Sunday, March 26, 2017

Compounding Makes A Difference

     A couple of postings ago I suggested that you start to save $20 or even $40 out of every paycheck. I also suggested that you do this for a year with out touching the money set aside. What might not seem like a lot does add up. It adds up to financial freedom. Now I want to visit the idea of compounding interest.

Table 1
     As I have demonstrated in some examples in the past, compounding interest does not make you instantly rich. In fact, it will be quite some time before it will do anything of significance to your financial stability. What I am looking for here is to squeeze every penny possible out of making your money work for you.

 
    If you refer to Table 1 you can see that your first end of the month interest payment for January is only $.10. Even after your first year the payout at the end of December is not significant at $1.32 per month. This gives you a meager $8.22 for the entire year, nothing that one can live on or even get rich off of.


Table 2
     After 10 years it is starting to look a little better. In December of your 10th year you can expect to be receiving $15.14 in interest per month. That of course is not much but remember it is $15.14 per month that you did not have to work for. It is because the money you saved is now working for you to earn you money. That comes to an extra $869.74 that you would of never had and that you never had to sell your time to earn it. Just imaging what you could do if you saved $40, $60, $80, $100, $500 or even $1000 per paycheck. Just imaging where you could be.
    The nice thing is that I have already calculated these numbers out and they are rather impressive.  Just see the listing below to realize the power of compounding in just a 10 year span of time.


$40 Investment per paycheck = $30.27 per month interest = $1,739.49 total interest earned.
$60 Investment per paycheck = $45.41 per month interest = $2,609.23 total interest earned.
$80 Investment per paycheck = $60.55 per month interest = $3,478.98 total interest earned.
$100 Investment per paycheck = $75.68 per month interest = $4,348.72 total interest earned.
$500 Investment per paycheck = $378.41 per month interest = $21,743.62 total interest earned.
$1000 Investment per paycheck = $756.83 per month interest = $43,487.24 total interest earned.

     Now just imagine what you can do with your money if you started saving when you are 18 or 20 years old and saved like this until you wanted to retire. How much would you have. Now I am going to burst the bubble just a little bit, but I have to before any of the financial geeks out there try ripping me apart for not taking into consideration one major issue with these calculations. I never took into consideration taxes. Yes, we do have to pay annual taxes on what we earn. That cuts into the interest that can compound and will significantly decrease the ending totals that I have come up with. I chose to do these calculation with out the consideration for taxes because there are ways to save and compound the interest with minimal taxation or even no taxes.You will have to eventually have to pay taxes it just is a matter of when you pay the taxes, before or after you have compounded your money + interest.

Everything that I write are the results of my own research. I strive to provide the most accurate information possible and cannot be responsible for any errors. I am not an accountant or a fiduciary. Before investing or using any of my ideas it is advisable to consult a financial professional. I am not responsible for any financial loss that might occur through the use of my ideas. Do your own research and come up with your own answers. The examples that I provide are just that, examples and are meant only for the purpose of teaching cash flow and ideas for possible investments. 





Tuesday, March 21, 2017

When All Else Fail...Having Liquid Assets Will Be A Lifesaver.

     Well, I was going to do a follow-up to the last posting but it will have to wait. I figured that this message would be more important. Just hours for leaving for a vacation to New York and to Ontario I found that I would be traveling with out the credit card that I was going to put every thing that I would spend on this trip. It was not an option any more.

     I called the credit card company and found out that my credit card was disabled several months ago. There was no problems with the account it, unfortunately it was shut off because they had sent me new cards with the chip in it. I still have not seen any evidence of having ever received these cards. They as sending new cards out but with less than 24 hours before my trip starts the cards would not get to us until half way through the trip. This could be a problem.

     What saved the day was the fact that I have liquid assets to work with. I was able to transfer some cash around and position it into accounts that I can use on my trip. I am able to pay for the entire trip with cash. This is something that I was not able to do just a few years ago. I have spent the time educating myself and putting the financial safety's into place. This has been a lifesaver.
     When I get off of this vacation I will be replacing the cash that I am spending from my savings. This is a very important thing to remember. In order to take from the savings account you must replace the cash in the savings account.  This way you will never run out. I am fortunate enough to have this ability to do this quickly. For others it might take more time, but you must remember to do this because you never know when another situation will arise and you will need to have that money.

     Having liquid assets have saved me this time and it is a great feeling. This however is just one branch of my financial freedom plan. In all reality I have 3 branches of this plan already in place. I have a job which is feeding cash into covering my financial obligations/bills and feeding more value into my other two branches. I have a savings a plan by utilizing a money market account. This enables me to maximize what little interest I earn off of my cash that I have set aside for the occasional emergency. I also have put into place a more risky investment with the stock market. I currently own stocks in seven companies in various sectors.

     This is not however the end of my path leading to financial freedom. I have put together a portfolio of affiliate companies that I represent. In other words I select companies that I feel that I want to promote because of similar interest, the right products or popularity with the shoppers. These are companies that I have contacted and requested to become an affiliate. In the beginning there will not be a significant income coming from these companies but as you promote these companies and you build a follower base the money will start to flow in on a regular basis and will start adding to your income.

     The purpose of this posting is to let you know that by investing in yourself can be a lifesaver and that it actually works. I will be back soon with more tip, tricks and ideas that will assist you in becoming financially free from the slavery that money has imposed on us and allowing us to control the money to working for use. Hope you have a wonderful day and I will see you soon. Next stop, Canada.


Everything that I write are the results of my own research. I strive to provide the most accurate information possible and cannot be responsible for any errors. I am not an accountant or a fiduciary. Before investing or using any of my ideas it is advisable to consult a financial professional. I am not responsible for any financial loss that might occur through the use of my ideas. Do your own research and come up with your own answers. The examples that I provide are just that, examples and are meant only for the purpose of teaching cash flow and ideas for possible investments. 

Tuesday, March 14, 2017

It Takes Money to Make Money

Everyone understands that it takes money to make money. The problem is that most do not have the money for basic survival let alone investing it to make more money. If I have a limited income and it all has to go to basic needs and then struggles to cover the bills, there is nothing that I can invest. In decades past it was profitable to put money into the bank and one could "pull" a paycheck off of the interest that the savings account made. It might not have been much but that was how people planned their retirements.

For example, If I had $100.00 in the bank and the interest rate was 8% v.s. the .25% that we have today that was a significant amount of interest. This is can be seen in these calculations.

$100.00 * .25% = $0.25
$100.00 * 8.00% = $8.00

That is a significant difference. This is what was happening a few decades back. People would put their money into the savings account it was worth something.Their money was working for them. So, just to depress everyone some more let's look at the differences at $1,000.00, $10,000.00, and $100,000.00. using the above interest rates.

$1,000.00 * .25% = $2.50
$1,000.00 * 8.00% = $80.00

$10,000.00 * .25% = $25.00
$10,000.00 * 8.00% = $800.00

$100,000.00 * .25% = $250.00
$100,000.00 * 8.00% = $8000.00

So, that seams to be more than a little depressing. Is there a way to make that much interest in today's world? The answer is yes but it is very difficult. Unfortunately, we will not be exploring this issue today. What I want to do is work with the money and the rates that you have accessible today. That means start putting money in the bank so that you have some security if you loose your source of income. We must strive to set aside a few paychecks worth of cash in order to be secure if there is a change in our employment. So this might see like nothing much but it is a start. 

A lot of the jobs out there are giving a paycheck every two weeks some are weekly and a few are monthly. What I want to focus on is the paycheck that is received every two weeks. I also want to remind you that this is not a super fast process but it many times is the only option and the least risky option. It does not make a difference if you make  $100, $500, $1000 or more per paycheck, the principle is exactly the same.

If you are paid every two weeks that means that you get 26 paychecks a year. For this example I will be using the idea that you are making $1000.00 a paycheck. Any you can save into the bank any amount of money that you can make do with out. In this example I will be assuming that you can save just $20.00 a paycheck. 

The first thing that you want to do is take the first deposit and open a savings account in a bank. It would be best if it was a account that you could have $20.00 deposited directly from your paycheck. Some employers allow you to break your paycheck into more than one deposit account. If your employer does this great if not make sure that you deposit this money and don't touch it. This is your lifesaving account. This is only to be touched if you loose your source of income. It would also help if this account was not easily accessible to you. I have had bank accounts in other communities or other states that were difficult to access so that I could not dip into that savings. 

Now let us look at how much you can save in just that one year period of time. Remember we have 26 paychecks of $1000 and we are going to save $20.00 out of each paycheck. Here it goes;

          Amount of Deposit             Amount Saved
  1. 20.00                                   20.00
  2. 20.00                                   40.00
  3. 20.00                                   60.00
  4. 20.00                                   80.00
  5. 20.00                                 100.00
  6. 20.00                                 120.00
  7. 20.00                                 140.00
  8. 20.00                                 160.00
  9. 20.00                                 180.00
  10. 20.00                                 200.00
  11. 20.00                                 220.00
  12. 20.00                                 240.00
  13. 20.00                                 260.00
  14. 20.00                                 280.00
  15. 20.00                                 300.00
  16. 20.00                                 320.00
  17. 20.00                                 340.00
  18. 20.00                                 360.00
  19. 20.00                                 380.00
  20. 20.00                                 400.00
  21. 20.00                                 420.00
  22. 20.00                                 440.00
  23. 20.00                                 460.00
  24. 20.00                                 480.00
  25. 20.00                                 500.00
  26. 20.00                                 520.00
Now after that you have officially saved enough money to survive a week without a paycheck. Keep it up and year after year this savings will become bigger and bigger. It will also give more security if you put away more money. Let's say that you save $40 each payday. That will just allow you to get to that goal and security twice as fast. and on top of it none of my calculations took into consideration the small amounts of interest that is compounding in your bank account. Money that is given to you just for keeping your money in the bank. It will not be much but it is more than you would of had if you spent that money. 

I will leave you today with the calculations of keeping up the $20.00 per paycheck for the next several years without that interest factored in. That will come in another posting.

     Year   Amount
  1.   $520
  2. $1040
  3. $1560
  4. $2080
  5. $2600
  6. $3120
  7. $3640
  8. $4160
  9. $4680
  10. $5200
Now we are getting somewhere. You have gained security and the ability to grow your money even faster. I have not even taken into consideration compounding of interest, this this is enough for now.

Have the most wonderful day and don't forget to pay yourself.

Everything that I write are the results of my own research. I strive to provide the most accurate information possible and cannot be responsible for any errors. I am not an accountant or a fiduciary. Before investing or using any of my ideas it is advisable to consult a financial professional. I am not responsible for any financial loss that might occur through the use of my ideas. Do your own research and come up with your own answers. The examples that I provide are just that, examples and are meant only for the purpose of teaching cash flow and ideas for possible investments. 

Saturday, March 11, 2017

DO NOT FORGET TO PAY YOURSELF!!!

     We complain about not having enough money to do the things that we want to do. We complain because all of our hard earned cash all goes to paying the bills. We seem to do a lot of complaining but what we are not doing is taking the necessary steps to make change happen. So, let's start trying to get you a steady income using the money that you already have. And it might just be easier than you thought.

     For most of us every couple of weeks we get a paycheck from an employer. We take that paycheck to the bank, cash it and commence buying the things that we need and/or want. Then at some point before the arrival of the next paycheck we struggle to make ends meet because there is to many expenses that are not covered when the paycheck runs out. Then when the next paycheck arrives we perpetuate that cycle. We never seem to get ahead of the bills and the savings account is dry.

     It is suggested from the financial guru's is that we should have enough liquid investments that we could comfortably live if we lost our source of income. It is suggested that we put somewhere in the range of three months worth of income into an easily accessible account. But how much money you put away is really up to you. Some people could be comfortable with three months, others at six months, and still others might not be comfortable until they have twelve months saved. The reality is that most will never get to the three month mark, let along getting to the twelve month mark.

     I really struggled with the same issues, but I decided to take charge of my finances and take charge of my life. I have not yet achieved financial freedom, but I am also well on my way. How did I do it? I educated myself. I taught myself a new way of financial thinking, and it is not the same way that has been handed down from generation to generation. This is to most people a new way of thinking. I say most people because the rich are already doing their finances differently.

      I have several methods of paying myself. One of the ways is to simply put cash into a savings account. Fortunately I was able to find an account that pays out a higher interest rate than that of a standard account. The other thing is my account has a sliding increase in interest according to a predetermined amount cut off.

     The other thing that I do it utilize a cash back credit card. Now I would not suggest getting yourself a credit card it you are not disciplined to pay off the entire balance every month. I can say that I do not pay off my card every month but what I do is pay off the money that I have been putting on it for my day to day expenses and now that is the only thing that I use that card for. I am slowly paying down the balance but I also have a strategy.

     This credit card is giving me a 1.5% cash back for each and every purchase that I make. If I shop at a warehouse store during the year of 2017 I get a 3% cash back, that is a great bonus that my card is running this year. Every Friday I take that money that I get as cash back from my credit card and I deposit into my money market savings account. That is a great thing. If I did not have a cash back card that money would have been gone forever. Now I am at least putting part of the money I spent into an account and by doing this I am paying myself. I have cash in my account that I have spent on my daily living which I keep adding to every Friday and on top of that this money that I have spent on feeding my family and paying my bills is also earning me interest.

     So let's wrap our heads around this. My money that I spent on living is sitting in a money market savings account making even more money for me through interest. That is awesome. You might say that it might not be worth it because the interest earned is not worth much. True, but remember, this is money that I spent and it came back to me.WOW! My money is finally working for me. I am not touching that money no matter what until I can truly obtain financial freedom.

      What I have done is started to diversify my finances. What I have shown you today is just one thing that I do to start making my money work for me. Stand by for more ideas of things that I am actually doing, planning on doing, or researching how to do it.

     It is really up to you to break you out of the financial slump and start making your money work for you instead of you selling your time and working for money.

If you want to help support me and help me help you Please support the companies that are listed under my affiliate links at the top of the page on the right side. Use these links to shop with these companies. The links are specifically assigned to me so that I can earn money a commission from these companies. The more financial assistance that I get the better that I can assist you in your financial education.

Thursday, March 9, 2017

Follow the Money

Following the money can be a complicated task, especially if you have it going to many directions. In order to follow the money you must write it down somewhere. You cannot keep it in your mind or located with the companies that are billing you. You need to have it on one page of paper, two at the most. It can be done.

At one point in my life things were so bad financially that we went to seek counseling with a credit counselor. After reviewing our information the counselor said, "there is nothing more that we can do that you have not already done". They suggested that we find more money by picking up more employment. Well I can tell you that was not going to happen. My wife and I were working split shifts already and someone had to be home with the kids. If I one of us was to work when the other one was working the cost of daycare would have quickly eaten up then extra paycheck and some. Besides that I was working in a profession with good pay and I had to be available to be on-call every other week for a week at a time.

We considered bankruptcy, but that was not going to happen either. Even the credit counselor said that it would not benefit us enough. The reason being that a large portion of the debt was from student loans. They the greatest portion of them were federal loans and could not be touched even with bankruptcy. Wow! Now what.Well I can say that that was a decade ago as of 2018. We have come along way since then.

We did what it took to get out of that hole. We managed our money down to the pennies. We implemented the "envelope" system and calculated how much money we needed in each envelope in order to make it to the next paycheck. We also set money aside for bills that would come up through out the month. We ran our house like a business. We categorized the envelopes with everything from groceries, gasoline, electric, pet care, entertainment, household supplies, etc.  Right now I cannot remember the exact number of envelopes that we used but I know that we kept them in a 4 inch 3-ring binder and it was full.

When I say that we ran the finances like a business I mean that we looked at each envelope as separate accounts. If we borrowed from one envelope because another one ran short we added IOU's to the envelopes from where we took the money. Then when the next payday arrived we paid off the IOU's first so that we would not be short in those "accounts". Now that is not to say that we did not add another IOU to the envelope, but at least they were paid up every payday.

It is now nearly ten years later and I have no need for the envelopes. I have moved to a new system and this works great for where we are in our lives right now. I am able to add to the savings, invest in stocks, and enjoy spending a little extra now and then on entertainment. Am I to where I want to be? Not yet. I am getting closer and closer to the end goal every day.

To the right is a snap shot of the actual spreadsheet that I use to visually understand my finances. I fill out one of these sheets each and every month.
Now I not saying that you need a fancy spreadsheet but you need to set up each of the categories on a sheet of paper so that you can see what you have and where you have it. If you have more than what will fit on the sheet you can turn the paper sideways and put two categories, income and expenses on one side and assets and liabilities on the other side. In the beginning I had to use separate sheets of paper for each of the assets, liabilities, income and expenses.

Do the best you can and your financial information into the categories that you think are the right ones. Don't worry if it is not 100% correct. You will learn that soon. Before long you too will be managing your money like a pro.

Wednesday, March 8, 2017

The Need for Money and Money Management

As a society we have become slaves to money and to those who poses it. We are destined to work long hours at jobs that we may or may not like just to keep up with the pile of bills. Not only that business' have learned by using some psychology how to manipulating us into thinking that we must buy or use their products.

Now spending our hard earned money is not a bad thing. That is why we slave at our jobs away from our homes and families for. Where the issue lies in when we start replacing our needs with our wants. When we make our wants into our needs.

It is just fine to want to have things that make us happy. It is OK to buy that new car, big house and the best TV that money can buy. The challenge is to buy these things without them becoming a burden financially on us or our families. So how do we go about making purchases without the burdens? I feel that there are two steps in this process. First, we must understand what we have financially and how much extra we have after our needs are taken care of. Secondly, we must use only our excess funds for the purchase of our frivolous. 

Now you might agree with me that the best of the best TV's is a expense that falls under the wants and not the needs, but certainly the car and the house are needs. We all need to have a car to get us to the job so that we can earn more money and we need the house for our families to live in. These are facts that I am not denying. What I am looking at are cars that cost more than our budgets allow for and houses that surpass the basic needs of keeping our families and possessions safe and sound.

If I asked you to tell me how much you earn and where all of that hard earned paycheck goes could you tell me? Give me a financial statement that outlines how much you earn each payday. Do you know the average amount you make per paycheck. What about your bills. Do you know which bills are due when,? How much balance are you carrying on the credit cards? What is the maximum amount that your card is good for?  Give me a detailed snapshot of your financial profile in one hour. Can you do it?

As for me I have created the financial snapshot and can produce a monthly copy of my finances in about 10 - 15 minutes. Now I am not saying that I have it down to every last penny but I know where my money is and can produce a one page financial report. On this report I have a listing of all of my income, expenses, assets and liabilities. In other words this one page report has everything that I earn, spend, owe and save each and every month. Before you can free yourself from being a slave to money and to finally become a money master you must understand what you have and where it is going. 

What I want to challenge you to do it to write down the following information for last month. Make these four columns on a piece of paper, Income, Expenses, Assets, Liabilities. To the best of your abilities fill this out. You should not be looking for perfection at this point but rather a financial snapshot to the best of your understanding. Don't worry if it is not 100% correct. That will come over time. In order to achieve that perfection you must take the first step by knowing where your money is and where it is going.

As you learn more you might realize that you have miss classified your money, especially when it comes to the assets and liabilities. Take the first step today with the knowledge that you have today. It can be tweaked as you go from financial infancy to becoming a financial master.

One last thing that you might be wondering. Where did I learn all of this? Through lots of research, reading and listing to those who are already masters in this area. The great financial gurus do not hide their secrets from us. In fact they freely, or at least the cost of a book or seminar, give this information to us. The problem is that we are resistant to changing when it comes to our financial health. For most it becomes a topic to avoid rather than something that we talk about with our family and friends. 

Food for though. If you became physically sick would you seek the help of a doctor to help make you better? There are financial professionals out there ready to help you with your financial health.

Tuesday, March 7, 2017

A New Journey...Somewhat.

I am just trying to do what everyone else is doing, trying to stay afloat financially is these shark infested waters. I am new to this...what! What? Heck no I am not new to this. I have been swimming in these waters for nearly 30 years. Treading water just struggling to keep my head above the water.

Well after 30 years I think that I have finally learned how to get out of the water and head for the shore. I decided that if I have tried something for nearly 30 years and it was not working then maybe I should make a change. Here is the thing that I hinted about in the first sentence of this blog.  I have been doing what everyone else is doing. I decided to make a change and do something that goes against the common financial beliefs.

As of now I am no longer treading water and standing just off shore. Though I am still in the water, I can touch bottom and with every step that I take I am rising farther and farther out of the water. I have positioned myself to have great financial gains in the near future. I am no longer living paycheck to paycheck. However, I still cannot survive long without the paycheck. Each day I am making my success happen.

I want to take you on this journey to freedom. I want you to see me get out of the oppression of money that I have been living with for most of my life. I want to help you and teach you what I have learned. It is not to late for me and I will teach you how to achieve the happiness that I have achieved.

This is a new blog so there is nothing proceeding this posting. Just add yourself to follow me. I know that you will not be disappointed.