Financial Sense Makes Cents

Just a quick blip here about spending that should put everything I have ever said about getting out of debt into massive perspective.

I know most of you think Ross Perot is crazy and he may be, but he is also a financial genius that has the ability to put things in layman’s terms so anyone can understand. On that note, I have placed a link to a financial chart about U.S spending, revenue, and debt that he has created. It will take about 10 - 15 minutes to watch this chart style presentation, but know this - at the end of it, anyone that took the time to watch it; even a three year old, will understand how much trouble we are in and why we all should eliminate any personal debt we have at this time because things are going to get real bad soon if something isn’t done about it!

View This Chart Presentation Now

Pay yourself first or pay yourself last, just pay yourself!

This is an old concept that I learned 18 years ago when I was a financial planner for Prudential, however the concept goes back to the beginning of time and it’s called “pay yourself first.” Pay Yourself First means just what it says. It simply means automatically setting aside a certain percentage of each paycheck to put into savings before you do anything else with your money, and is the cornerstone of financial success. It is one of the most powerful and effective strategies for building wealth. So how does it really work?

• First of all you have to have the discipline to do this.
• Secondly you have to choose a method and amount which I will explain later.
• And third, you have to tie this in with one of the debt elimination strategies I have discussed in prior articles.

If you have the discipline, then simply choose a small affordable amount such as: 10% of your take home pay, or one hour of your income a day. Then take that money every week and put into an high yield savings account before you even look at your bills or go grocery shopping. This forced savings will help you look at your debt or bills, and how you pay them a lot differently. By the way, anyone can do this. You will simply look at it as a pay cut when you pay your bills. This will force you to shop and spend differently to accommodate your smaller checking account balance every week. If you do not have the discipline to do this, then pay yourself last. By this I mean increase your tax with holdings from your pay check to the max. This will cause more money to be deducted from your pay every week and you will get much more back at tax time due to an over funding of your tax obligation. You then take that money (all of it) and put it into a high yield savings program. Obviously I prefer paying yourself first, but paying yourself last at tax time is still better than most Americans do, which is pay everyone else and hope to have something left for themselves. This is how debt starts to snowball and take over.

Saving and paying off debt simultaneously is hard but not impossible. Does it make sense to put money in a savings-type account earning minimal interest when you could be paying three times that much in interest on your credit card balance? Of course not, that is why debt elimination is the second part of paying yourself first. Reducing your debt is actually a way of saving money.
Achieving a debt-free lifestyle is important, too. We all could manage our money better and get out of debt, especially now with today’s economy. If we’re going into a recession, we need to get out of debt. Those who have a higher debt to income ration going into recessionary times, will emerge in the worst shape when it is over, if they emerge at all. So after you pay yourself, you will pay down your debt. After you pay down your debt, you will pay your regular expenses or bills. If there is anything left over (and there should be very little if you are paying your debt down properly) you should either spend it on yourself because every now and then you have to live a little, or add it back to your savings. Remember, you’ll need this savings for the not so everyday expenses that come up every now and then, otherwise you will just accumulate more debt again.

Here are some resources that have helped me live the lifestyle of someone with much more money than myself:

• JC Penny Clearance Outlet I didn’t even know they had a clearance outlet, probably not too many people do. Great deals here!
• Restaurant.com This one has always amazed me, but has never failed me. One of my favorites. Each out for a lot less!
• Key Codes Like a clearance house for clearance houses and items.
• Deal Time Definitely worth looking at. Comparison shops for you.
• The Mother Of All Savers Everyone knows mother knows best. This site is very well organized and can help you save a bundle.

Check back for more resources in the future. In the meantime there is one other thing you need to know and that is how to almost always get that additional discount at checkout when you shop online. Almost all online checkout centers have a box asking for a promo or discount code of some sort. You don’t know how many times I’ve bought stuff online thinking I was getting a great deal because I did not have to pay sales tax, or because I really researched my prices first I can’t be paying too much; only to be staring at this box just before I put my credit card info in. Then one day it hit me like a brick in the face. “Why not open another browser window and go to a search engine and type in the name of the online store I was at and add the words promotion codes or discounts.” IE: staples promotion codes or staples discount codes (for when I shopped at Staples.com.) Well now I almost always pay even less because that extra search phrase usually gets me an extra discount code to input right before my credit card info. If you can’t find a deal at one of the site above, then go where you want, but always do that extra search for an online discount code before you make the final purchase.

No big article today folks, just some simple financial tips that everybody should be aware of. After all, that is the name of this site.

• Social Security - If you are approaching the time when you need to start making retirement plans, please know that every dollar you earn while still working after the age of 60 will still have social security tax deducted from it, but may reduce your monthly stipend if you only work part time or at a trivial job that does not pay much (check with your accountant.)
• Identity - If you have not yet purchased a mail box lock and a cross cut paper shredder for your mail trash, then go to Safety 1st and browse through the safety and insurance premium reducing items because it’s not if, but when someone will try to steal your identity.
• Credit - Have you had the urge to by new furniture and take the “no interest or payments for 1 year” option? Well don’t do it. If you do, you will be opening a revolving credit account with a very low limit and high interest rate that will be listed on your credit report / score. Even though you may pay the balance off before any interest comes due, you will be hurting your credit score by adding a “garbage” account line to your score that will invariably lower your score (see my post from March 19th 2008 titled “Improving Your Credit Score.”
• Saving Money - Are you living debt free yet? If you are, you might want to consider ING for your savings. You could earn 7 times the national average over a local bank. If you are not debt free yet but you still save regularly I still recommend ING for a greater return on your everyday savings allowance.
• Taxes Have you appealed your property tax rate lately? You might want to consider it as many people are paying an unfairly balanced and improper levy of their property. You may have thousands of dollars, just ask you attorney for more information. Not looking in to this is like not counting your change at the cash register, eventually someone is going to make a mistake.

1. When using your credit and debit cards at restaurants and stores, pay close attention to how the magnetic stripe information is swiped by the waiter or clerk. Dishonest employees have been known to use small hand-held devices called skimmers to quickly swipe the card and then later download the account number data onto a personal computer. The thief uses the account data for Internet shopping and/or the creation of counterfeit cards.
2. Keep a list or photocopy of all your credit cards, debit cards, bank accounts, and investments — the account numbers, expiration dates and telephone numbers of the customer service and fraud departments — in a secure place (not your wallet or purse) so you can quickly contact these companies in case your credit cards have been stolen or accounts are being used fraudulently.
3. Always take credit card receipts with you. Never toss them in a public trash container. When shopping, put receipts in your wallet rather than in the shopping bag.
4. Never permit your credit card number to be written onto your checks. It’s a violation of California law (Civil Code sec. 1725) and laws in many other states, and puts you at risk for fraud.
5. Order your credit report at least once a year. Federal law gives you the right to one free credit report each year from the three credit bureaus: Equifax, Experian, and TransUnion. If you are a victim of identity theft, your credit report will contain the tell-tale signs – inquiries that were not generated by you, as well as credit accounts that you did not open. The earlier you detect fraud, the easier and quicker it will be to clean up your credit files and regain your financial health.

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