FINANCIAL PLANNING Part IV

Ideas to Save Money...

When buying a newer car:

• Don't buy a brand new one
• Look for a year old car (can save $10-$15,000)
• a leased vehicle
• leased by a company not an individual
• low mileage
• Once this car is pay off, save the payment money
• Use saved payment money to buy new leased vehicle

Upgrade your present home every 3-5 years:

• Purchase a $50,000 home (2020 - age 25)
• Only renovate bathroom/kitchen
• Sell for $75,000 (2025 - age 30)
• Shelter capital gains money from taxes
• Buy 2nd home for $100,000 
• Only renovate bathroom/kitchen
• Sell for $150,000 (2030 - age 35)
• Shelter capital gains money from taxes
• Buy 3rd home for $200,000
• Only renovate bathroom/kitchen
• Sell for $250,000 (2035 - age 40)
• Shelter capital gains money from taxes
• Buy 4th home for $300,000
• Only renovate bathroom/kitchen
• Sell for $350,000 (2040 - age 45)
• Shelter capital gains money from taxes
• Buy 5th home for $400,000
• Only renovate bathroom/kitchen
• Sell for $450,000 (2045 - age 50)
• Shelter capital gains money from taxes
• Buy 6th home for $500,000
• Only renovate bathroom/kitchen
• Sell for $550,000 (2050 - age 55)
• Shelter capital gains money from taxes
• Buy 7th home for $600,000
• Only renovate bathroom/kitchen
• Sell for $650,000 (2055 - age 60)
• Shelter capital gains money from taxes
• Buy 8th home for $700,000
• Only renovate bathroom/kitchen
• Sell for $750,000 (2060 - age 65)
• Shelter capital gains money from taxes
• Buy 9th home for $800,000
• Only renovate bathroom/kitchen
• Sell for $850,000 (2065 - age 70)
• Claim ONE TIME exemption from IRS on Capital Gains and purchase a less expensive home
• Pay off mortgage debt
• Save about $250,000 to $500,000

NOTES:

1. This concept assumes that the economy is continuing to grow
2. This concept assumes that each year you will receive wage increases
3. This concept assumes that you purchase a house that is in good physical condition
4. This concept assumes that you use common sense when renovating
5. This concept assumes that you take good care of your home
6. This concept assumes that you don't mind moving every 5 years
7. This concept assumes that you select homes in viable communities

FINANCIAL PLANNING Part III

In Financial Planning Part II, I talked about 401K's and the money that they could provide for you in retirement and while they are not the best source a savings, they are a source of savings and if your employers offers you one and is matching then put into 401K as much money as you need to in order to receive your employer's maximum match.






This post is about DEBT.

Debt will SUCK the life out of all families and their future, not to mention monies needed for a retirement that you are probably not even thinking about.



You must eliminate your debt!

Right now you are probably thinking how in the hell am I going to do that?

You can start by:

1. quit buying cigarettes if you still smoke
2. stop drinking alcohol everyday - maybe only on the weekends
3. stop going out to lunch at work
4. stop buying stuff you don't really need
5. be frugal in your purchases

These 5 items will get you started but what do you do with the money that you are saving?

You pay off your debt?

Let's suppose that you have the following debt?

• mortgage @ $1,000/month
• car loan @ $400/month
• school loans @ $300/month
• credit card @ $200/month

Recommended Approach:

1. Pay off credit card debt first with money you have scrounged up
2. Use money you have scrounged up with credit card debt money to pay off school loans
3. Use scrounged up, credit card, & school loan monies to pay off car loan
4. Use all those monies to pay off mortgage
5. Save all debt reducing monies to save for RETIREMENT

Not possible you claim...

Bullshit...  I say...  and, I know it can be done because I have done it...

I found ways to save money first.

Then I worked a second job.

After debt was paid off, I did two things:

     First - I renovated house for retirement with half the money

     Second - I saved the other half of the money

FINANCIAL PLANNING... Part II

In Part I (although, it was not labeled Part 1), I ended with 401K that many employees have set up with their employers, some of which match substantially and some of which match minimally.  Here's the information on your 401Ks...

Average 401(k) balance: $11,800. 

Median 401(k) balance: $4,300

SOURCE: NerdWallet Feb 7, 2020

If this is YOU, and YOU are 35 years old, YOUR average balance or Median balance could double or triple by the time you actually retire at age 70 which is doubling your current age...  this means that the average balance in YOUR 401K could increase to $23,600 (doubles once) or even $47,200 (doubles twice)...

NOW, let's round off the doubling twice amount and YOU are left with about $50,000.

NOW, let's suppose YOUR employer's contribution increases YOUR 401K to $100,000.

HOW LONG will YOUR  $100,000 last?

The CURRENT AVERAGE Social Security payout in 2020 is $1,800/month.

By the time YOU reach retirement age, it is estimated that you will only receive 80% of what is being received today, which means you will receive only $1,440/month.

Let's suppose that you are married, now that Social Security allowance for YOU and YOUR SPOUSE is $2,880 or rounded off is $3,000/month.

CURRENTLY, the average cost of living across the USA is $5,000/month.  So, you will need another $2,000/month or $24,000 each year and $240,000 over a decade...

But, 

YOUR 401K is only $100,000 and therefore will only last YOU and YOUR SPOUSE less than 5 years, assuming your money earns no INTEREST...  if we add INTEREST then YOUR money will probably last you 5 years...

DOES THAT SOUND LIKE A 

GOOD PLAN TO YOU???

Financial Planning

WHY DO YOU SUPPOSE A CARPENTER MEASURES TWICE AND CUTS ONCE?

For those of us who are intellectuals the answer to that question does not come easy... 

although, to a writer, it makes a little sense when we think about the tedious process of editing a manuscript... 

yet, neither of those areas reflect the true meaning of the carpenter's work because the true meaning revolves around and is totally dedicated to the concept of PLANNING.

Whether we are College educated, Trade School educated, Military educated, or simply High School educated, we are taught and have been exposed to the concept of PLANNING but seldom use it for our PERSONAL FINANCES.

Why do I suspect this?

BECAUSE Americans do not typically save money...  in fact, most Americans tend to borrow more money than they really need since they WANT more than they can AFFORD.  The has the same affect/effect of NOT PLANNING AT ALL.

Americans do not plan to have children, but they do like and often desire to have SEXUAL INTERCOURSE...

Americans don't plan to have heart issue, liver issues, or lung issues, but they do like and often desire to NOT EXERCISE, SMOKE CIGARETTES, and DRINK ALCOHOL...

Americans don't plan to keep working because they do not have the money to retire, but they do like and often desire to spend more than they earn.

HARDLY ANYONE HAS A FINANCIAL PLAN for the next 5-10 years let alone a plan that takes them into retirement....

Why do you suppose AMERICANS are like that???

BUT...  But...   but...   I have a 401K at work...  doesn't that count?

More about this in a later post.