PMW Says . . .
- Thread starter ProfMoneyWise
- Start date
Thank you for your posts.
ProfMoneyWise
Member
The Truth About Taxes
Debunking the myths about big tax refunds
from daveramsey.com on 03 Mar 2010
Myth: Getting a big refund on my income taxes is a good way to save money.
Truth: If you get a large tax refund, you’re allowing the IRS to take too much money out of your paycheck. You’re loaning the government your money—interest free. That’s money you could use to pay off debt and/or build wealth each month.
Getting a chunk of your money back at tax time is not the same as taking it home in your paycheck each month. According to the IRS, the average tax refund will be $2,800 in 2010. That’s about $230 per month you can’t use because you’re sending it to the government!
If you’re following the Baby Steps—Dave Ramsey’s plan to get you out of debt and building wealth—$230 will go a long way. In Baby Step 2, you pay off all debt (except the house) using the debt snowball. Imagine how much more quickly you could accomplish that by adding $230 each month to your payments. And, because you’d be paying down principal, you’d save on interest, too.
Or, instead of giving your $230 a month to Uncle Sam, invest it in a Roth IRA earning a 12% rate of return. In 10 years, you’ll have $53,438. Got some extra time? After 32 years, your Roth IRA will be worth over $1 million—tax free!
Your goal is to pay nothing at tax time and not get a big check back from the government. To do that, do some figuring now to determine what your taxes will be for next year. Fill out a new W-4 to have the proper amount withheld from your paycheck. You can get an idea of your potential savings by using the withholding calculator at irs.gov.
Debunking the myths about big tax refunds
from daveramsey.com on 03 Mar 2010
Myth: Getting a big refund on my income taxes is a good way to save money.
Truth: If you get a large tax refund, you’re allowing the IRS to take too much money out of your paycheck. You’re loaning the government your money—interest free. That’s money you could use to pay off debt and/or build wealth each month.
Getting a chunk of your money back at tax time is not the same as taking it home in your paycheck each month. According to the IRS, the average tax refund will be $2,800 in 2010. That’s about $230 per month you can’t use because you’re sending it to the government!
If you’re following the Baby Steps—Dave Ramsey’s plan to get you out of debt and building wealth—$230 will go a long way. In Baby Step 2, you pay off all debt (except the house) using the debt snowball. Imagine how much more quickly you could accomplish that by adding $230 each month to your payments. And, because you’d be paying down principal, you’d save on interest, too.
Or, instead of giving your $230 a month to Uncle Sam, invest it in a Roth IRA earning a 12% rate of return. In 10 years, you’ll have $53,438. Got some extra time? After 32 years, your Roth IRA will be worth over $1 million—tax free!
Your goal is to pay nothing at tax time and not get a big check back from the government. To do that, do some figuring now to determine what your taxes will be for next year. Fill out a new W-4 to have the proper amount withheld from your paycheck. You can get an idea of your potential savings by using the withholding calculator at irs.gov.
ProfMoneyWise
Member
Steam Engine Financial Coaching » 5 Reasons Married Couples Should Manage their Money Together - Roseville, CA
While many couples have one person managing the money, it turns out that there are some good reasons to do it together. Sure, one person may be an Excel guru and the other has no interest in making a 12-sheet ultra-fancy spreadsheet budget. That stuff doesn't matter. Its OK for one person to do the technical stuff, whether it's a spreadsheet, budget software or a simple piece of paper. What's really important is that the decisions about where to spend the money are made together. Here are some good reasons why couples should manage their money together:
1. Increase your intimacy.
Managing money together increases intimacy? You bet.
When a couple comes together to make decisions about their money, their choices will reflect their values, their goals and their dreams. The conflicts that arise when a couple begins to do their finances together provide a prime opportunity to talk about what is important to each of them.
Whether we want it to or not, our spending choices display our values. A person may say he values a college education for his kids. In reality, though, he's not saving for their education, but he is spending a lot of money at the coffee shop drive-thru on the way to work each day. Making a plan together can prompt a couple to really live out their values, to be purposeful about their money and their lives.
When the couple makes their budget, it should include the things they are passionate about, whether it's simply living debt-free or acting on a personal passion for something like literacy, evangelism, justice, helping abused women, or adopting children. When a couple is on the same page regarding living out these kinds of values, their money can be used to help achieve their goals and dreams and there is a much deeper sense of intimacy between them.
2. Being a team helps when times get tough.
It's never fun to have to tighten the belt when times are lean. But when a couple agrees on how to spend their money, they are going to be a lot less stressed when cuts have to be made. Tough times bring extra stress, but cutting out the money fights will help alleviate some of the stress. Even better is the understanding that "We can get through this together."
3. The surviving spouse will be in a better position when the other spouse dies.
It's terrible to lose a spouse. In the middle of that devastation, the grieving spouse shouldn't have to struggle to find important documents and account information. It's much better if that person already knows where the money goes each month, what insurance policies are in place and how to pay the bills. It's not a good time for surprises.
It's an act of love to help your spouse to be prepared for your death. After all, someone's going to die first. Death happens. It's best to be prepared for it than to just not deal with it.
4. Share the heavy burden of responsibility.
It's not fair for one person to have to be "the responsible one" in a marriage. It's not uncommon for one spouse to be completely disinterested in making plans for the couple's money. These people go about their daily lives and leave the heavy burden of decision-making to someone else.
Often, something like a parent/child relationship becomes the norm. One spouse, like a spoiled child, asks the other if they can get this or buy that. There's no consideration for how the item will be paid for, i.e. what budget item will need to be reduced to free up some money for that purchase. The responsible spouse is forced to make the decision - can they afford it? But the couple is not a parent and a child, they are spouses. The one who has to decide is put in an awkward position - they want their spouse to be happy, but they understand the consequences of unplanned spending. They don't want to be the bad guy and say "no." Yet sometimes they have to do so to make their money work. It's much better to share the responsibility together.
5. Improve the likelihood of achieving your goals.
Really, what are the chances that a couple will have enough money for retirement if one spouse would rather live for today than plan for tomorrow? Or, what's the likelihood the couple's debt will get paid off when one of the spouses is buying stuff with a credit card? The chances are not good.
Many couples work against each other in these kinds of ways. It reflects a lack of agreement on the goal. Maybe the uncooperative spouse gives the goal some lip service, but when spending decisions are made, the goal doesn't really figure in.
In conclusion...
It's crucial for couples to agree on their finances. Decide with your spouse to manage your money together. Start now and keep working at it. It's hard at first but it gets easier over time. And I believe you'll find that it's a worth the extra effort because of the positive effects it can have on your relationship as a whole.
While many couples have one person managing the money, it turns out that there are some good reasons to do it together. Sure, one person may be an Excel guru and the other has no interest in making a 12-sheet ultra-fancy spreadsheet budget. That stuff doesn't matter. Its OK for one person to do the technical stuff, whether it's a spreadsheet, budget software or a simple piece of paper. What's really important is that the decisions about where to spend the money are made together. Here are some good reasons why couples should manage their money together:
1. Increase your intimacy.
Managing money together increases intimacy? You bet.
When a couple comes together to make decisions about their money, their choices will reflect their values, their goals and their dreams. The conflicts that arise when a couple begins to do their finances together provide a prime opportunity to talk about what is important to each of them.
Whether we want it to or not, our spending choices display our values. A person may say he values a college education for his kids. In reality, though, he's not saving for their education, but he is spending a lot of money at the coffee shop drive-thru on the way to work each day. Making a plan together can prompt a couple to really live out their values, to be purposeful about their money and their lives.
When the couple makes their budget, it should include the things they are passionate about, whether it's simply living debt-free or acting on a personal passion for something like literacy, evangelism, justice, helping abused women, or adopting children. When a couple is on the same page regarding living out these kinds of values, their money can be used to help achieve their goals and dreams and there is a much deeper sense of intimacy between them.
2. Being a team helps when times get tough.
It's never fun to have to tighten the belt when times are lean. But when a couple agrees on how to spend their money, they are going to be a lot less stressed when cuts have to be made. Tough times bring extra stress, but cutting out the money fights will help alleviate some of the stress. Even better is the understanding that "We can get through this together."
3. The surviving spouse will be in a better position when the other spouse dies.
It's terrible to lose a spouse. In the middle of that devastation, the grieving spouse shouldn't have to struggle to find important documents and account information. It's much better if that person already knows where the money goes each month, what insurance policies are in place and how to pay the bills. It's not a good time for surprises.
It's an act of love to help your spouse to be prepared for your death. After all, someone's going to die first. Death happens. It's best to be prepared for it than to just not deal with it.
4. Share the heavy burden of responsibility.
It's not fair for one person to have to be "the responsible one" in a marriage. It's not uncommon for one spouse to be completely disinterested in making plans for the couple's money. These people go about their daily lives and leave the heavy burden of decision-making to someone else.
Often, something like a parent/child relationship becomes the norm. One spouse, like a spoiled child, asks the other if they can get this or buy that. There's no consideration for how the item will be paid for, i.e. what budget item will need to be reduced to free up some money for that purchase. The responsible spouse is forced to make the decision - can they afford it? But the couple is not a parent and a child, they are spouses. The one who has to decide is put in an awkward position - they want their spouse to be happy, but they understand the consequences of unplanned spending. They don't want to be the bad guy and say "no." Yet sometimes they have to do so to make their money work. It's much better to share the responsibility together.
5. Improve the likelihood of achieving your goals.
Really, what are the chances that a couple will have enough money for retirement if one spouse would rather live for today than plan for tomorrow? Or, what's the likelihood the couple's debt will get paid off when one of the spouses is buying stuff with a credit card? The chances are not good.
Many couples work against each other in these kinds of ways. It reflects a lack of agreement on the goal. Maybe the uncooperative spouse gives the goal some lip service, but when spending decisions are made, the goal doesn't really figure in.
In conclusion...
It's crucial for couples to agree on their finances. Decide with your spouse to manage your money together. Start now and keep working at it. It's hard at first but it gets easier over time. And I believe you'll find that it's a worth the extra effort because of the positive effects it can have on your relationship as a whole.
ProfMoneyWise
Member
Being debt-free” is the first piece of any “investment strategy.”
Investing is risk-based, but paying off debt is a no-brainer. Many think they should do both, when, in effect, they are paying out more money than they can ever hope to gain.
Investments are often at risk of being lost completely. Don't complicate personal finance. Get out of debt, then invest. Gains then are truly gains.
Investing is risk-based, but paying off debt is a no-brainer. Many think they should do both, when, in effect, they are paying out more money than they can ever hope to gain.
Investments are often at risk of being lost completely. Don't complicate personal finance. Get out of debt, then invest. Gains then are truly gains.
ProfMoneyWise
Member
When and Why to Save
The big three reasons to do it
FEB 2, 2011 | WRITTEN BY CHRIS RUSSELL
When you save, you win.
Having money puts you more in control in almost every area of life, and when you have that control, you make smarter decisions and have less stress and more peace and contentment. All because you had the discipline to stock money away.
There are three big reasons to save money.
Emergency fund
The emergency fund is the first thing you save for. It makes you ready for those times when life hits you upside the head. You don't flip out or panic. You can deal with an emergency and be done with it.
Money equals flexibility. If you have savings and then experience a car wreck, a busted heater or A/C unit, or a job layoff, money works for all three. It causes you to relax because you have cash saved up for Murphy visits. It's like being in a fender bender and having your seat belt on–you don't get hurt because you had something in place to protect you.
Purchases
When given the option to make a big purchase, most people buy now and pay later (that brings credit card fees, interest rates, overdraft charges, etc.). The right way to do it is to–drum roll–save for it! If you want to buy a $500 couch and can save $100 a month, then do that for five months and make the buy. This is actually a good test. You find out how much you want an item when you know you must wait for it.
You'll have a lot less stress in life when you use this method of purchasing, because once you've bought, the deal is done. You can enjoy whatever it is you bought and not worry about paying for it, because you already have. Whether it's a car, Christmas or something else, save up first.
Investing
This one is the most jaw-dropping because of the numbers involved. If you invest $100 a month for 40 years (a normal working lifetime), you'll have $1,176,000 saved up for retirement. Most of us blow $100 just eating out each month, so think about how much you'll have if you get out of debt, have an emergency fund, and then invest 15% of what you make.
Let's say you earn $40,000 a year. In Baby Step 4, you'd invest $6,000 of that each year. If you invest $6,000 for 35 years (age 30 to 65) at 12%, it will turn into more than $3.2 million!
When you save, the process itself makes the money work for you. You don't spend on interest, you don't go into overdraft, you discipline yourself, and you have a big reward coming when you finish. Try it.
The big three reasons to do it
FEB 2, 2011 | WRITTEN BY CHRIS RUSSELL
When you save, you win.
Having money puts you more in control in almost every area of life, and when you have that control, you make smarter decisions and have less stress and more peace and contentment. All because you had the discipline to stock money away.
There are three big reasons to save money.
Emergency fund
The emergency fund is the first thing you save for. It makes you ready for those times when life hits you upside the head. You don't flip out or panic. You can deal with an emergency and be done with it.
Money equals flexibility. If you have savings and then experience a car wreck, a busted heater or A/C unit, or a job layoff, money works for all three. It causes you to relax because you have cash saved up for Murphy visits. It's like being in a fender bender and having your seat belt on–you don't get hurt because you had something in place to protect you.
Purchases
When given the option to make a big purchase, most people buy now and pay later (that brings credit card fees, interest rates, overdraft charges, etc.). The right way to do it is to–drum roll–save for it! If you want to buy a $500 couch and can save $100 a month, then do that for five months and make the buy. This is actually a good test. You find out how much you want an item when you know you must wait for it.
You'll have a lot less stress in life when you use this method of purchasing, because once you've bought, the deal is done. You can enjoy whatever it is you bought and not worry about paying for it, because you already have. Whether it's a car, Christmas or something else, save up first.
Investing
This one is the most jaw-dropping because of the numbers involved. If you invest $100 a month for 40 years (a normal working lifetime), you'll have $1,176,000 saved up for retirement. Most of us blow $100 just eating out each month, so think about how much you'll have if you get out of debt, have an emergency fund, and then invest 15% of what you make.
Let's say you earn $40,000 a year. In Baby Step 4, you'd invest $6,000 of that each year. If you invest $6,000 for 35 years (age 30 to 65) at 12%, it will turn into more than $3.2 million!
When you save, the process itself makes the money work for you. You don't spend on interest, you don't go into overdraft, you discipline yourself, and you have a big reward coming when you finish. Try it.
ProfMoneyWise
Member
Dodging the Law of Credit Cards
How companies can skirt the rulesFeb 17, 2011 | WRITTEN BY Chris Russell
Only credit cards could have interest rates that would make a loan shark blush.
Exhibit A comes from First Premier Bank. It's a card targeted specifically toward people with bad credit, so as you can imagine, the rate isn't exactly user-friendly.
It starts out at 29.99%. And don't be surprised if it jumps to 79.99% after six months, which happened to one woman in Texas.
That woman, Toni Riss, said she spent another six months trying to cancel the card. That whole time, we might add, she said First Premier was charging her fees and then shipped her to collections when she didn't pay.
Perhaps the worst part is this: The credit card rate is legal. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (aka the Credit CARD Act) prevents companies from raising their rates retroactively on you. They can't jump to 79% and then back-charge you that much, but if they let you know that your rate will increase in 45 days, that's fair (for them, at least).
This is why we were saying that the CARD law wasn't going to fix anything. Once credit card companies know the rules, they can figure out ways to get around them. The money is all the same to them, so they don't care if they collect $100 from you by way of a rate, a fee, a charge or a penalty. When you play with snakes, you get bitten.
If you get a letter in the mail saying your interest rate is about to go up 50%, and you're carrying a $10,000 balance, you're not in any position to pay the balance off (since you have no cash). That means you'll start paying money, and lots of it. All because someone else decided to charge you. That's taking advantage of you.
When you choose to not even deal with credit cards, you don't have to worry about sky-high interest rates. Let them raise the rate to 5,749% if they want. As long as you're living with cash, you'll skip along without even noticing.
You owe it to your family and yourself. And when it comes to credit cards, that's the only thing you should owe.
How companies can skirt the rulesFeb 17, 2011 | WRITTEN BY Chris Russell
Only credit cards could have interest rates that would make a loan shark blush.
Exhibit A comes from First Premier Bank. It's a card targeted specifically toward people with bad credit, so as you can imagine, the rate isn't exactly user-friendly.
It starts out at 29.99%. And don't be surprised if it jumps to 79.99% after six months, which happened to one woman in Texas.
That woman, Toni Riss, said she spent another six months trying to cancel the card. That whole time, we might add, she said First Premier was charging her fees and then shipped her to collections when she didn't pay.
Perhaps the worst part is this: The credit card rate is legal. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (aka the Credit CARD Act) prevents companies from raising their rates retroactively on you. They can't jump to 79% and then back-charge you that much, but if they let you know that your rate will increase in 45 days, that's fair (for them, at least).
This is why we were saying that the CARD law wasn't going to fix anything. Once credit card companies know the rules, they can figure out ways to get around them. The money is all the same to them, so they don't care if they collect $100 from you by way of a rate, a fee, a charge or a penalty. When you play with snakes, you get bitten.
If you get a letter in the mail saying your interest rate is about to go up 50%, and you're carrying a $10,000 balance, you're not in any position to pay the balance off (since you have no cash). That means you'll start paying money, and lots of it. All because someone else decided to charge you. That's taking advantage of you.
When you choose to not even deal with credit cards, you don't have to worry about sky-high interest rates. Let them raise the rate to 5,749% if they want. As long as you're living with cash, you'll skip along without even noticing.
You owe it to your family and yourself. And when it comes to credit cards, that's the only thing you should owe.
Vince
......
Don't use the one credit card I have unless it's an emergency. The others? Called the bank, said, "cancel my card no. umptysquat." They asked why? Because you just raised your interest rates. Answer: Ohhhh, but we'll lower it back down just for you for a year.
I said, "did you hear that noise?" It was your card going through my shredder. They cancelled my card. But every since, I get their advertisements in the mail at least once a week with new card offers. Noise of the shredder again.
ProfMoneyWise
Member
The Nightmare Of Student Loans
How they can all but wreck your life
JAN 18, 2011 | WRITTEN BY CHRIS RUSSELL
Have you ever been sitting down watching TV or reading a book, and a fly starts buzzing around you and won't go away?
That's what student loans feel like. Only instead of a fly, it's more like a 50-pound pit bull that bites you on the leg and doesn't let go for years. In a way, these are the worst types of debt because you can't sell them to get rid of them, like a house or a car. Once you've gone on a date with Sallie Mae, you'll get stuck with a check that usually takes years to pay off.
A good example is a recent New York Times story that follows Michael Wallerstein, who graduated from the Thomas Jefferson School of Law in San Diego. The job market for lawyers isn't too hot right now, and he's surviving with on-and-off jobs as a legal temp. In the meantime, he has $250,000 in student loans, collectors calling at all hours, and no real money-making prospects on the horizon.
"It could be worse," he says. "It's not like they can put me in jail." Indeed.
We're not saying that you should give up your dream career. It's great if you want to be a lawyer, doctor, pastor or some other field that requires a lot of education. It's awesome if you want to run a small business. What you need to do is make that dream fit within your parameters. If you can't afford what you want to do, either find a creative way to make it happen, or put it off until a time when you can.
Another reason you should avoid huge student loan debt is that there is no guarantee of employment or huge income once you graduate. You might spend $60,000 getting some sort of specialized degree, but if you are unable to land a job right away and have to wait tables, you'll end up with no money and angry collectors calling you. Along with several years of payments that will cripple your ability to build wealth or have a life.
Don't pay too much or go into debt to get an education, start a small business, or find your calling. You can have it. Just have it the right way.
How they can all but wreck your life
JAN 18, 2011 | WRITTEN BY CHRIS RUSSELL
Have you ever been sitting down watching TV or reading a book, and a fly starts buzzing around you and won't go away?
That's what student loans feel like. Only instead of a fly, it's more like a 50-pound pit bull that bites you on the leg and doesn't let go for years. In a way, these are the worst types of debt because you can't sell them to get rid of them, like a house or a car. Once you've gone on a date with Sallie Mae, you'll get stuck with a check that usually takes years to pay off.
A good example is a recent New York Times story that follows Michael Wallerstein, who graduated from the Thomas Jefferson School of Law in San Diego. The job market for lawyers isn't too hot right now, and he's surviving with on-and-off jobs as a legal temp. In the meantime, he has $250,000 in student loans, collectors calling at all hours, and no real money-making prospects on the horizon.
"It could be worse," he says. "It's not like they can put me in jail." Indeed.
We're not saying that you should give up your dream career. It's great if you want to be a lawyer, doctor, pastor or some other field that requires a lot of education. It's awesome if you want to run a small business. What you need to do is make that dream fit within your parameters. If you can't afford what you want to do, either find a creative way to make it happen, or put it off until a time when you can.
Another reason you should avoid huge student loan debt is that there is no guarantee of employment or huge income once you graduate. You might spend $60,000 getting some sort of specialized degree, but if you are unable to land a job right away and have to wait tables, you'll end up with no money and angry collectors calling you. Along with several years of payments that will cripple your ability to build wealth or have a life.
Don't pay too much or go into debt to get an education, start a small business, or find your calling. You can have it. Just have it the right way.
ProfMoneyWise
Member
http://www.berkshirehathaway.com/letters/2010ltr.pdf
If you want to be rich then do what rich people do.
Berkshire-Hathaway can be characterized as a single stock, however with diversification as its cornerstone I have always been comfortable having this in my portfolio.
Mr. Buffett's politics and mine differ at times however his investing acumen and principles have always been a source of admiration for me. In fact his Owners Manual which is available whether you own BRK or not is a good read when you are seeing the end of the tunnel on BS3 (Fully Funded Emergency Fund of 3 - 6 months expenses) and while I am primarily Mutual Funds it has led me to always read my shareholder reports and to take note of the Top 10 holdings of each fund. Why? So I patronize those businesses is why. Simple maybe but it works for me.
Two items of note in the attached letter and the reason for why I post it. Go to page 22 and read the Life and Debt section, and the letter from Mr. Ernest Buffett so many years ago.
Second, is Mr. Buffett and his partner Mr. Munger's use of what is called "Book Value" to measure their business. Book Value's heady definition is "Assets minus Liabilities.'
In our world it is "Income minus Outgo."
There may be some that disagree with points in this letter, or Mr. Buffett in general. I'm not posting to start a flame-thrower exercise. I am posting for any like-minded individuals who see the following as the key to Financial Peace:
Get out and Stay out of debt.
Keep it simple.
Have an Emergency Fund.
Only invest in those things you understand . . . and can explain to a 7th grader.
If you want to be rich then do what rich people do.
Berkshire-Hathaway can be characterized as a single stock, however with diversification as its cornerstone I have always been comfortable having this in my portfolio.
Mr. Buffett's politics and mine differ at times however his investing acumen and principles have always been a source of admiration for me. In fact his Owners Manual which is available whether you own BRK or not is a good read when you are seeing the end of the tunnel on BS3 (Fully Funded Emergency Fund of 3 - 6 months expenses) and while I am primarily Mutual Funds it has led me to always read my shareholder reports and to take note of the Top 10 holdings of each fund. Why? So I patronize those businesses is why. Simple maybe but it works for me.
Two items of note in the attached letter and the reason for why I post it. Go to page 22 and read the Life and Debt section, and the letter from Mr. Ernest Buffett so many years ago.
Second, is Mr. Buffett and his partner Mr. Munger's use of what is called "Book Value" to measure their business. Book Value's heady definition is "Assets minus Liabilities.'
In our world it is "Income minus Outgo."
There may be some that disagree with points in this letter, or Mr. Buffett in general. I'm not posting to start a flame-thrower exercise. I am posting for any like-minded individuals who see the following as the key to Financial Peace:
Get out and Stay out of debt.
Keep it simple.
Have an Emergency Fund.
Only invest in those things you understand . . . and can explain to a 7th grader.
Last edited:
ProfMoneyWise
Member
Dave Ramsey's Thoughts on Hybrid Cars
Before you get your heart set on one, read this!
from daveramsey.com on 04 Mar 2011
Should I get a hybrid to save on gas? They make financial sense in the long run, right? Gas prices are killing my budget—a hybrid is the only answer!
Dave's been getting many questions recently from people all over America about the rising gas prices and fitting the extra costs into the budget. Many people wonder if it would be better to get a vehicle that gets better gas mileage—like a hybrid—instead.
Well, do you really want to lose more money?
The Math Doesn't Work
Let's say you currently drive a vehicle worth $10,000 that gets 15 miles/gallon. There's this $25,000 hybrid you're thinking about buying that gets 25 miles/gallon. That's a $15,000 price difference just to get 10 more miles a gallon. If you drive 100 miles a week, that's about a $10 difference a week.
So that would be about $40 extra you're spending a month in gas if you stuck with the current car. A monthly car payment is much more than that! To get your money back at current gas prices, it would take you almost 29 years to save $15,000 in gasoline!
The math doesn't work! You'd have to drive to the moon and back to make it worth it!
What You Can Do
• Get a different car. If you want to sell your gas-guzzling car, buy another car worth no more than the previous car's selling price. This means no car payments!
• Carpool. If you live near a coworker, this can save you both money—even if you just share a ride one day a week.
• Move closer to work. Write down all the specifics to see if it makes sense in your unique situation.
• Change jobs. No one says you have to work where you do. There's always the option to work close to home or even start a home-based business.
Don't use this high-gas excuse as a rationalization to go get yourself a new car or spend a dime more on one. It's not worth it!
Watch this to learn how you can drive free cars for life!
Drive Free, Retire Rich - Automobiles - daveramsey.com
Before you get your heart set on one, read this!
from daveramsey.com on 04 Mar 2011
Should I get a hybrid to save on gas? They make financial sense in the long run, right? Gas prices are killing my budget—a hybrid is the only answer!
Dave's been getting many questions recently from people all over America about the rising gas prices and fitting the extra costs into the budget. Many people wonder if it would be better to get a vehicle that gets better gas mileage—like a hybrid—instead.
Well, do you really want to lose more money?
The Math Doesn't Work
Let's say you currently drive a vehicle worth $10,000 that gets 15 miles/gallon. There's this $25,000 hybrid you're thinking about buying that gets 25 miles/gallon. That's a $15,000 price difference just to get 10 more miles a gallon. If you drive 100 miles a week, that's about a $10 difference a week.
So that would be about $40 extra you're spending a month in gas if you stuck with the current car. A monthly car payment is much more than that! To get your money back at current gas prices, it would take you almost 29 years to save $15,000 in gasoline!
The math doesn't work! You'd have to drive to the moon and back to make it worth it!
What You Can Do
• Get a different car. If you want to sell your gas-guzzling car, buy another car worth no more than the previous car's selling price. This means no car payments!
• Carpool. If you live near a coworker, this can save you both money—even if you just share a ride one day a week.
• Move closer to work. Write down all the specifics to see if it makes sense in your unique situation.
• Change jobs. No one says you have to work where you do. There's always the option to work close to home or even start a home-based business.
Don't use this high-gas excuse as a rationalization to go get yourself a new car or spend a dime more on one. It's not worth it!
Watch this to learn how you can drive free cars for life!
Drive Free, Retire Rich - Automobiles - daveramsey.com
ProfMoneyWise
Member
PMW Says: You gotta make it to pay it.
PMW Says: Those that use the "it will put me in a higher tax bracket, that is why I don't work" excuse just don't want to work.
Many have a misconception about tax brackets. So just in case, I offer the following:
When you break into a higher tax bracket it does not change the percentage of income you pay for your entire income, just the income in that bracket.
Example:
A married couple claiming no deductions on a $75,000 gross annual income would pay:
10% ($1,675) on the first $16,750
15% ($7687.50) on the next $51,250 ($16,751 through $68,000)
25% ($1750) on the final $7,000 ($68,001 through $75,000)
This couple is said to be "in the 25% tax bracket," because the final part of their income is taxed at that rate. However, this couple does not pay 25% of $75k. If they did (and took no deductions) their tax obligation would be $18,750.
But, if you add up each bracket, their tax obligation (again, with no deductions) is $11,112.50 which is only 14.8% and $7,637.50 less.
I am not a tax professional, I just own a calculator and read instead of listening to the sky-is-falling types on TV or worse yet, the one's I'm related to.
PMW Says: Those that use the "it will put me in a higher tax bracket, that is why I don't work" excuse just don't want to work.
Many have a misconception about tax brackets. So just in case, I offer the following:
When you break into a higher tax bracket it does not change the percentage of income you pay for your entire income, just the income in that bracket.
Example:
A married couple claiming no deductions on a $75,000 gross annual income would pay:
10% ($1,675) on the first $16,750
15% ($7687.50) on the next $51,250 ($16,751 through $68,000)
25% ($1750) on the final $7,000 ($68,001 through $75,000)
This couple is said to be "in the 25% tax bracket," because the final part of their income is taxed at that rate. However, this couple does not pay 25% of $75k. If they did (and took no deductions) their tax obligation would be $18,750.
But, if you add up each bracket, their tax obligation (again, with no deductions) is $11,112.50 which is only 14.8% and $7,637.50 less.
I am not a tax professional, I just own a calculator and read instead of listening to the sky-is-falling types on TV or worse yet, the one's I'm related to.
ProfMoneyWise
Member
What Is A Short Sale?
It's wise to know what you're getting into.
from daveramsey.com on 13 May 2010
Not long ago, few people knew what a short sale was. Now, thanks to the distressed housing market, short sales are happening in record levels. If you’re buying or selling a short sale, there are a lot of hoops to jump through. It’s wise to know what you’re getting into before you take the first step.
Short Sale—The Lender
In a short sale, the lender agrees to accept a mortgage payoff amount that is less than the balance owed. Typically, the lender forgives the remaining balance.
A lender will not consider a short sale if:
• The loan is current – If the homeowner is making regular payments, the lender has no reason to think he can’t continue making them. Usually, a notice of default must be issued in order for the lender to consider a short sale request.
• The homeowner declares bankruptcy – Negotiating a short sale is considered a collection activity, which is not allowed in bankruptcy.
The only benefit to the lender is that a short sale is faster and less expensive than a foreclosure. Once it is clear that foreclosure is unavoidable, a lender is more likely to approve a short sale request.
Short Sale—The Homeowner
If a homeowner is considering a short sale, times are tough. They’re about to lose their home without a profit. And, they must endure the emotional stress of convincing the lender to allow them to do it.
Throughout the process, the homeowner’s focus is convincing the lender that a short sale is the best option.
• A homeowner must prove that he will not be able to bring the mortgage current, and that there are no assets—cash, savings, cars, etc.—that can be used to catch up.
• The homeowner must also prove that the local housing market is so depressed that the home won’t sell for enough to pay the mortgage.
• Most lenders will require a signed contract with a buyer to consider a short sale.
• The homeowner must make sure the short sale agreement includes a waiver of the lender’s right to pursue them for the remaining balance of the loan.
A short sale is not a do-it-yourself deal. A real estate professional who’s experienced in short sales is essential.
Short Sale—The Buyer
The first thing a buyer should know about short sales—they take forever. If your timeline is any shorter than three months, don’t even look at short sales.
Second, all-cash buyers are more likely to be approved. If you’re getting a mortgage on the home, you’ll need to be pre-approved and put up a significant amount of earnest money.
More issues buyers should be aware of:
• Do your homework – What looks like a good deal may not be. A buyer needs to work with a real estate agent to know what home values are.
• Watch out for low-ball lenders – Sometimes lenders will set a short sale price artificially low in order to attract bidders, then they’ll jack up the price during the bidding process. Again, a real estate professional will help a buyer know what offer to make.
It's wise to know what you're getting into.
from daveramsey.com on 13 May 2010
Not long ago, few people knew what a short sale was. Now, thanks to the distressed housing market, short sales are happening in record levels. If you’re buying or selling a short sale, there are a lot of hoops to jump through. It’s wise to know what you’re getting into before you take the first step.
Short Sale—The Lender
In a short sale, the lender agrees to accept a mortgage payoff amount that is less than the balance owed. Typically, the lender forgives the remaining balance.
A lender will not consider a short sale if:
• The loan is current – If the homeowner is making regular payments, the lender has no reason to think he can’t continue making them. Usually, a notice of default must be issued in order for the lender to consider a short sale request.
• The homeowner declares bankruptcy – Negotiating a short sale is considered a collection activity, which is not allowed in bankruptcy.
The only benefit to the lender is that a short sale is faster and less expensive than a foreclosure. Once it is clear that foreclosure is unavoidable, a lender is more likely to approve a short sale request.
Short Sale—The Homeowner
If a homeowner is considering a short sale, times are tough. They’re about to lose their home without a profit. And, they must endure the emotional stress of convincing the lender to allow them to do it.
Throughout the process, the homeowner’s focus is convincing the lender that a short sale is the best option.
• A homeowner must prove that he will not be able to bring the mortgage current, and that there are no assets—cash, savings, cars, etc.—that can be used to catch up.
• The homeowner must also prove that the local housing market is so depressed that the home won’t sell for enough to pay the mortgage.
• Most lenders will require a signed contract with a buyer to consider a short sale.
• The homeowner must make sure the short sale agreement includes a waiver of the lender’s right to pursue them for the remaining balance of the loan.
A short sale is not a do-it-yourself deal. A real estate professional who’s experienced in short sales is essential.
Short Sale—The Buyer
The first thing a buyer should know about short sales—they take forever. If your timeline is any shorter than three months, don’t even look at short sales.
Second, all-cash buyers are more likely to be approved. If you’re getting a mortgage on the home, you’ll need to be pre-approved and put up a significant amount of earnest money.
More issues buyers should be aware of:
• Do your homework – What looks like a good deal may not be. A buyer needs to work with a real estate agent to know what home values are.
• Watch out for low-ball lenders – Sometimes lenders will set a short sale price artificially low in order to attract bidders, then they’ll jack up the price during the bidding process. Again, a real estate professional will help a buyer know what offer to make.
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ProfMoneyWise
Member
PMW Says: Have you thought about what would happen to you and your family if you became disabled and lost your income?
Would you be able to keep up with your monthly mortgage payment?
How would you buy groceries and pay the bills?
Could you afford your healthcare premiums?
Most of us do not realize that our greatest asset is not our home, auto or savings/retirement account. It's our ability to work and earn an income.
Consider these facts:
An illness or accident keeps 1 in 5 people out of work for at least a year before the age of 65.
90% of disabling accidents and illnesses are not work related
50% of all home foreclosures result from loss of income due to disability
Disability insurance replaces your lost income and minimizes the impact a disability will have on you and your family’s lifestyle.
Do not sleep on Short or Long-Term Disability Insurance!
Would you be able to keep up with your monthly mortgage payment?
How would you buy groceries and pay the bills?
Could you afford your healthcare premiums?
Most of us do not realize that our greatest asset is not our home, auto or savings/retirement account. It's our ability to work and earn an income.
Consider these facts:
An illness or accident keeps 1 in 5 people out of work for at least a year before the age of 65.
90% of disabling accidents and illnesses are not work related
50% of all home foreclosures result from loss of income due to disability
Disability insurance replaces your lost income and minimizes the impact a disability will have on you and your family’s lifestyle.
Do not sleep on Short or Long-Term Disability Insurance!
ProfMoneyWise
Member
Before borrowing money from a friend, decide which you need most. ~American Proverb
Creditors have better memories than debtors. ~Benjamin Franklin
Another way to solve the traffic problems of this country is to pass a law that only paid-for cars be allowed to use the highways. ~Will Rogers
Debt, n. An ingenious substitute for the chain and whip of the slavedriver. ~Ambrose Bierce, The Devil's Dictionary, 1911
Debt is the worst poverty. ~Thomas Fuller, Gnomologia, 1732
Who recalls when folks got along without something if it cost too much? ~Kin Hubbard
Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's. ~Earl Wilson
Credit buying is much like being drunk. The buzz happens immediately and gives you a lift.... The hangover comes the day after. ~Joyce Brothers
Creditors have better memories than debtors. ~Benjamin Franklin
Another way to solve the traffic problems of this country is to pass a law that only paid-for cars be allowed to use the highways. ~Will Rogers
Debt, n. An ingenious substitute for the chain and whip of the slavedriver. ~Ambrose Bierce, The Devil's Dictionary, 1911
Debt is the worst poverty. ~Thomas Fuller, Gnomologia, 1732
Who recalls when folks got along without something if it cost too much? ~Kin Hubbard
Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's. ~Earl Wilson
Credit buying is much like being drunk. The buzz happens immediately and gives you a lift.... The hangover comes the day after. ~Joyce Brothers
ProfMoneyWise
Member
PMW Says: There is no shame in renting. There is shame in foreclosure.
PMW Says: To buy a house please be debt-free, have a fully funded emergency fund, have enough down to avoid PMI and take on no more than a 15 year fixed mortgage with a total PITI and HOA payment more than 25% of your take home pay.
Do You Rent Or Buy?
Knowing when it's the right time
MAR 2, 2011 | WRITTEN BY CHRIS RUSSELL
To rent or not to rent (aka, to buy).
We are so eager to buy a home and yet many times, it is not the right time. You want to have a strong financial foundation laid first, and that means no debt and an emergency fund of three to six months of expenses, as well as a good down payment saved up. Until that time, it's better to rent a cheap place and get out of debt.
Here are some examples of when renting might be the way to go:
When you are just starting out – A young single person or married couple has their whole life in front of them. You could be transferred to a job in another state. You might decide that one parent wants to stay home with the kids, so your household income is cut. You may just not like your neighborhood and want to move. It's much easier at this stage of life to pick up and move from an apartment and be done with it rather than try to sell a house.
When you don't have a full emergency fund – You've heard on a certain radio show that when you buy a house and have no emergency fund, Murphy will move into your spare bedroom. If you need to fix the roof or a window gets broken, you pay for it. With no savings, you'll go into debt to fix it. Debt is the thing you're trying to stay away from.
When you have too much house – You've heard about this plenty of times in the news with the recent housing crash. Someone buys too much house and then the value goes down, or they buy a big house and then get laid off, and they can't afford the house payment. At that point, a person shouldn't try to hang onto the house, no matter how much they love it. It's better to sell and rent, and keep life as simple and cheap as possible until things pick up again.
When you still have debt – This goes along with not having an emergency fund. When you have debt, you don't want the obligation of fixing a broken pipe in your house. If you are renting, the landlord takes care of that, and you don't have to borrow money to fix anything. It takes a ton of stress out of your life, and it frees up your money so you can focus on becoming debt-free.
PMW Says: To buy a house please be debt-free, have a fully funded emergency fund, have enough down to avoid PMI and take on no more than a 15 year fixed mortgage with a total PITI and HOA payment more than 25% of your take home pay.
Do You Rent Or Buy?
Knowing when it's the right time
MAR 2, 2011 | WRITTEN BY CHRIS RUSSELL
To rent or not to rent (aka, to buy).
We are so eager to buy a home and yet many times, it is not the right time. You want to have a strong financial foundation laid first, and that means no debt and an emergency fund of three to six months of expenses, as well as a good down payment saved up. Until that time, it's better to rent a cheap place and get out of debt.
Here are some examples of when renting might be the way to go:
When you are just starting out – A young single person or married couple has their whole life in front of them. You could be transferred to a job in another state. You might decide that one parent wants to stay home with the kids, so your household income is cut. You may just not like your neighborhood and want to move. It's much easier at this stage of life to pick up and move from an apartment and be done with it rather than try to sell a house.
When you don't have a full emergency fund – You've heard on a certain radio show that when you buy a house and have no emergency fund, Murphy will move into your spare bedroom. If you need to fix the roof or a window gets broken, you pay for it. With no savings, you'll go into debt to fix it. Debt is the thing you're trying to stay away from.
When you have too much house – You've heard about this plenty of times in the news with the recent housing crash. Someone buys too much house and then the value goes down, or they buy a big house and then get laid off, and they can't afford the house payment. At that point, a person shouldn't try to hang onto the house, no matter how much they love it. It's better to sell and rent, and keep life as simple and cheap as possible until things pick up again.
When you still have debt – This goes along with not having an emergency fund. When you have debt, you don't want the obligation of fixing a broken pipe in your house. If you are renting, the landlord takes care of that, and you don't have to borrow money to fix anything. It takes a ton of stress out of your life, and it frees up your money so you can focus on becoming debt-free.
ProfMoneyWise
Member
PMW Says: The only reason a cosigned loan is approved is because of the cosigner. So, whose loan is it?
PMW Says: I heard it again this week. 75% of those on Forbes most wealthy 400 say the key to building wealth is to get out and stay out of debt. Not sure why only 75% of them say this but I know 100% of me knows it.
PMW Says: If you have a mortgage you are renting from the bank. Difference in this rental agreement is your phone rings when you call the landlord about broken stuff.
Good Debt Myths
Why none of them are true
APR 5, 2011 | WRITTEN BY CHRIS RUSSELL
The phrase "good debt" is an oxymoron. Emphasis on the "moron" part.
Some people are confused about this because, on the outside, it seems reasonable that a debt could be considered good if you have something to show for it or an asset that appreciates in value. You might owe money on a house that you can sell, but that credit card debt you ran up in college provides no benefit now.
Time to clear up the myth. There is no such thing as good debt, even if you have a building or business to show for it. The risk that debt brings to a situation outweighs any benefit that comes along with it.
Here are some examples:
Mortgage debt – Whether it's on your house or a home equity loan, taking money out of your residence to finance a project is a bad idea. You've put your home at risk by leveraging it, so if you can't or don't pay for some reason, you'd better find another place to sleep. And don't argue about deducting the interest you pay on your taxes. You could pay off the house, give extra money to a charity and deduct that instead. Same benefit with no risk.
Real estate debt – It's good to have an asset like an office building or rental property that you can lease to others and profit from. But owing money on it adds no benefit. The real estate crash from the last couple of years has left many property owners upside down on their notes and desperate to pay bills if a tenant defaults. With no debt, none of that happens.
Student loan debt – Some might argue that this is an investment in yourself, since you get something for it. But you can get the benefits of this "investment" without the debt. It's simple to work your way through college (not easy, but simple) while paying cash. Plus there are scholarships, grants and even programs where you can work in underserved areas in exchange for tuition help. School loans will suck your early paychecks dry and hinder your ability to build wealth. The worst part is that you have nothing to sell to get rid of a student loan debt. If you spend $50,000 on a specialized degree and then decide to do something else with your life, you're in debt and out of luck.
If you have a dream that you think can only come true by borrowing money, remember that it's much better and less stressful to leave the so-called good debt out of it. No debt means no wolves at the door.
PMW Says: I heard it again this week. 75% of those on Forbes most wealthy 400 say the key to building wealth is to get out and stay out of debt. Not sure why only 75% of them say this but I know 100% of me knows it.
PMW Says: If you have a mortgage you are renting from the bank. Difference in this rental agreement is your phone rings when you call the landlord about broken stuff.
Good Debt Myths
Why none of them are true
APR 5, 2011 | WRITTEN BY CHRIS RUSSELL
The phrase "good debt" is an oxymoron. Emphasis on the "moron" part.
Some people are confused about this because, on the outside, it seems reasonable that a debt could be considered good if you have something to show for it or an asset that appreciates in value. You might owe money on a house that you can sell, but that credit card debt you ran up in college provides no benefit now.
Time to clear up the myth. There is no such thing as good debt, even if you have a building or business to show for it. The risk that debt brings to a situation outweighs any benefit that comes along with it.
Here are some examples:
Mortgage debt – Whether it's on your house or a home equity loan, taking money out of your residence to finance a project is a bad idea. You've put your home at risk by leveraging it, so if you can't or don't pay for some reason, you'd better find another place to sleep. And don't argue about deducting the interest you pay on your taxes. You could pay off the house, give extra money to a charity and deduct that instead. Same benefit with no risk.
Real estate debt – It's good to have an asset like an office building or rental property that you can lease to others and profit from. But owing money on it adds no benefit. The real estate crash from the last couple of years has left many property owners upside down on their notes and desperate to pay bills if a tenant defaults. With no debt, none of that happens.
Student loan debt – Some might argue that this is an investment in yourself, since you get something for it. But you can get the benefits of this "investment" without the debt. It's simple to work your way through college (not easy, but simple) while paying cash. Plus there are scholarships, grants and even programs where you can work in underserved areas in exchange for tuition help. School loans will suck your early paychecks dry and hinder your ability to build wealth. The worst part is that you have nothing to sell to get rid of a student loan debt. If you spend $50,000 on a specialized degree and then decide to do something else with your life, you're in debt and out of luck.
If you have a dream that you think can only come true by borrowing money, remember that it's much better and less stressful to leave the so-called good debt out of it. No debt means no wolves at the door.
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ProfMoneyWise
Member
PMW Says: Normal is being in debt. Weird is having wealth. Your choice.
PMW Says: Gap Insurance even being offered should clue us in to RUN!
PMW Says: Own your food, your gas, what you drive, your fun, your brain and yes even your home and all it's furnishings. If you don't like it go back from where you came, but at least humor me and give it a try.
PMW Says: The magic begins long before your debt is eliminated.
PMW Says: Living within your means is not the same as living below your means. And a budget is not a penalty. The penalty comes from exceeding your budget.
PMW Says: I'm asked, "so what do I do if there is not enough money to do what I want to do?" To which I reply, "grow up"
PMW Says: You borrowed it, so pay it back. That foot stomping, fuming, arm crossing deal you are doing makes you look stupid.
PMW Says: Gap Insurance even being offered should clue us in to RUN!
PMW Says: Own your food, your gas, what you drive, your fun, your brain and yes even your home and all it's furnishings. If you don't like it go back from where you came, but at least humor me and give it a try.
PMW Says: The magic begins long before your debt is eliminated.
PMW Says: Living within your means is not the same as living below your means. And a budget is not a penalty. The penalty comes from exceeding your budget.
PMW Says: I'm asked, "so what do I do if there is not enough money to do what I want to do?" To which I reply, "grow up"
PMW Says: You borrowed it, so pay it back. That foot stomping, fuming, arm crossing deal you are doing makes you look stupid.
ProfMoneyWise
Member
PMW Says: Seven out of ten are living paycheck to paycheck, spending money they do not have, carrying $10,000 worth of consumer debt and have an average of 9 credit cards. 60% cannot withstand a $5,000 emergency without borrowing and 92% of our fellow citizens are losing sleep over their finances.
Is it any wonder why the majority of our leaders don't think this behavior is odd? They know it does not work, but they don't think it odd.
We don't have to be like the majority. Debt is normal, wealth is weird.
Which choice are you making today?
Federal Budget vs. Household Budget: How Do They Compare?
You can't borrow your way out of debt.
from daveramsey.com on 28 Apr 2011
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By Dave Ramsey
Whenever the talking heads on TV start talking about the national economy, most of our eyes start to glaze over. The gigantic numbers that they throw out there are ridiculous; most Americans have no idea what those numbers mean in practical terms. So, I thought it’d be fun to turn those figures into something we can understand a little better—like a household budget.
The federal government will take in $2.173 trillion in 2011. That’s their income, and it sounds pretty good. Until, that is, you factor in that the federal government will spend $3.818 trillion during the year. So, just like many families, the government’s outgo exceeds their income—to the tune of $1.645 trillion in overspending. That’s called the deficit. Altogether, the government has $14.2 trillion in debt.
What would happen if John Q. Public and his wife called my show with these kinds of numbers? Here’s how their financial situation would stack up:
If their household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000!
What’s the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it’s the only way out of debt for John Q. Public.
If I ever got a call from a family that was spending $41,500 more than they made every year, you would definitely expect me to yell at them for their dumb behavior, right? Kids, no more McDonald’s four times a week. Snacks come from the grocery store now. And we’re not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it’s time to amputate the lifestyle!
It works the same way for the government. You can’t borrow your way out of debt, whether you’re a typical American family or the entire U.S. government. At some point, you’ve got to say, “Enough is enough!” and make the hard cuts necessary to win over the long haul.
Is it any wonder why the majority of our leaders don't think this behavior is odd? They know it does not work, but they don't think it odd.
We don't have to be like the majority. Debt is normal, wealth is weird.
Which choice are you making today?
Federal Budget vs. Household Budget: How Do They Compare?
You can't borrow your way out of debt.
from daveramsey.com on 28 Apr 2011
Tweet Share Email
By Dave Ramsey
Whenever the talking heads on TV start talking about the national economy, most of our eyes start to glaze over. The gigantic numbers that they throw out there are ridiculous; most Americans have no idea what those numbers mean in practical terms. So, I thought it’d be fun to turn those figures into something we can understand a little better—like a household budget.
The federal government will take in $2.173 trillion in 2011. That’s their income, and it sounds pretty good. Until, that is, you factor in that the federal government will spend $3.818 trillion during the year. So, just like many families, the government’s outgo exceeds their income—to the tune of $1.645 trillion in overspending. That’s called the deficit. Altogether, the government has $14.2 trillion in debt.
What would happen if John Q. Public and his wife called my show with these kinds of numbers? Here’s how their financial situation would stack up:
If their household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000!
What’s the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it’s the only way out of debt for John Q. Public.
If I ever got a call from a family that was spending $41,500 more than they made every year, you would definitely expect me to yell at them for their dumb behavior, right? Kids, no more McDonald’s four times a week. Snacks come from the grocery store now. And we’re not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it’s time to amputate the lifestyle!
It works the same way for the government. You can’t borrow your way out of debt, whether you’re a typical American family or the entire U.S. government. At some point, you’ve got to say, “Enough is enough!” and make the hard cuts necessary to win over the long haul.
ProfMoneyWise
Member
Postal Service is reported to be $2B in debt and the cause being floated is pension payment requirements . . . tick, tock, tick, tock
No matter who you work for. No matter what is promised. Always be prepared to lose your job tomorrow and definitely plan on taking care of yourself in your retirement.
No matter who you work for. No matter what is promised. Always be prepared to lose your job tomorrow and definitely plan on taking care of yourself in your retirement.