Over the last few years, the discussion has been on how much money we can have if we only save early. In some articles, it talks about how we can be millionaires if we only save $2,000 a year for 5 years from age 21 to 25. The articles go on to discuss how if we save $2,000 from age 36 to 64, the amount saved would be less than ½ at age 65 than what would have been saved if we only saved from age 21 to 25 instead.
To me these articles have been dangerous because it has made some people feel ashamed that they did not save early enough to have a good retirement. They think that if they are in their 40’s or older that it is too late. It is never too late. And, before you believe these articles, find out why the numbers are greatly exaggerated. For more, read Myths – You Can Have A Financial Windfall Only If You Save Early.
As we remember those who gave their service for their country this Memorial weekend, I thought it would be good to remember the true meaning of tithing. Tithing is about giving without the expectation of receiving just as our war veterans have done over the years. We get caught up in thinking our tithe should be 10 percent of our income, thus we may give more out of obligation than giving freely and willingly. Or, we wonder where the 10 percent will come from when gas prices are rising and squeezing our budgets to the limit.
Tithing is a sign of prosperity that shows us that we already have enough. Even when we feel that we do not have enough due to economic conditions (e.g., rising gas prices), tithing is showing us that by changing our thinking, we change our reality. Tithing works because it helps us overcome our beliefs of sacrifice of money. To learn more, see Tithing.
If you want to know if you are (or can become) prosperous, you need to look at the language that you are using. Language is a very telling sign of who you are. Many say “I am trying to become wealthy” or “No matter what I do, I can not find a way to afford ______ (fill in the blank).” Using the words “try” or “can not” do not move you forward towards prosperity. To create prosperity in your life, you need to take responsibility and take action towards what you desire in your actions. One of the steps towards prosperity is to watch the words that you are using. To learn more, see Importance of Your Words.
We keep on hearing about cutting back on spending in order to save more. As I discussed earlier, this advice alone has not helped many families from accumulating a record amount of debt. This is because many are cutting back on what gives them peace, love and joy. By doing so, they are feeling deprived and actually creating a void that they try to fill by buying more. To learn more on how to avoid this, read Don’t Give Up Your Latte.
All homeowners have seen some marketing material on how much they can save by signing up for a bi-weekly mortgage payment plan. I have not been a big fan of this marketing pitch because it is one sided by focusing on how much interest is paid on a mortgage. In reality, the plan is just a forced savings plan. And, it does not present other alternatives on where you can save the additional money (e.g., emergency fund or stock market). By signing up for these plans, a homeowner also locks themselves into a large mortgage payment right away when things are probably already too tight especially for a new home owner.
There are advantages to a bi-weekly mortgage payment plan. However, there is also another alternative that is not being discussed; indexing your mortgage payments each year based on your pay raise. This option can actually save more money than a bi-weekly mortgage payment plan without the initial hardship of making a 13th mortgage payment right away. To learn more, see Alternative to Bi-Weekly Mortgage Payment Plan.
As college students graduate, we hear stories of how much debt they have accumulated while in college. Some of the debt is due to the rising costs of college. Another part of the debt is due to students not using credit cards wisely. For many college students, they did not learn about personal finances at school. So their only education about how money works was at home. What are the lessons that you want to teach your children? I have explored some questions you may want to think about in Teaching Children About Money.
The other day, I discussed how credit cards are just a symptom of a much deeper issue of why we spend and how cutting up credit cards will not solve a spending problem. Yet, I left you hanging on what to do to start solving the problem instead of just treating the symptom (cutting up credit cards). The key to solving any spending issues is to change unconscious decisions into conscious decisions. We may think consciously about not spending and think that this will work. Yet, when 90% or more of our financial decisions are unconscious decisions, then saying and thinking “I will not spend” is an uphill fight against the waves of unconscious thoughts of spending (implanted by marketers). To learn more, see How to Control Spending .
Over the years, I keep on hearing that people in credit card debt should simply cut up the credit cards to solve their problems. However, this advice just solves a symptom of the problem and not the real problem. It is like telling an alcoholic that by avoiding the bars he can solve his drinking problems. Drinking at the bars is only a symptom of an alcoholic. And, if he stops going to the bars, the problem will just show up somewhere else.
Cutting up the credit cards (or putting them away to be used only in an emergency) may be one step in solving the real problem for someone in credit card debt. The real issue though can only be solved by becoming accountable to a budget and finding the reasons for the spending. To read more, see Myth – Cut Up Credit Cards to Avoid Spending.
Have you ever wondered what type of plan was better for saving for retirement (Traditional IRA, Roth IRAs, 401(k), or non-taxed deferred investment vehicle)? If so, you will want to read Power of 401(k)s and IRAs.
I remember years ago where my former stock broker suggested that I forego my 401(k) and invest with him instead (using after-tax income) because taxes were bound to go up in the future due to Social Security and the national debt. Thus, it was better to be taxed now instead of waiting until retirement to be taxed. Well, tax rates have actually gone down since he told me this. And, he never did the math to figure out how much taxes would have to increase to make non-tax deferred investing better than a 401(k) plan. It goes to show you that you need to see the numbers to justify some of the advice that is being proposed. Click on the link above to see the advantages of tax-deferred vehicles and the math behind it.
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