Focus. Now!

Focus is the driver that separates those who accomplish their goals from those who "are getting ready to do it real soon." Let's examine a suggested way we can help you acheive your financial goals any day now!

Praise the Lord.

That was the first thing I said aloud after I clicked submit and sent the last $85 of the $2,374 in credit card debt incurred in moving to the New York area. That was May 22, 2006. The day I no longer owed a credit card company, student loan, nobody. Granted, I’m in the City which means I don’t need a car, and I’m currently renting so I have no home equity either, and I had no student loans when I graduated, but from this point on the Mafia and I are square. Inspection of my wallet however will probably turn up the credit card I’ve been using—rather used. I’m not a fan of credit cards, but until my Emergency Fund is completed, it’s all I have. Strangely, no emergencies have come yet (knocking on fake wood desk..well, actually my dresser—I’m getting another desk soon so I have to bootleg it for now).

However, there were no corks popped, not even in my mind. Probably because I’ve seen this day coming for so long it’s been kind of uneventful. Enough about my own horn, though. Today we’re here for a good conversation on perseverance and focus. For those of you who want to get out of debt, for those of you who don’t open bills when they arrive (!!!), today is a good day to change that.

Focus is not an abstract idea—it’s actually very doable but it will require discipline. If eliminating a debt is your above-all goal, then nothing else can trump that. If building your emergency fund is your goal, then nothing short of the Apocalypse should stop you. Specific goal-setting, as I’ve written about before, is the key to developing your focus. Specifics come from writing or typing your goals out and backtracking. Lack of focus is what keeps otherwise smart and well-meaning people from starting a task they want to do, and is also what makes them fail to complete it. That’s because you need more than specifics.

Goal setting must also be measurable. For instance, if you’d like to lose weight, a specific goal may be “I’d like to lose weight by November 1st.” This is a time-set goal. However, it must also be measurable—how much weight would you like to lose? 15 pounds? If so, you should break it out accordingly: “I’d like to lose 25 pounds by Thanksgiving.” Then backtrack—break it down to reasonable time periods. If you started on June 1^st, that would give you five months, which means you would have to lose an average of 5 pounds per month, which is much easier than trying to lose 25 pounds all at once. Then you’d make a nice chart and place it somewhere where you would see if often and it would mark your progress based on your average:

GOAL: Lose 25 pounds by November 1^st

Current Weight: 175lbs. Target Weight: 150 lbs

Month	Target Weight	Actual Weight
June 30th	170	173
July30	165	167
August 30	160	160
September 30	155	155
October 30	150	149.5

Focus is the driver that would keep you going. What if you want to go out to eat with friends at that new restaurant in town? Can you keep towards your goal? Are you monitoring yourself weekly to make sure you’re maintaining? After seeing you’re progress month after month, you’ll find yourself working to keep towards you’re targets. Even if you fall a little short of your wanted goal sometimes it’s OK if you’re focus is honestly honed toward completing the task. A similar approach can be used if your goal is to save money or pay off debts.

Let’s say that you have a credit card balance of say $5000. Speculate about how long that it would take you to pay that off, being mindful of your income. Keep in mind that serious people can pay off about 5G’s in less than 18 months. So if you can do it in 18, then your payment is about $280 a month. (Just imagine how long it would take it you only paid $40/month).This means while you’re eliminating the debt you have to take an L on (meaning delay the purchase of) the new 200X One-Upmanship LX Coupe. Expensive dinners are out. Remember, focus is the key, and the quicker you get rid of the debt, the quicker you can consider taking your sweetheart out to Chez L’argent.

If you’re not willing to take on accelerated payments, then be prepared to be a slave to the lender for as long as it takes before you snap out of it. The cars, the vacations, etc. will always be there and you won’t “miss out” on the fun if you don’t get serious now. So identify your goal, and focus. Not tomorrow either. Today. Maybe after you finish reading this article you’ll open up Microsoft Word, Excel, or grab a notebook and begin writing specific and measurable goals with specific (and reasonable) completion dates and you will pace yourself. I sense it happening! I see ya out there playa. Now get to work. Now.

Chronic Debitits

How “The Debit Well” can nickel-and-dime you to death…

Do you suffer from Debititis? It usually afflicts those who don’t watch their spending plans or take them seriously. It goes somewhat similar to this. Let’s say that you have $2000 in your bank account when you start your job. Every month, you receive, say $500 every two weeks. If your spending exceeds this amount, you will be in the red—and most people won’t even know it. Because when you check your account it may look like this.


-Your Bank Statement-
Beginning Balance: $3000
Income: 1000
Outgo: -1075
Ending Balance: $2925

Generally, this doesn’t raise a flag for most folks—they have “just $75” less than they did at the beginning of the month—and with the Challenges of Life most people are just “too busy” to worry about it—as long as they’re not in the red, or are close to it, they don’t really care. Now, what if we alter the stakes a bit: Instead of $3000, you have $150 in the bank?

-Your Bank Statement-
Beginning Balance: $150
Income: 1000
Outgo: -1075
Ending Balance: $75


A bit more noticeable, eh? It’s especially troublesome to see your three-digit income go down to two. This problem usually arises from those who only write a few checks and most of their spending comes from the debit card. Not to say the debit card is bad—its much better than using the credit card—but the problem is that people don’t think their minor everyday purchases “count” very much in the end. Month by month, the balance drops little by little.

The next thing you know, December is coming and you want to spend money on gifts and toys and an airline ticket to visit Mom and Dad for the Christmas weekend. So you splurge in December…and the Holiday Spirit is high! By the end of January you realize you’re in a negative cash position and you have to consult the Mafia to cover your “holiday hangover” losses.

If you have an established bank account, grab a few statements and look at your beginning and ending balances. If it’s incrementally smaller at the end of each month, you’ll either need to (a) develop more income or (b) plan your spending better, because at that rate, you may not be solvent for very long.

Look, at the end of each month its best to at least break even rather than operate at a loss. working in cash when making everyday purchases (the Starbucks, the cafeteria, the movies, the lotto ticket) and it will register in the mind quicker. Using cash for the DVD player, the Wii, and the DVR is the best way to make sure you're spending in a worthwhile way (unless of course, you're an online shopper and are getting cheaper rates.)

Cash Hurts!

- Plus some good news for those credit-card avoiders…

Hey, do you have a dollar? Relax, I don’t need it. I want you to take one out if you have it. Now take it, hold it in the air above your head and let it fall on your head. Did it hurt? Probably not. Now consider the following: the next time you walk into Best Buy, Wal-Mart, or Target for that next “big” purchase: that digital camera or book you’ve been looking for, take cash. Not your credit card or even your debit card; cash. Chances are, if you’re as normal as everyone else, there will be some reluctance to do so? Why? Isn’t it the same money? Of course! But cash hurts my friends.

When you actually spend cash on a purchase rather than a card, there is a psychological attachment to it. It registers more than say the new MasterCard “Tap and Go” Cards that are hitting the market now. The idea is that as more consumers are becoming aware of the dangers and traps of the credit card industry, the creditors losing their grip and need to re-establish themselves—and what better way to do this than by (a) getting your head off the purchase or (b) coming up with the great idea of using a credit card to help you save money? (these are way too good to make up). See here. In growing numbers, Americans are leaving the credit-card mafia in the dust and the creditors have to get more creative—asking consumers to “Skip a payment.” Bah.

However, some of you choose to use the credit card anyway, and that’s your choice. Responsible use of it can help, but do be aware that sometimes things happen and having that card can be a liability. But consider some of the benefits of using cash:

- Deals! Have you ever walked into a retail store, saw some shoes or apparel at the list (retail) price, and tried to ask for a cheaper price by paying with cash? You’d be surprised at how many businesses will discount things if you have cash (instead of a card).

-Instant Awareness. No need to track your bank spending; you know exactly how much you take out. Today many debit cards will do the same, but credit cards don’t deduct from your checking account until—well, until you say so.

Now, to be fair, there are times where it is unreasonable to carry cash—for instance, while traveling for leisure (or on business not involving your company card), you should probably carry a debit card. Most debit cards are just as safe and secure as credit cards. You do of course run the risk of overspending. I know this guy who did this all the time. OK, yeah it was me. But if I can learn, so can most.

The Site's Acting Up

Dear Readers,

Many new visitors to the site (and some regulars) have told me that the site hasn't been loading correctly. Apparently the sidebar will sometimes go on vacation and only leave an unclickable link called "Spending Plan" under the "Last Posts" section. If this happens, you can access the other articles under the Archives section.

Also, I will add a new article this week.

That is all.

-Thanks for stopping by.


--Charles J.

The Three

Becoming a millionaire is simple, but it ain’t easy. –Anonymous

If you don’t read any other article on this website, this is the one you read. Maybe you just stumbled upon this section of the Blogosphere and were intrigued by what you saw. Maybe you were referred. That’s great. But I know you like your information easily accessible and quick. So here are the three keys to financial success:

- Spend less than you earn.

- Save more that you spend.

- Put what you save into an interest-bearing account.

That’s all you need to know. The rest is just details. The next thing is to know how to write. Can you form letters with a writing utensil? Or can you tap letters on a keyboard in sequence to form common words and phrases? If so, you have the talent required to become wealthy. You’re already in college pursuing a career. That’s a good first step. But many college grads leave without getting The Three in order. But hopefully, you won’t. Here’s how you get started:

1. Spend Less than you Earn.

“Well duh” may be your reaction. But let’s take a look at the numbers. How much income are you pulling in? How much do you spend, including bills, transportation, food, and entertainment? Many people spend more than they think. As income rises, so does spending. We call this the Marginal Propensity to Consume, or your MPC (check Wikipedia for more info.) If you spend more than you consume (for example, if you use credit cards and don’t pay off the balance in full, every month, your MPC is greater than 1, and you’re overextending yourself. And no, economics dictates that you don’t “grow out of it.”

For one month, write down the typical expenses you have in a month, and add them together and measure it against your income. Or you can do what I did and estimate how much you think you spend and use cash envelopes to see how close you are. Most people go over. I know I did.

2. Save More than You Spend.

Oh, now this one is hard. Census estimates tell us that the average American family spends about $40,000/yr in disposable income. Unfortunately, people have taken this term too literally—disposable income does not mean “money you can pretty much throw away.” It’s the amount of money available after taxes, social security, etc. You should consciously put away 10-15% of your pay towards savings and retirement as soon as you’ve eliminated your debt (discounting your home mortgage).

3. Put What You Save into an Interest-Bearing Account.

This is probably the easiest thing you can do. Rewards come to those who take risks, and you can be rewarded if you’re careful. You should fully fund your 401(k), or if your company matches, you should put enough in to reach the match. The rest should go into a Roth IRA is you’re single and make less than 95,000/yr or if you’re married, 150,000 . Otherwise, it goes into the regular IRA.

Here’s how I’m set up. I have a Wachovia savings account for short-term savings (which are for things I am purchasing in the next 2-3 months). My long-term savings are in an ING account, where my emergency fund is growing and money for long-term future purchases (like a nice used car when I move back down South). Then retirement savings are just for, well, that. They will be mostly through my companies 401(k) and IRA plans. I start that in July. However, you have to develop your strategy based on your age and sensitivity to risk. Generally, the younger you are, the more risk you can take because you can climb out of it. More on this some other day.

Well, that’s all for now. See you next week.