Monday, March 20, 2017

Money Quote of the Day – March 20th, 2017


I wish I actually did a money quote each day but I haven’t found the time for that. But I did hear a good one today that I felt like I needed to share.

“Companies aren’t families, they're battlefields in a civil war” ~ Charles Duhigg – The Power of Habit: Why We Do What We Do in Life and Business

This is an awesome book about habits and human behavior. I strongly recommend it. But the quote above hit me because of the struggles I’ve been having at work recently. When I was first brought into this department there were some co-workers that I really liked end enjoyed working with, and I felt appreciated and valued. I felt like I had friends within the organization and that we would do our best to take care of each other. But there was a culture already established higher up that drove them off.

One by one I watched them leave and the toxicity spread. I tried to hold onto the idea that my managers and co-workers still valued and respected loyalty and would stick up for each other. But I’ve found that to be a flawed concept and utterly untrue.

In this book I am at a point where the author is discussing the habits that corporations develop over time and how people often think that the executives make conscious decisions on which habits to build. But in truth, organizational habits form by themselves based on the cultures within the organization. People think that the whole company is working together towards a common goal of increasing profits for the company. But in truth, there are fractures and fiefdoms all throughout the organization that pits people and departments against each other. The nature of corporations drives people to have to look out for their best interest and trying to get as far ahead of their competition as possible, even if this is a co-worker, an employee, or a rival manager. This fast nearly always results in business decisions that aren’t in the best interest of the employees or the business as a whole.

I hate corporate games. I hate that the people who play the games the best get paid the most, regardless of their value to the company. I am naturally a very loyal person and don’t want to feel like I’m screwing over my benefactors just because I want to win the game. But now I’m realizing the fact that these people are not here to keep my best interest in mind and that they see this as a battlefield and I’m an enemy that needs to be overcome.

So here’s my resolve to suit up, go to war, and challenge the worth that they have assigned to me. I am worth more than $61,749 per year and the 40% increase in work load I accepted over the past year is worth more than the 2% pay raise they assigned to me. How about you?

This is our war – Let’s get em’!  

Tuesday, March 14, 2017

10 Signs You Should Invest In Trading



We have a guest contributor today from the Czech Republic. Michael is an expert in trading binary options and Forex. These are things that I know very little about (I just know enough to know that I don’t want to mess with them). So we have Michael today to teach us about the basics. Take a look and if you decide that you want to venture into speculative investing feel free to reach out to him.

Letting your savings sit in a regular bank account means to voluntarily give up a part of it due to rising inflation. People who are aware of this, search for an alternative way to effectively evaluate their finances. Saving accounts do not even cover inflation, let alone make you extra money. Here are 10 Signs You Should Invest In Trading!


1# You Would Welcome Extra Income 

I started trading because I was in need of some extra money, and I still am. We live in a world where money can buy you almost anything. There is no denying that. Trading presents a great opportunity to make money, a lot of it. There are no boundaries of how much you can make when you truly master trading. Motivation is a very important thing, and with trading it is usually a vision of money. But that probably won‘t come easy, for free, or even soon.


2# You Want To Invest Your Time Smartly

Do you have some spare time which you want to invest well? Then trading is the perfect possibility. You would hardly find another activity with greater usage of your precious time than online trading. In the world of trading, knowledge is everything. And the more time you spend on educating yourself the bigger your advantage is. I started with only a few hours per week and so can you. But the more time you spend on learning, the greater chance of succeeding you have.


3# You Like The Excitement Of Making Money

Have you ever played poker, slots, or any other hazard game? Probably yes, and do you remember the feeling when you won big time? If so, you know how great of a feel that is. With trading, it is no different.

[Editors note: This is not an endorsement to enter into any gambling activities. Remember that there is also the flip side of this coin and there are high losses can can result from any of these activities. Know the risks and make sure that you’re ok with them as well before getting caught up in the potential wins.]


4# You Just Have A Little Money To Invest

Do you have just a little or no money to invest? With trading Binary options or Forex, this isn’t a problem. You can start on a demo account until you learn how things work. Once you have some spare money, you can start investing for real. You can also start trading with very small capital, even with $100 the world of trading opens its gates to you.


5# You Don’t Overestimate The Importance Of Planning

Are you a person who plans everything? If so, you have a great advantage in trading. I wasn’t and I learned it the hard way. Planning, making notes, keeping a trading journal all of these things are a necessity for me now. But when I started, I was just another person who read about all of these things but never actually did them.


6# You Know What Is Right For You

There are many financial instruments out there. And every one of them has certain advantages and disadvantages. To find the one that suits you best is a very important step. I trade either forex or binary options. Their principle isn’t hard to understand. The most important thing you have to do with them is to determine whether the price of an asset will go up or down.


7# You Have The Right Attitude

The right mindset is very important in trading. Some have it right from the beginning. Others don’t and learn it along the way. Determination, patience, discipline, and objectivity are all qualities are important for a trader to have. A traders decisions will depend on all of them. I have experienced times when I made hasty decisions just because I didn't make a trade for a while. When I look back, I am horrified by the number of trades that I made like that because most of them were unsuccessful.


8# You Are Not Easily Intimidated Or Bullied

Nerves of steel are the dream of some traders. If you have them, great, if not, you need to develop them. There might be times when the price will move in the opposite direction than what you thought, and you better be prepared for it. In a certain point of my trading, I tried to harshly react to those reversals. But usually, that didn’t help. If you trust in your system you should not pull the plug until it’s absolutely necessary or obvious that you will not win the trade.


9# You Trust No One And Test Everything

Unfortunately, there are a lot of scams out there that want your money. Just like in the real world, you need to be on the lookout 24/7. If you are a person who does not trust anything or anyone then even better. There are Forex or binary options scams at every corner that seek to lure people in by making up stories of how they made millions or thousands of dollars without any knowledge. The only thing you can trust is what you test yourself.


10# You Accept It Won’t Come Easy

Trading can be tricky and usually, the success won't come easy. Of course, unless you are a gifted trader right from the beginning, not my case though. A willingness of doing what it takes is one the most important signs of whether you are ready to invest in trading. So the questions is, are you?





Michael Kuchar a founder of TradingBeasts.com. A website which guides people thru Binary options and forex trading every step of the way. He is a husband, a brother, a friend, and most importantly a professional trader.  Michael contributes to our site with the one thing that he is best at; articles about trading.

Thursday, March 9, 2017

What Happens To Your Credit Score When You Settle A Debt?

We’ve got a guest contribution for you today about debt settlements. Obviously, our preference would be that you never ever ever find yourself in a situation where you are considering debt consolidations. We would much rather see you winning with your finances and not have to worry about this. But reality isn’t always pretty, and if there is no way for you to clean up your credit mess the more ethical way (ie. paying it back in full), then debt settlement is an option. It might not be something I agree with but I wanted to add this information here so that you will be fully aware of the implications in case you find yourself exploring this option.  Over to Stacy …


Many debtors are tempted to settle debts since they have to pay less than what they owe. But, they are not sure about its effect on credit score. Perhaps this is why if you check out any credit card debt settlement forum, you’ll find that it’s filled with questions like “what is your credit score after settlement?”, “how does debt settlement affect credit score”, “can debt settlement boost up my credit score?”

I have participated in various debt and credit forums in the last 7 years and there isn’t a single day when someone has not asked this question. And, my answer to all these questions is always the same - debt settlement hurts your credit score.

How does debt settlement affect credit score?

Debt settlement sounds like a dream come true when you don’t have enough cash to pay off debt. You make a big one-time payment to the creditor in exchange for having the remaining debt forgiven.

Let me explain this with a simple example.

Let’s say your total credit card debt amount is $9,000 and you haven’t made the minimum payment for several months. You can contact the settlement company, and negotiate to bring down the payoff amount to $4,500. If the creditor agrees, then you pay $4,500 on the stipulated date, and the remaining amount ($4,500) is forgiven.

Remember, the creditor is not bound to reduce your payoff amount. The amount is always negotiable, and the creditor is less likely to settle your credit cards when you’re current on your payments.

Now, comes the most important question - How does debt negotiation affect your credit score? Why does debt settlement pull your credit score down?

Give me a few minutes to clear up your confusion.

Referring to the aforementioned example. How much did you save through debt negotiation? It’s $4,500. How much did you borrow in total? It’s $9,000. This means you paid only half the amount. This means you enjoyed $9,000 and paid back only $4,500 to the lender. Is this a good consumer behavior? FICO doesn’t think so. Hence, your credit score drops.

Rod Griffin, the Director of Public Education, Experian, says,

“When you settle your debt, the activity usually shows up on your credit report as ‘debt settled’ or ‘partial payment’ or ‘paid in settlement”

This account status remains on your credit report for 7 years and 180 days. The negative effect on your credit score gradually goes away with the passage of time.

You can talk to your creditor about the specific language he uses. But the main point is: this is a red flag on your credit report.

How much your credit score can drop?

FICO hasn’t officially declared how much your credit score can drop after settling debts. But the higher your credit score is, the bigger the drop will be. If your credit score is already low due to late payments or missed payments, then settling debts will have little negative effect on your credit score.

In 2009, FICO released an information regarding debt settlement’s effect on credit score based on 2 hypothetical consumers with separate credit scores.

First scenario

Consumer’s credit score is 680 and he has made only one late payment.

Effect of debt settlement: Credit score would drop between 45 and 65 points.

Second scenario

Consumer’s credit score is 780 and is not delinquent on other debts.

Effect of debt settlement: Credit score would drop between 140 and 160 points.

You may see a similar drop in your credit score if your credit profile is similar to the aforementioned scenarios. You’ll also see a bigger drop in your credit score when you settle multiple credit cards.

Why should you still settle debts?

It is true that settling a debt is not good for your credit score. But, this is still better than ignoring the debt completely. Your credit score will drop initially and you’ll get lots of chances to improve it. But your credit score will drop even more if the debt is not paid off. Creditors may file a lawsuit against you to garnish your wages or impose a lien on your property. You’ll eventually find yourself in an even bigger problem.

First, you’ll face problems in getting a loan from lenders. Prospective lenders will consider you as a risky borrower. In this situation, several things can happen:

-       Lenders would reject your loan application
-       Lenders would charge a very high interest on your loan
-       Your employer will deduct a portion of your paycheck till the debt is satisfied
-       If you sell any property, then the sale proceeds will be used to pay off judgment

The only way to get out of this problem is to settle debt after judgment.

Conclusion

Debt settlement helps you get out of debt, particularly when you can’t pay the full balance. This may mean that you have to sacrifice your credit score temporarily. But once you have settled your credit card debts, you can start rebuilding your credit. Timely payments and responsible borrowing can help you achieve your goal.

Tuesday, March 7, 2017

Saving Tips: Look for Free Clothing Bins


I was reminded about something that we use to do in college that I thought would make a great saving tip for you today. By the time I graduated from college my wife and I both had bachelor degrees, a two year old who my wife stayed home with, and a net worth of about $80,000. Of this, we had $50,000 set aside as the down payment for our first home. We did a fairly good job of saving money while in college and here is one of the ways that helped us do this.

Look for Free Clothing Bins

This is a trick that my wife learned when she was a 17 year old freshman in college. Her parents weren’t very happy or supportive of her decision to graduate from high school a year early and move away from home to start college 18 hours away. Part of the deal was that if she choose to go through with it she would have to find ways to finance her own education. Needless to say, she had to work very hard and find ways to live very cheap in order to make this happen.

When she lived in the dorms she noticed that so many of the other freshmen girls were out there with semi-free reign to mommy and daddy’s credit card. It was their first look at “freedom” and used it liberally. She would watch many of them go on frequent shopping trips and they seemed to be always wearing new clothes. They seemed to have no regard for frugality and treated themselves to whatever they thought they needed at the moment.

Fast forward a few months to the end of their first year away at school. As finals ended and people began having to pack up for the trip home for the summer they started to notice a problem. Not that their finances were in a wreck, but that they owned too much stuff to fit into their luggage. Imagine that, they came with fully suitcases, bought a new oversized wardrobe, then couldn’t keep all their crap due to a lack of space.

This is when that big bin in the laundry room, the one with the “Free” sign, started to fill up, and up, and up. My wife and some of her more frugal friends realized that this was their opportunity to cash in on their patience and revamp their wardrobe. For years to come, as soon as finals week started each semester, her and a few friends would make “shopping” trips to the basements of the dorms and student apartment buildings around campus to sort through the poor financial decisions of others.

After we got married I was amazed at some of the things that she would find to bring home. Everything they would rescue looked like it had only been worn a few times at most. Sometimes they would find clothes that had never been worn and still had the price tags on them (why they didn’t just return it to the store is beyond my ability to comprehend). On a good finals week these girls would be able to completely replace their wardrobe (probably not socks and underwear though, thankfully those weren’t really donated).

A few times I remember her bringing home men’s clothes that they had come across that she wanted me to try on, I think there were only a few shirts that we found that would fit me. This was rare though because all of the dorms and apartment buildings associated with that school are not co-ed and they would only go into the female ones.

After about a week or two the university would send some big trucks around to clean out all of the free bins and take everything down to the local thrift stores. And our season of plenty would dry up again for a few months.

Did we ever feel guilty about taking things like this? No, we didn’t. I’m not saying that it’s a good idea to go dig through the stuff that is left on the Goodwill donations dock because those are items that are intentionally being donated. The free bins were just a convenient location for them to unload their stuff, I’d be surprised if half of them ever realized that they would end up being donated, and the other half probably didn’t care what happened to them.    

Wednesday, March 1, 2017

Monthly Progress: February 2017


The first day of the month is always a big day for me with my personal finance spreadsheets. While I update them nearly every day there are a few things that I do and track on a monthly basis, so the first day of a new month means that I get to hard code the actuals of the previous month and see how we did. I LOVE IT!

So, how'd we do in February? Hint – AMAZING!

1)       Net worth: $206,109.59, up $7,539.41

I am a bit obsessive but I actually track my net worth every morning that I work, just because I love seeing the graph it makes and knowing what's going on, and it only takes me about 10 minutes using Personal Capital if I go slowly and analyze anything (if you’re not already using Personal Capital I highly suggest checking them out. They are 100% free and I love them and use their android app nearly every day). But over the past month our net worth has increased from $198,570.18 to $206,109.59, growing by a total of $7,539.41 for February.

Killed that $200,000 barrier, just hope the bottom doesn’t fall out of the market. 

2)     Investment income: $4,531.33

Another detail that I measure on a monthly basis is how much we've made (or lost) due solely to our investments. This helps me to see what I would have to live off if I didn't work at all and choose to live exclusively off of investments, which is the goal. The current amount needed from investments each month is $2,600, which means that at a 4% withdrawal rate we would need roughly $780k in investments (easy calculation: $2,600*12*25=$780,000). On the first of every month I document what all of our investments are worth and back out the beginning value of the previous month and all of the investments that we made during the month.

In February we started with $122,693.75, invested $903.07 and ended the month with $128,127.87. Meaning that, in February, we gained $4,531.33 on our investments.

This year I added another metric to track on this. In February we spent a total of $3,720.36 (this includes an extra $808.92 towards our mortgage) which means that, this month, we could have lived off of our investment income and had $810.97 left over to re-invest in next month.

Current ER* date is being calculated out at 7/28/2033 (5,993 days left!).


3)     Financial plan savings: $805.13

I'm not going to go into the details behind the calculations on this one since it's more lengthy but you can read more about it in my post about 
Our Current Financial Plan. But after all of our income, expenses and planned savings for the month we ended up with an extra $805.13 in our checking account to use for investing in our future.

We have actually made one small change from our previously stated plan and instead on dividing this 50/50 between our mortgage and Vanguard we have begun dividing it into 4 buckets, adding 2 more buckets for remodels and vacation as follows: Vanguard = 30%, Mortgage = 30%, Remodels = 30%, Vacations = 10%. So this time we invested $241.54 divided evenly between our 4 Vanguard mutual funds (VFIAX, VGHCX, VHCOX, and VTSAX).

Then I called up my bank and scheduled a payment for an additional $241.54 to go to the principle on our mortgage. So after our regular mortgage payment that automatically pays on the 1st of each month and this extra payment our mortgage dropped down to $104,285.65 today. Which means that, as of today, we actually own 40.07% (roughly 754.25 sq. ft.) of our home. We bought 16 sq. ft. this month!

So, by and large our February turned out awesome. How did things go for you? 

And here's to having a great March ahead of us. And by the way the markets have opened this morning I’m feeling good about this month.


P.S. I got my annual bonus from work yesterday (wanna know how much it was? ;-) ). So, in accordance with our financial game plan I took 10% of the net amount out for tithing, then split the remaining 90% down the middle. Half ($567.38) was divided evenly between our 4 Vanguard mutual funds (VFIAX, VGHCX, VHCOX, and VTSAX). And the other $567.38 was put towards our mortgage principle. I plan on doing this same thing with our tax return next month as well.

*ER stands for Early Retirement. My wife and I do not go on dates to the Emergency Room on a planned schedule.

Tuesday, February 28, 2017

BONUS TAXES SUCK!!!


Do you know what feels ridiculous? How much the government takes out of your bonus. I just opened up my bonus check and was shocked when I saw it. So while I was still in the heat of the moment I figured that I should jot down my thoughts before clarity and time made me a little less passionate. Normally this is the worst time to write out how you feel about something but I’m going for it. And, no, I do not plan on taking that age old advice of re-reading the email an hour later before hitting send, I’m posting this, raw emotions and all. I'm not even going to edit it, just to make sure I don't decide to change something or change my mind about posting it.

When my boss handed me my bonus check he made a comment about it being $2,400 and change (apparently to a CFO $39 is “change” but to me it’s “$39 freakin’ dollars, score!”). Then there was the off-hand comment about, “Well what Uncle Sam lets you keep of it anyways.”

So when I got back to my desk and opened up my check I was instantly hit with a little ache of confusion and furry when the first number that I noticed on the check was $1,260.84. WHAT! THAT’S HALF OF THE $2,400 (+change) THAT I WAS TOLD ABOUT! I had just been thinking about how my friend who works at the Kroger headquarters makes about $10k less than me but gets an annual bonus of about $10,000, and how I should be grateful for the bonus even if it is 4X smaller than other companies pay out. And I know that I should still be grateful for this bonus because it’s “free” money that I’ve worked hard for. But to see it as half of what you had just expected is a bit infuriating.

Maybe it’s my boss that I should be pissed at. He was the one that build up the $2,400 expectation in my head. But he is also the one that just handed me a bonus check, so no, I’m choosing to be pissed about the bonus tax that gets applied.

And here’s why:
                Normal Paycheck:
                                Gross Amount                   $2,328.61
                                Pre-Tax Deductions           $   669.19
                                Taxable Pay                       $1,659.42
                                Federal Social Security      $   127.59            7.69%
                                State Taxes                        $     39.44             2.37%
                                Federal Medicare               $     29.84             1.80%
                                Federal Taxes                    $       8.44             0.51%   
                                Total Taxes                         $   205.31             12.37%                 


Bonus Check:
                                Gross Amount                   $2,439.00
                                Pre-Tax Deductions           $   414.63
                                Taxable Pay                       $2,024.37
                                Federal Social Security      $   151.22             7.47%
                                State Taxes                        $     70.85             3.50%
                                Federal Medicare               $     35.37             1.75%
                                Federal Taxes                    $   506.09            25.00
                                Total Taxes                         $   763.53             37.72%  That’s over 25% more than usual!


Can someone please explain to me why the government has decided that since this is a bonus they are entitled to take more of a cut from it? This is the part that makes me the most upset. It’s still just money, it’s still just money that I have worked hard for, what’s the justification for the 25% difference?


Ok.

I’m calming down a bit.

Still pissed – but calming down.


And yes, after looking at the deductions a bit I remembered that the 401(k) contribution is pulled out of my bonus just like any other paycheck, so $415 (or 17%) of that $2,439 went into my 401(k), plus an additional $122 (or 5%) worth of the free company match. 

Now, I need to go kick off my "Bonus/Tax Return Investment Plan" where we pull 10% (~$126) for tithing, invest 45% (~$567) in Vanguard, and the last 45% (~$567) goes to posting down our mortgage principle.

Tuesday, February 21, 2017

#FinancialFails – The Dishwasher Dilemma


I’ve found that it’s fun and easy to write about our financial successes. But what about our financial fails? Those are much harder to have the desire to write about. In an effort to try to stay fully open I’m going to break down and share a fail I experienced  had over the weekend.

About two weeks ago our dishwasher stopped draining. For the last few loads it had been getting progressively worse but finally stopped altogether this time.

When I realized that it wasn’t something that would just go away I started looking up DIY videos on YouTube. I was all excited to put together a great post about how I had this issue, watch a few YouTube videos, figured out how to fix the problem, and saved a ton of money on repairs by fixing it myself. But that was not the case.

When I got into it nothing seemed to go right. The videos that I had found were all on different models that didn’t look anything like ours. The only one that was remotely similar to our mechanical configurations came apart like a set of tinker toys for the guy. Ours was so old that all of the parts had sealed themselves together and nothing would budge. Things broke trying to get it to come apart so I finally took a chisel to one of the broken pieces that wouldn’t budge since it was already ruined. After I go that out of there the next piece wouldn’t cooperate either and I was going to have to remove it be force as well. To replace these pieces it would have been about $50 and a few days of shipping, and that’s just to get it put back together before addressing the draining problem it was having. By the time I gave up I was fuming mad at it and bout 5 hours into a problem that the YouTube guys solved in 10 minutes.

After talking it over we decided that we would probably have to replace it before selling the house anyways since it was having more and more frequent problems, so fixing it now would just be helping it to limp along. So we said, “screw it, we’re just going to replace it.” Each month we have been building up a savings fund for home remodeling projects that was up to $3,338 by now. We had planned to use this to knock out a wall, put down a fake hardwood floor, and eventually new countertops in the kitchen. So thankfully we already had the money set aside that could easily cover the cost of a kitchen appliance upgrade.

We are slow decision makers, especially when it comes to things we have to spend money on, so it took us about 2.5 hours of looking at Menard’s to finally make a decision on which one to buy. We ended up choosing this dishwasher in case you’re interested. I turned down the $59 delivery and installation offer, assuming that it wouldn’t be too daunting of a task. But after about 4 hours of working on installing it I was second guessing this choice. I finally did get everything put together but it was not a fun or easy experience. And to be honest, we still haven’t tested it out because I’m terrified that I inadvertently messed something up and it’s going to explode when we start using it.

Final Cost Breakdown:
Dishwasher – Regularly $599, on sale for $399
Parts for installation – $11.57
Storewide 11% Mail-in Rebate – $45.08 in-store credit
Total Cost to Replace Dishwasher – $392.42
I had gone into the store mentally prepared to spend $500 to replace it so it was a nice surprise to be able to keep that extra $100 in our account.

Could I have saved more money by finding a cheaper option? – Maybe, but it would have almost definitely been poorer quality.

Would it have been cheaper to have just called in a repairman in the first place – Probably, but it would have turned out more expensive if we had needed to replace it anyways.

Is it over and done with for good? – Definitely, unless I hooked something up wrong (knock on wood).

I hope this post has helped you realize that we are human to and sometimes we pay more for the convenience of not having to worry. We all make financial mistakes on this journey. I wish that breaking my washing machine instead of posting a repairman was the only mistake I've ever made, but it isn't. I'd be nice to turn this into a series. If you have a story you'd like to share please reach out and let us hear about it, you can be an anonymous poster of you're embarrassed to tell your story. Just email bandofsavers@gmail.com.