If you missed me this morning on NBC’s Today Show – Money 911 make sure to watch the segment now. This week we answered all back-to-school related questions. Hope our answers can help you!
When it comes down to it, finishing rich is simple. All you have to do is make a decision to do something that most people don’t do—to Pay Yourself First. And if you’re starting late, you have to Pay Yourself First…Faster!
It really is that simple. It’s just not easy. The catch is that you have to know what Pay Yourself First means and then you have to do it. And if you’re not where you’d like to be financially at this point in your life, chances are you don’t.
WHAT “PAY YOURSELF FIRST” MEANS
“Pay yourself first” means just what it says. The next time you earn a dollar, before you pay anyone else any money they may have coming to them—before you pay the government its federal or state tax, before you pay your landlord the rent or your bank the monthly mortgage—you must pay yourself first.
The fact is that most of us pay everyone else before we pay ourselves. The first person we pay is the government through our withholding taxes. Then we usually pay the rent or our mortgage and the rest of our bills. If anything is left at the end of the month, then maybe we pay ourselves by putting a few dollars into a savings or retirement account.
Unfortunately , this approach simply doesn’t work. For one thing, by letting the government take its portion first, there’s often not enough left over to pay yourself much of anything.
WHERE DO I PUT IT?
Fortunately, there is a way to pay yourself before you pay the government, a way where you don’t lose a third of your paycheck to taxes. And best of all, it’s legal. It involves opening a PRETAX retirement account and putting a portion of your salary into it. Every dollar of your income that you deposit (up to certain limits), as long as it stays in the account, is not subject to any taxes. And neither is any of the interest (or capital gains) that you earn on it.
My suggestion is simple. Starting today, you should work at least one hour a day for yourself. This means you should Pay Yourself First for your future by putting a minimum of 10%-12.5% of your gross income or 1 hour a day of your income into what we call a pretax retirement account. For Business owners this would be 10% of your gross income or 1 deal a year (or 2, 3 etc.. depending on your specific situation).
MAX IT OUT
The single most important investment decision you ever make may well be how much to automatically Pay Yourself First into your retirement account.
If you are already enrolled in your company’s retirement plan or have set up an IRA plan, SEP IRA etc…, congratulations. But that doesn’t mean you’re done yet. Now you need to find out how much you are using it. Are you saving 4%? That’s about what most people do. Unfortunately, most people retire poor, dependent on Social Security or family to survive. You are not most people.
In a perfect world, the fastest way to become rich is to MAX OUT THE PLAN. Here’s the maximum allowable based on current tax law:
Now, it’s okay to start off slowly, saving a smaller percentage of your income at first, and gently working your way up to where you need to be. Even if you think the best you can do is to save just 1%, don’t let that stop you. Anything is better than nothing.
At the same time, try to be ambitious. After all, this is your future we’re talking about. However much you think you can afford to Pay Yourself First for your future—do more. If you think you can save 4%, save 6%. If you think you can save 10%, save 12%. Most of us tend to underestimate how much we think we can manage. As a result, we wind up low-balling ourselves … and our futures.
IS THAT ALL THERE IS?
To be honest, not everyone is as enthralled by the idea of Pay Yourself First as they should be. In fact, it makes a lot of people angry. You may be one of them. Please trust me on this. Nothing will help you achieve wealth until you decide to Pay Yourself First. Nothing. You can read every book, listen to every tape program, order every motivational product, subscribe to every newsletter there is, and none of it will get you anywhere if you let the government and everyone else have first crack at your paycheck before you get to it. The foundation of wealth building is Pay Yourself First. So what are your next steps?
I hope that you found this information helpful and that you will make the decision to start paying yourself first TODAY!
Short of winning the lottery, nothing can change your finances as fast as getting a raise. And sometimes changing your life is as simple as changing your mind about what’s possible. Ask a new question, take a new approach, and you may very well get a new result.
So as summer comes to a close, ask yourself this: What would it take for me to get a bigger raise this year?
Not everyone has control over getting a raise, of course — government workers and union- or contract-based employees with fixed salaries, for example. Everyone else, though, should keep reading.
Step 1: Brand Yourself
Nothing determines your value in the marketplace more than how you position yourself and how you come across to your boss. Ask yourself these questions and answer them honestly:
In order for your employer to recognize your value, they have to perceive your value. And they can’t perceive you as a high-value brand if you don’t perceive it — and project it — yourself.
Step 2: Write Your Action Plan
Write the following on a piece of paper: your name, your current annual salary, how much of a raise you want, the percentage of your current salary it represents, your new salary after the raise, and your deadline for getting it.
Don’t just pull a new salary figure out of the air. Remember — you’re not going to be given a raise; you’re going to earn one by increasing your value to the organization. To get a sense for what pay ranges are for jobs like yours, and for targeted salary advice, check the following web sites:
Use the salary ranges and advice you find on these sites as guides, not as absolutes. If you find that you’re currently earning at or below the bottom of the range, you may have lots of room to negotiate. If you’re near or above the top of the range, you can still ask for more — you’ll just have to work harder to demonstrate your exceptional value.
Step 3: Put Yourself in Your Boss’ Shoes
Now it’s time to determine how you’ll add more value to your work. Asking for a raise can backfire if you aren’t willing or able to deliver the goods. A sound way to determine your perceived value is to imagine how your boss would respond if you asked what I call the Seven Magic Questions:
If you can’t answer questions one through six easily, then it’s time to meet informally with your boss. When you do, be honest about your goal. Start by saying, “I want to earn more money at work and I’m committed to adding enormous value to you. I want to become clearer on how I can help you better reach your goals and the company’s goals.” Then ask the Seven Magic Questions
Step 4: Focus on the 80/20 Rule
You may be familiar with the idea that in sales and commerce, 80 percent of your revenue tends to come from 20 percent of your efforts. Think about your own 80/20 rule: What is it that you do with 20 percent of your time and effort at work that creates 80 percent of your value? Once you’ve identified these high-value tasks, write down your plan for doing more of them.
Identify and maximize your most productive activities, and minimize the busywork that takes up most of your time but produces little of value. Then put your plan into action.
Step 5: Ask for Your Raise
After you’ve put your plan into action — and, just as important, demonstrated its results — it’s time to ask for a raise. Make an appointment with your boss, look him or her in the eye, and share what you’ve done to increase your value and how you plan to add even more value in the future. Then share the salary you want.
It may seem scary, but what’s the worst that can happen? Your boss will say no. Even then, you’ve brought to his or her attention that you’re increasing your value as an employee, and that you expect to be compensated appropriately. It also allows you to ask magic question number seven directly: “What would it take for me to get a raise in the next six months?”
What It Costs to Replace You
A final note — it can cost an employer up to a year of your salary to replace you. Depending on the level of training your company has invested in you, hiring and training a “new you” could cost a fortune, and employers know this.
Compared to your replacement costs, the cost of retaining a highly productive, highly motivated employee with a reasonable if substantial raise is well worthwhile.
I hope this information can help you get the raise you want and you deserve.
Of all the things people say to me after they’ve read my books, seen me on television, or heard me give a speech, there is one comment I hear more than all the others put together:
“If only I had started saving when I was younger.”
SOMETIMES LIFE THROWS YOU A CURVE BALL. While some of you may blame yourselves for not having started saving or investing earlier, I also know that many of you are starting late not because you were shortsighted or lazy or irresponsible, but because life threw you a curve ball. I hear from people all the time who are starting late because of divorce, death, illness, disability, bankruptcy, poor career choices, lack of education—and on and on. Either way, it’s time to cut to the chase. What’s done is done. You can’t go back and fix the past.
THE PAST IS OVER. Oh, you say, if only I knew then what I know now, my whole life would be different. Of course it would. But guess what—you didn’t know. Or if you did, you didn’t do what you knew you needed to be doing.
So it’s done. Finished. Settled.
Sometimes life is unfair.
But that’s okay.
You can move on.
You can get over it.
Stop asking yourself why you didn’t do what you should have done. The real question is: what are you going to do about it now?
NO MORE SAYING, “IF ONLY”! For a long time now, you’ve been beating yourself up about what you haven’t done or should have done. Some of you have been beating yourselves up for your mistakes for decades. It’s unreal how tough we can be on ourselves.
We all do this. I’m no exception. I can’t tell you how many times I’ve said to myself, “Oh, if only I hadn’t sold that house in Danville, California.” That house was the first house I ever owned. I bought it for $220,000 and sold it nearly five years later for $225,000. (Not exactly a Donald Trump real estate flip.) Today, that house is worth more than $700,000.
I could go on and on. But none of it matters. What matters is that with all the amazing mistakes I’ve made over the years, I still managed to become a multimillionaire. That’s because rather than looking back, I focus on going forward. And here’s the bottom line: if you are not yet as rich as you want to be, stop focusing on what you haven’t done and start focusing on what you want to do.
YOU CAN’T COULDA-WOULDA-SHOULDA YOURSELF TO WEALTH OR HAPPINESS. You know what I’m talking about. So stop “shoulda-ing” all over yourself. It’s messy and makes you unhappy. I know. I’ve been there.
Instead, decide today—right now—to let it go. We all make mistakes. I’ve made them. You’ve made them. Your parents and friends have made them. We are all human. Mistakes hurt. But let’s not waste one more ounce of your energy, spirit, or time thinking about them, because all that will accomplish is hold you back.
Keep this in mind: The past will continue to be your future if you drag it along with you!
THE FASTEST WAY TO LET IT GO. Here’s an exercise I recommend you do. If you really want to get over something you regret, the fastest way to do it is to acknowledge the regret—and then burn it up. Literally.
Here’s what you do. Get yourself a blank sheet of paper and write down a list of as many of your personal if only’s as you can think of.
If only I had saved more money.
If only I hadn’t quit that job.
If only I hadn’t taken the job I have.
If only I’d had kids.
If only I’d not had kids
If only I had bet on the Yankees.
If only I hadn’t bet on the Red Sox.
I’m serious about this. Really go to town with it. Free flow. Let it all hang out. Be honest with yourself. You’ve been beating yourself up over this stuff for years, so you might as well as get it down on paper.
When you’re finished making your list…set fire to it! I’m serious. Light a match and BURN IT UP. Let all those damn if only’s turn into ashes.
Have a “Goodbye If Only’s” party. Invite a friend over and do it together. Just make sure you burn your if only’s somewhere safe. We don’t want you setting fire to your house. If burning them seems too extreme, then just tear up your if only’s into little pieces and toss them in the garbage can.
YOU REALLY NEED TO GIVE YOURSELF A BREAK. The one thing I’ve learned from coaching so many people on their lives and money is that we are just too brutal on ourselves. And what do we do when we actually make some progress? We beat ourselves up for not doing everything perfectly.
It’s a fact that no one will ever be as tough on you as you are on yourself. So give yourself a break. Really. Please leave a comment below letting me know how you feel once you’ve freed yourself of your if onlys.
AND REMEMBER- ITS ONLY TOO LATE FOR YOU IF YOU GIVE UP!
Recently, a close friend said to me, “David, my mom is going through a divorce. Her house is for sale and she’s not sure if she should rent a place or buy a new home in this market. What do you think?”
As we sat on the beach, my friend Jennifer (not her real name) and I discussed her mom’s situation, how difficult the divorce process had been, and her worries about her mom’s financial future.
I listened carefully to Jennifer, and then shared with her some heartfelt advice and wisdom, having worked in the past with hundreds of clients in the same situation. What I told her might also be helpful to you (or a loved one) if you’re unsure of what to do with your money after a divorce or the death of a family member.
First, Do Nothing
There are often dozens of financial decisions to be made during a divorce or after a death. You might find yourself asking such questions as: Should I rent or buy? How should I invest the money (assuming there is any)? Should I hire a financial adviser? If so, who? How do I know I can trust them? Should I invest in stocks, bonds, or mutual funds? Should I start a business, or invest in one?
The questions can seem endless, and often lead to knee-jerk emotional decisions. My advice to Jennifer’s mom was to do nothing right away that involves significant financial decisions or commitments.
I went on to explain to Jennifer that making serious financial decisions in the first year after a divorce or death can lead to regret, and more important to financial mistakes that can last a lifetime. Instead, I said, her mom should give herself a solid year in order to clear her head.
Take a Year to Get Clear
Having worked before with divorced people, widows, and widowers, I can tell you from experience that both of these life-changing situations take a while to heal emotionally. It takes time to go through the feelings of losing someone you love either to death or divorce.
The best thing you can do the first year is deal with the denial, anger, pain, and confusion of the death or divorce. It can take months and often years to come to terms with what has happened, and only then can you finally reach a period where you can think straight.
Even the toughest people need to take time to grieve. And often, the tougher you are, the harder it can be and the longer it can take.
Find Your Money, and a Great Attorney
When you go through a divorce or the death of a loved one, the single most important thing you can do financially during the first year is to simply “find the money.”
Jennifer’s mom wasn’t officially divorced yet, and Jennifer was concerned that she wasn’t being treated fairly by her dad when it comes to finances. Jennifer told me, “My Mom thinks he’s hiding money, and she’s not sure what to do.”
“Tell your mom she needs to hire a professional,” I advised. “She needs to get her attorney to help her find someone who does forensic accounting to search for the money.” Forensic accountants spend their careers finding money that people and businesses try to hide.
When you’re starting the process of a divorce, you need to know how big the financial pie truly is before you split up — which is why finding all the money is so critical. If you’re dealing with a death, it’s equally critical to find all of the assets as soon as possible, as you may only have a few months to settle your estate depending on where you live.
Make Your Money Safe
Initially, put the money you come into after a divorce or death somewhere safe and simple. You shouldn’t tie it up in a long-term investment or anything risky.
My recommendation for Jennifer’s mom was to put the money she was to receive from the sale of the family home into a money market account. They’re liquid, safe, and often insured. You can withdraw your money without a penalty. It doesn’t get any safer and simpler than that — an excellent solution for the first year while you’re getting your head and heart together.
I hope my advice helps you or someone you love during a difficult period. Sometimes, the best thing you can do is listen when someone you love is hurting — but some financial advice never hurts, and can often really help.
The one incredible universal truth that has stood the test of time is that the more you give the more you receive.
This notion—that the more we give back to others, the more comes back to us—is not simply a religious doctrine; it is virtually a law of nature. If you are looking to attract more wealth and happiness into your life, the fastest way I know how is to give more.
HAVING IT ALL…THROUGH TITHING
What exactly is tithing? Tithing is the proactive practice of giving back. It is a spiritual principle common to many traditions that says you should give back a portion of what you receive, that those blessed with abundance have a duty to help others through gifts of kindness, time, ideas, and money. What is amazing about tithing is that when you tithe you get a feeling we often associate with acquiring material things. You simply feel great.
HOW TO TITHE
Should you tithe? Ultimately, it’s a personal decision. Still, I’d like to suggest that if you are not doing it now, you give it a try. Take a percentage of your income and start donating it to some worthy cause. You could donate the 10% traditionally associated with tithing, you could donate more, or you could donate less. As I said, tithing is personal; it’s not about percentages but about the love of giving. What’s important is simply that you get started.
YOUR 5 STEP PLAN FOR TITHING:
STEP #1: COMMIT TO TITHING. For tithing to work, it needs to be a consistent commitment. It’s just the same as Pay Yourself First. If you donate a set percentage of your income every time you get paid, you will compile an impressive record of contributions. If you wait until the end of the year to see what is “left over,” then you will wind up donating less—maybe even nothing. Select a percentage that feels right to you and that you know you can manage. Once you’ve done that, make a commitment in writing to donating this amount on an ongoing basis.
GIVING BACK A PERCENTAGE OF YOUR TIME
People ask me, “What about giving my time to charities? Does donating my time count?” Of course it does. In fact, donating your time can often be more useful than donating your money. There are tons of charities that need helping hands far more desperately than they need additional dollars. And from your point of view, donating your time can be incredibly meaningful.
STEP #2: AUTOMATE IT. Whatever amount you decide to tithe, arrange to have it automatically transferred out of your checking account on a regular basis. Doing this is easier than ever. Most organized charities will be happy to help you arrange an automatic transfer schedule (where they automatically debit your checking account on a regular basis), and many are set up to do it online in just a few minutes. If you are not comfortable having your bank account debited by a charity, you can probably set up an automatic transfer through your bank’s online bill payment system.
STEP #3: RESEARCH THE CHARITY BEFORE YOU GIVE. Where you donate your money is entirely up to you. The most important advice I can offer is to make sure that the charity to which you are giving your hard-earned dollars really uses the funds it collects to help the people or causes it is supposed to be helping. Here is a list of organizations that can help you learn more about potential recipients.
STEP #4: KEEP TRACK OF YOUR DEDUCTIBLE CONTRIBUTIONS. The U.S. government has long allowed taxpayers to deduct contributions to qualified charities. Depending on how much you give, you can offset as much as 50% of your income in this way. In order for a donation to be deductible, the organization must formally apply for and be granted tax-exempt status under section 501(c)(3) of the tax code. You can verify this for any particular organization by visiting the IRS website. For contributions of less than $250, the IRS requires you to keep some sort of written record, such as a cancelled check, a letter or receipt from the recipient, or a bank or credit card statement that verifies the where and when of the donation. If you give more than $250, the IRS wants your proof of donation filed with your tax returns.
STEP #5: FIND OUT ABOUT DONOR ADVISED MUTUAL FUNDS. Donor Advised or Charity Funds allow people to invest their money for a charity’s benefit later but get a tax deduction now. Benefits of these funds …
Here are some established donor funds worth considering – the minimum initial investment in each is $5,000 (except Vanguard, with a minimum $25,000 contribution).
WHY THE ‘HAVE MORES’ HAVE MORE
Over the years, I’ve seen firsthand that the “Have Mores” give more. I’ve also seen that the fastest way to feel rich is to give more—and that those who give more become rich faster. I don’t think it’s a coincidence. Research shows definitively that people who give of their time and money to help others live longer, happier, and wealthier lives. What more could you ask for?
I recently received a powerful story from a woman by the name of Stephanie. Her and her young family were trying to get on track financially and decided to read Smart Couples Finish Rich. In a short period of time, her husband was diagnosed with Lou Gehrig’s disease. She told me that his health failed at a considerable rate and he was immobile only 4 months after the onset. Two week’s after he passed away, she wrote to me an email thanking me for the advice to purchase life insurance. She said that although she was devastated, she was “financially ok” and could find a little peace knowing that her and her two boys could still live comfortably.
My entire team and I were so touched by Stephanie’s story and it reminded all of us why we do what we do: to help teach and inspire others to be smarter with their money for a more secure and rich future. And its because of her story that I am writing this blog post for all of you today; to make you stop and think… if something like this happened to you would you and your family be covered? Would you be able to find some peace?
When I was a financial adviser, I reviewed hundreds of my client’s insurance policies and for the most part what I have seen firsthand is that most people and most families are under insured.
The key to life insurance is figuring out if you need it, how much you need and the smartest way to buy it. Let’s get started…
In general, you don’t need life insurance if….
You do need life insurance if…
IF YOU NEED IT, BE SURE TO SHOP AROUND:
THE 3 MAIN FACTORS TO CONSIDER WHEN YOU’RE DECIDING WHICH INSURER TO BUY YOUR POLICY FROM ARE:
1. How stable is the company? To get an idea of how strong a company’s finances are and whether you can count on it to be around for the long haul, check with one of these firms that rate life insurers.
2. How well does the company take care of it’s policyholders? National Association of Insurance Commissioners maintains an online Consumer Information Source at www.naic.org/cis/, where you can look up the complaint record of virtually any insurance company in the country.
3. How cheap are their rates? Once you’ve satisfied yourself on these two counts, you should look for the best price. The most efficient way to do this is through an online broker such as.
MAKE SURE TO BUY THE RIGHT AMOUNT
Life insurance is all about protecting your family against financial hardship in the event you pass away. So you need to base the size of your policy on one of two things: either what your potential earnings would have been if you hadn’t died or how much money your family will need in order to stay afloat after you’re gone.
The Life and Health Insurance Foundation for Education (LIFE), an industry-supported educational group, has two terrific calculators on its website that can help you figure this out: a “Human Life Value” calculator “Human Life Value” , which estimates what your lost earnings would be worth, and a “Life Insurance Needs” calculator “Life Insurance Needs”, which computes how much money your family is likely to need.
DON’T FORGET YOUR COMPANY BENEFITS
Many employers offer free life insurance coverage that can be worth as much if not more than your annual salary. So when you’re figuring how much insurance you need, don’t forget to factor in your workplace benefits. If you are young and healthy, however, do a comparison between your employer’s group rate and what it would cost you for an individual policy. Because a group policy covers both healthy and unhealthy workers alike, your company’s policy could end up being more expensive than an individual policy for a healthy person in the open market.
MAKE SURE YOUR EMPLOYER PLAN IS “PORTABLE”
The most important advice I can give you regarding a group employer policy is to make sure the plan is portable. This means should you leave your employer, you can take the insurance policy with you (and fund it yourself). The advantage is that you won’t have to re-qualify for the policy and you should be able to keep the group rate that you were paying—which can save you a ton of money.
YOUR LIFE INSURANCE ACTION STEPS
The average American wedding costs $27,800.00 and the days of “dad” footing the entire bill are numbered. According to a recent study by The Wedding Report, in 2011 83.2% of U.S. couples made a contribution or paid the entire cost of their wedding, and only 51.5% of parents contributed to the wedding. The more people contributing to your wedding finances the more confusing the budgeting and bookkeeping will end up being.
Here are my TOP 2 wedding budgeting tips to help all parties involved communicate effectively and stay on track!
Tip #1: Determine your budget
Plan a money date and figure out how much money you and your fiancé can spend.
Schedule a sit down meeting with all parties involved, and be mindful of economic differences.
Pick your priorities.
Be upfront and honest with your vendors.
Tip #2: Manage your funds
Open a bank account devoted specifically to your wedding so you can track your spending.
Devise a secondary savings plan.
Reap great rewards: Sign up for a credit card with a rewards program.
The Bridal Budget Breakdown:
When it comes to weddings and money, (especially other people’s money) it’s important to remember to communicate and take into account each party’s economic differences and needs. Hope these tips can help you or someone you know plan ahead before walking down the aisle.