Tag Archives: Debt

Good Debt vs. Bad Debt – The Great Debt Debate

What’s the quickest way to start a heated debate among a room full of personal finance experts? I’m not certain, but starting a debate on the concept of good debt vs. bed debt must rank pretty highly on the list.

What factors matter the most when it comes to good debt vs. bad debt? In this debate, the circumstances of the debtor are everything!Opinions on the matter run the full gamut. Some people believe that debt is a tool to be utilized to finance a lifestyle – because #YOLO. Others would not borrow money for any reason whatsoever because debt is dumb and Dave Ramsey says so.

The trouble with such extremism, aside from being wildly unappealing, is the fact that a one-size-fits-all approach rarely works in life. The good debt vs. bad debt debate is no different.

What kind of debts are we discussing? What are the terms? What is the purpose behind the act of borrowing? Will the items or experiences being financed maintain value? What is the opportunity cost?

All of this is enough to make heads spin.

Traditional Stance on Good Debt vs. Bad Debt

Ask five of your closest friends whether they have any debt, and you’ll likely hear variations of the following:

“No, we’re not in debt. We just have a car payment, student loans, and our mortgage.”

“We have a few credit card balances – does that count?”

Answers like these can help us to begin to frame the issues surrounding good debt and bad debt.

Traditionally speaking, the average Baby Boomer defines good debt as money owed on an appreciating asset or an experience (i.e. education) which is likely to yield financial returns or benefits. Bad debt is defined as debt incurred on depreciating assets, i.e. does not yield positive cash flow.

Over time, however, these definitions have ridden the wave of cultural change. Today, in fact, some experts preach that all debt is bad.

Today’s Views

Grandma and Grandpa may hold a traditional view on good and bad debt, but to their instant gratification seeking offspring, all bets are off. “If debt allows me to get what I want when I want it, it must be good!” they reason. This is a classic example of the leap-before-you-look mentality, and the eventual landing usually isn’t a pretty one.

Generational assumptions aside, we find ourselves at a tipping point in the Great Debt Debate. With any luck, the following may shed further light upon the issue.

Less About the Debt, More About the Debtor

Debt is a undoubtedly a complicated concept. Perhaps the only piece of the puzzle which is more complicated is the debtor himself.

When we borrow money, we make a statement about ourselves. We claim confidence in our ability to pay back our debts. This confidence can be fully justified or woefully misplaced.

Suppose for a moment that an uber-wealthy  entrepreneur purchases a beach home on Lake Michigan and takes out a mortgage. Is this a good debt or bad debt? In this case, if she has the regular income and liquidity to pay off the mortgage in a relatively short period of time, we may safely consider this a healthy debt. After all, the home is likely to appreciate over time, and the mortgage provides additional flexibility to divert funds to other investments.

Let’s change a few pertinent facts in the above scenario for a moment. Suppose our entrepreneur is already upside down on her Chicago high-rise condo and is quickly burning through liquid cash like a raging wild fire due to a poor quarter for her business. We’re looking at a bad debt in this case, in all likelihood.

When evaluating debt, the circumstances of the debtor are everything.

Critical Circumstances

So where does this leave us? What circumstances impact whether a debt is good or bad?

1. Equity

Years ago I purchased a 2008 Honda Accord from my grandparents. The vehicle was worth $17,000 at the time. I put down nearly half of the cost and financed the rest. We quickly paid the vehicle loan off, but even if we hadn’t done so, we were protected by built in equity. If at any time things went south, we could have sold the vehicle, paid off the remainder of our loan, and used the remaining cash to buy a beater car and buffer our emergency savings.

Equity is a fine mitigator of risk associated with debt.

2. Consistent discretionary income

When it comes down to the bottom line, the scariest thing about debt is the prospect that we might not be able to pay it off. As we’ve seen, equity is a great hedge against this possibility, but consistent discretionary income is even more valuable.

For the family who routinely spends all of its earnings, it doesn’t take much for what was once a manageable debt to become a significant problem. But for those who maintain sizable wiggle room on a monthly basis – say 5-10% of monthly take home pay – a healthy buffer can eliminate the stress of difficult periods which stretch the budget.

3. Liquidity (Cash is King)

Dave Ramsey begins every radio show with the reminder that “Debt is Dumb” and “Cash is King.” I feel the latter is correct, but the former requires modification. “Some Debt is Dumb” is more appropriate.

Again, assuming reasonable interest rates, debt becomes a problem when the debtor cannot meet his obligations. A healthy level of liquid cash acts as an additional line of defense. With cash in the bank, the debtor has options if debt obligations become cumbersome. He may sell the asset, rely on discretionary income to avoid touching liquid savings, or draw on his savings.

Recommendations

If you find yourself in debt or are considering entering into a debt relationship, consider the aforementioned factors to evaluate the situation. Generally speaking, based upon the established criteria above, the following are examples of good debt and bad debt.

Good Debt

1. Mortgage on primary residence

2. Home equity loan for home improvement purposes* (Depending upon interest rates, expected rate of return on the project, and existing equity)

Bad Debt

1. Student loans

2. Auto loans

3. Revolving credit card balances

4. Cash advance and pay day loans


Readers, what is your position in the “good debt vs. bad debt” debate? How do you evaluate whether a debt is good or bad? 

Checking Up On My Goals

One month ago, I turned 30. Much to my surprise, I didn’t wake up the next day feeling like a stiff old man. In fact, I didn’t feel a day older than 20.

A day prior to this milestone birthday, I published a list of 30 goals I hope to achieve in the next year. Yesterday on Twitter, Staci – @Streamline365 – checked-in and inquired about my progress, which made me very happy. As I have written in the past, I have a strong desire to both help others with my blog while also seeking accountability for my actions and pursuit of my goals. So, thank you, Staci, for calling me out!

With that said, I offer a quick check-in on the progress toward goal achievement one month into my 30s.

INVESTMENT GOALS
1 – Max out both of our IRAs for 2016. $11,000 total investment.
PROGRESS: None to report, but that will change in September.
2 – Invest a minimum of $2,000 with Fundrise.
PROGRESS: I am going back and forth on which Fundrise option I wish to pursue, the Income or Growth eREIT. Both options, though different, are enticing. I had planned to dive in during the month of July, but a few unexpected medical and personal expenses proved to set us back in this regard. The current plan is to make a decision and pull the trigger in late August or early September.

Related Post: The Fundrise eREIT: Accessible Real Estate Investing for the Average Investor

3 – Grow my overall account value with Betterment.
PROGRESS: None to report.
4 – Increase our overall net worth by 50%.
PROGRESS: I have begun tracking our net worth on a more regular basis, so that counts as progress, I suppose. According to Personal Capital, our net worth rose by 1% in the past 30 days. Ho hum.
5 – Set a target date for early retirement and formulate a plan to get there.
PROGRESS: Mrs. Superhero and I have had several discussions about our retirement options and plans. More specifically, we have defined our vision of what early retirement will look like for us. I intend to write about this in the future. With any luck, we may be able to narrow down a specific target date in the next few months.

HEALTH GOALS 
7- Lose 10 pounds by September 1, 2016.
PROGRESS: In the midst of birthday and anniversary celebrations, I gained 4 pounds. Oops!
8- Run at least four times per week.
PROGRESS: I’ve been consistently running twice per week. Time to step it up!
9- Weight lift at least twice per week.
PROGRESS: None to report.
10- Implement Meatless Mondays on a regular basis. This will represent a health goal as well as a budgetary goal (decreasing our grocery budget).
PROGRESS: Success! I miss meat every Monday, but this goal has been a good one.

FITNESS/RUNNING GOALS
11 – Run an unsanctioned half marathon in the month of July. This will help me to have a target for getting myself back in excellent running shape after a year of inconsistent training.
PROGRESS: I have one more week to achieve this one. Chicagoland has been an inferno lately, so I might not be able to squeeze this one in.
12 – Run a sanctioned or unsanctioned marathon in August.
PROGRESS: This remains a big stretch goal. Time will tell
13 – Run a sanctioned marathon in October.
PROGRESS: I have looked into a few options and am narrowing them down based on my calendar.
14 – Begin training for and compete in the Artic Frog 50K scheduled for December 2016; definitely a stretch goal!
PROGRESS: Remains a big stretch goal.
15 – Run a 5:30 mile. I haven’t been able to do this since I was 18; my best has been hovering around 6:05 for  while now. Nothing like jumping in the time machine to prove I’ve still got it!
PROGRESS: Also a stretch goal.
16 – Shoot hoops in the driveway at least three times per week. Mrs. Superhero surprised me by taking me out to pick out a basketball hoop for our driveway as my birthday gift a few weeks ago. I intend to put it to great use.
PROGRESS: The basketball hoop has been my favorite birthday gift in years. I love getting out and shooting around, even if for a few minutes, as a break and a means to clear my head.

BLOG GOALS
17 – Reach 15,000 Twitter followers prior to turning 31.
PROGRESS: As of today, I have 4,177 followers.
18 – Boost my Alexa ranking into the top 200,000 globally. This is part of the Yakezie Challenge.
PROGRESS: As of 7/24/2016 – Global: 628,956. US: 80,587. I’m thrilled with this progress!
19 – Break into the top 100 on the Modest Money Top Finance Blogs List prior to turning 31.
PROGRESS: Currently sitting at 271.
20 – Continue to publish 2-3 new articles per week while also pursuing additional guest posting opportunities.
PROGRESS: Success. In the past few weeks I have been fortunate to guest post on Budgets Are Sexy and Distilled Dollar, and I have another guest post slated on Millennial Moola this week. Thank you to J. Money, Matt, and Travis for these great opportunities!

CAREER GOALS
21 – Decide what I want to do with the next chapter in my life.
PROGRESS: I anticipate completion of my real estate licensure very soon, and the new school year kicks off mid-August.
22 – Join a real estate brokerage and close my first real estate transaction in 2016.
PROGRESS: See above.
23 – Reach my commission goals for my current consulting role.
PROGRESS: None to report.
24 – Begin laying the groundwork for writing my first book.
PROGRESS: I’ve jotted down some foundational ideas.

BUDGET GOALS
25 – Reduce discretionary spending by 10%. We can learn to be happy with less. This will be a primary key to achieving our investment goals.
PROGRESS: We reduced our restaurant allotment for the month of July.
26 – Include Mrs. Superhero more in the formulation of our goals. To her credit, Mrs. Superhero is great at supporting my dreams when they are wise and shooting them down when they are stupid. I would like to be careful to involve her more when strategizing.
PROGRESS: Mrs. Superhero and I have scheduled more frequent budgeting sessions recently.

LIFESTYLE GOALS
27 – Visit Nashville, TN for vacation and do our “Debt Free Scream” on the Dave Ramsey Show.
PROGRESS: Tentatively planned for March 2017.
28 – Go on three vacations – one in the fall (hopefully Las Vegas), one in the spring of 2017 (see Goal 27), and one in the summer of 2017 – and plan them utilizing travel hacks and deal hunting techniques.
PROGRESS: Aiming for Las Vegas in October!

RELATIONSHIP GOALS
29 – Take Mrs. Superhero on one date each week. Sometimes this will be simple, and other times it will be more elaborate.
PROGRESS: Success. It has been the highlight of each week to spend dedicated time with Mrs. Superhero.
30 – Spend more quality time with my two nephews and new niece. Also, call my siblings to catch up on a monthly basis.
PROGRESS: Success. I’ve especially enjoyed bonding with my niece, who has to be the most adorable 4 month-old in the world!

Uncle FinanceSuperhero and Charlotte
Uncle FinanceSuperhero and Charlotte

How has your July progressed? Are you on track to meet your goals?

Tracking Your Net Worth

Super Millennial LogoToday’s guest post is from a fellow superhero. Michael is the creator of Super Millennial. He teaches people how to evaluate their financial situation, simplify money management & automate their investments to reach their financial goals. Subscribe for his personal finance “Keys To Success” and blog updates here. Make sure to follow him on Twitter as well.

Note from FinanceSuperhero: This post greatly influenced me to begin tracking my own net worth in earnest. Ironically, when I started tracking my net worth for the first time in earnest rather than simply maintaining awareness of a ballpark figure, I was pleasantly surprised to find out that it was much higher than I had previously thought.

 

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Everyone wants to be a millionaire or billionaire, but to most people it’s just a dream and will stay that way forever…UNLESS you decide to make your dream a GOAL & work hard to achieve it.

If you’ve read “Think & Grow Rich” or Millionaire Next Door it should be evident how important goal setting is in all aspects of life, including finances. Wanting something is one thing, planning & going after it is another…one way to start focusing on becoming a millionaire (so you can ball out like DJ Khaled in any of his 80 music videos) is tracking your net worth. Even though I don’t think he has mentioned/screamed it yet, it’s a major key to financial success (trust me).

Do you know or track your net worth? I’d be pretty surprised/impressed if you are. Whenever I ask someone if they are I tend to hear the same few excuses:

  • “Why should I track it? Seems time consuming & doubt it’ll matter ”
  • “But I don’t have that much money…”
  • “What’s the point of tracking a few thousand dollars?”
  • “I’m way too in debt to want to see exactly how much”


It doesn’t matter if you have $1,000 or $1 million dollars, it’s amazing how helpful it is to track your overall net worth…and it takes five minutes a month!

I started tracking my net worth after reading J Money’s “Budgets Are Sexy” …. over the past eight years he’s been able to go from 50K to now 500K and shows exactly how. Needless to say I was very inspired to start…

I REALLY wish I would have started this earlier in life, I’ll be honest and admit I just started in late 2015 (around 9 months now) and within a few pay periods I was amazed at how much it factors into my financial decisions (& how good I was at saving). Don’t worry I’m not asking you to track every single penny you spend, because I know you won’t (nor would I), let Mint automatically do that for you.

I’m only asking that you do this once a month, not daily or weekly to really see your progression and how easy it become to get “richer” by paying attention to your finances.

Here are the top benefits of tracking:

Main Benefits:

  • Financial Progress: We all want to evolve & progress in anything in life, its human nature. It’s even better when you grow your $$$ & can look back to the month or year previous and see how far you’ve come. Progress is impossible without change! 
  • Confidence Builder: For example if you saved an extra $1,000 in your emergency fund or watch your 401K increase due to a bigger contribution. It will make you feel proud of what you’ve been able to accomplish (and want to do more)…..do you think millionaires just got there by luck? No they made a conscious effort to earn, save & repeat! 
  • Avoids focusing on just assets: If you have 200K in assets but 100K in debt you’re just lying to yourself, it’s important to factor both into the calculation.
  • Loans: Your net worth can be a factor if you plan on applying for a loan in the near future (i.e. banks feel more comfortable giving you a loan when you have good credit & money in the bank).


How should you track it? There isn’t one specific way but here’s how I do it and takes up 5-10 minutes each month. I pull up my Personal Capital account for most of my accounts and then add to a google doc (not all of my accounts sync w/PC). 

It doesn’t matter if you use it or a different version, it’s just important to get in the habit of tracking your progress. Make sure to include all accounts and a comments section so you can notate when there are major +/- changes (i.e. 401K increase, stock market drop 5%, tax refund, inheritance, etc).

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You’ll spend 5-10 minutes a month entering the information for assets & liabilities and it will caclulate your net worth.
Here’s what you should include:Assets

  • 401K – You have a 401K and contribute AT LEAST to your employer match right?
  • IRA – Roth IRA’s are amazing, if you need to learn more check this out.
  • Checking Account:  I personally use Chase, but where’ve you bank make sure you don’t have a monthly “convenience” fee and low ATM fees if you bank at another ATM. 
  • Savings Account: I love Ally bank – no fees & 1% interest is better than nothing
  • Brokerage Account: If you have one…
  • Additional Accounts: Any other investment, CD, money market, etc….

 

Liabilities

  • Auto Loans: This is an asset and a liability, if your car is valued at 25K and you have 15K left on the loan add the 25K to assets & 15K to liabilities.
  • Student Debt: Yes they suck but you gotta include them too…..
  • House: Same as the car example…this is an asset and a liability, if your house is valued at 250K and you have 150K left on the loan add the 250K to assets & 150K to liabilities.


Regardless of where you are financially, knowing your net worth can help you evaluate where you are and plan for your financial future. Once you understand your situation you become more aware of your spending/budgeting and can achieve both your short and long term goals.  

On top of planning and reaching goals it will also help you stay motivated and can be a huge confidence booster. It can also make you aware of your current investments and how they are fit for different market conditions. For example in February the stock market dropped but my net worth barely moved, I had such good asset allocation that the loss was minor in comparison to the market.

If you are not watching your personal net worth on a regular basis, you are skipping an important step in preparing for retirement (or EARLY retirement if you do it right). As always save early so you can thank yourself later. Once you have your tracking system setup hold yourself accountable to spend five to ten minutes to update monthly (use a calendar reminder or choose a specific day of the month).


Readers, don’t forget to head over to SuperMillennial to check out more of Michael’s superhero advice and follow him on Twitter.

Do you track your net worth? Have you found a better way? Let us know in the comments section below.

20 Budgeting Tips for Singles – A Bachelor’s (or Bachelorette’s) Guide

Last week, the state of Illinois finally passed what I would describe as a “Band-Aid” budget. While politicians largely celebrated this move and patted themselves on the back, their budget does very little to solve the gaping wound that is the state of financial chaos in which Illinois currently finds itself.

As I read the headlines and a few articles, I marveled at the difficulty the legislature faced in passing a budget. As you may or may not know, Illinois recently went an entire fiscal year without a budget. This standoff made previous budget delays (18 days in 1991, multiple delays of several weeks in the 2000s, and the bitter standoffs of recent years) look like small blips on the radar.

While Governor Rauner and Speaker Madigan set aside partisan gridlock long enough to pass a budget, public schools, state universities, and social service agencies are from celebrating. To the detriment of the citizens of Illinois, the finger pointing between Republicans and Democrats will surely resume and intensify in the next months.

Right around the time that Governor Rauner was delivering his press conference regarding the new budget, I sat down to review my planned budget for July 2016. Since September 2009, I have created a unique monthly budget using Gazelle Budget, the online software platform created Dave Ramsey’s team at Ramsey Solutions. That makes 71 unique budgets. It felt good to add yet another accomplishment to the mental list of ways in which I put the state of Illinois to shame.

MY FIRST BUDGET

As I often do when completing a budget, I took a look through the archives to see how Mrs. Superhero and I have come. My trek brought me back to September 2009, the month in which I created my very first budget.

In September 2009, I was a newly-employed, engaged bachelor, living independently for the first time in my life. Less than one week before the new public school year started, I accepted a job offer to teach music about 25 miles away from my university campus. With a week to prepare, I scrambled to locate housing, sign my contract, and prepare for a radical life change.

At the time, I had barely a tiny inkling of how to responsibly manage my money. I had recently read The Total Money Makeover in record speed, but I didn’t know the first thing about budgeting an “adult” paycheck. This was going to be the first time I had ever earned a paycheck which included a comma in the amount field!

After reading about Gazelle Budget (which is being replaced soon by EveryDollar), I purchased an 18 month membership, which included access to all three hours (ad free) of the Dave Ramsey Show podcast, for $89.95. Moments later, I created my first budget.

In all its glory, my very first monthly budget, from September 2009
In all its glory, my very first monthly budget, from September 2009

I began by projecting my total net income for the month, $2,357.29 in total. In that moment, I recall feeling pretty wealthy. I continued by inputting my desired charitable giving ($236 – 10%), rent ($400 – I rented a room in a two-bedroom condo from a friend-of-a-friend), food ($305 – for groceries and restaurants), and my debt obligations ($50 car payment and $200 credit card bill). From that point, I filled out the budget with an estimate of utilities, transportation (gas, car insurance, and routine maintenance), clothing (new work clothes and change for laundry), personal spending (spending money blow money Starbucks fund, books, gifts, hair cut, toiletries, and the Gazelle Budget subscription), and savings (emergency fund and honeymoon fund).

As you can see above, my projections for spending (middle column) were not entirely accurate when compared with my actual spending (leftmost column) at the end of the month. In fact, despite projecting a zero-based budget, I spent more money than I earned in September 2009.

This was hardly a Superhero effort.

On the other hand, the percentages of my categorical spending mimicked responsible spending.

Budget Percentages 1

Budget percentages 8-11
Categorical budgeted spending as a percentage of net income, September 2009

THE TROUBLE WITH PROJECTIONS

For the first full month of living on my own, I updated my budget on a daily basis. I kept a stack of receipts for all cash purchases and utilized internet banking to reconcile all other transactions. Yet despite my diligence, I was still brand-new to the process of budgeting.

As you can see below, I overspent considerably on food and personal spending; I had budgeted a combined $572.29, approximately 24% of my net income, but at the end of the month, I had spent a combined $761.58, approximately 32% of net income.

When I broke these spending figures down further, I discovered that I had spent $156.50 at restaurants and $80.77 at Starbucks.

Ouch.

My First Budget - Spending
20 TIPS FOR THE BACHELOR’S OR BACHELORETTE’S BUDGET

I chose to present the above figures for two primary reasons. First, I wanted to prove that it is possible to build and maintain a monthly budget as a single person. Second, I wanted to be fully transparent about my early mistakes.

Yes, creating a budget is not always easy. It isn’t the cool thing to do, especially as a young 20-something fresh out of college. Even at age 30, I can still recall the temptation to throw caution to the wind and live it up. Heck, I almost went out and leased a car!

However, I still recall one of the most powerful motivators for a 20-something single: the desire to prove one’s independence. Creating a budget is one of the best ways to set out to accomplish this goal and appear to be an adult. If you don’t manage your money responsibly, you will surely appear to be a child to you parents and extended family.

To win with money as a bachelor or bachelorette, follow these 20 tips.

20 BUDGETING TIPS FOR SINGLES - TW

1. Share costs with a roommate.

In my case, I avoided spending $1,000 per month for a one-bedroom apartment and spent $400 to rent a home in a two-bedroom condo. By sharing costs in this manner, I avoided spending 40% of my net income on housing costs.

Housing is by far the biggest budget buster for the average bachelor or bachelorette. Spending within this category can be a difference-maker.

2. Gather an accurate picture of your monthly debt obligations.

When you are just starting out, you will feel the temptation to delay examining your debts, particularly if your student loans are still in deferment. Avoiding your debts will not make them go away, so gather this information, including total principal, interest rates, minimum payments, and loan terms for each debt. If you’re unsure or unclear about any debts, contact the appropriate customer service department right away. Also, you should check your credit report; remember, this can be done free of charge once per year with each of the major credit reporting bureaus.

3. Prepare your own meals and cook at home as much as possible.

As a single young adult, preparing your own meals will accomplish two goals: you will save money, and you will not gain weight eating low nutrition/high calorie fast food. As an added bonus, you will be able to host your dates for dinner and impress them with your fine culinary skills. They’ll expect Ramen, and you’ll blow them away with shrimp creole!

Ladies, don’t forget, the way to a man’s heart is through his stomach.

4. Maintain a college lifestyle, at least in terms of spending.

When your first paycheck rolls in, you will immediately experience the temptation to buy everything in sight. If you establish an unreasonable level of spending out of the gate, you will set yourself up for failure. As much as possible, continue to live a college lifestyle (i.e. behave as if you are poor), within reason, of course.

5. Do not go out and buy a new (or new to you) vehicle.

You need to get used to living on a budget first in order to determine what you can or cannot afford in a new vehicle. Don’t allow pride and vanity to influence your decision-making process. If your current vehicle gets you from point A to B, it’s a keeper – at least for a few months.

6. Invest in a decent coffee maker with a timer function and brew your own coffee at home.

I learned this the hard way when at the end of my first budgeted month I had spent $80.77 on coffee on my way to work. I had a decent Mr. Coffee coffeemaker, but it didn’t have a timer feature. If I happened to be running late to work in the morning, I resorted to a quick Starbucks stop, which cost me significant money without adding any perceived value (neither happiness-wise nor nutritionally speaking).

Nothing beats the sweet aroma of morning coffee, especially when you brew it yourself and save money in the process

Mr. Coffee
Nothing beats the aroma of freshly-brewed coffee in the morning – and it saves you money!

7. Stay in.

Fortunately, I did a good job of this. My wife-to-be and I enjoyed cooking dinner at my condo and watching reruns of The Office. I know that many single people will feel the temptation and be pulled into the expensive night life scene, but do so within reason. Invite friends or your significant other back to your place, where food and drinks are cheap.

8. Find affordable dates with Groupon and Restaurant.com . I’m not even sure if Groupon and Restaurant.com existed back when I was a bachelor, but taking advantage of them today is a key part of our dining out experience. With either platform, you can purchase certificates for what is usually a fraction of the value, which allows you to realize significant savings and still enjoy a night out. The most common Restaurant.com offer is $10 for a $25 gift certificate. Check out the Restaurant.com offerings in your area by following the link and entering your zip code.

9. Build an emergency fund as quickly as possible.

As a young single person, building an emergency fund is the definition of adulting. Without an emergency fund, you will face unexpected expenses and be forced to swipe your credit card. Or worse yet, you may have to beg your parents for a loan or a gift.

10. Begin charitable giving right away.

While I have always given 10% to charity and missions organizations, I know this isn’t for everyone. If you’re not a natural giver, start small. Even $1 or $10 per month will benefit worthwhile organizations. If you’re not into structured giving, pay it forward and purchase the coffee or meal for the driver of the vehicle behind you in the drive-thru.

I strongly believe that regular, consistent giving is a key to winning with money. The act of giving teaches you that money is not an asset to be horded, stockpiled, wasted, or worshipped, but a tool to help yourself and others.

11. Strive to create a zero-based budget every month.

Remember, you will fail at this at first. Over and over and over. However, I found comfort in a Dave Ramsey quote during my initial months of struggle with my budget:

Adults devise a plan and stick to it. Children do what feels good. -Dave Ramsey

12. Accept that your budget projections will rarely be perfect.

On a related note, embrace your budget mistakes as they occur. Be willing to adjust your budget several times during the first several months.

13. Share your budget with a friend who is wise with his or her finances.

Accountability is helpful for everyone. It is part of the reason why I write this blog. A good budget is not inflexible.

14. Tell yourself every day that instant-gratification isn’t all that gratifying.

A few days ago, I read that the average person only waits 5 seconds for a web page to open before becoming irritated and moving on. Clearly, we live in a culture which embraces speed and instant results over patience.

You will need to learn to delay your desires in order to maintain a successful budget. Make a plan and stick to it.

15. Don’t worry about investing money right out of the gate.

In the personal finance blogging community, the suggestion to delay investing for retirement is utter blasphemy! However, I believe that there are better uses for your first months of pay. Make sure your budget is in order, build an emergency fund, and take time to research your investment options. When the time comes to invest, look into low-cost options through Betterment and Motif Investing. You will be glad that you waited.

16. Identify your values and be sure that your budget follows them.

If you’re not sure where to start with values-based budgeting, check out my two part series on budgeting with values in mind:

Values and Budgeting – Part One

Values and Budgeting – Part Two

17. Once you’ve identified your values, create written goals that you wish to accomplish.

Writing V-SMART Goals is the best way to accomplish your goals.

18. Be transparent with your friends and family about your budget.

It is OK to explain that you are striving to manage your spending responsibly. In fact, if you keep your budget goals a secret, it will be more difficult to stick to your budget, as co-workers will invite you out for happy hour drinks and apps every Friday. Just be up front and honest.

You can still have a social life on a budget. But be willing to say "no."
You can still have a social life on a budget. But be willing to say “no.”

19. As follow-up to number 18, be willing to say “no.”

If you want to live on a budget and win with money, you will likely hurt people’s feelings from time to time.

20. Avoid making any purchases on impulse.

If you are considering a sizeable purchase, write it down and check back again in thirty days. See my recent piece, The Thirty Day List, for a step-by-step process on delaying purchases.

Note: This piece contains affiliate links. FinanceSuperhero only recommends products designed to save readers money.


Readers, what budget tips do you have for singles?

How to Overcome the Fear of Failure

What would you do if you knew you couldn’t fail?

If you, dear reader, will grant me a moment, I would like to be very blunt at the outset of this article:

I hate the above quote.

I understand that it is a commonly-uttered phrase intended to inspire and motivate people to dream big, take risks, shoot for the stars, and a whole host of additional clichés.

Reality check – everyone fails. All the time.

What if, instead of the above quote, people asked, “What would you do if you knew you could succeed?”

I prefer the turn of phrase above for two reasons. First, it is a question with an affirming, positive slant. Second, it does not erroneously assert that failure and success are somehow mutually-exclusive, as if failure may not be present on the path toward success; instead, it emphasizes that success is always a possibility, despite one’s past failures.

There is a reason the notion of “failing forward” has stuck around in the past decade since John Maxwell wrote Failing Forward: Turning Stepping Mistakes Into Stepping Stones For Success:

The difference between average people and high-achieving people is their perception of and response to failure.

 

If society better-prepared us to expect, even embrace failure, and keep pressing on, what fantastic successes might we experience?

A Modern Case Study

Last week, I read an incredible story about Taylor Rosenthal.

Rosenthal isn’t afraid to fail. The 14-year-old from Opelika, Alabama, is too young, optimistic, and busy to be afraid to fail.

A bright student and average baseball player, Rosenthal is the founder of the start-up company RecMed, which specializes in the deployment of medical supply vending machines.

His idea was basic, yet inspired. Explained Rosenthal,

“Every time I’d travel for a baseball tournament in Alabama, I’d notice that kids would get hurt and parents couldn’t find a band-aid,” he said. “I wanted to solve that.”

His initial thought was to set up a pop-up shop at the tournaments to sell first-aid kits. He tried it and quickly realized it wasn’t the best model.

“We noticed that it would cost too much to pay people minimum wage to sit at tournaments for six hours,” he said. Then the vending machine idea struck.

Rosenthal sketched a design and consulted with his parents, both of whom work in the medical industry.

By December, he had a working prototype and had acquired a patent.

Users pick from two options: prepackaged first-aid kits for dealing with issues like sun burns, cuts, blisters and bee stings (they run from $5.99 to $15.95). You can also buy individual supplies like band-aids, rubber gloves, hydrocortisone wipes and gauze pads, which cost $6 to $20.

Rosenthal hopes to start deploying the machines this fall. He said they make sense at “high-traffic areas for kids” like amusement parks, beaches and stadiums.

He already has an order from Six Flags for 100 machines.

RecMed will make money by selling the machines, which cost $5,500 apiece, and through restocking fees for the supplies. Rosenthal said he’s also open to putting advertising on the machines.

Needless to say, Rosenthal’s first business plan appears to be a wild success. Rest assured, he will probably fail majorly at some point in the future. But for now, he is seizing his opportunity, even turning down a $30 million buyout offer, because he isn’t afraid to fail.

Naturally, Rosenthal’s teacher, Clarida Jones, has taken notice of her star student’s fearlessness. Said Jones,

It has been amazing watching Taylor grow over the past year into this confident and amazing business man. Even with all of his success, he remains humble and ready to help others. He’s just 14. Bill Gates should be worried.

I doubt Mr. Gates is worried, but he undoubtedly should be impressed, as Rosenthal’s entrepreneurial pursuit is representative of the kind of educational outcomes that Gates hoped to procure through his educational reform efforts.

Photo credit to CNN Money
Taylor Rosenthal with the RecMed vending machine. Photo credit to CNN Money

It is easy to criticize Rosenthal’s rejection of a $30 million buyout. After all, he could somewhat lavishly off a very modest one percent annual return on his spoils. I suspect the rejected offer was less about the money and more about the thrill of the chase and youthful naiveté.

On the other hand, it is hard to fault Rosenthal. He can afford to take a big risk at this stage in his life. He does not have mortgage, auto, credit card, and student loan bills. He has not yet been jaded by the financial obligations of adulthood.

Perhaps he does not fear failure because he hasn’t yet been programmed to expect it.

Four Roots of the Fear of Failure

Pause for a moment and compare several of your grandest endeavors with that of Rosenthal. If you are like me, your story is probably much different. Perhaps you were programmed to fear failure, and it held you back in the past. Or worse, fear of failure may be holding you back from new pursuits in the present.

I consider the following to be the Four Roots of the Fear of Failure:

1. We fear getting started

Mark Twain said, “The secret of getting ahead is getting started.” It is a shame that Twain did not also share the secret of getting started!

As an entrepreneur, emulation of others is always an effective way to start.

For example, I followed other bloggers’ work extensively for months before beginning FinanceSuperhero. My goal was to observe the writing qualities that kept thousands of daily readers coming back to their websites on a weekly basis. I even studied the guides on how to start a blog written by FinancialSamurai and Mr. Money Mustache before launching my own blog.

Despite a reliable framework to follow, I felt a bit uneasy, at times, throughout the process. However, I was reminded of an important principle in the process: What we fear rarely, if ever, comes to pass; at the same time, if we do not start, we will never know what might have been.

2. We fear that failure is fatal.

It is normal to fear making a mistake, as mistakes will certainly happen. Yet despite that nagging inner dialogue, the repercussions of our mistakes are rarely fatal.

Billionaire Mark Cuban is a great illustration of this principle. In the early 1980s, the soon-to-be-billionaire was fired from his position as a salesperson for Your Business Software, a local Dallas retailer. Why? He was reportedly meeting with a client to develop new business instead of opening the store.

The road that followed was long and winding, but Cuban’s mistake would not define him.

3. We fear what others may think of us if we fail.

I must confess that I am very guilty of this from time to time. However, by simply being mindful of this trend in my own life, I am able to remain focused upon my own values and act on them rather than out of fear of what others may think. Besides, can any of us really purport to know what others think?

At every step of the way, someone will criticize your decisions and urge you to go in a different direction. Courage stems from the conviction to hold fast to your chosen path.

4. We fear the path of struggle and difficulty.

Just as assuredly as you will experience your share of failures, problems will arise. The key to overcoming them is learning to embrace challenges and view them as opportunities.

It is easy for me to say this. My natural personality leads me to chase challenges and run head on into difficulty. I feel most alive when toiling through adversity.

If you are naturally prone to fear difficulties, you’re not alone. But you can begin to ease your fear by taking a series of small steps.

How to Defeat Your Fears

In my experience, fear is like a boisterous middle school bully. It is threatening on the surface, yet it fades quickly when confronted by direct action.

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Afraid of general financial ruin?

Be sure you are on a budget. Protect yourself against identity theft and sign up for Identity Guard today. Monitor all of your financial accounts and spending easily, in one place, with Personal Capital. While I still track my budget the old-fashioned way, Personal Capital provides a quick snap-shot of my current financial picture in just a few clicks, which is very useful when I do not have time to log and reconcile transactions during the week.

It is also recommended to review your insurance policies at least once per year, if not more frequently. Protect your family with affordable term life insurance.

Afraid you will continue to drown in debt?

Get out of debt as soon possible. If you don’t have the income to do so, look to minimize the impact of monthly interest. If you are struggling with student loan debt, pursue a refinance with SoFi. SoFi also offers competitive terms for personal loans. As an added bonus, you will receive a $100 welcome gift if you refinance with SoFi today.

Afraid you will remain stuck in a job you have outgrown? Explore whether you might transition into a side hustle on full-time basis. Start a blog with Bluehost and share your knowledge and passion with others.

Conclusion

No article on overcoming the fear of failure – whether it be personal, career, or financial failure – could be complete without referencing perhaps the best-known quote on fear. In his inaugural address in 1933, President Franklin D. Roosevelt spoke the following immortal words:

So, first of all, let me assert my firm belief that the only thing we have to fear is…fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

If you fear failure, heed the timeless advice of FDR: advance!

Notes and Disclaimer: The links contained within this article are affiliate links. FinanceSuperhero only recommends quality protects which will serve to help you improve your financial position.

All investments feature risks. You should consult a qualified professional before entering into any investments that you may not understand.

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Readers, how have you learned to overcome fear of failure? Have your past failures been the launching board for your greatest successes?

Kicking Sallie Mae to the Curb: Goodbye, Student Loans!

In my nearly two months as a member of the personal finance blogging community, I feel I have developed a good grasp on the different types of financial bloggers. Some aim to share a technical and sophisticated approach to personal finance, while others are more simplistic and inspirational in nature. Some are humorous and self-deprecating, while others think they know way more than they do (Brief digression: Visit BeardsandMoney for a great article which touches on this topic). No matter the financial state in which a reader my find herself, there exists several blogs which can help her navigate the twists and turns of personal finance.

In the past year, the community has exploded with a host of new bloggers who are advancing our niche and providing me with plenty of inspiration to improve my writing and provide articles which are accessible and thought-provoking for readers. Challenges like the Million Dollar Club launched by J. Money, the Yakezie Challenge launched by Financial Samurai, the Save the Savings Challenge launched by Andrew at FamilyMoneyPlan, and a somewhat-secret project (in which I will be participating) in the works to be announced next week by two to-be-named-later writers, have added to the atmosphere of collaboration, encouragement, and excitement in our community.

Related: See the Blogroll

While this is all very exciting, Mrs. Superhero and I hardly need additional things about which to be excited. Friday was a big day for us. We pulled the trigger and kicked Sallie Mae to the curb by paying off my graduate school student loans!

I wish this story were nothing but rainbows and butterflies, but good things rarely come without a grind.

The Story

In May 2014, I completed my Master of Arts degree. When I entered repayment that November, I faced these terms:

GS2

 

 

 

 

 

 

I read further and my the lump in my throat began to grow:

On your current repayment plan, including interest and capitalization, your total estimated amount to be repaid is $27,178.23.

While I was relieved to have completed my degree, I must admit that I felt a little clammy and my blood pressure rose a bit when looking at the previously mentioned figures. In that moment, I was determined to ensure that my $18,000 educational investment would not grow by over $9,000, or approximately $900 per year, over the standard 10-year repayment term.

The problem I faced at the time was that I still owed over $5,000 on my undergraduate student loans. Yes, I was stupid. The worst kind of stupid. The kind of stupid with several zeros and even a comma involved. I took on additional student loan debt without paying off my existing student loans.

As I approached repayment, I was nervous. But mostly I was angry at the guy in the mirror for digging myself into such a large hole.

Climbing Out of the Hole

There are two different ways to tell this story.

The Short Version

All in all, we paid off a total of $21,229.00 of graduate school student loan debt over the course of 19 months, or 1 year and 7 months. This is an average of $1,117.31 per month, which does not appear particularly impressive or sacrificial for two working professionals who also own and operate a small business and engage in side hustles.

As I reflect and experience the benefit of hindsight, I think we should have paid off the loans much sooner. Maybe we could have done so if we had cut back on dinners out with friends, took a staycation  in place of our modest vacation last summer, and kept driving Mrs. Superhero’s vehicle from college.

This version, while still happy, is vanilla, incomplete, and unsatisfying. It’s the financial success story equivalent of the How I Met Your Mother series finale.

Ted
No spoilers from this HIMYM super-fan

 

 

 

 

 

 

 

The Longer (Better) Version

While The Short Version is factually accurate, it misses some of the finer nuances of our journey toward freedom from student loans. Perhaps the biggest fault of The Short Version is that it is leaves out two other significant financial successes which occurred as recently as the previous 11 months.

In July 2015, Mrs. Superhero and I decided it was an opportune time to upgrade from our 2000 Mercury Sable. Our search led us to a 2013 Hyundai Sonata. We had planned to purchase a vehicle with cash in the ballpark of $8,000-$10,000, but the  we couldn’t shake the idea of the Sonata and drove it home two days after taking it for a test drive. This depleted our $10,000 car sinking fund (and led us to take out an $8,000 loan with a 36 month term at a very low interest rate to cover the difference).

Two months later, in October 2015, I had another sweaty, racing heart moment when I sat down and reviewed the spreadsheet of our total non-mortgage debt. As I mentioned earlier, we still owed just over $5,000 on my undergraduate student loans, in addition to $19,000 on my graduate school student loans and the $8,000 auto loan. This was a sobering realization.

The hole had gotten even deeper, and while we had a new-to-us vehicle to show for it, I knew that something needed to change. That month we paid just over $4,300 toward my undergrad loans and tacked on an additional $829.00 the following month to wipe out these loans for good!

Our momentum was halted a bit in December and January, but shortly after the calendar turned, another look at my Excel sheet sent me back into orbit. In addition to minimum payments on the Sonata and grad school loans, we paid an additional $2,338.79 on the grad school loans in February 2016. Following a similar plan, we paid minimum payments and an additional $1,100 in March and an additional $4,000 in April. It felt like we were on a roll in some respects, but the finish line still seemed like a faint mirage on the horizon.

In personal finance and investing, we all know the mantra: slow and steady wins the race. I was content to push slowly and steadily toward the finish line and rest in the comfort of this phrase. That is, until I snapped for a third time last week.

A quick look at our emergency fund and sinking funds revealed that we could make a final payment of $10,166.37 without exposing ourselves to the unnecessary risk of an underfunded emergency fund. Upon realizing this, I told Mrs. Superhero that this payment would be the best early birthday present I could receive. Without hesitation, she gave me the green light, and last Friday, I submitted the payment!

Reflections

I feel The Long Version shows that perhaps I am being a bit hard on us, as we paid $10,000 as a downpayment on a vehicle in July 2015 and paid off the final $5,168.83 on my undergraduate student loans in this same time period that we paid off my grad school loans. Over 19 months, the total student loan and car debt paid + car downpayment figure rises to $36,397.83, or $1,915.67 per month.

The averages get more fun when you consider that we really got intense beginning in July 2015. From July 2015 to the present, we paid a combined total of $28,889.37 on the aforementioned student loan and auto debts, or an average of $2,626.34 per month for 11 months.

Narrowing the focus further, I realize that we paid off $17,831.65 in the 54 days leading up to May 13, 2016. This averages out to $330.21 per day!

Why This Worked For Us

Among the reasons for our success, three reasons stand out in my mind:

Effort and maximization. As previously mentioned, Mrs. Superhero and I have worked a lot over the past 19 months to make the aforementioned accomplishments a reality. We could have whined and complained about the predicament that we I placed us in, but instead we took action and did something about our unhappiness.

Values identification. Mrs. Superhero and I loathe debt with a passion. While we could have used the aforementioned funds to significantly build our investment portfolio over the past 19 months, I am satisfied with our decision. Over this time frame, the S&P 500 and VFINX, two important benchmarks for investors, have produced underwhelming results, in my opinion. And even if they had produced steady and modest growth, our values still indicate a preference for eliminating debt at this stage.

Sacrifice. I am fairly convinced that many people who know me and Mrs. Superhero personally think we are weird due to our handling of our finances. Once they have read this article, they are sure to think we are even weirder! Going against the grain of today’s culture with regards to our finances has been a sacrifice at times, but a worthwhile sacrifice nonetheless.

Recommendations

  • Identify your values and establish a set of written financial goals as soon as possible. I know plenty of people, including fellow bloggers, whose values and goals have led them to defer paying off their debt in favor of growing an investment portfolio and developing passive income streams. I do not begrude or criticize them for their choices, as their pursuits are grounded by values and goals.
  • Do not stray from your established goals and timelines without good reason. You will be tempted to give up and spend, but you shouldn’t do so in order to impress people you don’t even know. Don’t do it!
  • If you are drowning in student loan debt or other debt, explore refinancing with SoFi. SoFi is an excellent option to reduce the total amount of interest paid over the lifetime of a loan and make the pursuit of debt freedom much more manaegable for money people. Check out your options for student loan refinancing  and personal loan options here. You will receive a $100 welcome bonus when you sign-up!
  • If possible, join me and Mrs. Superhero in freedom from student loan debt. It is truly a great feeling. We hope to replicate this feeling in a few more months when we pay off the Sonata; however, that will come after we build our opportunity fund and navigate the summer months ahead.

Disclaimer: All links to SoFi are affiliate links. While I cannot personally share a testimonial regarding the product because I no longer have student loans which could be refinanced, FinanceSuperhero will always recommend products that can help readers accomplish their goals in a faster and more cost-effective manner.


Readers, have you experienced any recent triumphs over debt? What were the keys to your success? How did you stay motivated? If you are still in debt, when do you plan to eliminate student loans or other debt?

Whining Is Easier Than Winning

Two weeks ago, I channeled my inner Cesar Millan and began training our newest four-legged friend, Coda, who joined our family on Easter. I stood at the top of the staircase and looked down at my puppy. He stared back at me. And then it started: the shrill, deafening barking.

Some readers may find my training methods a bit cruel, but I refused to walk down the staircase to carry the little pup up the stairs. Yes, I felt bad, but after a few minutes of prolonged whining, Coda’s persistent protest gradually shifted toward perseverance.

One step. Two steps. A struggle to conquer the remaining steps.

Success!

Without becoming overly philosophical with this illustration, I believe Coda succeeded for a reason. It was not because of my tough love. He made it to the top of the stairs because he had not yet been conditioned to give up.

In this moment, it occurred to me:

Whining might get you pity, but it won’t net you any PROGRESS.

Unfortunately, the average person yields to his own inner whining and gives up far too easily. We are conditioned by our culture to seek and accept the path of least resistance. Furthermore, we whine and complain that life is so difficult and trying even in the absence of real difficulty, discomfort, or strife.

I am guilty of it from time to time, and chances are, you are, too.

The Problem

Despite my best intentions to avoid association with chronic whiners and complainers, society has conditioned us all to complain as an odd sort of coping mechanism. We are encouraged to talk about our problems, yet rarely are we encouraged to act upon potential solutions.

So instead of helping each other to grow and overcome difficulty, we lend a listening ear, nod in agreement, and encourage the status quo.

Typical Whining

Over the years, I have heard it all. Nothing surprises me anymore. The following are some of my favorites:

The little guy never gets ahead.

I often wonder who started this myth and why it continues to linger in the collective consciousness of the people. It is ironic that this statement is believed by so many, while countless underdog stories prove otherwise.

For example, consider the life of businessman Tom Gores. Born in Israel, Gores moved to the United States prior to turning five years old. He grew up playing playing football, basketball and baseball at Genesee High School in Genesee, Michigan. He stocked shelves at his father’s grocery story in nearby Flint, graduated high school in 1982, and attend Michigan State University, where he earned a Bachelor of Science degree in Construction Management.

Tom Gores
Photo credit to Carlos Osorio/AP/Detroit Free Press

Gores did not experience a privileged upbringing by any stretch of the imagination.

Today, Gores’ net worth is $3.3 billion. The founder of Platinum Equity and majority owner of the NBA’s Detroit Pistons, Gores is a self-made man. His high school coaches credit his business successes to his competitiveness, perseverance, and decision-making. None of them expected the quiet-but-talented athlete from a town of 24,000 people to follow the path Gores has blazed, but the little guy did it.

I’ll always have debt of some kind. It is a necessary tool for most people.

My head nearly explodes every time I hear this or a similar variation. When I achieve financial independence, I may take out a month-long ad in several major newspapers to remind the public that debt is not mandatory. These ads will also include a reminder that debt is not an exclusive club designed for lifelong participation, though Visa, American Express, and MasterCard would like you to believe otherwise.

I will not sport a holier-than-thou position and claim that debt has not helped me. Debt has allowed me to earn two college degrees and buy a house. However, these experiences would have been far sweeter had debt not been part of the equation.

When Mrs. Superhero and I finish paying off my student loans in the next few months, there is no turning back into debt (barring absolute catastrophe). Income is the only we will use to support our family and lifestyle.

I’ll always have a car payment/car lease because I can’t afford a nice car without one.

This statement also sends me into orbit every time. The truth is that moving up in vehicle is a process which need not involve debt nor take long if you are willing to be patient for a short time. Mathematically-speaking, a car payment or car lease are usually the worst methods toward owning a vehicle.

Let’s suppose you currently own a $2,000 beater car. While it is likely to depreciate over the next 12-24 months, I am willing to bet the vehicle could be sold for $2,000 in 18 months with careful marketing. Let’s also suppose that you saved $250 per month for 18 months prior to selling the beater. Through this flipping method, you could afford a $6500 vehicle. Continue the plan for another 18 months and an $11,000 vehicle is in reach. One additional cycle could allow you to purchase a vehicle valued at $15,500.  In four and a half years, you’ve moved up in car from a 1993 Honda Civic to a 2013 Hyundai Elantra. And you did it without a single payment! Of course, saving more than $250 per month could significantly change the conversation.

I deserve to be paid more than my current salary.

I find this phrase (and similar offshoots) is most often uttered by millennials. Please allow me to apologize for the collective whining of my generation.

Most millennials really need a lifestyle and attitude adjustment, not a salary adjustment. While the millennial median income is admittedly low across the United States, that hasn’t stopped millenials from living far beyond their means.

Facebook envy is largely to blame. Pictures of new cars and new houses lead the average millennial, especially men, into foolish spending in order to maintain appearances.

I am not saying that millennials should not increase their earnings. However, I am saying that whining is not the way to achieve that increase.

Recommended Action Plan

If you want to be successful, not just with your finances, you must start by addressing your attitude. Stop whining and take action to get ahead. Envision what you want your circumstances to look like and figure out how you will make that vision a reality. This will require V-SMART Goals, a plan to achieve the goals, and accountability. Ask a friend to call you out every time you complain about any financial struggles in your life. Put your wasted time to good use and correct the circumstances you hate.

A friend recently commented to me and Mrs. Superhero, “You two are busier than any other couple I know.” I had to hide my excitement that she had noticed! Ironically, she probably doesn’t even know how right she is; collectively, Mrs. Superhero and I typically work over 120 hours per week.

If people are noticing your hard work, you are on the precipice of greatness! Mrs. Superhero and I have done some basic math. There are 24 hours in one day and 168 hours in one week. This gives you plenty of opportunity to change your circumstances. Time is the great equalizer.  It is an asset everyone possesses equally.

Suppose the average person logs a 40 hour work week and sleeps 40 hours per week. This is less than half of the available hours in a week!

If you have significant financial problems, you have approximately 88 hours each week, when you are not working or sleeping, to roll up your sleeves and pursue progress! Pick up overtime, extra shifts, work a little harder to earn extra commission, start your own business, work as an independent contractor, start a new side hustle, or launch your own blog. Even if you worked one additional hour Monday-Friday and five hours on Saturday or Sunday, your progress would be significantly boosted.

Time is the great equalizer.  It is an asset everyone possesses equally.

My dad is a great example a Finance Superhero in this regard. He typically works 55+ hours per week. Similarly, Superhero Grandpa often worked 16+ hours per day in his younger years and even worked 8+ hour days on his side hustle in retirement.

Grandpa was too busy making (and counting) money to whine or complain.

As an added bonus, if you work additional hours for a short time period, you will not have time to spend money foolishly or put yourself into further debt. This is a worthwhile, temporary sacrifice. Yet people today are averse to hard work because we are conditioned, as I wrote earlier, to seek the path of least resistance.

This is why Americans are in love with debt. Our society must learn to see hard work, in a sense, as a punishment for putting yourself into a situation to have to pay off debt. Yes, you should be a little masochistic for a while. It will be good for your progress. Too much comfort breeds contentment, and contentment is the enemy of progress. Every time you feel tired or just want to quit, you should relish the feeling and know that you are on the verge of winning.

You won’t have to work hard forever. Do it for a short time and earn the right to relax in early retirement. As talk show host Dave Ramsey often says, “Live like no one else so later you can live like no one else.”


Readers, what do you do to guard against whining and complaining? How do you respond when others do it? What is the most common complaint you hear when others whine about their finances?

The Staycation: A Cure For Burnout

One month ago, Mrs. Superhero and I were about to embark on a vacation to Nashville, Tennessee. We had our hotel room booked, dinner reservations were made, and our itinerary was packed, with plans to visit the Parthenon, the Grand Ole Opry, and check out the local music scene. When we received word that one of our preferred dog breeders had puppies available, we scrapped the vacation plans in order to stay home with the newest addition to our family.

Our Easter surprise
Our Easter surprise

Give us some credit! At least we tried to take a vacation.

According to Kelly Phillips Erb at Forbes, most Americans utilize only half of their allocated annual vacation time, while seventeen percent (!) use no vacation time at all. This shouldn’t be too surprising. Erb cites a 2013 American Express press release figure stating that the average American vacation costs $1,145 per person, or an astounding $4,580 for a family of four. What was once a summer tradition for nearly all families in previous generations has become an impossibility for many families today.

While our planned vacation would not have cost anywhere near these figures, it would have represented a significant cost. At the top of the list of projected costs, of course, were hotel fees, fuel, and meals.

And while we would have been fortunate to avoid the high costs of flight tickets, Disney World passes, and the uncertainty and stress of international travel, our vacation would have been a busy one. Truth be told, I was exhausted prior to the vacation and was already looking forward to my vacation from the vacation.

Why Americans Overspend on Vacation

Based upon the aforementioned average vacation costs, there is little doubt that the average family is spending obscene percentages -around 10 percent- of their annual income on vacations.  While the reasons for this are varied and plentiful, the opportunity cost is devastating. And the average family does not even realize it.

Imagine spending $2,000 per year on vacation and saving the remaining $2,580 each year for 10 years. I think I could live with that scenario. Factor in compound interest, if you were to invest that money each year. I hope I have your attention.

Excuses, Excuses, Excuses . . .

Over the years, I have most often heard the following rationales excuses for overspending on extravagant vacations:

But my kids deserve a vacation!

I will not debate the fact that your kids likely want to go on a vacation. Whether they deserve one is not my place to determine. However, I can determine this with certainty: Your kids want quality experiences and your undivided attention, neither of which cost $4,580.

My greatest memories of childhood vacations involved inexpensive vacations. My family always had fun staying in average hotels, eating in local diners and mom-and-pop restaurants, and partaking in reasonably-priced attractions.

Years later, your kids won’t remember the vacation more fondly because of the money you spent. They’ll remember the time you spent together!

Everyone else has been to ________.

The Keeping Up With The Joneses mentality is nearly as powerful as the kids-related guilt trip, by my observations. The problem? Keeping up with the Joneses is one of the most anti-Superhero moves you can make. The Jones financed their $4,580 vacation on their American Express card at 25.99% interest. It is OK, they insist, because the monthly payment is “manageable.” The Joneses probably lease a vehicle or two, as well. Don’t even think about following the Joneses. They’re likely broke.

The Solution

When planning a vacation, Mrs. Superhero and I have very different ideals. She would be happy to be parked on the beach for 16 hours per day, while to me, this sounds a lot like a scene from Dante’s Inferno. I am good for a couple hours at the beach, but afterwards, I suffer from insatiable wanderlust. I long to see and do everything a locale has to offer. Yes, the Superhero Principle of Maximization has even followed me into the realms of vacationing. I am sure Mrs. Superhero and I are not the only couple to experience this kind of disagreement.

Despite our differences, Mrs. Superhero and I always have fun on vacation. We both understand that everyone needs to recharge from time to time. Most employers today provide vacation time in order to ensure that their employees avoid burnout and remain productive in their roles. However, the type of vacation we have been reviewing thus far rarely offers the opportunity to recharge.

Ever feel like you need a vacation from your vacation when you return home? Bingo.

The Staycation

Based upon my most recent experience, I believe the staycation is the answer to all of our problems. Compared to a vacation, a staycation allows for several built-in savings:

  • No hotel fees ($100-300 per night, on average)
  • No rental car ($50 per day, on average)
  • No obligation to eat 2-3 restaurant meals per day ($10 per person per meal, on average)

With the realized savings (likely exceeding $1,000) associated with a staycation, you are presented with several opportunities:

  • Go out for one nice meal at a restaurant you would not normally visit
  • Complete a necessary home improvement project (Boost your home’s value by choosing an improvement with a high return on investment and increase your equity at the same time)
  • Get started on a side hustle
  • Visit friends and family
  • Actually rest!

My Staycation

The time away from work turned out to be the perfect cure for the burnout I had been experiencing. During our staycation, Mrs. Superhero and I reaped the benefits of several of the suggestions listed above. In addition to bringing home our new puppy, Coda, we were able to spend time with our newborn niece, experience quality time with my in-laws, host friends for dinner, and complete many items on our spring cleaning list. I took a nap every afternoon, read several quality books, and took Mrs. Superhero to a couple restaurants we had been waiting to visit.

Coda, our adorable teddy bear
Coda, our teddy bear

Perhaps most importantly, I launched FinanceSuperhero after several months of contemplation and poking and prodding from Mrs. Superhero. I had an incredible amount of fun and began work on a project that will hopefully help thousands (eventually) of people Restore Order to their World of Finance.

Further Benefits of the Staycation

Obviously, the opportunity for savings associated with a staycation are sizeable. Depending upon your circumstances, you might invest your realized savings, build your emergency fund, or use them to reduce or eliminate debt. You can be responsible while having fun!

Staycation Pitfalls and How to Avoid Them

When planning a staycation, follow the Know Thyself Superhero Principle. You have inherent weaknesses which threaten to derail your staycation, and it is up to you to know yourself well enough to neutralize the threats posed by your weaknesses.

If you have a tendency to work too much, even when you are on vacation, take concrete action to prevent this. Unplug your devices, set an auto response to your e-mail, and let clients and associates know in advance that you will be unavailable for the duration of your staycation. Provide an alternate contact who can handle matters and contact you in case of emergency or crisis.

If you have are in the habit of wasting time off completely by mindlessly watching TV or sleeping in until noon, you need to anticipate these problems and build in structure to your staycation. While you need to rest, this should be planned to some extent. Develop a loose, non-restrictive itinerary with your spouse/family so everyone is in the same page. Base the itinerary on designated priorities for your staycation.

If you are likely to spend too much money, be certain that you create a line item for your staycation in your monthly budget. Most Superheros will create a separate budget. Yes, make a separate budget for your staycation, even if you do not plan to spend sizeable sums of money. Without hotel and travel costs, you should be able to afford a few luxuries, such as massages, nice dinners, or shopping trips; your budget will help you understand what opportunities are within your reach.

Plan Your Next Staycation

If the concept of a traditional vacation stresses you out, straps your cash, and leaves you feeling like you need a vacation from your vacation, a staycation may be right for you. A staycation allows for time to rest, revisit and reevaluate your goals, focus on helping others, and declutter your financial life, among the aforementioned possibilities. What are you waiting for?


Have you planned a recent staycation? How did you maximize the realized savings? What are your favorite staycation activities? Share your tips in the comments section.

Decluttering Your Finances – Five Steps to Simplify Your Money Today

Earlier this week, I published a post about the importance of written financial goals.  Several readers and commenters agreed that the creation of written goals has been one of the largest contributors toward their financial progress. In reading and responding to their comments, it is clear to me that these commenters have detailed plans and have been able to follow them.

I believe their successful planning and subsequent written goals ultimately stem from possessing an accurate understanding of their financial outlook at all times. Furthermore, written goals often provide the added motivation and accountability needed for that final, persevering push toward achievement.

Organization is Vital

Yesterday, I was having one of those mornings. I found myself in a mad scramble to locate a pair of socks which would fit in with the color family of my pants, shirt, and tie. After a few minutes of searching through an unsorted basket of socks, I located a pair. Though this simple search only stole a few minutes of my time, it got me thinking about the perils of my own disorganization.

chaotic desk, covered with all kinds of paper, files and envelops
If your desk looks like this, read on!

When you do not maintain organization, in all areas but specifically your finances, uncertainty lingers in the air like the smell of rotting garbage; it may not bother you much at first, but if it is ignored, the problems will quickly worsen.

Five Steps You Can Take Today

Much like unsorted laundry, your money is helpless without you. If your finances require some decluttering, whether minor or major, now is the time to take control and do what is necessary to be the Superhero that your finances desperately need. You can start by implementing these five easy steps toward decluttering your finances:

1. Automate Your Finances As Much Possible

If you are like me, you value your time just as much as you value money. By automating common expenses, such as mortgage or rent payments, utility bills (such as water, trash, electricity, gas, television/internet, and mobile phone), life insurance and disability monthly premiums, car payments, student loan payments, retirement account contributions, and even savings, you can save yourself significant time, energy, and money. The days of writing countless checks, licking envelopes, and purchasing stamps will be drastically reduced.

Most major banks will allow you to set-up auto-pay on these bills with very little effort involved. You can even negotiate with most providers to establish a chosen day of the month for your auto-draft to occur, which will allow you to spread out your payments to align with your pay periods. Lastly, some institutions, particularly student loan servicers, may provide a small APR reduction when you sign-up for auto draft and paperless billing.

Alternatively, you could choose to place these expenses on a credit card each month, leaving yourself with only one condensed bill to be paid. This could be advantageous if you receive rewards.

2. Sign-up for Paperless Billing

When you became an adult, checking the mail each day surely lost its allure. Good news: you can restore fun to the act of walking to the mailbox each day by signing-up for paperless billing with all providers who offer this service. Doing so will literally and figuratively decrease the clutter in your mailbox and your finances. Furthermore, with electronic copies housed by your various institutions on secure servers, your information will be protected, you will be less likely to experience identity theft, and you will not need to fear losing an important document or missing a bill in the mail.

3. Sign-up for an Online Budgeting Tool

When it comes to monthly budgeting, I firmly believe everyone should experience working through the fine details with a legal pad or spreadsheet and a calculator. In the interest of decluttering and saving time, however, the average consumer has plenty of online budgeting tools from which to choose.

After utilizing Gazelle Budget for many years, I am currently transitioning over to a paid subscription version of EveryDollar, a product created by the team at Ramsey Solutions. EveryDollar is a very effective way to create detailed monthly budgets, track spending by linking with all of your financial accounts, and monitor progress on your goals. I particularly enjoy the features which allow users to create sinking funds and budget for irregular (bi-monthly, quarterly, semi-annual, or annual) expenses.

I also utilize Personal Capital to gather a daily snapshot of all of my accounts and to gauge my current net worth. It is the most simple and effective way to monitor all of your accounts, and furthermore, it will be provide a variety of analyses. The best part? It is free!

4. Use Cash Allowances to Pay for Basic Spending

While EveryDollar can certainly ease the burden of tracking a multitude of debit and credit transactions within your monthly budget, I recommend providing cash allowances within basic categories such as groceries, restaurants, gas, and discretionary spending (or what Mrs. Superhero likes to call her Stitchfix Fund). You can include these cash allowances in your budget with one simple transaction on the first day of the budget month and be finished with the category.

If you are like me and Mrs. Superhero, these categories will represent a large percentage of your monthly expenses. By implementing cash allowances, your will provide an additional layer of accountability to stay on budget (you cannot spend more money when the cash is gone) while simultaneously freeing up additional time each week, which you could allocate toward a side hustle or building your own blog.

5. Eliminate Your Debts as Soon as Possible

For many families, debt can represent a significant percentage of their monthly budgeted income. When you shed the shackles of debt, you free up additional streams of income which may be re-allocated as automated contributions toward liquid savings, retirement accounts, non-retirement investments, and savings toward the purchase of rental properties.

Additionally, without multiple debt obligations, the sheer number of your monthly transactions will be reduced. Fewer transactions will lead to even greater simplification. You will also experience the peace that comes with no fear of missing a payment or incurring late fees and interest charges. Lastly, you will not experience guilt each month as financial institutions earn interest on your hard-earned income. Trade monthly debt payments for the joy of watching interest work in your favor as soon as possible!

Final Recommendations

If you are willing to dedicate a few hours this weekend, you can implement the above steps to greatly declutter your finances. The sacrifices you make in doing so will pay great dividends, pun partially-intended, for your financial future. After doing so, you will be free to turn your attention from fretting and worrying about your finances and onto creating a game plan and written goals for your future.


Readers, what steps have you taken to simplify your finances? What recommendations would you suggest, in addition to the above suggestions?

 

The Power and Importance of Written Financial Goals

People believe that their circumstances dictate their actions. They don’t realize that they can begin to dictate their circumstances by taking a single step in the right direction.

In my recent series on Values and Budgeting (Part One and Part Two), I highlighted a progression toward writing what I have coined V-SMART Goals. As a review, V-SMART Goals are

Values-based, Specific, Measurable, Attainable, Realistic, and Time-Oriented

When I wrote this post, my natural assumption was that a majority of the population implemented SMART Goals or general goal-setting practices in some capacity. A bit of research showed that my assumptions were quite naïve.

The Shocking Statistics About Goals

In the book What They Don’t Teach You at Harvard Business School, author Mark McCormack cites interviews performed with new graduates from the Harvard MBA program in 1979 and 1989, respectively. Full disclosure: The above link is an affiliate link. I have not yet read this book in its entirety, but it is on my reading list. However, the statistics contained in the book are alarming.

In 1979, interviewers determined that:

-84% of adults had no specific goals
-13% of adults had specific goals that were not written down

-3% of adults had specific, written goals

When this cohort was interviewed again in 1989, the results showed were predictable:

-The 13% group had, on average, earned twice as much as the 84% group who had not established goals
-The 3% group who had written goals, on average, earned ten times as much as the other 97%, collectively speaking.

Impact of Goals is Not Limited to Income

While the results above should not surprise us, they left me with unanswered questions.

-In 1989, which group, on average, had the highest net worth?

-In 1989, which group had the highest percentage of written monthly budgets?

-In 1989, did the 3% cohort create and monitor written goals for other areas of their lives?

Without having access to the interviewees, we cannot ascertain the answers to these questions. However, I feel the answers are not likely in doubt.

In my own life, I have seen that greater organization and goal setting in one area can easily spread like wildfire into other life areas.  When I got my act together, financially-speaking, and set written goals, I suddenly became highly aware of other areas in my life in which I needed to establish written goals and hatch plans to achieve them.

For example, as a new graduate who had just entered the workforce, I established a written budget and soon realized that I needed a similar plan to improve my physical fitness. I began running with a friend, signed-up for a half-marathon and later a marathon, and trained according to an established plan. Without realizing it, I had created a SMART Goal for my race training, even though aspects of the goal were unwritten (For shame!).

When I got my act together, financially-speaking, and set written goals, I suddenly became highly aware of other areas in my life in which I needed to establish written goals and hatch plans to achieve them.

The Power of Written Financial Goals

I strongly feel that the power of written financial goals cannot be overstated. One my favorite talk radio hosts, Dave Ramsey, often says, “If you aim at nothing, you will hit it every time.” By definition, having no established goals is aiming at nothing.

In order to adhere to the Superhero Value of Maximization, you must strive to make every single penny work hard for you, and this begins with written goals. As mentioned previously, I prefer to think of my dollars and cents as employees. If I do not direct them, they will not be maximized. Furthermore, this is the one time in which I am a huge advocate for micromanagement! You should be reviewing your finances with a fine-toothed comb on a regular basis.

When you established Values-Based, Measurable, Attainable, Realistic, and Time-Oriented Goals, you are poised for a high probability of success. Additionally, you are only one step removed from being able to share your goals with others, who in turn will be able to hold you accountable. Even the simple act of posting your written goals in a prominent place in your home, such as your refrigerator or bathroom mirror, can simultaneously serve as both a means of keeping your goals at the forefront of your mind and providing accountability.

Why Some People Continue Without Written Goals

Over the years, I have heard people share many reasons for their lack of written goals. Frankly, I am not a fan of any of them. I find it is easy to make excuses, and I hate when I catch myself doing it. Here are a few of the common reasons/excuses I often hear:

They don’t think about goals. Why? They spend too much time on social media, TV, and other major time wasting activities.

They don’t know how to write goals. They must learn the V-SMART Goal writing process.

They have given up. They believe their circumstances dictate their actions. They don’t realize that they can begin to dictate their circumstances by taking a single step in the right direction.

Financial Goals for Everyone

To get started with written financial goals, I believe everyone should pause for a moment and visualize what they would like their financial landscape to look like next week, in 3-6 months, in one year, and in 3-5 years. By beginning with the end in mind, we can create goals that will serve to motivate and inspire. After jotting down some notes, you are equipped to begin writing goals in the categories below.

Note: Brief, vague examples are provided in parentheses; these examples may not fit your circumstances. They should be modified to align with your visions and expanded to meet V-SMART specifications based upon your specific circumstances.

Short-term: (reduce your weekly spending, renegotiate television/internet contracts with service provider)

Intermediate/Mid-range goals: (pay off debt, establish a 3-6 month emergency fund, save for a home down payment)

Long-term – (purchase a rental property with at least a 20% down payment, create multiple streams of passive income, reach a net worth of $1 million, retire early!)


Readers, do you maintain written financial goals? Do they follow the V-SMART recommendations? What barriers are preventing you from establishing written goals? How have written goals boosted your achievement in the past? Share one current financial goal in the comments section below!