Posted by Ryan on December 11th, 2007 in Money Management

Building wealth is really pretty simple. Spend less than you make, regularly invest the money you save, reinvest your profits and let compound interest build your wealth for you. Why then are Americans so unprepared for retirement and deeply in debt? Here are 15 common money pitfalls to avoid becoming another case study:

1. Ignoring Your Personal Finances: The first step in becoming wealthy is to understand your income and expenses. Without knowing how much you have coming in and what’s going out is like driving a car without a gas gauge.
2. Refusing to Budget: Creating boundaries and limits helps identify and reduce unnecessary spending, while planning to set aside money for your financially free fund.
3. Using Credit Cards to Supplement Your Income: If you can’t afford it, you shouldn’t buy it. Numerous small expenses will quickly add up to a big expense that will drive you deeper in debt. Additionally, the items you used credit for will cost you a whole lot more with interest accruing.
4. No Emergency Fund: You should have 3-6 months of living expenses set aside in a cash account to be prepared for tough times. This precautionary step will help you avoid turning to credit in order to bail yourself out. Make the best out of a tough situation by being one step ahead.
5. Lending Money Interest Free: Your money in a basic savings account is unable to keep up with the pace of inflation, and is losing value. Cash beyond your emergency fund should be transferred into another higher yielding investment account, such as a CD or mutual fund.
6. Paying Yourself Last: Procrastination and delaying your investments in a retirement plan is a sure way to miss out on a comfy retirement. You know the saying, “Failing to plan is planning to fail.” Take advantage of employer 401k matching and tax sheltered retirement accounts such as a 401k or an IRA.
7. Dipping into Your Retirement Fund: The tax implications and long term effects on prematurely taking money out of your retirement plan is a poor decision. This should be an absolute last case scenario.
8. Not Reviewing Your Credit Report: You are entitled to a free copy of your credit report from each of the three credit reporting agencies. Take advantage of this and review your credit report for inconsistencies every four months. Order a copy of your report from AnnualCreditReport.com.
9. Failing to Diversify: You never know what trouble lies ahead that could bring an entire industry down. Diversification is the only way to protect yourself from the inevitable.
10. Ignoring Investment Fees: Your investment picks might have an outstanding track record, but your brokerage and mutual fund fees could deteriorate your gains. Remember to understand and consider all fees before making an investment and taking profits.
11. Avoiding or Taking on too Much Risk: It’s important to have a nice balance between risk and reward. Not taking any risk will get you nowhere, and taking on too much risk can drain your account. Be sure to understand your risk tolerance and properly allocate your investments according to your investment strategy.
12. Letting Day-to-Day Conditions Affect Your Investment Decisions: Remember that investing is for the long term, and over time the stock market has returned incredible gains. There will be many declines and many all-time highs, but over time you will have nice, consistent gains in your portfolio and opportunities to purchase stocks or funds at tremendous discounts.
13. Paying the Tax Man too Much: Take advantage of all tax incentives including common tax deductibles and pre-tax retirement contributions.
14. Staying on Task: Becoming wealthy is a long road of consistent, sound money habits. Don’t forget that wealth accumulation is a long-term process and does not happen overnight.
15. Not Sweating the Small Stuff: Small contributions add up to big bank accounts, just as small expenses add up to large expenses.

Millionaire Money Habit: To become a self-made millionaire, all you have to do is pay attention to the fundamentals of wealth accumulation. Take a look in the mirror and see where you can make improvements in your plan.

2 Comments

Posted by Ryan on December 9th, 2007 in Entrepreneurial Mindset

Do you ever sit around and try to think really, really hard about the next million dollar idea. And what happens? Usually nothing, right? On the other hand, there are probably a countless number of times that great ideas pop in your head out of nowhere, only to be forgotten latter. Sometimes great ideas seem so easy, and other times you just can’t get your brain to click.

Wouldn’t it be nice if you could cultivate an environment that gets your creative juices to flow at peak performance? I believe you can because I do it almost everyday, and so do many people I know.

From my experience with working with managers, a great deal of productive problem solving is actually done “off the clock” and during downtime. Just listen to people tell you, “I was thinking during my run . . .” or, ” . . . on the drive over here.” These million dollar “ah-ha!” moments tend to materialize when your mind is at complete ease and in an environment that allows for a moment of clarity. Million dollar ideas are discovered during long, peaceful car drives or in the shower, during a run or while relaxing in the hot-tub, while sitting on the plane or as you are falling asleep. Anywhere that allows you to temporarily put life on hold and escape the creative vice that we constantly surrounded with will help you generate brilliant ideas.

It’s no wonder why many CEOs and successful people set aside time to shut down the computer and turn off the Blackberry specifically to do things that help them relax. This may also explain why being a workaholic is counter-productive. Overworking leaves no time to relax and discover how to creatively move business forward and solve problems.

Millionaire Money Habit: Find whatever it is that allows you to tune out the noise that is constantly cluttering your brain and causing distractions, and make it a habit to schedule time daily to engage in that activity. Just be sure to bring a piece of paper and a pen in case you are able to think of something really big.

For more ideas on how to unleash your creative juices, read How to Be a Creative Genius at http://www.lifehack.org/.

2 Comments

Posted by Ryan on December 6th, 2007 in Credit and Debt

Remember the good old days? You find a home or investment property in a booming neighborhood, you get an offer accepted, and you close on your new home, and your average credit score granted you a fantastic mortgage with no hiccups and no questions asked. Finally amateurs could play with the big boys and get rich quick flipping houses.

Let’s be honest. It was quite evident that banks were being too lenient approving loans, and lenders had no problem pushing paperwork through with no documentation and taking commissions on mortgages they knew were overextending the buyer. The process was highly unregulated, and as a result the economy as a whole is suffering, and the end is nowhere in sight. Housing inventory and foreclosures are at record highs. Housing prices are dropping and many businesses are suffering as a result. The credit crisis will continue to disrupt businesses, the economy and consumer spending, and personal finances for months to come.

What About Those With Good Credit?

The credit crunch, mortgage meltdown, whatever you want to call it, only affects those with poor credit ratings who have adjustable rate mortgages, right? Sadly that’s not the case. To put it in basic terms, financial institutions gambled with mortgages and now, as a result of the foreclosure rate, they are tightening their borrowing requirements and being more selective with granting loans. Just like it used to be.

What Does This Have to Do With Me?

If you are planning to buy a home, need a car loan or even a line of credit, things are changing if they haven’t already. Some of the creative financing terms, such as no documentation and no money down loans, which made it possible for people who couldn’t actually afford to buy a home under ordinary terms, will disappear. Now, just like the days before creative financing become an acceptable option, you will actually have to prove that you are creditworthy. To prove this you will need an acceptable credit score that shows you pay your bills and your income is greater than your expenses.

The New Perfect Credit Score

John Ulzheimer, president of consumer education at Credit.com told Money Magazine, “A year ago a credit score of 720 would have been good enough to get you the best rate. Now to get the same deal, you’ve got to be in the 750 range.” So what does this mean? While your credit score has always been an important report card lenders used to judge your ability to repay a loan, an outstanding credit score is even more important going forward in order to receive the best rates and keep your payments down.

Millionaire Money Habit: Request a free copy of your credit report every four months from one credit reporting agency at AnnualCreditReport.com. Review your report closely to look for errors that need your attention. Keep your debt to available credit ratio on your credit cards below 30 percent and pay your bills on time. These two factors alone account for 65 percent of determining your credit score.

Finding a loan is getting harder so why not let Thrifty Loans make the process easier. Thrifty Loans has over 500 secured loans to choose from.

4 Comments