Control Your Money or It Will Control You
Most people will admit that they do not completely understand finances, and are not able to grasp the concept of money management. Money management is a difficult topic to discuss with most people, because people are overwhelmed with many common issues. In this post, I’m going to go over the first area that you must understand when it comes to your money – taking control of your income.
Let’s take a look at credit cards, first and foremost, what people do not understand is that credit is a good thing; when used properly, and it is a highly effective tool that can be maximized throughout the course of your life. Credit establishes credibility, and it shows lenders that you are a viable source. Managing your credit provides a statement that you are able to not only balance a checkbook, for you are able to manage your life. Credit cards are used to replace fiat money when there is an emergency, and/or when you need to establish documentation that you are able to meet your obligations.
When managing credit, it is important to aim for 30% utilization on your cards, so that if you have a $1,000 limit – only use $300. What this does is it shows that you are able to maintain a healthy balance between what has been allocated, and what has been used. This also helps you in many ways. First, most credit cards want to increase their limit with you, so maintaining a 30% usage will allow them increase the limit later. Using 30% also increases your credit score, for it shows that you understand debt and obligations. The 30% usage is the target amount that creditors look for when it comes to managing your debt-to-income ratio. Focus on making purchases that can be easily paid off within the month, or within two months. It is everyone’s goal to not carry debt, and it is not a bad policy. Nevertheless, carrying some debt can be beneficial to your financial future.
Next, set aside some money from each paycheck to pay yourself first. You may have heard the term, “Pay Yourself First,” and its the first step to building financial wealth. It should be a goal of yours to be able to put away 20% of your income towards debt/savings. If this is a difficult hurdle, which it may be a big jump, start with a small increment, and work your way up to 20%. Try putting 5% into an online savings account each paycheck, which pays anywhere from .40% to 1% annual percentage rate, and in time you can move the money around as you need. It will allow you to create a few avenues towards stability. Your commitment to saving each money will allow you build an emergency savings fund, vacation fund, and an investment fund. An emergency savings fund should have enough money to cover your expenses for 8 – 12 weeks if you lose your job, become ill, and when unforeseen expenses arise. This is one of the most important things you can do with your money immediately.
Some of the most popular online savings banks are –
Ally Bank – http://www.ally.com
Capital One – http://www.capitalone.com
First National Bank of Omaha – http://www.fnbodirect.com
Additionally, these banks offer other services, such as CD’s, IRA’s, Auto Financing, and Home Lending. Establishing an account with these banks early on creates a relationship that may allow you to obtain a loan later in life.
Lastly, many companies offer an employer-matched 401k program that allows you to gain free money on top of interest, and it is a wise decision to commit to your employer match from the start. As your income and skill set grows with the company commit 2% every year or every other years. It is a goal to maximize your 401k each year, which is $15,500, and after speaking to many well experienced workers, all of them say they made the mistake of not maximizing their 401k early in their careers. To the beginning employee, $15,500 can mean 30% of your salary goes right into a retirement account, and it is not feasible to do this, so if you can put this plan into steps; you will reach your goal as you grow. Additionally, pay attention to what the company has to offer with its holdings. Many 401k programs are managed by a third party, so you only have a few options that you are able to invest. Take a look at what those holdings are, and do some research. There may be two mutual funds that look exactly the same on paper, and when you look into them, you will find the holdings are very different. One fund may specialize in healthcare, and the other in technology. For the average investor, simply take a look on Yahoo! Finance, and see which sector is performing better, and allocate a certain amount of money into that area.
If you are unsure what to look for – here is a link to a PRIMECAP Odyssey Growth Mutual Fund – http://finance.yahoo.com/q/hl?s=POGRX+Holdings
They have posted higher than average growth over the past few years, and you can see what their holdings are within the fund. Most 401k providers carry this holding, and it is an easy way to allow your money to work for you.
Remember, only you can control your money, and if you can’t control your money; you can’t make money. We all are given the same opportunity with work, and with our future. It is up to us to cultivate, develop, and manage our futures. Warren Buffet has been quoted as saying, “If you can’t control your emotions, you can’t control your money.” Learn to invest in yourself, and learn to live below your means. Take control of your money, or it will control you.
Stay Focused. Stay Strong. Never Allow External Forces to Make You Give Up the Great for the Good.
A friend of mine told me a story recently. He was pitching for the Kansas City Royals Triple A affiliate in 1972. He had just come off a no-hitter, and was well on his way to becoming a major leaguer. He had just come off the mound after the game, which he won, and a coach came up to him and said, “Hey Kid. What’s your name?” He replied, “My name?” He was puzzled because it was on the back of his jersey. He said, “My name is Mazin (last name).” The coach said, “What is that?” (Jeff) Mazin replied, “Are you asking my nationality or my religion?” The coach said, “Your religion.” Jeff replied, “Well, I’m Jewish.” The coach replied, “There is no room for k*kes or n*ggers in this league.”
This was 1972. It was nearly 30 years since Jackie Robinson had broken the color barrier with the Brooklyn Dodgers, and this was still going on in professional baseball.
Jeff’s family all fell victim to Holocaust in Europe, and took this comment harshly. He stayed in professional baseball for 3 more years, and became friends with one of the greatest pitchers of all time, Juan Marichal. He spoke with his family, and they took the news as serious as he. Jeff went on to leave baseball, and go to medical school in Philadelphia. He is now a surgeon in San Diego, and has had a successful career.
What Jeff told me was that his biggest regret was not going through, and working towards the major leagues. The truth behind it all is that if you throw a no-hitter in Triple A baseball, someone will give you a chance to prove yourself at the best level in the game, and you will have an opportunity somewhere.
Now nearly 65 years old, he says what he regrets most is that he could have been a major leaguer, and played what he was passionate about from the time he was a child.
While we may look as this as a tragedy within our human race, and we must begin to wonder how can we learn from this excerpt of one man’s life.
There will always be someone or something that will try to take away from the success you have developed, and it is our choice to persevere or to give in.
Through all of life’s trials and tribulations it is the ones that are relentless in their goals that become successful, and they are the ones that we base our life upon. We must never allow someone to weigh us down with their small-minded thoughts, and never allow their own anchors to weigh us down. When moments like this arise – we must rise up, and face the challenge.
Our life is the culmination of the choices that we decide, and what we have now, what we will have tomorrow is the reaction of all of our choices. We must be able to see how our answers coincide with what we want to have in the future, and learn from our mistakes.
Never allow someone to weigh you down with their own self-deprecating thoughts. It is their will to bury themselves. It is your decision whether or not you will allow them to bury you along with them.
What I propose to you is to create your own foundation, and consistently develop your thoughts to be able to withstand any actions or comments that will not enable your success. We have all heard stories like this before, and we will read more throughout our lifetime. There is no way, shape, or form that we can allow this to take hold of our lives, and direct it in a way that does not satisfy our own needs. Our lives are our own destiny, and we have a direct say in the results.
This is your life to live. You only have one. Never give up the great for the good, and never stay down.
Smart Investing for Young Investors
Creating financial freedom is something that can be overwhelming for the young investor, and for many experienced investors – it is a daunting process. Viewing the stock market at a glance, many people are consumed with an overabundance of information, and underinformed with the knowledge to create wealth that will last them a lifetime. With the information that you will gain from this blog you will be ready to begin investing in your future, and begin creating wealth immediately.
Investors are far too often looking for the big return in one investment. While it is possible to gain that exponential gain in one day – there is one major problem – this is a huge investment risk, and the greatest mistake made by young investors. They are far too often looking for where they can make the huge return, and ignore the slow gain.
A major standard in the market is the S&P 500 and Dow Jones Industrial. These are the biggest companies in the stock market, and it is believed that the movement of these companies can foreshadow the future movement of the market. Some of these companies include – Apple, AT&T, Pepsi, Mastercard, Visa, and Wal-Mart. These comapnies have such a large economic value that believe they can influence the market.
Now, what most hedge fund managers promise their clients is that they will be able to beat the market, and what they don’t tell their client is that most hedge fund manager fail to beat the market. In fact, 88% of hedge funds and 65% of mutual funds underperform the market, so what does that mean for you?
For the young investor, why choose one individual stock, when you can own a small piece of many companies in the market, and invest where other billionaires are placing their hard earned cash.
Some simple ways to invest your money would be to go through SPYDER ETFs, and Vanguard ETFs. The symbol – SPY, which is an ETF that encompasses the holdings in the S&P 500, it includes Apple, Johnson and Johnson, Exxon, Microsoft, Wells Fargo, Berkshire Hathaway, and others. This has returned 13% to 15% over the past 3 to 5 years, and is poised to do so in the next 3 to 5 years. It guarantees you that you will be able to manage your portfolio instride with the biggest companies in the market, and your portfolio will gain a compounded growth until your retirement. What makes the SPYDER ETFs special is that they pay a dividend payment that can be accepted in cash or in shares. The SPY ETF pays a dividend of 1.93% which is higher than most individual companies on the market, and they have ETFs for each sector of the market. For further information you can view all of the SPYDER ETFs, check out – SPYDER Funds .
The biggest advantage of this style of investment is that you can base your portfolio off of this holding profile, and build an even bigger percentage of holdings based of what is performing the best in the market. From this you will be able to see what everyone else views to be as exponential gainers, and learn what to expect from high end companies.
Everyone needs a coach, and everyone needs help getting started. Check back here each week, and we will provide you with new information each week on how to make your career, finances, and future better. If you have any questions, please feel free to e-mail me at switriol@yahoo.com.
50/30/20 Rule and Developing a Budget for a better you – Today and Tomorrow
Have you learned how to live on a budget? Are you working towards a better chance tomorrow? Creating a budget today will formulate a prosperous tomorrow, and it will allow you to achieve everything you wish. While we are all not given the same base to start, for we are all given the same opportunity to create something for ourselves. Learning how to live on a budget will allow us to build what we did not have at the start.
The 50/30/20 rule is simple, yet it does take some effort to start. It starts that 50% of your net income goes to living expenses, which are necessities, 30% goes to wants, and 20% goes to savings/debt expenses.
The easiest way to get started with this project is to take your monthly income and divide it to 3 sections. Take 50% of your income and put into that area your necessities for life. This section may include –
50% Living Needs –
Rent/Mortgage
Utilities
Groceries
The next section, which commands 30% of your salary is your wants, or entertainment expenses –
30% Entertainment –
Vacation Fund
Weekend Excursions
Dinners/Lunches
Meetings
The last section, which stands at 20% is allocated to savings, and is put away to not be seen for some time in the future –
20% Savings/Debt Expense
House Fund
Emergency Fund
Retirement Fund
Savings Fund
Business Fund
School Fund
**note this section is considered in addition to any funds that are withdrawn from your paycheck to a payroll contribution to a 401k or a PSP Plan.
It is important to put this plan into action immediately, and allow this plan to become part of your daily habit. There are many ways to keep track of this through spreadsheets, and in time, you will learn what you can and what you cannot spend on a regular basis. It will allow you to search for areas where you can save money, and purchase items ahead of time so that you will save money over the long haul.
Make sure to track your progress. Utilize your past bank statements to review how you have been spending your money, and when you are able to put away money each month – it may be in your best interest to open a couple different spending accounts.
An easy way to save is to open an online high interest savings account that withdraws from your monthly paycheck each month. Many of these accounts offer .50% APY to 1% APY, and over time can have exponential benefits with minimal taxes over the course of the account. Furthermore, you will learn how to save, and find other avenues that will allow you to place your income into these accounts that will not create unnecessary expenses.
The key to this exercise is to learn how you can save everyday with minimal changes, and learning that you can achieve your biggest goal without stressing over every penny.
Everyone needs a coach, and I am able to help you in any area where you have questions. Send me an e-mail to switriol@yahoo.com , and title it – “50/30/20 Rule.”
Remember to achieve great results you must stand on the shoulders of those who are working to their goals.
Mutual Fund Savings
Investing in the future is far different than simply saving money. Many articles written today will tell you how our most recent college graduates are tending to save rather than invest. It is well understood that the most recent downturn the the American economy is responsible for this reaction, but it is bad direction to simply put money into a savings account. The reason being is that the yield is far below what you would receive from simple investing.
Lets take a look at a simple investing idea that will allow you to save for the future, and create long term wealth that will create freedom and stability in today’s ever-changing world.
Mutual funds are great for the average investor. They require little to no knowledge of what will happen in the market, nor do they require expertise in fundamental or technical analysis. It is simply a sit and hold type of investment. Now, there are many types of funds out there, and while it is easy to get lost in the mix – lets focus on one idea – saving for 10 years.
It would be in the best interest of the portfolio to look into large cap or large value funds. They typically hold some of the biggest in the market, and will allow you to own partial shares in some of the biggest companies in America, and across the globe. They are managed for you, so you don’t need to worry about buying and selling shares, and it allows dividends to be collected, which routinely outproduce a high-yield savings account.
They pay a short-term and long-term dividend in most cases, and will allow your money to work for you, rather than you working for your money. They are also investments that may gain over time, and will increase your wealth. Before you invest in a mutual fund – look into it’s holdings, and make sure that you agree with what the company has in its portfolio. If you believe that they stand a good chance of making money then you may be in a position to make a sound investment.
Plan on holding the mutual fund for over a year, and in that time continue to fund it with periodic contributions. In the 12 month span, you will be amazed with your accrual in your account.
If you have any questions, please feel free to reach out to me directly at – switriol@yahoo.com
Saving for the Future
Saving for the future involves planning, and a dedication to a better life down the road. While it can be difficult to aimlessly save, it is important to have a clear cut goal, and continue to work towards that plan on a daily basis. Some of these goals are simple, and can start with a new computer, or a vacation getaway. Regardless of the item, the most important element here is getting into the habit of saving. Let’s go over a few simple ways to help you save for the future –
1) Open an online savings account that has a high-yield interest. These accounts are great, because they allow you to pay yourself first. Each paycheck allocate a certain amount of money to be placed into the account. When the year ends you will have accrued compounded interest on the account that can be put towards debt, or purchasing a new item for your home.
$50 dollars a month at .8% a month (given you started at $0) would equal = $630.80 at the end of the year
2) Open a money market account that allows you to make safe investments for the future. Most individual brokerage accounts allow you to open for $25 or less. Not only do you receive interest on your deposits, for you able to make safe investments into your future. Here you can purchase mutual funds, and allow them to mature over time. These accounts are self-directed and do not cost anything to maintain. You are able to purchase investments that will grow over time, and you can easily monitor them through apps on phones or through websites. Additionally, at the end of each year, mutual funds pay dividends which can equal 10% of your investment, and they grow over time.
A $300 dollar initial investment into a mutual fund may purchase 10 shares of that fund.
– If each share of that fund costs $30 you will have 10 shares. Over the course of the year, those shares may grow to $15, and you will have gained $50 on your $300 investment.
– At the end of the year, the mutual fund pays a yearly dividend, and you may gain another $25 to $50. By the end of 12 months, your simple $300 investment may be worth $375 to $400.
3) Cut expenses. Find different areas in your life to reduce your overhead. Pay off credit cards, and reduce expenditures that are not necessary. This will allow you to save more, and be able to enjoy life.
– Cut rent. This immediately reduces overhead, and allows you to save more. Paying $1500 for a 1 bedroom? You can easily find one for $1200, and you can save the rest. Most apartments are comparable to one another, and you may not need to sacrifice amenities. Don’t want to downsize? Find a roommate. You can find a 2 bedroom for $2000, and split it down the middle. It will reduce your overhead by $200 to $500.
– Pay off your credit cards. $1000 at 12% will cost you $120 a year plus membership fees. Reducing this down to a monthly purchase will allow you live off your cash, and not maintain any liabilities.
Here are some easy ways to review, and save money. These are some tasks that may take some time to incorporate into habit, and as you are able to complete these tasks; you will see your monthly cash flow increase.
If you have any insights, or would like to reach out to me directly, please feel free to e-mail me at switriol@yahoo.com
Shaun Witriol
Economics, Finance, Leadership, and Stocks 
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