Ric Edelman and I were just on The Willis Report with Gerri Willis. Tune in here to find out why now is the time to rebalance your portfolio.
Ric Edelman and I were just on The Willis Report with Gerri Willis. Tune in here to find out why now is the time to rebalance your portfolio.
Watch the nine minute interview I just did after the PA Conference for Women with Arthur Kade. You can also check out the video on his website here: http://bit.ly/TBzzzm
My grandmother used to say that you should never put all your eggs in one basket. She was right. As I see it there are three baskets into which you should put your eggs. I call them the security basket, the retirement basket, and the dream basket. The security basket protects you and your family against the unexpected (such as a medical emergency, the death of a loved one, or the loss of a job), the retirement basket safeguards your future, and the dream basket enables you to fulfill those deeply held desires that make life worthwhile.
This three-basket approach may sound simple, but don’t let that fool you. If you fill the baskets properly, you can create for yourself a financial life filled with abundance and, most important, security. In today’s blog post I’m going to give you a breakdown of the 3 baskets- how much you should be putting aside, where the money should be going and how to make it automatic!
The goal with your security basket here is to put away “rainy-day money” to cover expenses in case you lose your income. Exactly how much money you need to put away depends on what you spend each month. I generally recommend to my students and clients that they put away somewhere between 3 and 24 months’ worth of expense money.
Now this 3- to 24-month range covers a lot of ground. What’s right for you depends in large part on your particular emotional makeup. Some of my students simply do not feel safe if they have anything less than two years’ worth of cash sitting in a money-market account. I happen to think that’s a bit excessive, but if that’s what it takes to make you feel comfortable, then by all means make it your goal.
Whatever amount you decide it’s important to put this money an FDIC-insured bank account (not your regular checking account but a separate one set up specially for this purpose). Until this emergency account is fully funded, you should have at least 5% of your paycheck directly deposited into it. If your employer doesn’t offer payroll deduction, arrange to have your bank automatically transfer the money from your checking account the day after your paycheck clears. To learn more check out my appearance on NBC’s Today show where I share my 6 tips for setting up an emergency account.
What’s a dream account? This is where you save the money that is going to pay for your home, car, wedding, trip to Hawaii, new boat, guitar, ski lessons, cooking school—whatever your dream happens to be. Most dreams require CASH, and because most people don’t have the cash, they either borrow to pay for their dream (whether by putting it on their credit cards or taking out an actual loan), or they never make the dream a reality. In some ways, your dream account is the most important account you will have because living your dreams is where the excitement of life really is. The best way to start filling this basket is to decide upon a fixed percentage of your income that you will automatically contribute every month. I usually recommend people start by investing 3%-5% of their after-tax income. As with your emergency fund, use either payroll deduction or your bank’s online bill-pay service to have a percentage of your paycheck automatically transferred into an FDIC-insured account set up just for this purpose. If your dream is at least three years away from fulfillment, start investing the money more aggressively once your dream savings total $10,000.
In my earlier blog post I explained the critical importance of paying yourself first—having at least 10% of what you earn deducted from your paycheck and deposited directly into a 401k, IRA, or similar qualified retirement account before the government takes its bite of withholding tax. Ideally, this deduction should total 12.5% of your income (the equivalent of one hour’s worth of work each day). But whatever you can manage, you must make the process automatic. The good news is that payroll deduction is a standard feature of most 401k plans, so as long as you’re signed up, your contributions will be automatically deducted from your paycheck.
If you’re not eligible for a 401k or similar plan and as a result use an IRA for your retirement saving, you’ll have to create your own automatic “pay yourself first” program. Tell the bank or brokerage where you have your IRA that you want to set up a systematic investment plan. This is a plan under which money is automatically transferred on a regular basis into your IRA from some other source (such as a payroll deduction). Most banks and brokerage firms will handle all the arrangements for you, contacting your employer’s payroll department on your behalf and dealing with all the paperwork. (If your employer doesn’t offer payroll deduction, you can have your retirement-plan contribution automatically moved from your checking account to your IRA—ideally, the day after your paycheck clears. Most banks have free online bill-paying services that allow you to schedule regular automatic payments of specified amounts to anyone you want).
I hope this blog post helped you gain a better understanding of the 3 basket approach to financial security and has motivated you to start funding all 3 – AUTOMATICALLY! Please leave a comment below or on my facebook page. I love hearing from all of you!
Hey everyone. Happy September!
I just did an amazing interview with remarkable man and entrepreneur named Brandon Steiner.
Brandon, has a new book coming out called You Gotta Have Balls: How a Kid from Brooklyn Started From Scratch, Bought Yankee Stadium, and Created a Sports Empire
The book is fantastic. I read it cover to cover in about three hours and loved it. While the title sounds funny, it’s not what you may be thinking. It’s actually about how to pursue your dreams, recover from adversity—and raise children with strong values that will benefit them for life! It really moved me as a parent.
Brandon, owns a company called Steiner Sports Marketing & Memorabilia, Inc., one of the largest sports memorabilia companies in the world.
Last year, he made my dream come true—when he took my son Jack on a tour of Yankee Stadium, and had “second base” hand delivered to his seat at the seventh inning of the game! This was Jack’s first time at Yankee Stadium, needless to say—not your normal first experience at a baseball game. He’s one lucky kid, and I am one lucky daddy!
This interview is one of the best I think I have done in a year—and it’s my gift to you for being a member of the FinishRich Community! Enjoy and please share your comments on how you liked it.
Oh…and if you haven’t “liked” me yet on Facebook—come join me (we just went over 25,000 “likes”—would love to see you there)!
In my earlier post, The Foundation To Building Wealth, I explained how the kind of wealth you build is determined by the way cash flows through your life. With that in mind, I suggested that you set a goal of Paying Yourself First at least 10%-12.5% (or 1 hour a day) of your pretax income. I received tons of great comments and some awesome questions, one of which I would like to highlight and answer in today’s blog post….
“Should I still open a retirement account and save money if I have credit card debt?”
This is a question I get all the time and my answer is:
Yes, you should absolutely open a retirement account and start saving even if you are in debt!
After more than two decades of experience teaching people about money, I have come to believe with all my heart that it’s a big mistake to put off saving money until you are debt free. If you do, you may never get started saving. And you’ll miss out on the matching contribution many employers offer on 401(k) plans.
But if you’re in credit card debt, you need a different plan. Here it is: whatever amount you decide to Pay Yourself First, split it in half. Put 50% in your retirement account and use 50% to pay off your debt. Once the debt is paid, you can revert to Paying Yourself First with the full 100%.
If you make $50,000 a year, Paying Yourself First 10% would mean setting aside $5,000 a year or $416 a month. But if you have credit card debt you’d split that in half, putting aside $208 a month and using the other $208 to pay off credit cards. This system allows lets you feel like you’re working for the future while erasing the mistakes of the past.
This is bound to motivate you and get you excited about the future. In my experience, money is as much an emotional issue as a numerical one. This approach helps you handle both at once.
I call this my “Bury the Past, Jump to the Future” system. Try it. It really works.
How to Use It: Print out this blog post and fill in the blanks below to figure out how much money every month you can put toward your debt while still Paying Yourself First. (you can also just write this on a piece of paper if you don’t have access to a printer).
Why to Use It: It’s a fast, easy way to know exactly how much you’ll have every month to pay off your credit cards.
The Bottom Line: Dividing your money this way makes sense, because it lets you keep building for a bright future while steadily getting rid of that killer consumer debt.
When You’ve Finished the Exercise: Now start making those payments and watching your balances fall! If you have more than one card and you’re not sure which to pay first, then CLICK HERE for my easy and effective system to prioritizing your debt.
If this post helped you, please leave a comment below!
Farren’s Success Story….
I received an email from a reader named Farren. Farren was in the middle of taking my FinishRich Coaching Program, and he was writing to let me know that even though he hadn’t yet finished the course, his entire life had already completely changed. In less than eight months, he had gone from being stressed out over his finances to being out of credit card debt and on his way to a dream trip—seven weeks in Australia with his wife and two young sons.
As I read his email, it really hit me—it’s all about mindset and action. Farren’s mindset had changed, and as a result so had his actions.
Here’s the original email Farren sent me. I want you to read it because there’s so much in it to learn from. The fact is, you too can enjoy this type of success.
David, I just wanted to send a quick email to thank you once again for providing a great product/service and resource. I have listened to the CDs, watched the DVDs, read your book “Start Over, Finish Rich,” implemented the strategies, and changed my mindset! My wife, Amelia, implemented our latte factor and started looking at our overall expenses or consumables. Things we could really get out of our life and stop spending money on right away and then… how can we also look at our different bills and cut them out. The TV, the direct TV. Things that are small, but as you add them up with the whole, it’s really a lot of money.
In less than a year, we’ve paid off $12,000 in American Express credit card debt, drastically reduced our monthly expenses, created a financial future with less stress, and – drum roll, please – the most exciting thing is that we are taking 7 weeks off for a family trip to Australia! (And I was able to pay cash for the $6k airfare!) My wife and two boys age 5 and 8 years old are so excited.
I took a picture of our little home savings jar that we used as a visual reminder for our kids and ourselves to see what we were saving for and how much we were saving. My kids are now excited to save. When they find a nickel or a penny – even change in my car – they run to the kitchen to put money into our “Australia Fund.”
Really life-changing stuff… so thanks to you and your team for their financial wisdom. These are troubled times for some, but with a plan and a coach, there’s nothing stopping you from the greatest life change you can do … understanding how to be financially free!
Cheers to you guys and “hi 5”! Thanks again!
Live your dream,
I wrote back to Farren immediately, telling him how amazing I thought his email was. “I love how you changed your mindset, took action and involved your family!” I wrote him. “You are an amazing example of how quickly you can get out of debt and start LIVING YOUR DREAMS. Nearly two months in Australia—sounds incredible!”
Farren’s response was as inspiring as his first note
We have just barely implemented your systems and still have made significant changes and progress. But it’s really like you said—it’s all about mindset and action. If you are married, you really have to have a “come to Jesus” meeting with your significant other. Look at ways you are both wasting money, create a goal, and go after it. A visual reminder like the jar in our kitchen also really helps. And if you can get the kids involved and excited, that can make all of the difference.
Farren’s story touches me for many reasons—and maybe it touches you, too.
Even though Farren was in debt, he was still willing to invest in himself to learn more about handling money and building wealth. With the benefit of what he learned, he changed his mindset and he took action. He’d didn’t over-think it—he just got going. He also involved his whole family in his dream of being debt free. He sat down with his wife and had the hard talk about looking for ways to cut back on spending. Then they created a visual aid (the money jar) to help them save money—and they got their kids to participate. As a result of all this, in just eight months, Farren was able to pay off a $12,000 credit card debt—and on top of that save enough to be able to pay cash for $6,000 in plane tickets and take his family on a two-month dream trip to Australia.
I mean, really—it’s a story that can make you jealous. Here’s a couple in debt, struggling to keep their heads above water, and in less than a year their whole life is turned around—simply as a result of changing their mindset and taking action (plus a little bit of coaching and education).
IF FARREN CAN DO IT, WHY CAN’T YOU?
If this story inspired you like it did me- please leave a comment below and share it with your family and friends.
With all the real-estate websites available on the Internet these days, it’s possible for anyone with a computer to do a lot of the stuff that only a real estate agent used to be able to do. Certainly, you don’t need a professional in order to locate homes for sale in a particular area or get a good sense of where prices are in the category that interests you. But this kind of research may be the least important thing a great real estate agent can do for you.
I’ve been a real estate agent myself (specializing in commercial properties) and I’ve worked with real estate agents on all of my own real estate transactions. I know from personal experience how much they can help you. But I also know that not all real estate agents are created equal.
So how do you find the one who can guide you through the process intelligently and help you close a great deal? Here’s a list of things you should look for.
HOW TO FIND A GREAT AGENT Finding an agent who is ready, willing, and able to do all these things is not as hard as you might think. You should start by asking trusted friends and colleagues for recommendations. If one name keeps cropping up, that’s a good sign. Make a note if you see a particular agent’s name repeatedly on for-sale signs in the neighborhood where you want to buy. You can also collect business cards from agents you meet at open houses.
As your list of prospective agents begins to take shape, do an Internet search on all the candidates you’re considering. Look for articles, chat room or blog posts, and personal websites to get a feel for their work, their style, their values, and how they market themselves.
DON’T BE AFRAID TO ASK TOUGH QUESTIONS When you’ve narrowed your list to three to five prospects, schedule a meeting with each—and treat your meeting like an actual interview. I recommend that you ask the following questions:
Based on their responses, ask yourself how you think it would be to work closely with each of them. Does your gut say this person is trustworthy? The only correct answer is whether the agent feels right for you. It’s all about chemistry.
Finally, before you commit to a particular agent, check them out with your state’s real-estate commission or licensing board. You want to verify that your choice is not only licensed but also that his or her license is in “good standing,” meaning the agent has kept current with all educational requirements. You also want to find out whether he or she has any record of complaints or disciplinary actions.
Hope this blog post helps you find the great agent you deserve. Be sure to leave a comment below!