Money

Management 101 

Cash Course:

4 signs

You're living beyond your means

You're not saving

Financial advisers suggest saving around 15 percent of your income, whether it be for retirement or in separate savings accounts. If you can't afford to save 5 percent of your income, it's time to consider cutting expenses in your budget.

 DYI:  Live below your means save and invest the difference.  How many of us actually do it??!  When one report after another that a huge portion of our population are unable to scratch up $400 dollars for an emergency; obviously not all of these people are destitute but a vast majority simply unable to control their spending habits.

For those of you who are living below your means and have money to save how much is enough before starting to invest?  There are many rules of thumb here is mine.  Have at all times 5 to 10 thousand dollars [preferably 10] in your checking account for any of those day to day small emergencies or scheduled events such as car maintenance, dental visits etc. and basic bills that arrive every month.  After that I subscribe to the debt free lifestyle that provides maximum freedom from worry and of course allows for more dollars to save and invest.

Checking account is over 10 grand?  Great here is step 2 for your saving plan.  Open a short term bond fund [DYI’s favorite is Vanguard Funds] building up reserves for your next car/truck replacement keep on saving until a greater amount than needed.  This will help you significantly for your next vehicle.  In other words keep pushing up the dollar amounts until the mutual fund’s compounding is funding a lifetime of car/truck purchases.  This is possible unless an individual is purchasing high end cars/trucks.  Purchasing used or modest vehicles [I drive Honda Civics] this is very possible.

The author of the article would have you saving 15%.  Shoot for 25% by subscribing to a frugal lifestyle.  There are almost endless websites, videos, or books out there to help you and to keep you motivated.   

Your housing costs take up too much of your income

It's easy to fall into a trap of overspending on housing, especially in areas where affordable, convenient housing is difficult to find. But financial advisers suggest housing costs — including rent, mortgage payments and insurance — should not exceed 30 percent of your take-home pay. 

DYI:  A house for most of us mere mortal middle class folks will be the largest dollar purchase in our lives.  Over spend and you will quickly understand the expression “money pit!”  Never spend more than 2 times your income for a home.  I prefer no greater than 1.5 times income that can be achieved with a significant down payment.  Homes are a consumption item that is rarely a great investment.  Purchase a McMansions thinking they are a great investment, after adding up insurance, interest payments, property taxes, maintenance and inflation most of the time the return is negative unless it is sold at the top of a real estate bubble.  Every self made millionaire will tell you greater the mortgage smaller the net worth.  Simple as that!    

You don't have an emergency fund

In 2017, the Federal Reserve Board found around 44 percent of households could not cover a $400 emergency expense. If you're in that group, car problems, medical expenses, the loss of a job or any other emergencies could cause you to go deep into debt.

DYI:  Before monies are placed into long term investments have that emergency fund in place that I’ve already described.  Get the horses in front of the cart!  

You spend for entertainment 

"The main thing is don't develop bad habits. Do you really need those high-end, brand-name things?" Ramsay said. "People think they need the newest BMW or whatever it is. But I think those brand name things can hurt you over time."

DYI:  If you are reading this blog or others you are not one to be purchasing high end name brand merchandise.  I do advocate buying quality for if you purchase cheap junk you will end up buying twice.  I’m a Honda guy their cars are well engineered and well made.  I know a Civic is not for everyone their Accord model is just as good as any of the upscale BMW’s or Lexus’s.  Purchasing these cars or similar types of trucks is for nothing but status.  Simple as that!

 DYI