The great things in life never come easily. If you dream of a great career or a great life, don’t kid yourself into thinking that they’ll happen tomorrow when you wake up.
They will happen, but only if you work for them. They’ll happen only if you put in the hours of care and the countless good decisions that will make them happen.
If you want an easy ride, be prepared to be average. If you want something more, be prepared to work for it and be patient for the results.
The success you want – the success truly worth having – doesn’t happen overnight. It takes years to make a mountain of debt go away. Years. It takes years to put your career on a track that you want it to be on. Countless choices. Countless projects. Countless decisions to not spend money. Years and years of them.
Yet, there is success on the other side.
Your stuff doesn’t define you. It won’t fill the holes you feel in your life. It won’t solve the problems you face. It just makes you feel good for a little while, but then you’re back to where you started.
Instead, your actions define you. If you choose to stand up for yourself and for your dreams, you become the type of person that defines their own future. It’s up to you to make that choice. No one else reaps the rewards from making that choice, and there’s no one else to blame when you don’t.
You are in a relationship. That relationship is starting to get serious. You are contemplating marriage or some other form of long-term commitment.
Now what?
Quite often today, people are bringing significant debt into relationships with them. Credit card debt. Student loan debt. Auto loan debt.
Should you keep these loans separate from each other? How much debt should you really share?
First of all, regardless of who actually owns the debts, they are now shared debts. When you’re married, your money effectively becomes a shared pool, whether or not you directly share that money or not. If one of you has a debt, the money to pay for that debt comes out of the shared pool. What’s left in that shared pool is smaller, reducing your opportunities as a couple to build towards other financial goals.
Even though you may want to keep your debts separate, the reality is that the consequences of those debts were shared. If the consequences are shared, then it follows that the responsibility for paying off the debts ought to be shared as well.
Which brings me to my next point: once you acknowledge the debts as essentially shared, the optimal way to get rid of those debts is to consider them all together. It should no longer matter who has the worst debt. What matters is that the worst debt is the one that you both focus on first.
Doing all of this successfully requires complete openness. You can’t hide debts from each other. You can’t hide money from each other. You cannot hide spending splurges from each other.
Whenever you do these things, you are taking money out of that shared pool that helps you both get what you want from the future. You’re also being dishonest with your partner and, likely, you’re undermining your debt repayment plan and other financial plans for the future.
This type of dishonesty is toxic to any relationship. It opens the door to other forms of dishonesty that can completely destroy a relationship.
Any relationship where things are not completely in the sunshine is a relationship that’s eventually asking for problems.
If you’re not comfortable with that openness, then your relationship needs work. This goes beyond mere finances. It’s an indication that there are trust issues in your relationship and as long as those trust issues exist, you’ve got a gigantic fault line in your relationship that can easily erupt into an earthquake.
Simply put, share your debts. Regardless of who brings them to the table, you share the consequences, so you should also share the effort of eliminating them. This can also help you to pay them off in a more optimal fashion.
The holidays are a time for family and festivities - not reading wealth creation newsletters.
I always respect your in-box, and there is nothing to write this time of year that merits distracting you from connecting with family and friends. The goal is true wealth - not just making money - so the last thing you need is something more to read during this busy time of year.
I wish you happiness, peace, inspiration, joy and laughter in 2011
I will resume the regular weekly Friday Minute newsletter in January 2011.
As you line up your financial goals for 2011, you may be wondering if you can still save money on your mortgage.
Here are two good options for you. First, there's the obvious appeal of refinancing-which I wrote about in March. Interest rates are about as low as they were then.
But if you don't want to refinance, or you're not sure how long you're going to be in your home, you could make a slightly larger mortgage payment each month-or make one extra payment each year.
Pre-paying your mortgage gives you some of the advantages of refinancing, in that you save quite a bit on interest-but don't have to pay the fees.Example:
A $250,000, 30-year mortgage at 5.5% gives you a monthly payment of $1,419.47 .
At that rate, you'd pay $261,010 in interest alone, after 30 years.
- If you added $100 per month, you'd pay $216,132 in interest, and your loan would be paid in 26 years-saving you $44,878.
- One extra mortgage payment per year would save you almost $50,000 after 25 years.
But let's be realistic, and assume you stayed in your home for 10 years. If you made one extra payment each year, you'd still save $4,200 in interest-and you would have paid down $18,397 more in principal.
Real estate investors have mastered 5 key skills that have made them successful.
- Mining
- Money
- Maintenance
- Marketing
- Managing
Mining is finding really good deals. Deals that will guarantee an exceptional return on your investment of money and time.
Money means finding the funding to purchase your real estate investments. Unless you have an endless supply of money,
it will be necessary to develop the skill of finding an endless supply.
Maintenance, the easiest to master, is getting an investment property ready to market. Just find a good and honest maintenance contractor, train him or her to do what you want and how you want it and you are done.
Marketing is critical to the success of real estate investing. You must learn how to rent, sell or lease option the property quickly.
Learn quickly and move the property quickly. A real estate investment sitting unoccupied can and will put a dagger in your chances of success.
Managing renters is probably the most difficult skill to master. Not because it is the hardest to learn but because many investors just don't spend the time and effort necessary to learn how to manage their investment properties.
By learning and becoming really good at each of the 5 M's you will increase your chances of investing success one hundred fold.
Before you decide to invest your hard earned savings into a real estate investment, you have to understand the numbers. The numbers tell a story: Is there cash flow? What kind of mortgage to select? What is the CAP rate? How variable expenses affect your cash flow? Do your homework first.
How good are you at staying on top of your credit card spending? Credit cards are a convenient financial tool that many of us prefer to use in lieu of cash, but they can become a thorn in your side if you're not careful. To determine how disciplined you are when it comes to spending with plastic, it may be a good idea to do a self-assessment. Here are five signs that your self-control goes out the window when it comes to buying stuff with your credit cards. If any of these signs seem familiar to you, then it's time to sit down and give yourself a good talking-to.
You can't leave the house without your credit cards.
This may be a sign that you are overly dependent on your cards, and that you've grown used to a certain level of spending. Do you really need a credit card every time you pop into town for a litre of milk? When you carry your card around, it's easier to succumb to spending temptations that can add to your card balance. Try leaving it behind once in a while and see if doing so has a positive effect on your card balance and even your spending habits. You might be surprised by the results.
Every single thing you buy has to be bought with your credit card.
Have you fallen for the pitch that you should put all your financial transactions on your credit card? It's a good thing if you have a rewards credit card, and you are able to pay your bill in full every month to reap those rewards. But if you're keeping a credit card balance, then you need to think about the possible consequences of putting everything you buy on there. Maintaining a credit card balance that grows over time means that you will ultimately find it harder and harder to pay down. Many consumers mistakenly assume that their card rewards will neutralize or make up for their spending. This is not true.
Impulse buying has become second nature.
Impulse buying gets us all once in a while. But the habit can sneak up on you more easily if you always have a credit card with a high credit limit in your back pocket. In order to curb impulse shopping, you need to regain some common sense and question everything you buy for a while. One way to control your spending urges is to set up a budget and account for all the spending you do.
You don't stick to a budget.
A budget allows you to become intimately aware of your limits so you don't exceed them, and many responsible credit card users are able to keep their spending in check because of the simple act of budgeting. But it's not enough to set up a budget; you also have to make the commitment to stick to it! Try the free TWF budget to help you.
The idea of cutting up your credit cards makes you break out in a cold sweat.
Does it make you nervous when you think about leaving the house without your cards? If it does, it's time to think seriously about who is in control - you or your credit card. You should never feel as if you couldn't do without one in your wallet. Many folks have switched to using cash for all their transactions and have actually found it to be a liberating experience.
If you can't spot any of the above signs just yet, congratulations. You are still in full control of both your common sense and your credit cards. But don't get complacent yet; it's important for you to always track your credit card usage and how much you spend. So keep your eye on those cards!
It's a common dilemma: Should you put all your spare cash toward paying down debt, or build up your emergency savings-or a little of both?
It's a serious question now. If you lost your job, the average length of unemployment is about 33 weeks-or eight months. That means your emergency fund must be a priority.
But should it come first? Let's run some numbers.
Your monthly expenses: $4,000
Your debt: $5,000 on a card at 14% interest
You have: $500 to apply to debt, savings or both each month.
If you stashed $400 each month in your emergency fund, and made only the minimum payment on your card-that's $100, assuming a 2% minimum payment-it would take you more than six years to build up eight months' of expenses ($32,000).
And you'd still owe about $2700 on your card.
Now let's flip it. If you put $400 per month toward your card, and $100 toward savings, you'd be debt free in about 14 months-and you'd have a tidy $1,400 start to your emergency fund.
Now that's real savings, on every front.
If you are a real estate investor looking to buy investment property, it is crucial to know how to properly analyze an investment property. If you do your homework in the beginning and buy property the right way, you will be able to make significant passive cash flow. Here are six ways to help you analyze your real estate investment
- Determine what you would want to do with the property. Do you want to fix it up? Do you want to rent it out for cash flow? Do you want to fix and flip? Do you want to wholesale the piece of real estate? This will alter how you continue your analysis and ultimately what you do with your real estate.
- Calculate the market value of the property, both in its current condition and in repaired condition. Make sure to look at recent comparable sales. It is important to know exactly how much you could sell the real estate for in the current real estate market. The value of the real estate after it has been repaired is called the after repair value (ARV).Also calculate market rent for the property, in fully repaired condition.
- Estimate all expenses for the property. Look up property taxes. Estimate utility payments. Call your insurance agent to get an estimate for property insurance. Factor in vacancy by figuring the % of vacant units in the area and multiplying that percentage by the market rent. Also include property management fees (if applicable) and marketing costs. Maintenance costs will also need to be included.
- Take your market rent and subtract all expenses, not including mortgage payments. From this amount, subtract the cash flow you desire. The remainder is the mortgage payment you can afford.
- Using a financial calculator or a spreadsheet, calculate the loan balance on a mortgage with the payment from the previous step. Use current investment mortgage interest rates and the appropriate loan terms.
- The mortgage loan balance plus any cash you have to put down is the maximum you should be willing to pay for the property. You can make this offer to the current owner. If the owner declines, move on. It's not worth wasting your time if the owner is not willing to sell at a price that works for you.
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