Financial Success

So, the other day I was asked the following question:

What savings and/or investment strategy have you applied that has been a success? 

My answer came fast, Pay Yourself First: 

There are three steps to make Pay Yourself First (PYF) work. 

Step 1 is to create a budget to prove what surplus cash COULD be available at the end of the month. For me, this budget is reasonable but should also favor semi-aggressive savings. This is why I don’t like super itemized budgets that cover such things as wrapping paper costs each month. While I am a control freak and generally like lots of detail, I can’t handle that level of budgetary detail in my finances. 

Step 2, once a budget has been created and you know how much money you should have at the end of the month this amount is set up as an auto-draft at the beginning of the month. Again, personalities play a big part in the success of a specific type of financial practice. For example, I don’t like moving money from my savings account back into the checking account. So if there is a purchase above a budgeted amount that has to be transferred back into the checking account.

Step 3, after $1,000 has been accumulated in the savings account any additional funds can be transferred off into higher interest earning accounts to develop wealth.

Do your Grades reflect the average of your five closes friends?

Ask your five closest friends what grades they have (or GPA) - as if that's not an awkward conversation - and divide that by five. Is it pretty close to your own?

The "Law of Averages" states that we are very similar to the five people we spend most of our time with. If your not happy with the results of your five closest friends grades, and your not thrilled with our own grades, to put it bluntly, you may want to look for some better friends.

Personally, I had some less-than-stellar friends my Freshman, Sophomore, and the first half of my Junior years of high school. There is precious little time for homework and class projects when your out pretending to be the next Baja 5,000 Trophy Truck winner. My friends grades were suffering, my grades were suffering and I was barley on track to graduate. Then, I joined a couple of clubs, and that introduced me to a new type of friend. I'm still friends with many of these individuals today. They invited me to things like SAT test prep courses, compared SAT scores when we took the first test, and encouraged me to practice and re-take the test. My grades rose and while there was still a lot of damage to my overall GPA, I made some honor-roll's and such during the remaining semesters. These things saved me money in college and really worked to get me off to a good start as I moved to being an adult.

As adults the "Law of Averages" still plays a role, only now its finances. Take the bank account balance of your five closest friends and average that and it will be very close to the balance in your own account.

- Moral of the Story? If you want a healthy bank account balance, have five close friends with large bank account balances. Want better grades...

Good hunting!

Pure, Driven, Snow

I have been struggling lately with how to communicate this sense of urgency that I have for young adults to value financial education. While I can see the value of "if I knew this when I was your age..." education, students never appreciate the value of learning from other peoples mistakes until they are on the precipice or have already made the mistake themselves.

Roy H. Williams said "A smart man makes a mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether"



Its a shame that what should be valued most is mostly despised. 

So, for what its worth, here is why I think that this information is so important.

1. You haven't made any financial mistakes that need time to fix.
2. You don't have any bad financial habits that need to be corrected.
3. You have unlimited potential.
• That's precisely why this information is so important.

You want so badly to be an adult, and rightly so, being an adult is awesome. But don't make a hash of it. Don't be average. You have the potential and the access to education to be great. Go Be Great!
You just need to decide.

http://insights.schwab.com/personal-finance/financial-planning-by-decade

Justin Prince

We had a great guest speaker in Financial Literacy. Justin Prince shared with the class some very important thoughts about how to prepare for and manage your life. Below are some of the highlights, as captured by the students in attendance.  If you missed this opportunity or even if you were there but found it difficult to "drink from the fire-hydrant" here are some key points to review:

Secret to getting rich... Pay Yourself First

10% Charity/Tithing

10% Saved

10% Invested (The #1 investment is yourself! Learn new skills.)

70% Spend 

Elements of Success:

1. Ambition

Always do more than what you’re paid for as an investment for future

The marketplace is your employer

The market place will pay you what it thinks your worth

We are paid by the value that we bring into the marketplace

Dream big

2. Mentor

Give your mentor permission to hold you accountable.

Have multiple mentors. Pick mentors that are the best for each facet or your life.

Surround yourself with great people, those who believe in you

Learn from the mistakes of others OR learn from your own.

It's far better to learn from the mistakes of others.

Drive Time Learning: Use this time to read/listen to great information

You tend to earn the average of your five closest friends... choose well. 

Apply what you learn, this is what truly makes you extraordinary

3. Opportunity-

Life is the challenge to become more than ordinary.

NET: No Extra Time

It's he that doeth the deed that hath the power.

Do the thing you fear the most and the death of fear is certain. (If you don't like checking skyward/checking account, then you must check it often and the fear will go away.)

Never quit on a bad day

Make words physical. Live your life so that your words are meaningful

Maximize the potential of every opportunity

You are paid what the marketplace believes your worth. The more you demand of the marketplace the more the marketplace demands of you. Are you worthy of the price you demand? Can you become worthy of the price you desire? You absolutely can be worth what you want from the marketplace.

How to be successful… 4 ways to increase your value in the marketplace

Read Rich Dad Poor Dad, Miracle Morning, Richest Man in Babylon

Listen to good things

Surround yourself with great people

Apply what you learn

How to shake hands:

Look them in the eye

Give a sturdy grip

Say, "Hi, I'm (use your full name)" - With confidence

Ask, "How are you doing?"

There is no power in mumbling. If you’re going to say something, say it and own it!

When you’re hungry you want to grind up your grain seed to make flour to eat. But if you grind your grain you will have no seed to plant for the future. You've got to give up the thing you want now for the thing you want most. If you plant some of the grain seeds now you will have food for your future. 

The Poor use their income to pay expenses.

The Rich use their income to buy assets that are used to pay expenses.

Assets = Investments or Business's 

For more information or to connect with Justin:

iamjustinprince website

modere website

     Enter code: 564914 to receive $10 off your purchase.

Poor, Car

Purchasing a used car is like the Iliad of old. The young and inexperienced picking a fight with the strong and unyielding. You see, an average person will buy something like 20 cars (1.5 cars every 5 years from 20-75) in their lifetime. However, a car dealership will buy/sell something like 20+ cars a month. If your feeling a little bit like an underdog, your right.

So lets try and level the playing field and see if we can't keep your Achilles heel intact.
First, do not attempt to finance a car with bad credit. No credit history is better than bad. So if you have some dings to your credit, take the necessary time and drive "cash-only clunkers" until you get your credit score fixed (700 or higher).

Here is why this is so important:
I was talking to a sales rep at Ken Garff West Valley a while back. Ken Garff corp. is a great supporter of secondary education in Utah through their Keys to Success program. While speaking with the sales rep. he related a few stories from different customers who they were trying to help, despite their bad credit situations.

One type of situation sounded particularly desperate:
Customers come in looking for another car because their previous one has been repossessed (taken back by the bank/dealership because the owner wasn't making payments anymore). This is a major hit to your credit score; and typically, repossession is a symptom of other bad debt/bill payment issues. So, generally speaking, repossessions results in credit scores near the 300 minimum. In other words, you have a proven history of NOT PAYING FOR CARS.

As a result, the interest rate of your new auto loan will be around 24%. However, if you make on time payments for a year, then trade it in, you can finance into another car with a better credit score and a lower rate. This can be a great way to fix a bad credit situation. Except... you have a proven history of NOT PAYING FOR CARS!

According to this sales rep., most people who have these low-score high interest rate loans don't make the on time payment consistently for one year in order to qualify for the better rate. Why? Because they haven't fixed their bad debt/bill payment habits and therefore couldn't get our of their bad situation.

There was one more, very telling, outcome of this situation. As we walked around the car lot looking at the inventory, one thing was very noticeable, the cars at this particular lot were dirty, and many had dents, scratches, and other blemishes. It was obvious that this location catered to a low income, low credit score, low financially educated population. Cars that looked like they had been repossessed and the dealer expected that they would be repossessed again from their next owner.

I can't think of a better metaphor when buying a used car. The car you buy will reflect the condition of your financial education/credit score...
If you have "dirty" credit with some "dents" "dings" and "scratches" your car will too!

How to Clean Your Room

Cleaning your room can be a monumental undertaking. All the different toys and all the pieces of toys can make the proposition of cleaning your room seem overwhelming. "A problem so big and unfix-able why event start?" - Right? The other thing about a messy room is how quickly it can become messy. Often times the room was clean just a couple of days ago and now look, its a mess again.

Here's how to clean your room. 
Organize all of the different toys into categorizes based on the number of pieces. For instance, stuffed animals, dolls, accessories, building blocks, cars, action figures, books, clothes, unmade bed. Pretty overwhelming list. And, some of these items consist of many parts and pieces.

Arrange the toys according to the number of pieces the toy has.  There is only one bed so its first on the list. The building blocks/doll accessories contain many small pieces so they are last on the list.

Attack the list by first maintaining the amount of mess from the other items (don't get distracted and begin playing with the other toys). You will feel a sense of accomplishment with each "easy" victory. This will motivate you towards completing the ever-increasingly larger chores. But soon, you will have a clean room again.

Debt is a lot like a messy room. Lots of different types of debt and lots of different amounts and its amazing how fast the debt can grow. Soon the amount seems so large and unfix-able "why even start?" - Right?

Paying off debt is much the same as cleaning your room... enter, the Debt Snowball.

The Debt Snowball is a method of debt management where you organize all of your debts smallest to largest, by amount. While paying the minimum amounts on all debts, you put all of your excess funds into the smallest debt first. Once the smallest amount of debt is payed off you take the money that was going to it and roll it into the next largest debt. You continue this process of rolling ever-increasing amounts of money into the next largest debt until all the debts are paid off.

There are more effective methods to paying off debt, but I believe more personal satisfaction comes at a quicker pace through the snowball method than any other option.

Lastly, while the Debt Snowball is usually used for credit card debt, the principles can be applied to all debts. For instance, your credit cards may be the smallest debts so they would be paid off fist, but then, continue the process for your car loans, students loans, and even your home mortgage. Paying the smallest amount of debt to the largest. Within a few years you can be totally debt free!!