Debt = Drugs

I finished reading the book Maxed Out about "hard times, easy credit, and the era of predatory lenders" as the subtitle states.

It was a very interesting read.

This is what I got from it:

Predatory lenders target customers that cannot afford to ever pay back the debt.

These type of lenders look for people that will pay minimum payments forever.

Like a drug dealer they hook you in with a small amount.
(0% for a year!)
They keep pushing it on you giving you more each time.
(increase your credit limit, more offers)
They know it is not good for you or ever was to begin with.
(income to credit limit ratio)
They don't care if you die or go broke.
(they've made their money in fees and interest)
They will send enforcers to make you pay.
(selling your bad debt to credit collectors)

The author buys a mug that reads,
"If you think nobody cares, try missing a couple of payments."

It is so true.

America, Land of the Money Tree?

I finished a book titled Getting Rich in America.

It talks about how fortunate it is to be born in America.
Even if you only earn $24,000 a year you can still be a millionaire by the time you retire.

Calculation:
$2000 a month income.
$200 to charity
$180 to save/invest.

$180 a month at 10% rate of return for 40 years is $1,053,759.91.

You work hard to plant the seed (save) and then enjoy the benefits (reap the fruit).

But what happens when you eat the fruit (spend) without planting (saving)?

It doesn't taste good/as good (you didn't earn it).
You will owe the owner of the fruit (debt).

If you never save you will always be in debt.
The borrower is servant to the lender.

You will only work to pay someone else.
You will only serve your credit cards.
You will be a slave to your home.

So save up before you buy something (earn it).

The Best Things in Life are...

Free!

Or very close to free. I spent 2.5 hours today with my sisters and niece.

We drove 42 miles round trip.

300 miles a tank.
12 gallons a tank.
25 miles a gallon.

$3.66 a gallon.
$6.15 on the trip.

(Calculation:
42 mi. devided by 25 mi. = 1.68 gal.
1.68 gal. times $3.65 = $6.1488)

We went to the library and then to the beach.

2.5 hrs. of entertainment for 4 adults and a baby.
Six dollars.
That's a very good value.

Happiness of Less

I believe that you will be happy when you can save and live on less than you make.

Happiness takes work and begins with being grateful so I don't think it will be easy.

So going back to my original post let's look at spending less money than you make.

If you made $2000
Gave $200 to charity
Invested/Saved $180
Lived on $1620

Do you need many of the things you say you do?

Starbucks everyday
New books every week
New shoes every month
New computer every year.

Avoid these money suckers and you could look towards the future with hope.

Pay Yourself First

You have probably heard this before but what does it mean?

It means before you spend any of your money you need to save some of it.

The goal is to save 10-15% of your income.

Actually the first 10% is for charity and then you pay yourself.

So $2000 income.
$200 charity.
$1800 left.
$180 a month to invest at 10% rate of return.
At the end of 35 years you will have $683,394.85.
Yes, that's over six hundred eighty-three thousand dollars.
Here is the calculator.

So before you do anything else, pay yourself first.

Freedom from Debt

During the Dave Ramsey show people call in and scream "I am debt free." The best part is they play the audio from this clip (from the film Braveheart) right after they scream.

Imagine that, they don't owe any money to anybody (Some of them are debt free except the house). Imagine no credit card payments, no car payments, no HELOC. You would then be able to save tons of money.

Most people you speak with are caught up with their FICO score. As Dave tells it, "all that means is you love borrowing money and paying it back with interest".

So don't give in to the idea that credit is a good thing. All it is is debt.

the 2 Ways to Have Money

1. Spend less money than you make.

2. Earn more money.

This is simple to understand but difficult to do.

I want to help you reach your financial goals.