8 Things To Buy With Your Tax Refund That Will Make You Wealthier

Written by Sam on . Posted in Inspiration, Personal Finance. 1490 views.

Things to Buy That Will Make You WealthierAmericans love spending their money.  The high we get from buying a flat-screen tv, iPad or new pair of shoes is shocking.  This phenomenon creates a spend vs save competition not only for our paychecks, but also for the biggest single payment most Americans receive:  their tax refund.  The result is most Americans squandering their tax refund on material possessions and missing a great opportunity to create long-term wealth.

There is a trick that can prevent you from consuming your newly received funds (but still giving you that purchase high you require).  The trick is to buy something that will make you wealthier.

Here are 10 things you can “buy” that will increase your wealth.

  1. Buy your debt.  I know, I know, I tricked you…You knew this was going to be the first thing you have to do with your tax refund, sorry.  Think about this tho, by decreasing your interest expense you’re actually increasing your net earnings for the year.  “Earn” an extra 10 or 15 % this year by paying off your debt.
  2. Buy a ROTH IRA.  Opening an IRA account is more than just saving.  Under a ROTH IRA your “after-tax” tax refund grows tax free.  Once you reach age 65, you’re eligible to withdraw all funds without paying tax on the gains.  The tax benefits make this a great account for new investors to learn about investing, potentially free from tax consequences.
  3. Buy home efficiency.  Within the last five to ten years some fields have made giant leaps in efficiency.  Energy Star appliances, tank-less water heaters, insulation and solar panels are just a few household purchases that could decrease your energy costs and whose savings could actually pay for themselves.
  4. Buy a healthier you.  Wanting to join the gym or the country club, but just can’t justify it with your current budget?  Rather than blowing your refund on electronics or a vacation, prepay 6 months in advance for a membership .  Keep in mind that a healthier your is a less expensive you – investing in your health now will financially benefit you down the road.
  5. Buy more schooling.  How satisfied would you feel by using your refund to sign up for online classes or that certification class you’ve been putting off?  Investing in yourself pays great dividends (financially and mentally) and is one of the 7 Ways to Be Seen as an Expert in Your Industry.  What is a form of education you could buy this year?

5 Realistic Steps to Increasing Your Wealth in 2013

Written by Sam on . Posted in Personal Finance, Retirement. 3543 views.

How to increase your wealth in 2013Wealth is not about making money, it’s about saving money.  Good habits are what separate a wealthy individual from a bankrupt one (and independence from dependence) .  In the consumer-based society we live in it’s easy to judge one’s wealth based upon the toys they have in their garage, the size of their house or the exclusivity of their country club membership. 

The reality is that those “rich people” who are leveraged out the wazoo are no more wealthy (nor happy) than those living paycheck to paycheck.  Here are some realistic first steps to increasing your wealth in 2013:

  1. Make your nuts smaller.  Pardon me?  Thanks right, you need to decrease your fixed costs for 2013.  Write down exactly how much you’re spending per month on fix payments such as mortgage, car, utilities, school debt, etc.  Chances are at least one of those items will be paid off this year.  Instead of getting a new car as soon as your old one is paid off, keep driving payment free for a year or two.  Instead of getting a bigger house when you payoff your school loan, direct those payments to savings.  Look back on 2013 as the year that your payments decreased and your savings increased.
  2. Let your material possessions go…  If you’re like most Americans you have way too much crap in your house.  By crap I mean material possessions which you’re not using, which are taking up space, and which you probably purchased as an impulse rather than a real need.  Start the new year differently this year by making a list of what you can get rid of – not what you want to accumulate.  Shrinking your basis of material possessions will free up both your mind and your wallet.  Living a substance based life is one of the 18 Financial Tips I Wish Someone Told Me When I Was 18.
  3. Reverse your buying cycle.  Most of us run up our credit card to then pay it off when we get the money.  Start the new year by reversing this cycle.  Try delaying your spending by one pay cycle so that instead of putting your purchases on credit, you put them on your debit card.  By spending the money you already have, you’ll force yourself to think twice about impulse buys.

The Only 5 Ways to Increase Your Credit Score

Written by Sam on . Posted in Personal Finance, Taxes. 14554 views.

the only 5 ways to increase your credit scoreThere are only five ways to increase your credit score.  It may surprise you, but factors like your income, length of employment, home ownership vs renting status, and education are all completely ignored when it comes to calculating your credit score.

Many people have been negatively affected by the downturn in the economy.  The side effects range from occationally missed debt payments to losing one’s house to foreclosure.  These examples encompass both sides of the spectrum of debt avoidance that will adversely affect your credit.  The good news is that so many people have been affected by these “credit blemishes” that creditors are now forced to be a little more lenient and understanding if they hope to have a profitable book of borrowers in the future.  So how do you get back on track and rebuild your credit score?

  1. Pay down your outstanding debt.  Most of us have seen that those who are in debt typically need their credit much more than those who are debt free, however, the more you need credit the harder it is to get.  Why is this?  Lenders are in search of borrowers who don’t need the credit, but when they use it they pay it back quickly.  The best way to become one of these attractive borrowers is to pay down the debt you owe.  Some outstanding debt looks worse than others.  I recommended paying down debt in the following order (pay off completely, then move on to the next):
    Credit Card  >  School Debt  >  Medical  >  Car Payment  >  Mortgage
  2. Establish a clean credit history.  The largest part of your credit score is your ability to pay the debt you’ve accumulated.  In the eye of a lender, a consistent payor is also an attractive potential borrower.  Setting calendar reminders or automatic bill pay are great tips to ensuring that your credit history is never in jeopardy.  Chances are, developing a habit for paying bills is one of the 15 Financial Life Lessons Your Parents Forgot to Teach You.
  3. Avoid frequent sources of new debt.  Looking to save 15% at the Gap or Home Depot by opening their in-store credit card?  While it might save you a few bucks, it’ll also drop your credit score several points.  Lenders view volatile borrowers who are constantly opening and closing sources of credit as less attractive than those who have well established sources.  This brings us to our next point of…

15 Financial Life Lessons Your Parents Forgot To Teach You

Written by Sam on . Posted in Inspiration, Personal Finance. 6097 views.

Whether it’s matters of money, love or health, certain life lessons transcend all boundaries.  Some of us are looking for guidance to follow ourselves – others are searching for advice to pass on to their kids.  By blind luck some of us had parents who instilled most of these life lessons into us as we grew up – unfortunately, others weren’t as lucky.

Regardless of if you’ve heard these before or not, from today on you have the chance to better yourself and those around you.  Here’s a list of life lessons to both follow yourself and to pass on to your kids:

  1. A good reputation is more valuable than money.  Warren Buffet once said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”  Putting people first is some of the best financial advice you can follow.  It’s people that help you get that promotion or keep customers coming back to your start-up business.  Don’t forget that along your way – it’s one of the Things Successful Entrepreneurs and Executives Do Differently.
  2. Nothing worthwhile comes easy.  Human nature is to take the easy way out – try to fight this.  Why?  Because I guarantee that you’ll only achieve true happiness through accomplishment and realizing your potential.  Anyone who’s inherited or been given money has learned this lesson.  Easy money won’t earn the self-respect you desire – hard work will!
  3. Patience is the best remedy for every trouble.  Like anything worthwhile in life, nothing good happens quickly.  Sometimes it’s the raise you’re looking for at work.  Other times it’s the adoption papers you need finalized.  Recognize (and accept) when events are out of your control – embrace the fact that the marathon of life is made up of thousands of small steps.
  4. Avoid the “unknowledge” trap.  Do your best to avoid ruts of “unknowledge”; where you’ve quit learning within your professional and personal lives (one of the 25 Things to Stop Doing At Work Today).  Keep maximizing learning opportunities within your industry, but also set a personal goal to obtain a new license or skill outside of your profession.  Invest in yourself – I try to think of new knowledge gained as a unique perspective which can serve to further enlighten you!
  5. Debt is the slavery of the free.  Most simply, avoid credit card debt you can’t immediately payoff!  Nowadays it’s so easy to just put it on credit and worry about it later – fight this urge.  The only form of personal debt you should see as acceptable is a Mortgage/Deed of Trust – everything else is financially wasteful.
  6. Persistence pays off.  If ambition is the path to success, persistence is the vehicle you arrive in.  You’ve undertaken this venture, now don’t be discouraged by the lack of immediate results or success.  It’s those who keep with it after the excitement and newness wears off that reap the long-term benefits.  Remember, if it was easy and happened overnight, everyone would be doing it.

12 Things Every Investor Should Quit Doing

Written by Sam on . Posted in Investing, Investing for Beginners, Personal Finance, Retirement. 1381 views.

Things Investors Should Quit DoingI’m sorry to tell you, but nature has programmed you to be a bad investor.  It’s true, investing is counter-intuitive.  Your brain wants you to sell when a stock is going down and buy when it’s going up.   Even worse, some of the best investors in the world have learned this fact and actually make money by betting against what retail investors like you are going to do.  Warren Buffet said it best: “Be greedy when others are scared and scared when others are greedy”.

Don’t worry, there’s hope for you.  Here are 12 things you should quit doing when it comes to investing and how to fix them:

  1. Quit chasing sexy investments.  As humans we want to be part of the “In Crowd”.  Whether it’s the latest gossip, the hottest style, or definitely the hottest stock – we want in.  Facebook was a great example of this.  Most retail investors ignored (if they even looked at) the fundamentals and shockingly low earnings to be apart of the hype.  How to fix this:  Simple, if your uncle, co-working or momma, tells you to buy a stock just because they did – get as far away from the stock as you can.  I promise, you’ll hear all about their sexy stock…until the bubble bursts.
  2. Quit buying or selling after it’s too late.   Most of us remember when we had the idea to buy a stock, only to see it go up after we passed on buying it.  Then some of us made the critical mistake of buying it after the move already occurred.  Fight this urge, it’s too late.  How to fix this:  If you’ve missed your opportunity, take note but move onto the next investment.  However, it’s ok to continue to monitor the investment to see if it drops back down to your attractive buying range.
  3. Quit 0wning individual stocks.  Unless you are an employee of the company and involved in their stock purchase/option program, don’t own individual stocks!  Plain out crazy right?  No. Individual company stocks have something called “Diversifiable Risk”, or risk that can be eliminated by diversifying your assets.  Think of a scandal within the company or their key patent expiring.  How to fix this:  Target sectors as a whole.  Say you like ConocoPhillips because you think think energy will go up.  Instead of buying the stock, buy an energy ETF which tracks multiple stocks in that sector (Vanguard Energy ETF, ticker VDE, in this case).
  4. Quit paying too much in fees.  Investing really pays off when your returns start to compound upon the returns you’ve earned the previous years.  Every percentage you pay in fees will result in less of a return, ultimately lessening your compounding effect. How to fix this:  Only pay a fee when you can answer exactly what you’re getting.  Paying a fee to a mutual fund for their expertise in the bond market can be ok.  Paying for a mutual fund which replicates the S&P 500, when you can just buy an ETF which accomplishes the exact same thing, is not ok.  This is one of the 18 Things I Wish Someone Told Me When I Was 18.
  5. Quit being too proud to sell.  This is a common one so pay attention…Just because a stock went down does not mean it is going to come back up.  Pause and ponder this.  I’m not saying to emotionally sell when your investment goes down, I’m saying to recognize when the environment has changed and it’s time to get out.  How to fix this:  If you bet wrong or were hit by an unforeseeable event, cut your losses and move on.  There are plenty of other investments out there, don’t let emotion take influence over your money.