Financial prosperity

[skalenfehl]

I'm not going to pretend to be an authority on the subject but I have been through a school of hard knocks and I have come to realize some important lessons. Maybe others can benefit from my experience put it in a nutshell because I still read about some folks who still can't figure out why they aren't getting by. We're making the same mistakes over and over again.

I won't be saying anything new. There are books out and I've already shared about one very good book. The church has a website on provident living. Who has really read and listened to all of it? Anyway, here are some things to consider:

Is anyone who is reading this a believer is slavery? Is there anything good about being a slave? Are you a slave? Yes or no. Really? Go through all your bills and debts and calculate how much you're paying every month in interest alone. Tens? Not too bad. Hundreds? Thousands? Sounds like slavery to me. Debt, as President Hinckley has said in the past, is bondage. Interest never sleeps. Now consider all that interest that you're paying for things you didn't really need or could have bought with cash if you had just saved up. What percentage of your income is going solely to pay interest to someone else?

We are a self indulgent people who want things now at the expense of the future. If we are earning $10/hour we tend to live on $10/hour. If we are earning $25/hour we somehow end up living on $25/hour. In other words, we continually find ways to use up the money we earn.

When I started out 17 years ago I had a beater of a car and lived in a slum apartment. I was only making $5.50/$6 per hour but I was getting by. My wife was waitressing and we were paying the bills. We didn't really have much left over for saving or investing. Nowadays, I'm self employed, own a house, a nice shiny expensive truck and toys. Why? Because I decided to continue living on everything I earned. Could I have lived on less?

Nope. I had to have a nice big house, which by the way is too big for me now. My boys are full grown and I live in a 5 bedroom home with three family rooms, three bathrooms and more room for additions. I own a nice big 4 door turbo diesel Powerstroke 1 ton truck that eats way too much fuel. I have toys that I thought I just couldn't live without over the years. Now please don't think I'm bragging. I've worked hard for the things I have. I built my house with my own two hands.

Our eyes shimmer with all the cool things that we can use up all our income buying. Mine did. But what if I had built a smaller home and kept my third truck (I've continually upgraded trucks in the last 15 years from a crappy old International to an old Ford to a nicer little S-10 to a nice GMC extended cab to my super cool Ford today). I'd have a much smaller mortgage payment, my S-10 would have long since been paid for and I wouldn't be paying nearly as much on fuel to take care of all my company business, etc, etc.

If I could have disciplined myself to do some of these things, I could easily be living on about 70% of my current income. That would have left me with a whopping 30% to play with. After tithing I'd still have 20% to use for saving, investing, etc. Furthermore, I'd really only have one small mortgage payment and utility bills, which would have freed up even more money (no car payments, credit card loans, etc) As the richest man in Babylon did, I could have saved up at least 10% of each paycheck (in other words paid myself first...after tithing) and put it away to amass real earning power so that my money could actually begin to work for me. You will be surprised how saving even all your pennies and nickels can add up over ten years and to put them in along with your hard earned Benjamins would only add to the earning power of interest working for you. Your money would then become your slave to work for you while you continued working in life and earning more money and saving and spending wisely.

I could have had a full basement full of food storage by now. I'd need a clean-up on aisle 6 and spend the rest of the day fishing leisurely. Economic depression? Not me. I'm catching fish to eat tonight!

It can be tough living within our means especially when life gets in the way. I've had more than my share of struggles and dire financial straits and still do, but they were self created. Instead of building wealth for 15 years I've built debt. My only saving grace is the fact that I have a lot of assets to show for it. But we all start out the same way. But while the getting was good, I did manage to build up a small investment account that has been working for me for about five years now. I haven't had extra money to add to it because I'm a slave to all the interest payments on the things that I thought I really needed. It cuts me to the center to admit that I have a debt on my home equity that is an interest only loan. It is evil. I hate it. I am a slave to it and will be for some years, but in this particular case I had to survive. So now I'm paying the price. Do I believe in slavery? My actions speak louder than words, don't they?

So get out your budgets, figure out how you can live on less and do it. And I will plug in that book. It's called the Richest Man in Babylon and it costs $7. Buy it. Read it. Understand it. The same for the LDS Provident Living website. Read through it and listen to all the audios. Start your financial strategies now. It's in the disciplining of yourself now that will pay off in huge dividends tomorrow, next year and even ten years from now. Yes you will likely be around in ten years, but you could be infinitely more well off then instead of in the same rut you're in now because you won't be living on everything you earn. You will not be a slave. Or will you?

[a-train]

It is when we judge affordability by what our neighbors have rather than by our own means that we get lured into off-budget spending. They call it: 'Keeping up with the Joneses'.

Also look at:

The Millionaire Next Door - Thomas J. Stanley,William D. Danko
Rich Dad, Poor Dad - Robert T Kiyosaki

-a-train

[skalenfehl]

Yup. It's bad here in Utah. I fell into it. But I'm turning it around. I just hope people realize that no matter what station they're at in life, they can turn it around.

[Loudmouth_Mormon]

I was fortunate enough to have a dad raised in the aftermath of the great depression. I was taught thrift and budgeting from the get go. No credit, I've rarely had a loan for anything but a house. I currently drive a '95 Accord with 230,000 miles on it.

I've probably not paid $50,000 or more in interest that the next guy over has. Suits me just fine. I built my wife a barn and got horses with that money. She had to wait 10 years for it, but it's here now.

LM

[Palerider]

Dave Ramsay has a great radio show and book about Financial freedom.....they are awesome......went thru his class a few yrs back and I learned alot of things that I wish I could have known alot sooner in my life.

[skalenfehl]

I just wish I could have learned early on. My dad really didn't teach me how to budget or manage finances but he was a spendthrift so I did learn from a humble childhood how to get by and realize that it's ok to live on Top Ramen for a while.

I always did buy everything used. Even most of my company and personal things were used, bought at yard sales and discounts. I started out slowly and built carefully. The thing about construction is learning when to get a jump on the market and seeing the times of leaning to batten down the hatches. My company was growing, doing well and I needed a bigger truck, more tools etc, to meet a bigger demand. At one point I was building a couple spec homes a year, then I had three crews and multiple jobs in different cities. Now it's just little ol' me doing carpentry work on new homes (installing all the doors, moulding, shelves, banisters etc). So now I have to be careful. The money is still good but the headache is infinitely less. The only setback is not profiting in terms of volume.

The economy will pick back up again eventually. When it does I'm going to play it a lot smarter. I'm looking at refinancing my home once more to consolidate my mortgages. My prime mortgage is at 5.125% interest, which isn't bad. It's my second that's killing me. If I can get a better deal (and it's a good time to refinance), then that will also buy me a few months of not having to make a mortgage payment (typical loan approval process).

I have been gradually knocking my debts down successfully. Some months are just harder than others. The biggest problem is hoping the business demand picks up sufficiently to warrant keeping my truck and large company trailer, etc. Otherwise I have no problem selling it all and downsizing to accommodate my company's changing needs. One thing's for sure, gas is not going to go back down.

I'm really glad I read the Richest Man in Babylon. It only took a day or two to read. It's a small paperback book, about 100 pages, but well worth it. Now I'm tackling providentliving.org.

[a-train]

Remember this: in order to pay $100 in interest, you must earn about $135.

This, of course depends on your tax bracket and so forth.

A person making $10 an hour will not be able to pay off $10,000 worth of debt with 1,000 hours of labor. It will require closer to 1,350 hours because of income based taxes. That would be 34 weeks, or almost nine months straight full time. Then you still have the interest to work off! So a person in credit card debt at a level equal to half their annual income would need almost a year of wages to pay it off even if 100% of their income went toward the loan balance.

-a-train

[skalenfehl]

It can be daunting at times. My upside is having a business and creating a potential for earned income greater than an hourly/weekly wage. I can work around the clock to get jobs done faster and build a stream of accounts receivable quicker instead of doing the regular 40 hour work weeks without worrying about labor/overtime issues. It's when the market is bad like now that backfires the whole process and puts me behind. I'm also not getting younger. I can't wait for things to pick up again at full steam.

I've learned that ten years is a good average for beginning to build wealth. If one can live within his means to set aside at least 10% of his income, then in ten years he will have saved one year's worth of earnings that can be used for more earning power. However along the way by setting that money aside and adding to it incrementally the extra change, the occasional wage increase, and any extra money will continue to add to potential interest earned in a safe investment.

In ten years I will be 48 years old regardless of what financial decisions I make now. But because I've built debt instead of wealth I will be working extra hard to kill my debts starting with my highest interest debt (second mortgage). Once I kill that slave master I will take the money that I paid each month and kill my next highest interest debt and kill that slave master. Before too long (a matter of years) my debt to income ratio will be less and my earning power will increase. I will then be able to start adding to my old investment account.

Fortunately the work that I do now is not back breaking so I have no problem working longer hours to expedite my debt killing strategies as I've been doing for the last several years. It also helps that my boys are full grown and no longer draining my income with all the juvenile fines the state imposed upon me for their "poor community choices", bless their hearts!

I've tried to teach them to start saving and building wealth now, but kids just want everything now. Just like I did. That brings to mind an extremely important point in getting out of debt and building wealth. Procrastination. Prosperity and procrastination do not go hand in hand. Success is little more than hard work that doesn't stop. This topic is just as much for me as it is for anyone who is still trying to figure it out, especially you twenty-somethings. Hopefully it's motivated you to take stock of your financial position.

[UintahJack]

Ska, Good advice from somebody who has been there. You are brave to reveal your failures and successes like that. Good luck in your goals to start doing things more wisely. The provident living website the church has that you referenced is fabulous and is definitely a great place to go on this subject.

[skalenfehl]

Thanks UintahJack. I don't think I'm brave, really. I kicked my pride to the curb and never looked back. There was a time that I worried about appearances, but worrying and stressing are simply not worthwhile or profitable activities. I don't consider my mistakes failures, only learning experiences. I'm still moving forward so I'm a success story in progress. We all are and should view our lives this way. I only hope that people who read this take my advice and learn from my learning experiences instead of repeating them.