Do You Believe These Money Myths?

There are a lot of different things you’ll read when it comes to your money.  The personal finance world has lots of people with many opinions.  I’m one of them!  But with so much out there, it can often get confusing.  What do you believe?  What’s true and what’s a suggestion?  I don’t have all the answers.  But there are a few money myths that I’ve seen come up more than a few times.

#1: Always Pay The Higher Interest Loan First

The higher the interest rate means that less of your payment goes to your principal.  This is true.  So, you should always pay the highest interest loan first, right?

Not always.

I think you have some flexibility here.  If you have a loan with a low balance, maybe consider paying that off first.  It will free up some cash flow.  Plus, paying off a loan will give you a ‘win’ on your scorecard.  Those can be very important and might be worth a few bucks in higher interest in the short term.

#2: It’s Too Late To Start Saving

Many people start saving for retirement or their first home right out of the gate.  If you’re one of those people, then congrats.  But if you’re not, don’t worry.

It’s never too late to start saving.  I don’t care how old you are.  Many people who give this answer are just making excuses to continue bad habits.

I don’t care if you have friends that are your age who are already retiring and you haven’t saved a buck.  You should and you can start making a difference.

#3: You Have To Choose Between Paying Off Debt Or Saving Money

I’ve read at least a thousand pieces over the years on this topic.  Which is better if you have extra money?  Paying off debt?  Or saving/investing?

I’ve never understood why people think it has to be either or.  It doesn’t.

If the answer isn’t clear or you don’t have motivation toward one, why choose?  Try a mix of both.  Either one is going to help you in the long run.  And, you might find that one excites you more than the other.  If that happens, then you can make adjustments.

#4: Having An Emergency Fund Is Good Enough

OK, so you saved $1,000 for an emergency fund.  You’re covered, right?  Wrong.

The fact is that even if you’ve built yourself a cushion, there is still work to do.  What if you have an emergency greater than $1,000?  How will you restore your fund if an actual emergency depletes your fund?  What if someone comes to you with an emergency of their own?

Be prepared.  Think ahead.

#5: Following Someone Else’s Budget Is Your Ticket To Success

A budget that works for someone else may not work for you.  Everybody has different circumstances and different needs.

Also, many people are at different stages of how they can handle a budget.  Someone who’s never used a budget should start simple. If they tried to use the budget template of someone that’s had one for twenty years, it probably won’t work.

Budgets come in all shapes and sizes.  There is no one size fits all.

#6: Focus On Cutting Spending To Save Money

This isn’t bad advice.  It’s actually really good advice.  However, it may not always be the best advice.

After all, the advice here only focuses on one side of the equation.  Spending.  This is great, but there’s also opportunity that comes by making more money.

Consider that we all have limited time in our lives in which we can focus on saving money.  If your time allows you to cut $1,000 per month in expenses, that’s great.  But what if you focused that time on earning more money instead?  If you could earn $2,000 per month with the same effort, then focusing on cutting expenses could actually be costing you $1,000 per month.

#7: The Stock Market Is Always Going To Go Up

It may seem like this is true given that it pretty much has for the last ten years.  But it doesn’t.  And it won’t.  Don’t believe people on CNBC that tell you that ‘this time it’s different’.  And that the market can go up forever.

It’s not and it won’t.

Everybody needs to keep an eye on the market and recognize that it’s not a one way only road.  The experts that tell you that it can only go up probably have a plan in place.  And when the market starts going down, they’ll have executed their plan before they go back on the air and talk about the downturn.  Trust me on this.

The fact is, they don’t care about your money.  They care about theirs.  Don’t get the two confused.

Readers, what advice have you heard that may need some corrections or clarifications?  What do you think about the items I mentioned?  Please let me know your thoughts in the comments below.  Thanks for reading.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

10 Short Term Money Goals That Are Easy

We all know we can do a better job at saving money, right?  I know I do!  Sometimes figuring out where to start is a bigger obstacle than actually making the changes.  If you can relate to that, then this post is for you.  Here are ten short term money goals, things that you can do today and without much trouble, that can really help you out.

Review Your Insurance Policies

Most people could save money on insurance.  You can often adjust your deductibles to lower your payment.  I also recommend shopping your policies around.  If you have more than one type of policy, you can often get a multiple policy discount by using one carrier.  Either way, checking your insurance is something that can probably save you money.  The great thing is that you can do this with just a few phone calls or website visits.

Create A Savings Fund

If there’s something that you have always wanted but don’t have the money for, that can change!  Create a savings bucket and start putting some money aside.  Whether it’s a bigger TV, a new car, or a family vacation, you can start saving for it today.

Calculate Your Debt To The Penny

Most people know the benefit of getting out of debt, or even reducing it.  This is all fine and good, but I wonder how many people know exactly how much debt they have.  Now is the time to figure it out.   Look at everything you owe and add it together.  It might sound like a frightening idea, but knowledge is power.  Once you know your debt amount, it won’t be holding itself over your head.  Now you can start thinking about ways to pay it down!

Create A Christmas Fund

This sounds an awful lot like the savings fund idea, but it’s really a specific one.  If just thinking about paying bills in January stresses you out, then this one is for you.  Stick a little bit aside every month and you can have a good chunk (or all) of the money ready when the bills come due.  I’ve used this strategy for years and it makes the holidays much less stressful.

Look At Your Cell Phone Bill

If you have a cell phone, and who doesn’t, then take a look at the bill.  You might be able to save some money.  These days the plans and offerings change so fast, that you might be able to make some changes and save some money.

Bump Your Retirement By 1%

Most people won’t notice if their paycheck declines by 1% but it can make a serious difference in your savings.  Go in and add 1% to your deductions today.  Bonus tip: Every time you get a raise, bump it by another 1% each time.

Sell Some Junk

It might be junk to you but you might have stuff sitting around that someone else will pay for.  You get money and space.  It really can’t get much better than that!

Track Your Net Worth

This is another one that goes into the ‘knowledge is power’.  Track your net worth, which is simply to add together all of your assets, then subtract out your debt.  Once you’ve figured it out, then re-calculate it every month.  This will start letting you see how your financial story is changing over time.  The thing is you have to start doing it, so do so today.

Check Your Credit Reports

You get a free check of each of your three credit reports every year.  I go in roughly every four months and run a check of my credit report. This is easy.  It only takes a few minutes.  You want to make sure that everything is accurate, and you can use this to identify things that you could do, like close a dormant credit card account.

Think Of Something That You Can Live Without

Indulgences are fine, but chances are there is at least one that you can get rid of and find that you’re perfectly OK with.  If you have premium channels on your cable package, could you drop this? Could you make your own coffee instead of stopping at the coffee shop?  Do you really need that pair of fancy shoes?  When you spend less money, it adds up to money in your pocket.

Readers, what are some easy ideas that you have to meet short term money goals?  Let me know your ideas and what’s worked for you in the comments.  Thanks so much for reading.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

7 Steps To Improve Your Credit Score

Few things are worse than finding out that you have a bad credit score.  Many people know that they have this hanging over their head, where others are taken completely by surprise when they go to take a loan or just do a check.

If you have a bad credit score, then don’t wait to start fixing it.  Every step you take can count and help improve your score, and the faster you get started, the faster you can see your score move in the right direction.

Check your credit report for accuracy.

The first thing you should do is check your credit report to make sure that everything is accurate.  A bad score can come about with inaccurate information or if you’ve been the victim of identity theft and there are items that you don’t even know are there.

Work through any late payments.

If you’re late on any payments, you need to get this taken care of in order to gain any sort of traction at all.

Reduce your available debt.

If you have a lot of credit lines open, you can often improve your score by selectively closing credit cards or calling credit companies and asking for a lower credit limit.  Less available credit is often seen as less risk of default, which can improve your score.

Reduce the number of open balances.

If you are carrying a lot of different credit cards with balances, you want to start reducing this number as fast as possible. If you owe $5,000, it’s more favorable to have two cards splitting that balance than it is to have six or seven.  You can start by paying off cards that have the lowest balances.  You may also look for an existing card that will offer a good rate on balance transfers and bring some or all of your credit balances together into one spot.

Pay off your loans faster.

If you’re only making the minimum payments, you need to start bumping this number up.  Sell some stuff.  Take on a side gig.  Make lifestyle changes.  Whatever it takes, you want to start lowering your balances, which will improve your score.

Stop applying for credit.

Newer lines of credit are seen as riskier than older ones.  Every ‘new’ credit card you take can potentially damage your score.  As a general rule, don’t apply for any additional credit.

Stop charging.

If you pay off $500 on your balances but then add $400 in the month, you’re not going to get very far at all.  Make your purchases for what you need today via cash, check or a debit card.  This way, any activity on your cards is only serving to lower it.  Knowing that goes a long way.

The bottom line is that bad credit scores are awful, but they don’t last forever.  You may not be able to change it overnight.  However, you can certainly do so with an organized and disciplined approach.

Readers, have you ever actively taken measures to improve your credit score? How did it go?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Why We All Might Be A Bit Like Bernie Madoff

Recently, ABC aired Madoff ,a two-part miniseries about the biggest ever (to date) ponzi scheme that bilked investors out of $65 billion dollars.  By now, many are likely familiar with the details of the scheme, so I won’t go into great detail except to recap that he started a hedge fund and always provided great returns, except that he was never investing a penny of money.  Instead, he was just putting the money into a giant savings account.  As long as there was more money coming in than going out, he could keep it going, but once the financial markets started crashing and investors started redeeming money faster than it was going out, the whole thing fell apart when the bank account (nearly) dried up.

The miniseries was pretty entertaining, and I always like Richard Dreyfuss, who was entertaining, but might not have been the best casting decision, as he usually makes his characters likable to a degree, so much that you often forgot to hate Bernie Madoff at various times.

After I got done watching the movie, I spent some time thinking about it, and I realized something and it was a little bit eye opening.

Why Did Bernie Madoff Start His Ponzi Scheme?

Why did he do it?  That’s one of the biggest questions that will always get asked when it comes to trying to figure out

US Dept. of Justice, CNN
Bernie Madoff – US Dept. of Justice Photo, CNN

and dissect the scandal.  Why?  To steal money?  Maybe become rich?  To gain fame?  So he could be the best at something? To make history?

These are all answers that I think probably fit to some degree or another, but there probably isn’t really one answer about why he started.

In fact, the movie didn’t spend a lot of time on that part of why.  Maybe the producers knew that there wasn’t one single a-ha moment or reason that provide a basis for why he would start the scheme.  It seemed, instead, that it just sort of started as a combination of reasons and grew into something that he himself didn’t know it was growing into.

See, they why of why he started wasn’t so important as the true question.

Why Did He Continue?

This is the true question and when you really look at the movie, it really spends most of the time telling the story hitting on this question of why.

Now, this question of why was answered pretty distinctly.  So why did Bernie Madoff continue once he got started?  The answer: Because he didn’t see a way to stop.

So How Does That Make Us Like Bernie Madoff?

Bernie Madoff’s story was hopefully one that we’ll never hear again.  So, when I say that I think a lot of us have a little Madoff in us, I don’t think there are people angling to start a ponzi scheme or rip people out of billions of dollars.

That’s not how we’re like Madoff.

Here’s how we might be:

See, often times once we start doing something, even if it’s not bad at first, it doesn’t seem like it’s a big deal.  We keep doing it and it’s still not a big deal. By now it’s a bit of a habit, but we keep doing it because we’re used to doing it.  At a certain point, we might start to get some bad feelings, but things are as we’re used to and we really don’t know how to stop.  Eventually, we might see just how fast the train is moving and how the tracks are ending soon, but do we really know how to stop?

Wow, that’s a lot for one paragraph…but that’s often how things happen.

What Kinds of Things?

So, what are some of the things that might fall under the same umbrella.

  • Debt – You’ve seen it before.  In fact, you might have lived it.  You open one credit card, and a couple of months of higher than normal expenses and you suddenly have a balance.  You have every intention of paying it off but the hits just don’t come.  Fast forward a few years and suddenly you’ve racked up more debt than you could have ever once imagined.
  • Smoking – Does anybody ever start smoking thinking that they want to get addicted to cigarettes?  Not likely.  Most people probably start with the occasional one and for reasons that are far different than having the desire to harm our bodies, yet isn’t it often how it ends up?
  • Drugs / Alcohol – Same deal as smoking.  What’s a little touch here and there?  That’s how it starts, but it’s often not how it turns out.

And that’s just the examples I thought of in the first 30 seconds of outlining this post.

So What Does It All Mean?

Unfortunately, I don’t think Madoff had unique behavioral characteristics that led him to do what he did.  I think that his ability to latch on and multiple the negativety far exceeds what most human beings are capable of, and his ability to impact people was far greater than the influence that most of us have on others.

So, that’s the good news, in that these habits when seen in most people, aren’t going to negatively impact thousands, if not millions of people.

However, they can impact at least one person.  You.

But, there’s hope.    You can be less like Bernie Madoff.

See, Madoff did his bad thing and had it carry on for years and years and years.  Decades.  Most of his life.  And he got way in over his head really fast.  We don’t have to.

Now, what to do?

  • Recognize – Do you have any things in your life that are out of control or might get there?  If you don’t, that’s awesome!  But be honest here.
  • Be Honest With Yourself – How far along are you?  Maybe you’re just on your first credit card.  If that’s the case, don’t be ashamed to the point where you go after that second one, because each one after that will only get easier.  Be honest now and get in front of it.
  • Ask for help – People in your life can help you.  You have to ask and talk and be honest.  If someone isn’t able to help you personally, there are professionals.  Believe me, there’s help for any and every situation these days.  But it won’t find you.
  • Assess your triggers – If you do get in front of any bad habits, then good for you.  Celebrate!  Treat yourself.  Spoil yourself, in fact!  But, make sure you don’t head down that same path a second time.  Know what got you there so you can go a different direction.

Conclusion

Bernie Madoff was a terrible man who did terrible things that led to terrible outcomes for himself, his family, and countless people who lost everything.  His name will forever be vilified.  He didn’t have to have his story end that way.  I know that a lot of what ABC put out there was likely modified for entertainment purposes, but it’s clear that one thing they likely didn’t have to embellish is that he knew he things were getting more and more out of control, and that he knew that one way or another, it wouldn’t end well.

While we all may have a little bit of something in our lives that can lead us down a wrong path and get us to where things are or seem out of control, the good news is that we can make it right.  For ourselves and those around us, we can make it right.

Readers, did you watch the Bernie Madoff inspired movie?  What do you think of my analogy?  Do you think that he could have stopped before he was a lot less in over his head?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.