Success Warrior: The Blog That Embraces ADHD

It Should Come Down To Priorities

We were driving back home after kicking my brother's dog out of my car.  My wife and I started talking about the houses that we had looked at and what we do.  Regardless of what Pete thought or was used to, we could afford quite a bit of house with a 30 year fixed loan.

The question wasn't about whether we *could* or not but rather, did we want to.

Surprisingly, the answer is no.

I say surprisingly because we thought we would be moving back into a house the size of the one that we moved out of last time.  It was big and nice and we just thought we would get back into something like that.  Quite frankly, we probably would if the prices were like they were 3 years ago.

I like space.  I know it's not efficient but I like to have open space.  I don't like to feel cluttered or closed in.  We have never owned a coffee table because it takes up too much space.

With prices the way they are now, it became a trade off between having a large (well, relatively anyway since I wasn't impressed by what we saw) house or having extra money every month.  A couple years ago, we may have gone with door #1 but after living with extra money in our pockets for a year, we just can't see going back to having all our money spoken for before we even have our paycheck.

"Do we want an extra comfortable house or extra comfortable everything else?" my wife asked, summing it up. 

This Is Probably The Hardest Part Of The Money Choice Program

My wife overheard a conversation the other day that she shared with me this morning.  A couple were going to refinance their house and were going to get an "interest only" refi.  I can't remember if I've covered this here but I go into it in some detail in my book.  The short of it is that for most people, these are a bad deal.  For mortgage companies they're great.  That's usually how it works.  If it's wonderful for the mortgage company, you're getting screwed.  If it's good for you, they aren't getting any money.

The conversation came to an end with a shrug and the words, "I've accepted that I'll always be in debt."

The hardest part of my job is breaking the programming that the banks have instilled in the general public.  People don't have to always be in debt.  In fact, people can get out of debt rather quickly if they want.  They don't try.  One of the reasons they don't try is because of this belief.  There are other reasons but this is a big one.

What to do with money

My wife and I have discussed this often.

Right now, we are concentrating on our family.  You have to take care of yourself before you can take care of others.  We have a limited number of people that we are going to buy presents for.

Next year, it will probably be different and from then on out.

Once we have gotten to where we are going then we will start working with helping others on a larger scale.  Friends, family, and charities. 

More on this later.  Right now, I'm going to go back to enjoying my vacation.

Here's another good rule that I have heard

If you can't afford it, then you can't afford it.

That's pretty straight forward but most people don't abide by it.

My wife and I have gotten really good at following this rule.  It is actually surprisingly easy to live by once you're out of the habit of charging things.  And like I said in an earlier post, once you get to the point where you can afford things, you may not want to buy them anyway because this plan is so addicting.

My wife said it best yesterday when we were talking about our upcoming trip.  It's going to cost us more money than we would have liked but it's the holidays and we're visiting her parents.  We only get to see them a few times a year so it's important to go when we have the chance.  It's really not costing that much as far as trips go.  Gas and a bit of food and that's about it.  And we are paying cash of course. 

Anyway, she said that it just comes down to choice.  We get to decide what we do with the money that isn't promised to bills.  Many people get themselves so caught up in bills that they have little choice in where their money goes. 

For us, it means that for the next month we slow down on paying off our debts.  We'll use the extra cash for this trip, Christmas presents for Trey, and another trip after Christmas. 

When the holidays are over, all the extra cash starts going back toward the debts.  In 2007, we should have everything paid off except our house.  How cool will that be?

Instant Gratification

I have heard these words take such abuse by financial advisors and I really think it's uncalled for.  You won't hear that from me.  I'm a big fan of instant gratification.  A huge fan.  When I see something that I want, I want to buy it.  I don't want to wait.  What's the fun in that?  Aren't we working to get money in order to buy things?  What good would money be if we didn't use it to buy stuff?  Sure you can use it to make more money but then what?  At some point, isn't it supposed to be used for its purchasing power?

The only thing to remember about instant gratification on this plan is that you can only use cash to use fulfill it.  It's a simple rule.  Maybe you have heard it this way, if you can't afford it then you can't afford it.  You can't charge purchases for instant gratification because the end cost is way too much plus you reduce your ability to purchase things next month and for the next 20 to 25 years. 

The longer that you work this plan, the more cash you will have on hand.  I told you what will happen over 3 to 6 months on the plan.  You start to increase the amount of cash that you get to spend on anything you want.  Discretionary cash, experts call it.  MY cash, is what I call it.  It doesn't belong to the mortgage company or the credit car company or the bank holding the title to my car.  It's mine, all mine.  Insert demonic laughter here if you like.

And the longer that you work the plan, the more of it you will have.  After a year or so, you'll probably be able to pay cash for that new TV if you want.  You'll have more cash and more buying power than you can remember. 

There is one thing that might get in your way of buying that TV though.

Tomorrow: the addiction

Part of the power of this plan

As you work this plan, things will change for you rather quickly financially.  You will find that you have more cash at your command within months.  That's the goal of this plan, to put you in charge of your money.  Financial Freedom means that you get to decide where your money goes on a case by case basis instead of promising it away for the next 20 years. 

Back to your TV.  In our example, we had $100 in cash left after we paid utilities, food, and the bills.  Let's say that you applied this $100 toward your smallest debt.  How long until it was gone?  When it was gone, you would be able to add the money you usually use for that bill into your cash.  Then you start putting it toward your next bill and pay that one off.  We'll go into more detail on examples later but let's say that after doing the plan for 4 months, you now have $200 in cash that you are applying to bills.

And you decide that it's time to buy that $1,000 TV.  Now you only have to save money for 5 months before you can buy it.  That's pretty good.  Not great.  But good.  Not instant gratification but at least it's not a year.

What if you were into the plan 8 months and had $500 in cash that you were using to pay off bills when you decided to buy a TV?

Tomorrow: instant gratification

Do it in reverse

Make the payments on what you want, to yourself at 0% interest (or even earning interest), and then pay cash for what you want.  I know that at first glance this seems to go against the fondness shown for instant gratification but it doesn't have to.  I'm not going to talk about the evils of instant gratification because I don't necessarily have a problem with it.  I'll explain why.

When you work the Success Warrior Plan for Financial Freedom (a cool name that I just now made up), you are going to have some extra cash from the start.  This means that if you want a TV, you may have to save up for a few months but look at these scenarios.

Let's say that the TV costs $1,000 and you are able to save $100 a month.  Easy math shows that you'll have your new TV in 10 months.  Instead of that, you decide to finance it with the company at 8% for two years.  Your payments will be about $54 and you'll pay around $1,300 dollars for a TV that should cost $1,000.

Maybe that doesn't seem terrible to you but let me show you something else that is so important.  Let's say that while you are either saving for the TV or paying your installment payments, you blow out a tire on your car and it has to be replaced.  If you are making installment payments, you may only have $46 dollars cash to play with.  Maybe enough for a tire but you might be forced to put it on a credit card instead.  If you are making the payments to yourself, you have $100 in cash to fix the tire.  It might put the purchase of the TV back a month but that's how life goes. 

People are putting themselves into debt to the point that they can't deal with "surprise" expenses.  I put surprise in quotation marks because if you are alive and drive a car and own a house, it really is no surprise at all that you are going to get sick, have car repairs, and need to make home repairs.  There is no surprise that these are going to happen, we just don't know when they are going to happen.  That's the surprise part of it but it doesn't excuse us from being prepared for them.

Tomorrow: more on the TV, three to six months into the plan

Let me clear up yesterday's post

I tend to run short on time on Saturday's and it showed in yesterday's hurried post.  I work a long shift on Friday getting off early in the morning and I wake up when my son wakes up which usually isn't more than a few hours.  I teach karate on Saturday's and then try to catch a nap if my son will let me so I can work long and late on Sunday.  The payoff is that I get Sunday off and some extra time with my family.

It was pointed out that buying cheap sunglasses sounded very much like settling.  A good point.

Not settling means that you are buying what you want.  The item that will best suit your needs or wants.  That doesn't always translate into buying the very best item and it certainly doesn't mean buying everything you can. 

For my sunglasses purchases, I'm looking for something that will give me some protection from the sun and something that I don't care gets broken or lost.  When my son gets older, maybe that will change.  Maybe not. 

If I was going to be in the Tour De France or the America's Cup, I'm sure that I would have a different view on sunglasses and I would make the appropriate purchase.  If all my friends wore a certain brand of sunglasses and I wanted to fit in, I would have a different view. 

But I have a two year old son who manages to get ahold of things that were once safely out of his reach. 

Taking the "Don't Settle" attitude means bringing the best things into your life that will meet your needs.

Tomorrow: more on settling

Don't Settle

I had a good friend that used to say this.  We talked several times about settling, from everything ranging from material goods to personal relationships.  Settling is such a devious thing because it can become a habit.

"Good enough is the enemy of greatness."

Everytime you settle for something less than you want, a part of your dream dies.  And each time that it happens, you become more resigned with the life that is claiming you.  You give up on the life that you wanted and accept the one that is offered to you.

"Don't settle," doesn't mean that you have to have the best of everything.  It does mean that you can get what you want. 

For example, I buy the cheapest sunglasses that I can find.  I have several pairs.  I don't lose them like I used to but they end up getting scratched or like my last pair, snapped in half by my son who was testing their strength.  It also means that I usually have a pair around where I need them.  If I leave a pair in the car, I probably still have one in the house so if my wife has the car, I still have some sunglasses.  I have thought about buying expensive sunglasses but at this point in my life (or rather, my son's), I don't see the point.

Most people get stuck where they have backed themselves up into a financial corner and they have little choice on what they can purchase.  Settling just becomes a way of life and it can effect so many things beyond just what you can buy.

Tomorrow: more on settling