We were able to spend a fun night with some of our best friends over the weekend. Ryan &
Dana are just precious....
....and we enjoyed a yummy dinner (I made the spinach lasagna rollups from
skinny taste!!), lots of laughs, and about seven hours straight of talking with our friends. The boys talked lots of politics while the girls talked crafts- of course! Ryan is an accountant and very smart with finances...so we hit him up for some financial advice before heading home. He would make an excellent financial planner with his knowledge! Here are the tips he shared with us combined with lots of my own advice...and I wanted to share with you all!
Here's My Guide to Being Financially Savvy, Yo!
*Work on paying down debt, starting with loans with the highest interest rates. There was a time when it was smarter to keep your money in a savings account or investment opportunity and make the lowest possible payments on loans; however, thanks to monetary policy and the current state of the economy, this is no longer true. The amount we make off interest is a significantly lower amount than the interest we are currently paying for borrowing money. PAY OFF DEBT!! Debt-free is the way to be!
*If you pay extra on anything, always denote that you want the extra amount applied toward principal only. This is something I learned the hard way! When I had a car payment, I paid almost double the amount every month in attempt to pay it off early. I thought I was being so "good," but those sneaky little companies apply it to interest so they make more money. You have to call the company and specify on the payment that you want the extra payment applied directly toward the principal.
*Invest in an IRA (individual retirement account) or Roth IRA (depending on your current income & tax situation). This should be done in addition to a 401K or other retirement plan. I plan to do this soon with a local credit union.
*Invest in some whole life insurance. Term life insurance only pays out 2-3% of the time and is often called "Lost Opportunity Cost," so whole life insurance is the smarter choice. This is tougher to explain, so you can read about it below from
here:
{The company generally will guarantee that the policy's cash values will increase regardless of the performance of the company or its experience with death claims (again compared touniversal life insurance and variable universal life insurance which can increase the costs and decrease the cash values of the policy). The dividends can be taken in one of three ways. The policy owner can be given a check from the insurance company for the dividends, the dividends can be used to reduce the premium payment, or the dividends can be reinvested back into the policy to increase the death benefit and the cash value at a faster rate. When the dividends paid on a whole life policy are chosen by the policy owner to be reinvested back into the policy, the cash value can increase at a rather substantial rate depending on the performance of the company. The cash value will grow tax-deferred with compounding interest. Most whole life policies can be surrendered at anytime for the cash value amount, and income taxes will usually only be placed on the gains of the cash account that exceeds the total premium outlay. Thus, many are using whole life insurance policies as a retirement funding vehicle rather than for risk management.}
*Work on a budget and stick to it as closely as possible. I think many people just blow through life living paycheck to paycheck, spending whenever, hoping to have enough money at the end of the month. I don't know how people make it without a budget! I suggest keeping track of ALL expenses and income for 3 months, then work on developing a budget. It'll help you see where your money is actually going, and some of it may surprise you. (I know I was not thrilled when I realized how much we were spending eating out- so I started cooking at home 4-5 nights a week and saved some $.) This will help you not spend on things you don't need and become more aware of your spending.
*If you don't have the money, don't buy it. I do have a credit card, but I use it like a debit card and only use it to benefit from the points (I refuse to pay those big credit card interest rates!) If I don't have the extra money, I simply do NOT buy it. Sometimes that means I go without something I'd like to have, but it's worth it to have the peace of knowing we do not have tons of crazy debt.
*Save up to pay for something in a lump some rather than financing. I know this is not always possible, but if you are able to hold off on something until you're able to pay for it in full, you'll be way better off (unless there is no interest for a time period and you're 100% certain you can pay it off in that amount of time!). I am just NOT down with paying interest. I paid my degrees out of pocket and don't have to deal with any students loans that plague most people. (Thankfully my parents let me live with them while I was working on my Master's and Specialist's so I didn't have the expense of rent or a mortgage! Definitely a blessing.). I refuse to have another car payment, so I'm saving up until I can pay the leftover amount in full when I trade my car in. You save yourself lots of money in the long run! I remember when we bought our house and they told us how much our house would cost us total, with interest, if we paid on it for the full 30 years. Ummmm, I love our house, but it sure ain't worth all that!
*Pay one extra mortgage payment a year (to principal only) to cut YEARS off your loan period. Most people I know have no intention of ever paying their house off. I don't understand that thought process! If we are disciplined now, we can eventually live life without a house payment!! Wouldn't that be suh-weet??? I know some people like to pay bimonthly, but I choose to do it the other way because teachers only get paid once a month and I pay all of our bills at one time. Either way, it's a great idea!
*What can you cut out?? Most of us have a few things we can cut out of our expenses to save money, and it adds up big time. Can you lower your tv package? Can you cook at home more to save money instead of eating out? Will couponing help you save on your grocery bills? Can you paint your own nails, highlight your own hair, or do any other things around the house to avoid having to pay for extra services (fertilize your own lawn, spray or bugs yourself, etc.)?
*Make saving a priority. I put a certain amount into savings each month as soon as I get paid, and I don't even miss it. I put in extra when I can. It's there in case of emergencies, but for the most part I have a "don't touch" policy with our savings. It is recommended to have at least enough to pay for your "cost of living" for 6 months in case anything were ever to happen.
*Find balance. Determine what is important to you and your spouse. Dave Ramsey says to "Live like no one else now so you can live like no one else later." That is definitely a principle I agree with and we try to make smart, frugal financial decisions. BUT, I also believe you have to find balance. We are not promised tomorrow and we can't take it with us when we go. We really like to travel, so to us it is worth is to spend the extra money to take a few big trips every year.
*{Last but definitely not least...} Tithe 10% of your income. Don't cheat God. It's all His anyway. He allow us to work and provides our jobs and resources. The Word tells us to give to the Lord and he will bless us and entrust us with more. I have always tithed and never gone without anything. Sometimes human nature takes over and I want to be greedy, but I don't want to miss the blessing from giving. I remember one time I was at church and felt the Lord telling me to give above and beyond my tithe. I didn't want to do it, but I did. When I went to the car after church, I had three voicemails asking for pitching lessons (extra money) that would pay me three times the extra amount I'd just given. It's amazing to see how God will multiply when you are faithful with the resources he gives you.
Well, there you go! I'm certainly not an expert, but Big Jon & I have researched & studied, read Dave Ramsey, and made some wise choices to get us in a pretty decent place with our finances. As of right now, our only debt is our mortgage, and our goal is to pay our house off in 15 years while building up equity!! Of course we don't have as much as we'd like in savings, (things come up!), but we are working on that little by little. It'll get there.
I know times are tough right now and lots of people are struggling. People are unemployed, can't find jobs, have had major setbacks, and other issues that make these tips difficult. Jon and I are both very thankful for stable jobs and income. We're grateful for the opportunities we've had that allow us to be in the position we are in. I just wanted to share some of what we've learned in hopes to help others out....so take it for what's it's worth.
Hopefully you learned something, and feel free to ask any questions!! (If I can't answer them, I'm sure Ryan can! P.S., if you're looking for an accountant, he's awesome!)
What are your favorite financial tips??
What is the smartest thing you've done regarding your finances??
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