Posted in Building Wealth, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

When It Rains, It Pours

There is one thing I can guarantee you – no matter where you live, it is going to rain.  Maybe just one day a year, but it will rain.  When it rains on you, are you prepared with an umbrella or are you going to get soaked?

The same way it will rain on you literally at some point this year, it will also rain on you figuratively.  Something unexpected is going to happen.  An emergency is going to happen.  Life is going to happen.  Do you have an umbrella or are you going to get soaked?

Right now, many people in this country are wishing they had an umbrella – even a small one.  It is raining on them right now.  They are not getting paid because of a situation that they couldn’t control.  Some were prepared, but many were not.  Some will be able to continue to pay their bills and put food on the table, but many will not.  This is just an example of what happens everyday in this country and in our lives.  Life happens – some things we know might happen and some things we have no clue are going to happen.  This is why an emergency fund (umbrella) is so important.  If really should be the number one priority in your finances.

So how big should your umbrella be in order to not get soaked the next time it rains.  Ideally, you want to have one year of expenses set aside.  But start somewhere, even $50. And just keep building it.  You want to get $1000 to $1500 as soon as you can.  This way you can handle a sprinkle if it comes through.  Next, set aside 3-6 months of expenses.  This will cover a regular rainstorm.  And then save up to one year of expenses.  This size umbrella will cover any storm that comes your way – sprinkle to hurricane.

It is going to rain this year.  Are you ready?  Today is the day to start.  Whether you are starting at the bottom, or building what you have into a bigger umbrella, today is the day.  As people find out each and every day, you never know when a storm is coming.  The best thing you can do is be prepared.  Having an umbrella can be the difference in the rain being just a little nuisance and it being a drowning storm.

Listen to Debbi’s podcast on this subject and so much more.  

 

Posted in Building Wealth, Credit Cards, Debt Free, Financial Freedom, Winning with Your Money

Are There Any Advantages to a PayDay Loan?

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The answer to the question is flat out “no”!  But you know me, I won’t say yes or no without a reason.  This particular no has many components to it.  But before I get to those, let’s discuss what a payday loan is and why people use them.

The What – A payday loan is just that – it is a loan to get your through a financial crisis until payday.  The problem is that once payday rolls around, unless you won the lottery, you still don’t have the money. It sounds easy because you know you will have money once you get paid again; however, what we tend to forget is that that money is spoken for already which means jumping right back on the hamster wheel for another ride.

The Why – When you are not prepared for the rain, you will get wet.  You need an umbrella – a rainy day fund – to cover you when it rains because it will.  Not having this rainy day fund makes us desperate when something happens.  We panic and we are attracted to offers like the payday loan lenders make – basically we will give you the money now and you can deal with it when you get paid.

Why “no” – The way payday loans really work is why there are no advantages to them.  They work like this – you take out a $500 loan.  When you get paid, your loan is due with interest (up to 1000% or more).  One of 2 things happen – either you can’t pay it so they reset it or you pay it and come up short again and have to take out another loan.  They have basically set you up to fail.  There are no regulations on the amount of interest that they can charge you in most states and it has been known to go as high as 1000% – yes that is 3 zeros.

Payday loans were designed to prey on the poor and the desperate.  When you don’t have the money to pay for something and you consider it an emergency, you will sell your soul to take care of it and they know this.  What you are really doing is just digging your hole deeper and deeper making it harder to get out.

How can you stop the “need” for payday loans?  First, you have to have an emergency fund in place, even $100 to start so that this doesn’t happen again.  Make it a priority to build it up so that when something happens you are prepared.  If you have a payday loan currently, pay it off as quickly as possible.  Sell stuff, cut back, eat Raman noodles – do whatever it takes to pay it off and stop the madness.  The sole purpose of these loans is to make money off of the hurting.  Put yourself into a position where you don’t “need” them and together we can put them out of business.

The ABC's of Personal Finance Book
The ABC’s of Personal Finance Book

Buy Debbi’s books at Amazon or her DIY system on her website.

Posted in Buying Your Dream House

Property Virgins

As many of you know, I love and hate watching home shows on HGTV.  I love them because they are interesting and I learn a lot, but I hate them because the people are so clueless sometimes.  If you are one of those people and you have never bought a house before, don’t fear.  I have some awesome information and tips for you that will help you have a great house buying experience.

First, let’s talk about the finances.  Are you financially ready to buy a house?  If you want a house bad enough, you can talk yourself into believing you are even if you are not.  I want to be real with you and help you to know if you really are ready to buy a house.

  • Do you have 20% to put down as a down payment?  If not, you are not ready quite yet.  If you do not have 20% down, you will have trouble qualifying for a good loan.  But even if you get over that hurdle, you will be required to carry PMI insurance to cover the difference.  For example, you want to buy a house for $200,000.  You will need  $ 40,000 down to avoid an additional payment of PMI.  If you only put down 10%, you will add an additional $80 to your monthly payment for the life of the loan.  Therefore a monthly payment of $1420 just became $1500.
  • Do you have debt?  Do you have a 6 month emergency fund?  If you have debt, you are not ready to buy a house yet.  Adding this much debt to your already existing debt is just asking for a disaster.  If you are out of debt, then you will be able to cover problems which will arise in the house and they will arise even if the home is new.  For this very reason, in addition to being out of debt, you need a 6 month emergency fund to cover those issues.
  • Will your payment (insurance and taxes included) be less than 27% of your take home pay?  If not, your payment is too high and will stress you budget.  Your loan should be a fixed rate loan for 15 years and the payment no more than 27% of your take home pay.  If you don’t meet this criteria, you will either have to put more money down or lower your mortgage amount.

If you buy a house and it causes you to live paycheck to paycheck and a water heater breaks or a roof begins to leak, this house will become a nightmare instead of a blessing.  Be patient, write down what you need to do to buy the house with ease, and work on those goals aggressively and you will have a house that will be a blessing in no time.

Now, let’s talk about reality house buying.  We all have a wish list of what we want to have.  However, make sure it is really what you want and not just what is “in” right now.  For example, everyone wants stainless steel appliances.  But do you have any idea how hard they are to clean and keep clean?  I agree they look better than white, but deal with what is there and save up and buy something like the Slate line from GE which is the look of stainless without the mess.  Granite requires yearly maintenance to reseal it.  Did you know that?  Don’t just want something because everyone else has it.  Find out what is best for you and save up to get that.  You will be much happier.

Also, when you are house buying, walk into a house knowing that the home owners taste will probably be a lot different from yours.  Don’t blame the seller if they have carpet and you want hardwoods because you have a dog.  It is not their fault you want hardwoods.  You are going to have to budget for that cost because it is your preference, not theirs.  Same with granite countertops and stainless steel appliances.  The value of the house is in the house, not in the accessories.  And if it is going to cost too much to change, move on.  Focus on what you can’t change such as location and lot size and not on what can be changed such as paint color and cosmetic issues.  Those items just need to be included in your house buying budget.

And last, if you insist on buying a house with every dollar you have and cannot pay for closing costs and upgrades, do not be mad at the seller because they won’t give you these things.  I hate seeing a couple whose budget is $200,000 make wise cracks because a seller won’t accept their offer of $200,000 asking them to pay closing cost when the asking price for the house is $240,000.  Don’t expect the seller to give the house to you just because you want it.  It has to be fair for everyone.  I hear a lot “Well don’t they want to sell the house?”.  Well, of course they do, but they don’t want to give it away.  If the house is worth $240,000 they are not being unreasonable.

Be very realistic in your house buying process.  This may mean having to wait a little while to get exactly what you want.  This may mean starting small and upgrading later.  This may mean buying new because you will never find the perfect house.  Whatever it means, do it wisely and make sure that your new house is a blessing and never a curse.