Stop Living Paycheck To Paycheck

paycheck to paycheckI ran across a great article written by Mary Beth Storjohann at Workable Wealth, about breaking the cycle of living paycheck to paycheck.  In the article, an estimated 1/3 of all US households are living paycheck to paycheck.  It’s pretty scary, but very easy to see and/or understand why.

People, especially middle-class workers, continue to live right up to their means.  What’s worse is, most also continue to rack up debt in the process.  Once the debt overcomes them, they have an incredibly hard time ever getting ahead.

I remember these days myself and that’s why I enjoyed reading her article because it reminded me of all the things I actually did right to get myself out of the hole and ahead for good.  Take a look at her article HERE.  Follow these simple, easy to understand guidelines and stop living paycheck to paycheck for good!

Check out other related blogs on my site at Middleclasssuccess.com

 

 

 

 

I Save Tons Of Money By Being Healthy

exercise_money_tstock

I can honestly say that I’ve saved tons of money, year over year, for staying healthy and eating well.  I regularly exercise and eat well with home cooked meals and a Paleo style diet.  To me, when it comes to living frugally, staying healthy is a big part of my plan.  I haven’t been to a doctor in years, so no co-pay visits, no billing from the insurance companies….most importantly, no meds!

How many people do you know that are constantly sick?  If it isn’t a cold or sinus issues, it’s stomach problems, or some other health issue.

I see people like this everyday, especially at work.   A lot of my co-workers eat really bad and have no energy, or are just not motivated to stay active.  This is especially true at an administrative job, where you seem to get stuck behind a desk all day long.    I see co-workers eating fast food every day for lunch; taking in tons of sugar with junk food and soda, gaining more and more weight, then they wonder why they are sick all the time.   I just sit back and watch and appreciate the fact that I haven’t been sick even once this year or last year for that matter.  Obviously I’m not super human, but when I do catch a bug, I can quickly shake it and will be back to 100% in a matter of a few days.

Outside of my interests with my finances and investing, I love working out.  I’m a personal trainer and enjoy exercise as one of my passions.  Of course the way I look at it, both of these hobbies actually go hand-in-hand.  If I keep myself in good shape and take care of my overall health, I stay away from the doctor and save tons of money year over year.  I can imagine I’ve literally saved thousands of dollars over the past several years (in comparison to most people I know), by just maintaining my health.  I feel better than I did 10 years ago and I’m in a lot better shape.

I actually get the best of both worlds….good health and significant savings.  Both of which play a big part in my future goals.  I plan to live well and enjoy life to the fullest as I age.  Staying in shape, maintaining my health AND stashing away all that extra cash I saved in the process to reach my financial goals.  It’s a win-win situation!

Look good, feel good, live a long healthy life and stay away from the doctors office.  No meds, no insurance bills, tons of money saved in the process!   Get active, stay active, eat clean and live well.

 

10 Ways To Build Your Wealth In 2015

2015I came across this great Forbes article written by Laura Shin called “10 Surefire Ways To Build Your Wealth In 2015”, that I wanted to share.  It has some great information that we can all benefit from to help us stay on course to accomplish our financial goals this year.  Check out the article here.

I hope 2015 is a happy and prosperous year for everyone.  Stay focused on your goals and monitor your spending closely.  Watch your investment accounts grow and feel good about your accomplishments this year!

 

Joining The “Million Dollar” Club

Million Dollar Club

Ah, don’t get too excited with the title of this blog….I’m not really there yet, although it is exciting to me to be joining a list of many others that have dedicated themselves to achieving this goal.

I recently came across a great blogger J.Money at Budgets Are Sexy that has really inspired me.   He created a Million Dollar Club for people like myself that aspire to build some serious long-term wealth.   Although, at times it seems like wishful thinking for most of us working-class stiffs to make this type of a goal, I see absolutely no reason why I won’t be there by the time I retire (or during retirement).  Unfortunately for me, I started way too late in life and I did have a financially devastating divorce right in the middle of it all.  Still, starting late is better than not doing anything at all.

Now, I’m not one to sit back and just hope to make this goal, I know it’ll take a lot of hard work and dedication. I’m also not naive to believe that reaching this goal will be the end-all for me and I’ll fade off in the glory of my riches in retirement.   This is an excellent goal for me at this point in my life, plus I get to be a part of the “Club”, that’s the cool part!

In order for me to make this goal, I need to stay focused and listen to my own good advice…..at least I think it’s good advice!  If I do the following things and make some smart financial decisions, I will make this goal.  Hopefully sooner than later.  For the most part, all I have is time, and time is what it will take to make it.  With limited resources, time is really the only thing you have on your side.  To build this type of net-worth, it’s going to take me some time, but I’ve already dedicated myself and this website to long-term wealth building, so let’s take this journey together.

Here’s my plan:

1. First off, build up my savings account to give me a healthy emergency fund to cover all my unexpected expenses. Ideally, I would like to have at least two or three months-worth of living expenses saved up.

2. Continue to live debt free.  If I can stay away from debt, I’ll be way ahead of the game.  All of my resources will go into achieving this goal.

3. Continue to aggressively fund my brokerage account, especially buying good dividend paying stocks.  If I stay focused on this path, I will be able to build a solid income stream that will snow-ball my account year-over-year.

4. Finish out my current employment and earn the service credits it takes to lock-down a significant pension at my State job.  I pay 10% (mandated) right off the top of my salary every month for my pension.  If I can get 25 years of service, I will be able to secure about 65% of my three-year highest average salary for my pension income.  I already have 14 years of service, so I’m not too far out now.  This will be the life blood for me in retirement!

5. Build up my 401k and don’t take any loans against it (although this has been a great resource in a pinch).  I just pay myself back with a low interest rate and it doesn’t show on my credit report.   It’s has been a life saver in the past.

6. Build up my wife’s accounts: savings, Roth IRA, etc.  Remember, it’s a team effort when your married!  Ultimately, I want to make this goal with my accounts and investments, but we can get there twice as fast together.

7. Continue to fund my investment club with my co-workers.  At this club we use a separate brokerage account with four of us contributing monthly.  It’s been a nice pool of money building on the side.  I really don’t think about this one, I just fund it with the other accounts and it continues to grow.  It’s just another great way to build wealth on the side!

8. Look into purchasing rental properties.  I’m especially interested in vacation condos at destination resort areas.  I can rent the condo year around and occasionally enjoy it myself!  I have a good friend that has successfully owned and rented condos for years.  His guidance will be crucial and absolutely priceless when I get to that point.

9. Dedicate my spare resources to all of the above.  Continue to make smart financial decisions as I go.  Stay healthy and fit to hopefully avoid any health issues along the way.  Eating well along with routine exercise will keep your body healthy for the long haul.  I feel like I’m in better shape now than I was 20 years ago!   Good health can keep you away from expensive doctor bills and medications.  How many people do you know that rely on meds to get them by everyday?  It’s sad, but true.  Stay healthy, not only for your own life (and your kids, if you have any), and start to realize how much long-term health care could potentially cost you.   It’s extremely scary to think about health care costs in retirement.  I’ll take care of myself to try and avoid this hazard!

10. Last but not least, I should have a Social Security benefit as well.  I paid into the system for many years, so I’ll take whatever I can get from this income stream.

If all goes well, I will wear the badge of the Million Dollar Club.  Good luck to everyone else on the list!

Compound Interest: The Miracle Behind Wealth Building

imagesAn important feature of investment returns is something called “compound interest”.  With compound interest you can turn a modest middle-class investment account into millionaire status by the time you retire.

So how does compound interest work?

With compound interest, not only your initial investment appreciates in value over time, so does all the gains on that initial investment.  For example, you might expect $100.00 that gains a 10% annual rate of the stock market to appreciate to $110.00 after one year and $120.00 after two years without compound interest.  But if no money is taken out, then in the second year it is not just the initial investment ($100.00) that grows at 10%, but also the gains on that initial investment from the first year ($10.00).  So, after two years the investment is actually worth $121.00. After many years of compounded interest, the gains on the initial investment become very significant, making more money year over year.

The really cool thing about compound interest is how it can double the account value after years of saving.  It’s really like a snow-ball effect; it keeps growing, doubling and doubling over time.  Investment professionals refer to the “rule of 72”, which is basic rule of thumb that illustrates the power of compound interest over time.  The “rule of 72” basically says to determine the approximate number of years an investment will take to double in value, you divide 72 into the annual average rate of return earned on the investment.  So basically,  if an investment earns a 10% rate of return it will double approximately every seven years (72 divided by 10 is just about 7).  An investment that doubles every 7 years, will double twice over 14 years, quadrupling your account value.   You can see over time how this snow-ball effect works.  After 35 years of saving, your account could potentially double 32 times.

Wow, that’s crazy to imagine, but this is part of the mindset that you need to have to secure long-term wealth with limited resources.  The average middle-class worker really can manifest some serious wealth with compound interest.  This is why it’s so important to start saving today.  Obviously the younger you are, the better off you are, because you have time on your side.  The more years you can take advantage of compound interest, the better.  Start saving whatever you can at first, even 1% of your paycheck will get you in the right direction.  Then start adding an additional % of your pay whenever you can.  Imagine yourself getting to a point where you can invest 50% or more of your paycheck!  Can you imagine how much wealth you can accumulate when you dedicate that type of income to your investments?

Take a look at some of the investment tips that we have discussed on Middleclasssuccess.com and do your own research to help you try to achieve the best possible return on your money.  The better the rate of return on your investment, the more you can accumulate faster.  Historically the stock market over time has produced solid 10% returns.  Determine what the best investment vehicle will be for you….a brokerage account, IRA, Mutual Funds, 401k, real estate/rental income….maybe eventually all of these will be a part of your portfolio (I hope so!).

Stay focused on your long-term goals and start saving today.  Before you know it, 10, 20, 30 years go by.  If you start the process and stay on track, you will set yourself up for financial success and true wealth building.

 

10 Steps To Get Ahead And Create Long-Term Wealth, Part 1

In my blogs I’ve discussed a lot of ideas on ways to get ahead.  For most of us working-class folk, we need to look for easy, creative ways to squeeze out extra money from our paychecks and find a way to build some wealth.  When you’re strapped for cash, it’s incredibly hard to find a way to get ahead of the game and get out of that financial rut that everyone seems to find themselves caught up in.  This website is dedicated to help people find ways to get ahead and break out of the “blue-collar” mindset that seems to keep working class people locked in to unending debt and a feeling of hopelessness of ever creating any wealth.

I want you to understand that you can get ahead, and you can create wealth a little at a time.  You have to be patient and you have to be persistent.  More than anything you have to change the way you think about money and your spending.

I was fortunate enough to make an acquaintance with a co-worker that actually changed the way I think about money for good.  This guy is truly the “millionaire next door” or in this case the “millionaire in the next cubicle”, I call him.   I never imagined a guy like this ever had any money.  He drove an old, beat up car, didn’t dress fancy, and didn’t look or act like he had any money at all.  After I really started to get to know him and he opened up about money and how to actually use it to make make more money, I really started to understand.  He truly changed my prospective on money for good.  Since meeting him and really starting to understand money and how to manage it, my finances have turned completely around and are heading in an upward trend month over month, year over year.

It’s truly amazing how much you can accomplish when you have a different mindset about something and really focus on your goals.  This applies to really anything in life, but for me it was all about my financial future and setting the stage for long-term success.  Now I know that it is possible for any working class stiff like myself to create an environment for financial success.

Below are some of the steps I’ve learned that can help you find a way to get ahead for good.  Remember, stay focused and keep your sights set for long-term success.  One step at a time, little by little, you will succeed.  Here are the simple but effective steps to take control of your financial future:

Step #1:  Set your financial goals

You need to set some financial goals and make yourself accountable to stay on track.   As I mentioned, It’s all about changing your mindset regarding spending and saving.  Your goals will help you stay focused and help you make financial decisions as they arise.  Your goals should be really personal and mean something to you, so you really keep locked-in on them.  I make a point to create goals every New Year’s Eve and write them down on a piece of paper.  I stick the paper in a jar and stash it away, so at the end of that year I go through all my goals and see what my progress was.  It’s amazing how much you actually accomplish when you set your mind to it.  It’s also fun to look back and see how things change in just one year.  I now have my wife and kids doing the same thing.  It’s a fun family activity to look at all our goals every New Year.   Just make sure you make realistic financial goals….don’t shoot for the moon.  Make goals that you really think you can accomplish, you will be surprised how good it makes you feel to make and/or exceed each goal.

Step #2:  Set a budget and track every dollar you spend

As I’ve mentioned in some of my other blog posts, you can’t possibly get ahead if you don’t know where your money is going.  Some people don’t even really know how much money they have coming in!   It’s really important to know what you have coming in and what you have going out.  I like to use a free online budgeting program called Mint.com.  This program is very easy to use and you really can track your money coming in and going out, as well as your spending trends of all your accounts.  You must set a budget or you will never be able to accomplish your goals.  If you don’t want to use a program like Mint.com, then you can simply create a budget on a pad of paper.   You just need to start with your gross (take-home) pay, then track each and every expense so you can account for every dollar you spend.  Then you will truly understand what you have left over.  The bottom line is, you ultimately need to spend less than you earn.  Spending less than you earn is the only way you will be able to free up some extra cash to start building wealth and/or pay down your debt.

Step#3:  Eliminate debt

Once you have your budget tweaked correctly and you know exactly how much money you have left over after paying all your expenses, start paying down your debt.  The best way to get ahead and stay ahead is by not having any debt. Eliminating debt gives you the cushion you need to cover any unexpected plans or life changing events.  Life is so much easier and less stressful without debt, so this is a high priority on your list.  Eliminate all debt!  Start with credit cards or small loans.  Pay off the smallest or highest interest debt first.  Put a large portion of your resources towards this task.  Once you eliminate the first one, take the money you saved from that payment and put it towards the next debt to knock that one down.  Keep going with this routine until you have eliminated all small loans and credit cards.  Keep one credit card for emergencies only and don’t get in the habit of ever using it for any other reason. Now start new goals for bigger loans, like car payments or a home mortgage for example.

Step #4:  Build your savings up

You may have noticed in step #3 that I mentioned to put a large portion of your available resources towards debt.  I didn’t say put all your resources towards debt.  You absolutely need to create a savings account right along with paying down debt. This account is needed to cover any unexpected expenses at any given time.  Put whatever you can in your savings automatically every payday.  Always pay yourself first!  I learned this a long time ago and I never looked back.  Once I paid myself, I found ways to cover everything else and looked back to realize that my savings continued to grow month over month.  Make sure you put money into a bank that offers you easy access to your money 24/7.  This account needs to be liquid and fully accessible in case you have an emergency.   Build up your savings account to your own comfort level.  Financial experts recommend that you have at least three months of expenses saved up in your account.  That would be a great goal, but for now shoot for at least $1000.00 and keep building from there.

Step #5:  Review and analyze your expenses

Once you have your budget working well and know where all your money is actually going, start looking at each and every expense closely.  You need to decide if you really NEED that expense.  Obviously some things like utilities are a given (even though there are a lot of ways to save money on heating and electric bills), but look at extra things like our TV service.  Do you really need four high definition TV’s in your house?  Satellite TV service is really expensive!  Take a look at your programming, do you really need to have 250 channels including HBO or the NFL package?  These are obviously extra services you don’t NEED.  How about your home phone?  Do you have a cell phone, if so, why do you need a home phone?  Cut down on all these services and save hundreds of dollars each year!  Well, you get the point, take a look at each and every expense and see where you can cut corners to free up some extra cash.  You will be surprised how much you can save.

Stay tuned for part 2 of this article for the rest of my tips on getting ahead for good.  It’s so important to start right now with these steps.  If you really focus on your goals and getting ahead, I know you will get there!

 

 

10 Steps To Get Ahead And Create Long-Term Wealth, Part 2

Continuing on from my previous post, “10 Steps To Get Ahead And Create Long-Term Wealth, Part 1”  here are the next five steps that I’ve personally used to help me get ahead and create an environment for long-term financial success.  I want you to understand that you can also get ahead and start building wealth.  Keep the process simple… your finances can be as complicated as you want it to be.  For me, I like everything in my life to be simple, so I use very simple methods.

As I keep things simple, I continue to educate myself, as you will see in Step #10.  There are so many resources out there at your disposal.  Step #10 will touch on some of them that I’ve found useful.  This website is dedicated to try and inspire people that are in the same situation as I was, just trying to find a way to create some wealth with limited resources.  I’ve learned so much in the past 10 years, I only wish I could have started the process earlier. Still, the key to long-term success is starting now, no matter what point in your life or what your current finances are.  Start now and secure your future for yourself and your family.

Continuing from Part 1, here are the next five steps that have worked for me:

Step #6:  Be conscious of your spending 

Evaluate every purchase and decide if you really NEED to make the expense.  Living frugally is really the key to creating an environment for long-term financial success.  No matter how much money you earn, if you make good financial decisions you can definitely get ahead.  The good majority of people I know that are struggling with their finances have done so because of bad financial decisions, over and over again, then they wonder why they have no money and live paycheck to paycheck.  Remember, being frugal and controlling your spending is a true mindset and lifestyle that you have to implement in order to get ahead with limited resources.

Of course, living frugally doesn’t mean that you have to totally deprive yourself completely.  We all have hobbies and different interests that cost money.  You also need to treat yourself with a reward occasionally, you earned it!  Just be smart about your expenses and really think about each purchase.  After I changed my mindset on accomplishing my financial goals, I soon realized that material things just weren’t important.  Just ask yourself, “will buying this help me make my goals”?  Most people simply don’t think about spending money, they act impulsively, then when the reality sets in with their spending it just gets them down and depressed.  Again, it’s all about making good choices.  If you do this, you will come out ahead and the money you save by living frugally will help you secure your financial freedom for good.

Step #7: Setup automation on your accounts

In earlier steps, I mentioned always paying yourself first before your expenses.  Once your budget is totally tweaked and you fully understand how much you have coming in and going out, you can setup automatic transactions for deposits to your savings or investment accounts.  This way you make sure money is funneled into your accounts, so you get paid first.  Then you can also setup automatic payment transactions for your expenses.  It really helps to have a system down to make sure you don’t forget to pay a bill.  Automatic transactions eliminate the human element, which really helps from potentially paying late fees if the payment is accidentally overlooked.   You can setup automatic payments for just about everything.  It just simplifies the process and helps you manage your budget better.

I also use an EXCEL spreadsheet for all of my bills every month.  I mark off each bill or financial obligation once I see it clear my checking account, just to make sure I didn’t miss anything.  Do what works best for you, but keep it simple and efficient so it makes it easier and less stressful to deal with every month.

Step #8:  Fund Your Retirement

Step #8 goes right along with Step #7.  Pay yourself first!  Your long term-wealth building is just that, long-term!  It takes time to accumulate wealth, especially with limited resources.  If you don’t already have a retirement account, you need to start one now!  Time is on your side and it will take many years to build up a significant amount of wealth to live on in retirement.  I’m not a mathematician, but the basic numbers from my Social Security (SS) benefit tell me that I will need much more income to live on in retirement.  If you haven’t done so already, take a look at your potential SS benefit and really think about how much money you will need to live on.  If you think that you are going to make it on SS and live the way you currently live, you’re in for a real shock.  Do the math and really think about this, it won’t be hard to see that you will need different sources of income to keep you afloat…especially if you live 20 to 30 years after you retire.

At a minimum, take a look at your employer and see if they offer a 401K plan.  If so, do they offer matching funds?  If they match your deposits up to a certain percentage, take advantage of that, it’s free money!  If they don’t offer a 401K, you can start your own IRA account.  There are lots of good options, so do your homework and see what works best for you.  If possible, have one of each going and utilize them for different tax purposes long-term.  I also highly recommend opening a taxable account with an online broker, such as Ameritrade, E-Trade, Sharebuilder, etc. I am a huge fan of dividend paying stocks.  With a brokerage account you can buy good dividend paying stocks that pay you to own them.  You will be amazed how much you can accumulate with a good dividend stock portfolio.

We will take a closer look at these different types of retirement accounts in future blog posts.  Visit my website for more on this subject later.

Step #9:  Earn extra money

Once you have your budget set and fully functional, you may realize that you still don’t have any money left over. At this point, you may need to simply find ways to earn extra money.  The best way to push your financial goals over the hump is to bring in more money.

Maybe you can find a promotional opportunity at your current job?  If not, maybe you can work with your employer to ask for a pay raise.  Most of the time employers don’t realize how important you really are to the organization until you bring it to their attention. If you are highly valued as an employee, you might be surprised that they will do whatever it takes to keep you.  If not, maybe you can look at switching jobs and finding a better avenue for future advancement opportunities somewhere else?  If you are happy where you are, maybe you can just consider working a second job?  That may be the answer to help you bring in that much needed extra money each month.

You should also look to get rid of stuff around the house to free up some extra cash.  I’ll bet if you look around the house, you’ll find plenty of stuff that you can get rid of that you really don’t need.  Put your ads on Craigslist, it’s free!  You could also sell stuff on eBay with online auctions.

Getting extra money selling stuff you don’t use or need around the house can really help you get a jump start.  I can honestly say that I’ve used Craigslist successfully for everything that I’ve tried to sell.  It works great for advertising your stuff and won’t cost you a dime.  You might also find local papers in your community that you can advertise your stuff for free.  Do some research and look for the best alternative to paid advertisements in your area.

Step #10:  Learn as much as you can about money and finances in general

Educate yourself and learn as much as you can when it comes to money.  There are so many good resources for this, including on-line blogs like this site, books and financial newspapers or magazines.  You can go to the public library in your community and check out books for free!  Knowledge is power, the more you learn the better off you will be. Remember I said that I prefer to keep my finances as simple as I can, I also keep this prospective when reading new books or articles.  I take whatever I can from each type of material and implement what I believe would work for me. Every book I’ve read has given me different perspectives to consider.  Some offer great information or ideas that I really find valuable.  Either way, it’s all really a continual learning process.  I find that reading and researching financial books and topics help to keep me focused on my own goals in creating long-term wealth.

Getting a grip on your finances and building wealth can be overwhelming, stressful or even intimidating at times.  That’s why I really like to keep things as simple as possible.  Learning different perspectives from multiple resources can be beneficial, but ultimately finding what works best for you is the key to your own financial success.

In summary:

Use the 10 steps I’ve outlined here (part 1 and part 2) to help you get started on your journey to taking control of your finances for good. Stay focused and persistent with your goals.  Make good financial decisions that will put you in a position for long-term success.  Use addition income resources to build a security blanket account to cover unexpected expenses, then use anything left over to start using your money to make more money.  Do your research and continually educate yourself.  Once you change your mindset about your finances, you will actually break the mold of the typical blue-collar worker and get ahead of the game for good.  Best of luck to you!

Disclaimer:

We are not professional financial advisers.  All of the information presented on Middle Class Succuss.com is for informational purposes only.  Our goal is to try and help as many people get control of their finances and create an environment for long-term success as possible.   Please continue to do your own research and/or consult with a financial professional to make the best possible decisions for your own financial future.