Sunday, July 15, 2018

Money from Nothing - Part II

Ok, I’m a little late getting part II out.  I finished this about 2 weeks ago, but had to sit on it for a little while before the release.  Now I concluded the original Part II was much too long and I need to leave out some details so the main ideas don’t get lost.

So here goes.

In Part I of “Money from Nothing” I explained that around the same time I realized I ran out of jokes,  I also realized that for a non-professional working class Joe, I enjoy some financial security that most Americans don’t have.  I decided to share what I did, and hope if helps a few folks out there.

I’m not selling anything, so there’s no catch.

Ten years ago I was forced to re-evaluate my finances by necessity.  On more than one occasion we found ourselves overdrawn and a few checks bounced.  Back then, our bank charged $30 for each occurrence, each day.  Not sure if that’s still legal, but I’m sure Trump will reverse that law, since it was started by Obama.  If he does, all the average Joes are screwed.  One bad bill paying spree ended up costing us about $150.  That month I had to pay our electric bill with a credit card.

I knew I had to start tracking our expenses better, so I set up a system to not only track what we spent, but track what we will need to pay each coming month.  For us this was step one.  I’ll get into the details of how to do this later, but for now I just want to plant the idea into your head that once this is done, you can evade many financial inconveniences.  It’s worth the effort.

A lot of folks hope/wait and work for that dream job that will make everything better; however, my plan is based on the idea that, this ship may never dock.  If it does, then that’s great, but if it don’t, you’ll still be in pretty good shape.

I firmly believe that 90% of financial success is timing.  This is especially important when you are working with a limited budget.  Later, when things pick up you can use that same idea to finance more than just the monthly bills.  When I first started studying finances, I wasn’t confident that all this reading would ever amount to anything, after all, we had low incomes and how can knowledge lead to better finances?  I’m sure a million folks out there are thinking the same thing.  But in my case, applying a few basic concepts and a little creative financing lead to comfortable place.

So with 10 years of hindsight, here’s a list of the six things that I did that changed our situation.  I know everyone’s situation is different, but if you’re employed and just not getting ahead, my experiences may work for you too.  Each point will have a detailed post dedicated to that topic in the coming months.

  1. I started with a 401k with my employer and took the maximum contribution based on the employer match.
  2. I self managed my 401k for maximum growth 
  3. Started tracking my budget with future budget projections.  This way I know WHEN I can spend or pay bills and when I can’t.
  4. Cut expenses, started small and worked my way up to new house (cutting a bunch of bank fees, knowledge really helps here because banks are experts at ripping folks off).
  5. Never took out a second mortgage on our house.  More advice than a step, but I have to mention.  I wouldn’t do this unless it was an extreme-extreme emergency!  I know, it can happen, but if you can avoid this, don’t do it.
  6. Once my 401k reached $80,000, I borrowed $10,000 and invested it in high long term growth mutual funds, in a private investment account. I committed myself to not spending a dime of this until it was about 70% paid.
That’s pretty much it.  

At the time of this article, I save about $1500 a month from 10 years ago (saved another $500 by paying off our cars and not buying a new one right away).  My simple investment account grows about $3000 a year.  Not a great income, but it’s nice to have money available if I need it.  It’s like having a rich uncle that will give you what-ever you need if times get rough.

And now my politics:

I’ve heard a lot of Democrats let off steam about Donald Trump’s incompetence and failings.  The frustration that his base will follow him thru anything is just too much.  If you’re one of the folks pulling your hair out, think about this.  It’s a cult, and followers of cults don’t think.  There’s nothing anyone can do to stop them from drinking the Kool-Aid.

Why try?
Just think of the next few years as a bad storm that we can do nothing about except hang on!

We can’t ignore everything like his followers.  For example, if he starts killing babies and handicapped people, then we have to step in and try to stop it.

But as long as the baby killing doesn’t start, we don’t have to expend energy and effort trying to tear down a man who will eventually tear himself down.

What’s done in the dark will come to the light… Justice will find a way.

And with that, my moment of Zen (song in my head):