Many of us have heard the savings philosophy of Pay Yourself First. This is where you pay yourself out of each and every paycheck at least some amount by depositing that money to a savings account. Over time, this savings does grow and eventually the goal is that you will not be living paycheck to paycheck.
A follow up to the Pay Yourself First plan, is what I call the Pay Yourself Back.
I was able to put aside money in savings over a long period of time that accumulated to about $5,000. That was and is alot of money, especially if you don't have any other savings. Then the car situation required the purchase of a new to me car. Of course I bought a used car and I was very grateful that I had savings to help me do that.
However, I agonized over spending the very $5,000 that took me so much effort to save. I could of course finance a car and pay someone else about $250 a month (at that time) and not spend my savings. I knew that I was not yet disciplined enough to pay myself back.
A credit union can be a great benefit for people trying to keep their financial house in order. I found a used car for $6200. I took the $5,000 and put it into a 5 year CD at the credit union. Then I borrowed my own $5,000 with my CD as collateral and not my car. The CD loan interest rate was 3% over what the CD was earning. For example, I my CD earned 4% per year in interest, so my CD loan was 7% per year. The 7% rate was 1 % higher than a car loan at the time, but I was also earning back 4% on the CD. Over time as I paid the CD Loan off, I would earn more and more of the interest.
This allowed me to pay myself back over 5 years, but at the end of the 5 years I had a CD now worth over $6,000. I also continued to Pay Myself First, so I had another CD of about $3,000. Now that it's time to buy another car, I will do the same thing all over again. Basically, this is my prepaid car. When I pay off my CD Loans, I can buy another car. If I want a nicer car, then I need to Pay Myself First - more.
This buy my own car plan took a few years to get started at first. But I am glad I did. I just bought my 3rd car. I am happy to say that I was able to borrow my own CD's again and take a little money out of my savings to pay for nearly new car with less about 29,000 miles. I hope to pay off my CD Loans in 3 years this time and not 5, but I have the flexibility to do what I need to do in this very uncertain financial market.
Do yourself a favor and start paying yourself first even if it is only a few dollars a month. You are not just saving money, you are changing your mindset. It won't be long until you can move to the next level and Pay Yourself Back.
If I had financed my car for 5 years through the dealership or through the credit union, I would basically pay for that car twice with the interest going all to someone else. This way, I do pay some interest, but I also get the benefit of earning some interest and not having to discuss my credit report with anyone at the car dealership.
Do the math.
L.Taylor
9/27/2008
Saturday, September 27, 2008
Government Bailouts
Today congress will agree to some $700 billion dollars in bailing out the banking and credit industry in our country. I understand that we need them to do something in order to avoid a full collapse of our system, but don't be fooled. The bailout means that more money will be available for credit to be extended to small and large businesses and to allow people to buy a home or car.
But think about this. We are in this crisis because many many businesses and people borrowed more money than they could afford to repay. So in order to avoid the collapse of the whole system, we need to allow some of these same people to borrow yet more money. Hmmm....?
The reality is very scary.
The important thing is, that you as an individual need to take a look at your own finances. I took a look at mine this week and I was shocked. I have enough to pay for my needs and I am very grateful for that. However, I had not realized how much of my 'savings' that I had been setting aside I had actually spent recently. So a quick adjustment to my monthly budget this week to pay myself back.
While the economy needs you to borrow money, you need to get out of debt. Americans are in debt to the tune of some $850 Billion dollars according to reports on financial networks this week. So the government bailout of $700 Billion dollars basically almost doubles your personal debt. No, you won't make monthly payments, but you might see it in other areas such as fees, taxes, and other unknown charges.
Where will it all end? The economy needs credit and cash flow to grow. But wisdom would say on a personal level, that you need to get out of debt as quickly as possible and stay there. If you do not pay off your credit card bills every month and you carry debt on a home, a car or cars, credit cards, and other loans, you are in trouble and noone is going to bail you out. In fact, they will standing in line to collect from you for the rest of your life.
Wake up! I know it's scary, but get a reality check on your personal finances and get up enough courage to start a savings and get out debt plan. This is not just about finances, this is about your physical, mental and spiritual health as well.
Good Luck and Grace to You!
But think about this. We are in this crisis because many many businesses and people borrowed more money than they could afford to repay. So in order to avoid the collapse of the whole system, we need to allow some of these same people to borrow yet more money. Hmmm....?
The reality is very scary.
The important thing is, that you as an individual need to take a look at your own finances. I took a look at mine this week and I was shocked. I have enough to pay for my needs and I am very grateful for that. However, I had not realized how much of my 'savings' that I had been setting aside I had actually spent recently. So a quick adjustment to my monthly budget this week to pay myself back.
While the economy needs you to borrow money, you need to get out of debt. Americans are in debt to the tune of some $850 Billion dollars according to reports on financial networks this week. So the government bailout of $700 Billion dollars basically almost doubles your personal debt. No, you won't make monthly payments, but you might see it in other areas such as fees, taxes, and other unknown charges.
Where will it all end? The economy needs credit and cash flow to grow. But wisdom would say on a personal level, that you need to get out of debt as quickly as possible and stay there. If you do not pay off your credit card bills every month and you carry debt on a home, a car or cars, credit cards, and other loans, you are in trouble and noone is going to bail you out. In fact, they will standing in line to collect from you for the rest of your life.
Wake up! I know it's scary, but get a reality check on your personal finances and get up enough courage to start a savings and get out debt plan. This is not just about finances, this is about your physical, mental and spiritual health as well.
Good Luck and Grace to You!
Wednesday, September 17, 2008
Constitution Day - September 17, 2008
Happy Constitution Day - September 17, 2008:
In honor of Constitution Day here are a couple of links that you might find interesting.
Read the Constitution of the United States for Yourself :
http://www.archives.gov/exhibits/charters/constitution.html
You might also want to take a look at the Federalist Papers and related facts since this collection of essays on the Constitution are often referred to when trying to intrepret the Constitution:
http://thomas.loc.gov/home/histdox/fedpapers.html
More Information on the Constitution of the United States:
Constitution Timeline:
http://constitutioncenter.org/timeline/
Supreme Court Justices discussion on the Judicial Interpretation:
http://www.uscourts.gov/outreach/resources/constitutionday.html
In honor of Constitution Day here are a couple of links that you might find interesting.
Read the Constitution of the United States for Yourself :
http://www.archives.gov/exhibits/charters/constitution.html
You might also want to take a look at the Federalist Papers and related facts since this collection of essays on the Constitution are often referred to when trying to intrepret the Constitution:
http://thomas.loc.gov/home/histdox/fedpapers.html
More Information on the Constitution of the United States:
Constitution Timeline:
http://constitutioncenter.org/timeline/
Supreme Court Justices discussion on the Judicial Interpretation:
http://www.uscourts.gov/outreach/resources/constitutionday.html
Tuesday, September 16, 2008
Understanding FICO scores:
What's my credit rating? Credit ratings are reported as a FICO score.
The FICO score is made up of:
35% Payment History of your credit accounts
30% Ratio of debt to total credit limits
15% Length of credit use
15% Variety of credit types
5% other
FICO scores range from 300 to 850. A FICO score of 720 or above is best and will qualify you for the lowest interest rates for credit.
Payment History includes the severity of any delinquencies you may have as well as how frequent you may be delinquent on payments. While payment history is important, it is almost equally import to have a low amount of debt compared to you available credit limits. If all of your credit cards are at their limit, you will see it affect your FICO score. Some credit analyst propose that your outstanding debt be 35% or less than your credit limits. How long you have had credit accounts will also affect your credit score. You may not want to cancel a credit card once you have it paid off, because the payment history will eventually be deleted from your credit report.
L.Taylor
9/16/2008
The FICO score is made up of:
35% Payment History of your credit accounts
30% Ratio of debt to total credit limits
15% Length of credit use
15% Variety of credit types
5% other
FICO scores range from 300 to 850. A FICO score of 720 or above is best and will qualify you for the lowest interest rates for credit.
Payment History includes the severity of any delinquencies you may have as well as how frequent you may be delinquent on payments. While payment history is important, it is almost equally import to have a low amount of debt compared to you available credit limits. If all of your credit cards are at their limit, you will see it affect your FICO score. Some credit analyst propose that your outstanding debt be 35% or less than your credit limits. How long you have had credit accounts will also affect your credit score. You may not want to cancel a credit card once you have it paid off, because the payment history will eventually be deleted from your credit report.
L.Taylor
9/16/2008
DollarPlanning starts Blogging
Welcome to the new DollarPlanning.com Blog.
We hope you will find the information and resources posted here to be of help to you, your family and small business. We are looking to find resources to help families manage finances. Please let us know if you have links or resources that would be of interest to our readers.
Sincerely,
DollarPlanning.com
We hope you will find the information and resources posted here to be of help to you, your family and small business. We are looking to find resources to help families manage finances. Please let us know if you have links or resources that would be of interest to our readers.
Sincerely,
DollarPlanning.com
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