing with the stress, it is going to be better.

My goal is to talk about my experiences, reach out to the community to help you build new money habits, see if you have any thoughts that could be holding them back, and teach others how they are being manipulated to buy things they don’t need, to impress people they don’t like, with money they don’t have.

I’m excited to see where we will go together in our journey.