Moved to a new address…

If you reached this blog through WordPress.com or martilyo.wordpress.com, please visit my actual blog at www.angrymillionaire.com.  Due to the limited options on WordPress.com I moved my blog to a paid webhost.  Thanks again and hope to see you at angrymillionaire.com

Debt Worth, laying the cards on the table

The main purpose of my blog is to track my progress as I go from being in debt (negative) to building wealth (positive).  The secondary purpose is to help financially education my readers (that would be you) and to persuade you to start your own “quest” for financial freedom.  In my most humble opinion, as a society, we have been duped.  We have been led to believe that our need for instant gratification and purchasing all the things we want on credit is perfectly normal and a good thing.  Student loan – Check.  House with a 30 year mortgage – Check.  2 new cars – Check.  All the purchases on a credit card to fulfill our “needs” – Check.  The next thing you know, you are over $100k in debt, not counting the mortgage.  Sound familiar?  It does to me…because it is me.  Let me give you some real “truth”  there is no such thing as good debt.  There is nothing good about owing someone money.  Especially so if there is $interest$ involved.  Lets take a look at my financial “debt worth”.  I am going to lay my cards on the table…

Monthly Debt	%	Min payment	August
6K credit card	11.90%	$100.00	$4,500.00
12K credit card	11.90%	$152.00	$7,680.16
11K credit card	14.90%	$218.00	$10,772.47
9K credit card	0.00%	$175.00	$8,741.00
15K credit card	0.00%	$283.00	$14,117.00
2K credit card (1)	0.00%	$38.00	$2,523.00
2K credit card (2)	0.00%	$38.00	$2,523.00
Student loan	6.80%	$65.00	$4,034.68
Auto loan	7.19%	$304.00	$15,682.73
Equity loan	3.25%	$325.00	$21,661.86
Total		$1,698.00	$92,235.90

The graph at the very top shows, that in June 2011, I was in debt over $115,000.  Actually, $116,082.34 to be exact.  This was the turning point for me and my financial future.  You can see it in the graph.  I kept going further and further in debt until June where I started climbing out of the hole I created.  My turning point came with the scare of the current economy in the United States.  The current economy and its unknown economic future scared the H#!! out of me.  I became worried.  This was first time in my life that I was seriously worried about my life and my family’s future.  What a wake up call!  What would happen if I lost my job?  Would I be prepared financially to retire?  If so, how comfortable could we live and for how long?  This was a very rude awakening.  I came to the realization that the cruise control that I placed on my life had to be turned off and I had to look out the windows and see what was going on around me…metaphorically speaking…

Let’s talk about this debt…I will be honest with you, it is rather embarrassing.  I consider myself to be an educated, intelligent individual.  So how could I be this financially irresponsible?  I could blame a lot of people and a lot of companies but the truth is, I blame myself.  It is my money, my debt and my decisions.  I know for a lot people, it would be much easier to blame the new car salesman because he was a “really good salesman”, or the credit card companies because of the billions of dollars they spend for advertising.  I can go on and on about people to blame for my debt, but in all honestly, it comes back to me.  Since I am the master of myself, it is time to be responsible.  It is time to be accountable.  It is time for a REAL change.  It is time for my great economic recovery.  It truly “Starts with Me” and it started in June of 2011.

Debt beater

If you compare the graph with the spreadsheet above you will notice a difference of -$23846.44 in paid debt.  How could I pay this amount so quickly?  Well, I sold some things and I paid a lot of “stupid tax.”  I sold a vehicle that I was paying over $500.00 a month on including insurance.  I bought a used 1998 Honda Civic that has almost 200k miles for $2500.00.  I named this car my “Debt beater” since it is a “beater” and it will help me in my quest to become debt free.  I figured that I didn’t need a $28,000 vehicle to drive 6 miles round trip to work.  Unfortunately, I lost $4300.00 in negative equity on the vehicle.  This is the “stupid tax” I referred to earlier.  ”Stupid tax” is money paid for “stupid” decisions.  I consider it payment for a financial education.  I also setup a “debt snowball” in which I used to pay off a $2,900 Best Buy credit card.  I learned that the only real “Best Buy” is the purchase you make with cash.

So where do I go from here?  Well, I setup a budget, which I will discuss in a future post and now I tell my money where it goes rather than it going where ever it wants to.  I pay the minimum payments on all of my bills with the exception of one.  On that one debt (see “6K credit card” above)  I focus all of my extra money (debt snowball) and apply it to that card.  Lather…rinse…repeat.  I just dropped a $538.51 payment on it and now it has a balance of $4500.00.  If you go to my “goals” page you will see that is one of my goals is to pay off 1 credit card by the end of the year.

I know that this debt looks depressing and I really wish it was gone, however, I created it and now I am going to get rid of it.  How do you eat an elephant?  One bite at a time!  I am going to win.  You never win without paying a price and I am going to pay that price to win.  It is not easy, it is just worth it.

To your financial health – Martilyo!

Home is where you hang your sombrero part 1

In this ever so changing roller coaster of an economy, tough decisions have to be made.  Whether by force, practicality or even opportunity, decision are made everyday.  One of the biggest decisions a person has to make is of a residential one.  Do I buy or do I rent?  To be or not to be?  Well the question of buying or renting is not as popular as Shakespeare nor is it as entertaining.  None the less, it is a very important question in a person’s life.  Do I continue to rent or do I make a major financial decision and buy my white picket fence.  Let’s take a look at renting and see if it works for you.

Renting – A unit in a complex, a townhouse or a single family house…your choice!

Advantages

• Flexibility – Probably the biggest advantage to renting is the ability to come and go as you please and live where ever you want.  If the job market changes and you want to move out of state, no problem… (personal experience here!)
• Maintenance – If something breaks, it is an easy call to your landlord or management company to schedule a repair.  The cost?  Usually nothing unless your lease has some sort of a repair deductible clause.  Air conditioning go out?  Need a new roof? Foundation cracked?  Not your problem!
• Amenities – If you rent a unit in an apartment complex you may benefit from amenities such as swimming pool, 24 hour gym, clubhouse, movie theater or computer business center.  If you rent a single family house or townhouse you have all the amenities of owning your own home without the liability of home ownership.
• Cheaper insurance – Since you are renting, renter’s insurance will cost you around $10-$30 a month depending on coverage.  This cost is much cheaper since the insurance only covers the contents of your home rather than the structure itself.
• More bang for the buck! – Usually, you will be able to afford a nicer home if you rent than if you were to buy.  Of course this also depends on your location and local economy.

Disadvantages

• Annoyances – Very close neighbors…apartment complexes are not built with soundproofing.  The resident above you is not going to care about your enjoyment of your domicile when he and his 20 college classmates are playing beer pong at 0300 in the morning.  The neighbor to your left isn’t as cleanly as you are and now their bug problem is your bug problem.
• No investment – Kiss all the money you pay in rent goodbye because you will never see each other again…  No equity will ever be built because you don’t own it…
• No tax deduction – All the money you paid in rent is of no benefit to you come tax time.  Homeowners, usually, are able to itemize their tax deductions rather than being forced with a standard deduction due to the deduct-ability (new word) of their mortgage interest.
• Rent increase – When your lease is up, depending on the rental market in your area, there is a good chance that your rent will increase every year.  What can you do?  Simple, you can pay the increase or move.  Landlords and management companies rent homes to make a profit; not just to provide you a nice place to live…
• Eviction – Not that you are a bad person or anything but sometimes a property will be sold and the new buyer doesn’t want to rent to you.  They want to live there!  Of course this happens mainly to people renting single family houses and townhouses.

As with anything in life there are advantages and disadvantages.  Nothing is absolute except for death and taxes or death and jail if you refuse to pay your taxes  I hope I have provided some better insight whether to rent or not to rent.  Obviously, my list of advantages and disadvantages is not complete and they might not all apply to you and your situation.  I urge you to add your ideas and opinions in the comments section and share your experiences with renting.  A special thanks and shout out to Cristina Bautista Nash for her topic suggestion.  Up next?  Home ownership – the good, the bad and the mortgage!…stay tuned!

To your financial health – Martilyo!

Save, spend, give! How to teach your children the proper way of handling money at an early age

One of the most fun times I have had with my 8 year old daughter, Natalie, is when I take her to the bank so she can deposit money into her savings account.  This weekly task may seem menial, but the personal finance lesson it teaches is priceless.  As long as my daughter does her chores, such as making her bed, taking care of her guinea pig, cleans up after herself and behaves, she receives a commission of $10.00 a week.

A commission?  Don’t you mean an allowance?  No, I mean a commission.  An “allowance” is defined as an amount that is allowed or granted, whereas a “commission” is defined as a form of payment to an agent for services rendered.  Services rendered, meaning she has to do something to “earn” her commission.

Once we reach the bank, the real fun begins…  Natalie will go up to the teller with her savings account number in hand.  She will either have cash or a check that I have written to her.  She happily signs the back of the check and presents it or the cash to the teller.  She explains to the teller that she wants to deposit 20% into her savings.  If the teller has never dealt with Natalie before, the teller will be caught off guard at this request.  Usually they will look at Natalie for a second and Natalie will tell the teller, “two dollars.”  I giggle when this happens.  When the teller gives Natalie back her change, Natalie has 2 envelopes to keep her money in.  She has a “spending” envelope and a “giving” envelope.  Natalie will put 10% or $1.00 into her “giving” envelope and 70% or $7.00 into her “spending” envelope.  When we leave the bank, I always have a smile on my face and feel really proud of her.  I notice the bank tellers always smiling when Natalie leaves.

When I first started teaching Natalie this money program to her, I explained how everything worked.  I explained to her the benefit to always saving a portion of what she earned and saving for a “rainy” day.  I then went on to explain to her the concept of helping people that are worse off than we were by giving away a portion of her money.  Two weeks ago, she wrote a letter to the Appalachia Mission of Hope (The Appalachia Mission of Hope is a Christian, non-profit, charitable organization that is motivated by the love of God to provide spiritual, economic, and other necessary aid to children, families, and persons in need in the Appalachian area.)  Natalie explained in her letter, that she sets away 10% of her “commission” that she gets from chores every week and she had decided to give them $5.00.  She finished her letter by telling AMOH to use her money to help people in need.  It was soooo cute!  I explained to her that by helping now, she may be provided help when she needs it.  She asked if giving to others was like depositing into “giving savings account.”  I smiled and told her…”Something like that Nat!”

Some of you may think that $10.00 a week is a lot for an 8 year old.  It really isn’t considering that if she ever wants something other than the things I should provide for her, she can pay for it.  For example, a few weeks ago, Natalie and I were at Barnes and Noble book sellers and she wanted a piece of Cheese Cake Factory, double chocolate cheesecake.  She asked me if she could have a piece.  I said it was okay and that she was allowed.  I then just sat in my chair and waited.  She then stated, “Well are you going to go get it?”  I was really laughing inside…I told her that she had money in her spending envelope and she could buy it.  I will tell you, the look she gave me after I said that was priceless!  She then stated, “I don’t want to spend my money!”  Of course I rebutted with, “Sorry baby, cheesecake is not in my budget.”  Of course I was not going to budge.  It was personal finance lesson time…  I purposely let her sit and think about whether the cheesecake was worth $4.99 to her.  To my surprise, most children I know would have already had the cheesecake and devoured it by the time my dearest Natalie was pondering over this very important financial decision. She finally came to the conclusion that she had enough money to buy it, enough left over for other things she wants and Friday was right around the corner.  She went up to the counter, ordered her cheesecake and brought it back to the table. “Daddy, will you help me eat it?”  It just about brought tears to my eyes…  You may be wondering if I would have bought her the cheesecake if she didn’t want to pay for it.  No way!  Remember, it wasn’t in the budget

Teach your children the value of money now while they are young so when they are older they will be more responsible with it.  Save, spend and give…very valuable lessons in life!

To you and your children’s  financial health — Martilyo!

If you want to be wealthy, figure out what broke people are doing and run the other way!

In my quest of becoming debt free and becoming a “millionaire,” I have read many books on both subjects.  Some books have that “get rich quick” twang and others are practical and make good cents (pun intended.)  There is not 1 diet pill or miracle drink on the market that is going to make you drop weight like a Victoria Secret’s model, just as there is not any “get rich quick” program that is going to make you go from rags to riches faster than Superman can put on his cape.  This is a rather sad but honestly true fact.  However, it is possible to lose weight just as it is possible to gain wealth.  To accomplish either or both require knowledge, tools and skill.  Knowledge is the knowing, the blueprint, the map, the know-how.  Call it what you will, it is…the plan.  Tools are the items required to carry out the plan.  The tools can be your computer, pen and paper, calculator, spreadsheet and motivating friends and family.  The skills are created through the repetition of positive actions over the course of time.  Properly creating and using a budget over and over will increase your wealth building skills.  With all of this being said, lets take a look at why broke people are broke.

1. Broke people do not know the difference between needs and wants.
2. Broke people can not delay instant gratification in obtaining something they “need” (read want)
3. Broke people think that borrowing money to pay a bill will get them out of debt.
4. Broke people think if they play the lottery they actually have a realistic chance of winning
5. Broke people who do actually win the lottery are usually broke in 6 months.
6. Broke people frequent the services of rent-to-own stores, payday loan lenders and title loan companies.
7. Broke people live above their means (spend more than they make)
8. Broke people try to keep up with the Joneses or the Trumps when their income won’t support it.
9. Broke people look at credit cards invitations in the mail as a blessing.
10. Broke people actually think 90 days is really the same as cash

Now personally I have fallen into a few of the these categories and I could also come up with a lot more.  I recommend for you to read Dr. Thomas J. Stanley’s book, The Millionaire Next Door and Stop Acting Rich.  Both are excellent books and should be available for check out at your local library (free).  These books will give you the insight to the mindset of a true millionaire.  Since we established why broke people are broke, lets take a look at why wealthy people are wealthy.

The Millionaire Next Door

1. Wealthy people don’t borrow money.
2. Wealthy people live below their means.
3. Wealthy people live on a budget.
4. Wealthy people buys cars with cash.
5. Wealthy people only buy things they can afford.
6. Wealthy people do not use credit cards.
7. Wealthy people have an emergency cash fund.
8. Wealthy people eat at home.
9. Wealthy people don’t play the lottery, they invest for retirement.
10. Wealthy people use cash.

My job allows me to drive around the city I work in for 12  hours a day.  I like to drive through a sub-division where the houses are between $200-$300k.  The majority of these homes are owned by Indian (India) families.  In my experiences, people from India are either extremely poor or extremely wealthy.  I have not met too many Indians that I would consider middle class.  You can make all of the 7-11 and hotel jokes you want, but Indians know wealth.  Now, I have never visited India, but I have visited other 3rd world nations, and I will tell you that these people work very hard and are very well educated.  It is their upbringing.  Now, back to my driving.  When I drove through this neighborhood I noticed one thing in common.  Almost every driveway had a Toyota or a Honda.  Now, I expected to see BMWs, Mercedes and Lexus throughout.  These Hondas and Toyotas I saw in the driveways of these very nice homes were not new.  They were at least 3-5 years old.  Could these families afford BMWs, Mercedes or Lexus?  My assumption is yes.  Why they don’t is probably due to the fact that they are living below their means and expensive, flashy transportation is not important to them but reliable transportation is.  Do you want to be wealthy?  I do!  Where do you start?  Start by stop borrowing money.  Stop using credit cards.  Stop trading in your car every year.  Educate yourself.  Learn why wealthy people are wealthy.  Set up a budget and get out of debt.  Stop being a slave to the lender!

To your financial health! — Martilyo!

Most Americans can’t afford a $1,000 emergency expense

According to the National Foundation for Credit Counseling, or NFCC, a majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense.

http://money.cnn.com/2011/08/10/pf/emergency_fund/index.htm

“Only 36% said they would tap their rainy day fund for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card.”

I know personally this a true and really sad. This is why I recommend building a $1000.00 emergency savings and place it in a higher interest rate savings account or money market account.  This money should be easily accessible.  I am a current account holder and recommend Ally Bank.  http://www.ally.com/bank/savings/ As of 8/12/2011 their online savings account rate is 1.00% APY.  This rate is probably better than the rate you are getting at your brick and mortar financial institution.  Ally has a very simple to use web interface that allows electronic transfers between banks to allow funding and withdrawals.

Think about this article.  Think about having $1000.00 for emergencies.  No it is not rocket science, just financial common sense.  For the record, I did not have $1000.00 just to transfer into this emergency account.  I had to put money in month by month.  If you want to get out of debt you have to stop borrowing money, stop using the credit card and stop frivolous spending.  Now it is time to start your emergency expense fund.  Just remember, a sale at any retail or online store is NOT an emergency.  When your A/C system at home goes out and it is 100+ degrees outside, that is an emergency.

To your financial health! – Martilyo