A money/finance blogger should not be considered a true blogger until he or she writes a Ten Commandments-themed post on the topic. Here's the first one for me, with variants of the same theme to be written in future posts.
For some of you, when it comes to finances, you may be satisfied where you are. If so, kudos to you and perhaps you should just skip this post.
For those of us not in the top ten percent, or even in the top twenty percent income wise, it takes planning, dedication and implementation to remain in the middle class, help pay for our children's education, help out with our parent or parents if you are lucky enough to have both, and meanwhile, by the way, try to save up a million bucks or more in the hopes of someday "retiring."
We may not be able to achieve the holy grail of financial freedom, but we should be able to reach a point where debt no longer controls our lives.
Consider these Ten Money Commandments in improving your and my standing in the world of finance in this coming year and beyond.
I. Thou Shalt Have a Plan and stick to it. Set realistic short-term, medium-term and, yes, even some long-term goals for yourself. If you have been carrying credit card debt, make this the year that you pay it off. If you cannot pay it all off, make a Resolution about how much of it to pay off. If your balance is now $20,000, resolve to have it at $10,000 by next January first. If you have not set up an IRA, resolve to do it this year. If you only have $2,500 in your savings account, resolve to have at least $5,000 next January first.
II. Thou Shalt Embrace what you have. This is something that I am working hard at. With our daughter recently making her new high school's varsity poms team as a freshman, all of a sudden we are incurring many new expenses, including a trip to a national competition in Orlando in February, new outfits, specific shoes, etc. For whatever reason, it seems that the poms team is comprised of only girls from upper middle class families. Their homes have pools, they own second homes in Wisconsin or Florida, she is the only one without an iPhone, the girls over sixteen have new cars, etc.
Our daughter's other friends all went on great vacations this past summer. Us, we went to Starved Rock for a few days. I drive the most beater car in our neighborhood, at my place of employment and of any parent at the high school. Learning to embrace what you have is easier said than done, but I have just about given up on trying to keep up with the Joneses.
III. Thou Shalt Know how much goes in and out. If you are anything like me, you only have a notion of where all the money goes. I know that I am always paying bills and that there are always unexpected, large expenses. I have shared about how much money has come in and gone out over several months. Knowing where our money comes from is easy. I work full-time and have done so for twenty-four years, getting paid on alternate Fridays the entire time. My wife works very part-time, ten hours per week during the school year helping coordinate lunch at the school where both of our children attended through eighth grade.
I make some money, thirty here and fifty there, selling an eBook about being a P.O. that I wrote under a pseudonym at least ten years ago and posted on Amazon. We get dividends quarterly and annually, which we always automatically reinvest. Where the money goes is another story. College tuition here, high school fees there. Orthodontia here, property taxes there. Auto repairs here, eating out thirty times per month there. When it is all said and done, about a hundred grand enters our checking account every year, and the same amount goes out. I would like to urge my wife to spend less on things that we do not need, or to at least clip a few coupons. But I would rather get along with her than try to change her shopping habits. Plus, I have tried a few times before and it did not catch on very well. That does not mean that we cannot track our spending a little bit better this year. Since I handle all of our financials, the thing that I will change is to show her our checking account statements a few times this year, particularly those months when thousands more go out than comes in. The thing is, besides going out to eat so much, I am not aware of much else that we can cut back on.
IV. Thou Shalt Reduce your expenses. This is a no-brainer, but is also something easier said than done. We have had Comcast cable for many years, and the monthly bill just creeps and creeps and creeps to the point where we pay nearly $200 per month. I did sign a two-year extension in late 2016, thus in late 2018 I should be able to end our indenture to them. I hate AT&T as a company and have never personally done business with them, but I might just do so in order to cut the cord from the business that I hate the most.
In other news, we will finally be paying off our daughter's braces ($180 per month with $900 down) after about two years near the end of this year. For her first several months of having them, we were also paying a slightly higher amount for our son's Invisalign, which worked wonders on his teeth. So we have been paying the orthodontist automatically every month via my wife's credit card for the last four years. By the same token, we have been driving the same beater cars for the same period of time, and have not had car payments for even longer than that. What we will be doing, essentially, is replacing the monthly payments for braces with monthly car payments. Also, with our daughter in high school, we no longer have the other $180 monthly payment year-round for the dance company that she had been a part of for the last six or seven years. Overall, I cannot exactly say that we are reducing our expenses, but we have had some expenses disappear, which have generally been replaced by even higher ones.
V. Thou Shalt Pay off consumer debt. By the time I completed graduate school, I had nearly $10,000 in debt on my credit card. Our son was born right after I graduated in 1998, at the same time that my wife and I decided that she could become a stay-at-home Mom. We had also just moved from our ghetto apartment in east Rogers Park to a condominium in Evanston. Borrowing about one hundred grand seemed like all the money in the world to us at the time. We both had car payments, we had to pay an association fee, and my wife had credit card debt, too. I was making about $45,000 at the time.
How did we do it? Looking back nineteen years ago, I am not so sure. I do remember telling my wife not to spend more than fifty dollars at the Dominick's buying our groceries once, and I remember well juggling what bills to pay on alternating Fridays. We sure did not pay Comcast $200 per month back then or a private college $2,500 per month or a Benjamin per week in property taxes.
What I did was work and work and then work some more. Did I mention that I worked? I paid whatever I could toward our credit cards, until I paid them all off about ten years ago. Ever since then, I pay off all three of our cards every month (I have a Chase Visa, she has a Bank of America Visa and a Kohl's charge card) with the exception of following our Disney trips. We have taken our children to Disney World six times, about a week each time and staying on Disney property. That's a post for another time.
It is my goal and Resolution to pay off all three of our credit cards in full every month in 2018, with the exception of my wife's Visa card early in the year due to her and our son going to Disney once again. We are ending 2017 with zero credit card debt and intend to end the year the same way.
VI. Thou Shalt Supplement your income. With so many gigs out there, online selling and publishing platforms, so many at-home side businesses, there are ways to make a few bucks above and beyond what your primary employer pays you. This is something that I spend a lot of time contemplating and intend to improve upon this coming year. Instead of making maybe one thousand extra in online publishing, like in 2017, I would like to increase that five-fold. Again, easier said than done. If I write enough high-quality posts, I intend on packaging some together for eBooks to sell on Amazon and Nook. What I would really like to earn is five grand per month, but I must practice what I preach and start by taking baby steps.
We cannot all become online blogging and publishing millionaires soon upon sharing our thoughts in the ether. However, I sincerely hope that my posts help you gain some insights, as I have gained some insights into my own way of thinking, and are well worth whatever you paid for this, if you paid for it. Your way or ways of supplementing your income may be different than mine. I have a Millennial friend who rents out rooms in his home. I know at least one Uber driver, although he claims that there is little income to be realized by doing that. You may be able to sell something that you created on an online platform, or do something as simple as delivering pizzas for a while. I do believe that if there is a will, there is a way. Plan on supplementing your income in any way that you can. The first time that I made about twenty dollars in royalties on my eBook about ten years ago, I showed the tax form to my wife and told her the truth. That twenty dollars meant more to me than the seventy-five thousand or so that I made at my job that year. For sure, that twenty dollars could not support my family for more than a minute or two, but it sure did feel good to see some money that was not paid to me by my employer make its way into our bank account. Now, I dream more of making twenty thousand in eBook sales in a year than just the twenty. But I would be mighty proud to report making five large this coming year.
VII. Thou Shalt Live below your means. Had you asked my wise grandfather for financial advice while he was around, he would always tell you this. If you make fifty grand, live like you make forty-five. If you make one hundred, live like you make ninety. The problem with us, and many a Middle Class Guy's family, is that when I made eighty, we lived like I made eighty-five. Now that I make nearly one ten, we live like I make one twenty. I hope to make one twenty in the next few years, but I suspect that I will still feel the pinch as my family spends like I make one thirty.
I do not want to make it sound as if we are spendthrifts. Out of the money that goes out, a decent amount of it is actually invested. I saved up nearly two hundred thousand bucks, one hundred for each of our children for college savings. I also Pay Ourselves First with every paycheck of the year.
So it is not like I am driving a nice car, using an iPhone, or even have a flat screen TV. We did not go on one vacation outside of Illinois all year. I would feel very guilty if I purchased a Starbucks. If you saw me on an average weekend day, you may think me just above a bum. Maybe not even above.
But I do hold a Master's degree, have what most would consider a white collar job, although I feel more like a working class employee, make a six-figure salary and have contributed to a highly solvent pension plan for twenty-four years. All that said, we could do a lot better in living below our means, although that causes our daughter a great deal of dissatisfaction due to our continued failure in Keeping Up With the Joneses.
VIII. Thou Shalt Pay Yourself First. If you asked me what my best piece of financial advice is, this is it. When you pay yourself first, you remove the element of choice that makes saving money a low priority. Some of those months when I am paying college tuition, property taxes, insurance premiums and auto repairs seem like good months to skip investing in our future. But those months, like last month, are the months that I take the greatest satisfaction in Paying Ourselves First. I think to myself that although I am paying through the tooth to support our family and keep our household moving forward, I am not forsaking our future on behalf of current expenses. If you asked me how I saved nearly two hundred grand, starting from making in the forties to currently making just over a hundred grand, over the course of about fifteen years, the above is your answer. I was not paying myself first all those years, but by automatically investing $300 per child for about four years, to then investing $500 per child per month for about five years straight, to then investing $400 per child per month for the next four or five years, it added up. The $6,000 that I invested per child in 2010 has now become over $9,000 for each of them now, through cost appreciation and dividends. The same can be done for your own savings. Currently, I send money to both my own and my wife's Roth IRA on the first of every month. I would like to increase the amount, but for 2018, my Resolution is to invest at least $8,000 in our IRAs, which amounts to the $300 per paycheck plus an extra $200 to round it out.
IX. Thou Shalt Not spend money that you do not have. Why would you pay someone a fee to spend money that you have not earned yet? If you are in your twenties, have little responsibility to others and have never been taught about money by anyone, I can understand. But by the time you reach middle age, like I have, you should know better than to purchase a car or a home that you cannot really afford, or take your family on a ten thousand dollar vacation if you do not have at least fifty grand in the bank. This goes along with chipping away or eliminating your credit card debt, but let us both resolve not to spend any money that we do not have on consumer credit this year or any.
If you have already done it, then see Commandment #5 again to pay off your consumer debt and remember Commandment 37 and live below your means. I would love to take my family on a ten-day trip to Hawaii, but I know that I could not afford it and can only dream about it until that day when I fulfill Commandment #6 and significantly increase my income.
X. Thou Shalt Keep track of your progress, make adjustments and learn. You and I are far from becoming financially independent. Truthfully, we may never get there. But working toward financial freedom is an ongoing process. Track your progress or lack thereof in the way that best suits your own tastes. Me, I am an old-fashioned middle aged mensch. The last thing that I want to do is use an app to track my progress. The kind of app that I use would be writing it down on a piece of paper and/or sharing it via this blog. I did take a credit analysis course earlier this year, that re-taught me how to make a balance sheet and analyze cash flow and credit capacity.
If you have investments, like you should, you receive quarterly and annual statements. It can be motivating, or perhaps depressing, to review these statements. But if you raise the amount in your IRA by the $5,500 that you are allowed to contribute if you are under fifty years of age and your combined income is under $196,000 or $6,500 if you are fifty or older, you can feel good about that.
If your goal is to contribute $5,000 to your child's college savings account, you can feel good about accomplishing that, as well. An occasional slip up is not the end of the world, either. It is just a good idea to get a better grasp of how you are doing when it comes to your financial goals.
There are many cases where two neighbors have similar homes, similar vehicles, send their children to similar schools and take similar vacations. They may even have similar incomes. Yet one has a million in the bank and collects twenty-five grand per year in dividends, while the other is on the brink of bankruptcy, receives late notices from creditors and finances everything up to his eyeballs. If you take these above Ten Money Commandments to heart, you may not be the one who ends up with a million in the bank, but you certainly should not find yourself on the brink of financial disaster.
For some of you, when it comes to finances, you may be satisfied where you are. If so, kudos to you and perhaps you should just skip this post.
For those of us not in the top ten percent, or even in the top twenty percent income wise, it takes planning, dedication and implementation to remain in the middle class, help pay for our children's education, help out with our parent or parents if you are lucky enough to have both, and meanwhile, by the way, try to save up a million bucks or more in the hopes of someday "retiring."
We may not be able to achieve the holy grail of financial freedom, but we should be able to reach a point where debt no longer controls our lives.
 |
I. Thou Shalt Have a Plan and stick to it. Set realistic short-term, medium-term and, yes, even some long-term goals for yourself. If you have been carrying credit card debt, make this the year that you pay it off. If you cannot pay it all off, make a Resolution about how much of it to pay off. If your balance is now $20,000, resolve to have it at $10,000 by next January first. If you have not set up an IRA, resolve to do it this year. If you only have $2,500 in your savings account, resolve to have at least $5,000 next January first.
II. Thou Shalt Embrace what you have. This is something that I am working hard at. With our daughter recently making her new high school's varsity poms team as a freshman, all of a sudden we are incurring many new expenses, including a trip to a national competition in Orlando in February, new outfits, specific shoes, etc. For whatever reason, it seems that the poms team is comprised of only girls from upper middle class families. Their homes have pools, they own second homes in Wisconsin or Florida, she is the only one without an iPhone, the girls over sixteen have new cars, etc.
Our daughter's other friends all went on great vacations this past summer. Us, we went to Starved Rock for a few days. I drive the most beater car in our neighborhood, at my place of employment and of any parent at the high school. Learning to embrace what you have is easier said than done, but I have just about given up on trying to keep up with the Joneses.
III. Thou Shalt Know how much goes in and out. If you are anything like me, you only have a notion of where all the money goes. I know that I am always paying bills and that there are always unexpected, large expenses. I have shared about how much money has come in and gone out over several months. Knowing where our money comes from is easy. I work full-time and have done so for twenty-four years, getting paid on alternate Fridays the entire time. My wife works very part-time, ten hours per week during the school year helping coordinate lunch at the school where both of our children attended through eighth grade.
I make some money, thirty here and fifty there, selling an eBook about being a P.O. that I wrote under a pseudonym at least ten years ago and posted on Amazon. We get dividends quarterly and annually, which we always automatically reinvest. Where the money goes is another story. College tuition here, high school fees there. Orthodontia here, property taxes there. Auto repairs here, eating out thirty times per month there. When it is all said and done, about a hundred grand enters our checking account every year, and the same amount goes out. I would like to urge my wife to spend less on things that we do not need, or to at least clip a few coupons. But I would rather get along with her than try to change her shopping habits. Plus, I have tried a few times before and it did not catch on very well. That does not mean that we cannot track our spending a little bit better this year. Since I handle all of our financials, the thing that I will change is to show her our checking account statements a few times this year, particularly those months when thousands more go out than comes in. The thing is, besides going out to eat so much, I am not aware of much else that we can cut back on.
IV. Thou Shalt Reduce your expenses. This is a no-brainer, but is also something easier said than done. We have had Comcast cable for many years, and the monthly bill just creeps and creeps and creeps to the point where we pay nearly $200 per month. I did sign a two-year extension in late 2016, thus in late 2018 I should be able to end our indenture to them. I hate AT&T as a company and have never personally done business with them, but I might just do so in order to cut the cord from the business that I hate the most.
In other news, we will finally be paying off our daughter's braces ($180 per month with $900 down) after about two years near the end of this year. For her first several months of having them, we were also paying a slightly higher amount for our son's Invisalign, which worked wonders on his teeth. So we have been paying the orthodontist automatically every month via my wife's credit card for the last four years. By the same token, we have been driving the same beater cars for the same period of time, and have not had car payments for even longer than that. What we will be doing, essentially, is replacing the monthly payments for braces with monthly car payments. Also, with our daughter in high school, we no longer have the other $180 monthly payment year-round for the dance company that she had been a part of for the last six or seven years. Overall, I cannot exactly say that we are reducing our expenses, but we have had some expenses disappear, which have generally been replaced by even higher ones.
V. Thou Shalt Pay off consumer debt. By the time I completed graduate school, I had nearly $10,000 in debt on my credit card. Our son was born right after I graduated in 1998, at the same time that my wife and I decided that she could become a stay-at-home Mom. We had also just moved from our ghetto apartment in east Rogers Park to a condominium in Evanston. Borrowing about one hundred grand seemed like all the money in the world to us at the time. We both had car payments, we had to pay an association fee, and my wife had credit card debt, too. I was making about $45,000 at the time.
How did we do it? Looking back nineteen years ago, I am not so sure. I do remember telling my wife not to spend more than fifty dollars at the Dominick's buying our groceries once, and I remember well juggling what bills to pay on alternating Fridays. We sure did not pay Comcast $200 per month back then or a private college $2,500 per month or a Benjamin per week in property taxes.
What I did was work and work and then work some more. Did I mention that I worked? I paid whatever I could toward our credit cards, until I paid them all off about ten years ago. Ever since then, I pay off all three of our cards every month (I have a Chase Visa, she has a Bank of America Visa and a Kohl's charge card) with the exception of following our Disney trips. We have taken our children to Disney World six times, about a week each time and staying on Disney property. That's a post for another time.
It is my goal and Resolution to pay off all three of our credit cards in full every month in 2018, with the exception of my wife's Visa card early in the year due to her and our son going to Disney once again. We are ending 2017 with zero credit card debt and intend to end the year the same way.
VI. Thou Shalt Supplement your income. With so many gigs out there, online selling and publishing platforms, so many at-home side businesses, there are ways to make a few bucks above and beyond what your primary employer pays you. This is something that I spend a lot of time contemplating and intend to improve upon this coming year. Instead of making maybe one thousand extra in online publishing, like in 2017, I would like to increase that five-fold. Again, easier said than done. If I write enough high-quality posts, I intend on packaging some together for eBooks to sell on Amazon and Nook. What I would really like to earn is five grand per month, but I must practice what I preach and start by taking baby steps.
 |
VII. Thou Shalt Live below your means. Had you asked my wise grandfather for financial advice while he was around, he would always tell you this. If you make fifty grand, live like you make forty-five. If you make one hundred, live like you make ninety. The problem with us, and many a Middle Class Guy's family, is that when I made eighty, we lived like I made eighty-five. Now that I make nearly one ten, we live like I make one twenty. I hope to make one twenty in the next few years, but I suspect that I will still feel the pinch as my family spends like I make one thirty.
I do not want to make it sound as if we are spendthrifts. Out of the money that goes out, a decent amount of it is actually invested. I saved up nearly two hundred thousand bucks, one hundred for each of our children for college savings. I also Pay Ourselves First with every paycheck of the year.
So it is not like I am driving a nice car, using an iPhone, or even have a flat screen TV. We did not go on one vacation outside of Illinois all year. I would feel very guilty if I purchased a Starbucks. If you saw me on an average weekend day, you may think me just above a bum. Maybe not even above.
But I do hold a Master's degree, have what most would consider a white collar job, although I feel more like a working class employee, make a six-figure salary and have contributed to a highly solvent pension plan for twenty-four years. All that said, we could do a lot better in living below our means, although that causes our daughter a great deal of dissatisfaction due to our continued failure in Keeping Up With the Joneses.
VIII. Thou Shalt Pay Yourself First. If you asked me what my best piece of financial advice is, this is it. When you pay yourself first, you remove the element of choice that makes saving money a low priority. Some of those months when I am paying college tuition, property taxes, insurance premiums and auto repairs seem like good months to skip investing in our future. But those months, like last month, are the months that I take the greatest satisfaction in Paying Ourselves First. I think to myself that although I am paying through the tooth to support our family and keep our household moving forward, I am not forsaking our future on behalf of current expenses. If you asked me how I saved nearly two hundred grand, starting from making in the forties to currently making just over a hundred grand, over the course of about fifteen years, the above is your answer. I was not paying myself first all those years, but by automatically investing $300 per child for about four years, to then investing $500 per child per month for about five years straight, to then investing $400 per child per month for the next four or five years, it added up. The $6,000 that I invested per child in 2010 has now become over $9,000 for each of them now, through cost appreciation and dividends. The same can be done for your own savings. Currently, I send money to both my own and my wife's Roth IRA on the first of every month. I would like to increase the amount, but for 2018, my Resolution is to invest at least $8,000 in our IRAs, which amounts to the $300 per paycheck plus an extra $200 to round it out.
IX. Thou Shalt Not spend money that you do not have. Why would you pay someone a fee to spend money that you have not earned yet? If you are in your twenties, have little responsibility to others and have never been taught about money by anyone, I can understand. But by the time you reach middle age, like I have, you should know better than to purchase a car or a home that you cannot really afford, or take your family on a ten thousand dollar vacation if you do not have at least fifty grand in the bank. This goes along with chipping away or eliminating your credit card debt, but let us both resolve not to spend any money that we do not have on consumer credit this year or any.
If you have already done it, then see Commandment #5 again to pay off your consumer debt and remember Commandment 37 and live below your means. I would love to take my family on a ten-day trip to Hawaii, but I know that I could not afford it and can only dream about it until that day when I fulfill Commandment #6 and significantly increase my income.
X. Thou Shalt Keep track of your progress, make adjustments and learn. You and I are far from becoming financially independent. Truthfully, we may never get there. But working toward financial freedom is an ongoing process. Track your progress or lack thereof in the way that best suits your own tastes. Me, I am an old-fashioned middle aged mensch. The last thing that I want to do is use an app to track my progress. The kind of app that I use would be writing it down on a piece of paper and/or sharing it via this blog. I did take a credit analysis course earlier this year, that re-taught me how to make a balance sheet and analyze cash flow and credit capacity.
If you have investments, like you should, you receive quarterly and annual statements. It can be motivating, or perhaps depressing, to review these statements. But if you raise the amount in your IRA by the $5,500 that you are allowed to contribute if you are under fifty years of age and your combined income is under $196,000 or $6,500 if you are fifty or older, you can feel good about that.
If your goal is to contribute $5,000 to your child's college savings account, you can feel good about accomplishing that, as well. An occasional slip up is not the end of the world, either. It is just a good idea to get a better grasp of how you are doing when it comes to your financial goals.
There are many cases where two neighbors have similar homes, similar vehicles, send their children to similar schools and take similar vacations. They may even have similar incomes. Yet one has a million in the bank and collects twenty-five grand per year in dividends, while the other is on the brink of bankruptcy, receives late notices from creditors and finances everything up to his eyeballs. If you take these above Ten Money Commandments to heart, you may not be the one who ends up with a million in the bank, but you certainly should not find yourself on the brink of financial disaster.
Godspeed!
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