Unexpected expenses

Unexpected things happen in life.  Some may be good and other things not so good.  We should all take ownership in preparing for unforeseen events that may occur at some point in our life.  We can prepare mentally, physically, spiritually, emotionally, and so on.  Our focus is on the financial aspect when it comes to being ready for unexpected circumstances.

First, we need to realize there is no shortage of expense in our lives.  Each month we need to have enough money for our mortgage, utilities, transportation, food, and so on.  Most of us only have one income or two incomes if your significant other also works.  If one or both of these incomes vanishes, we still need to come up with the money each month to pay bills and buy food.  Ask yourself, how long can you survive if your income disappeared?  Do you have enough fluff in your savings to support a few income-less months?  Also, do you have a backup plan in case you could no longer work for some unknown reason?  These are really difficult questions to answer.

Before answering these questions, I think it is only fair to understand the implications of saving more money versus investing or paying off debt.  If you decide to save an extra $500 or $1,000 per month, this is going to be $500 or $1,000 less you are investing or using to pay off debt (i.e., car loan, mortgage, student loans).  This money sits in your savings account with minimal interest.  This money is also very liquid and those with little discipline may have a difficult time not touching it.  These are a few things we need to think about when using extra funds for savings versus other activities with higher ROIs.

Back to the question, do you have enough fluff in your savings to support a few income-less months?  You need to determine how long it would take you to find another job with a comparable salary if you were let go.  If you think you can get another job in 2 months, then you will need at least 2 months of salary to hold you over.  You should include an additional month as a safety factor, so total 3 months salary saved.  If you did end up getting laid off and had no income temporarily, you will want to understand what expenses you can cut back on for the time being.  For example, you may want to cancel your cable or stop eating out temporarily.

As a young boy, I lived in a small town in Ontario, Canada.  The town had multiple manufacturing plants (i.e., food, automotive, chemical) operating, which provided many residents with good paying jobs.  Unfortunately, by the the 90s a lot of these companies closed their doors and moved to Mexico or consolidated with other plants some place else.  The workers who saved their money were fine and did not fall during these tough times.  The workers who spent their money quickly did have to sell their houses, boats, vacation homes, and so on.  This is something I always think about when planning for the future.  You do not want to end up like the workers who spent their money quickly with no plan for the future.

Feeling behind and how to get ahead

Imagine… everyone around you has advanced to levels above you in their careers, social status, and personal lives.  You may feel jealous, discouraged, and maybe even deficient.  In order for you just to catch up, you would need to complete your degree, work for years in an entry level role, and break poor habits you have today.  Surprisingly, many would rather not put in the effort to change their lives.

“I am too old to go back to school…and I do not have the time”
“I do not have the money to go back to school…”
“It is too late for me to change my career now and I do not want to start allover again”

There are countless excuses out there for why people do not pursue a better life for themselves and their families.  This is often easier said than done, but is important.  Do not delay any further from pursuing your goals.  If you want a new career and it requires additional education (i.e., college degree, training), then research information on the program, create a plan, and execute.  This needs to happen quickly before you can talk yourself out of it.

At one point of my life, I knew I needed a graduate degree to keep moving up in my career in the corporate world.  I researched various programs to see, which one fit me best.  Since I was working full time, I knew I needed a program friendly to professionals.  I also knew my company would pay up to $10,000 per year, so I wanted a program reasonably priced.  Each of us will have different situations and we need to be cognizant of this.

Once I identified the program I felt was best, I drew up a plan, which included timing for each step required.  I immediately purchased a GRE (Graduate Record Examination) study guide to help me with studying for the GRE.  I booked an exam date for the GRE, sent my undergraduate transcripts to the University I was applying to, and asked for three letters of recommendation from an old professor and two colleagues.  After getting the application process completed and being accepted, I selected my first courses.  After two years, I had my graduate degree.  If I thought I was too old or it was too late, I would not have finished this today and would still be thinking about it.

Work towards your goals by acting today without second guessing yourself.  If you are looking to improve your situation, then you are on the right track.  Do not be the people who generate unlimited excuses.  Be the person who generates results by taking action.

 

Mindset of a champion

Imagine there are two tennis players analogous to one another in terms of talents, skills, and abilities.  How can one tennis player increase their chance of winning the match knowing their talents, skills, and abilities are comparable?  Looking past all other physical factors (i.e., weather, location, equipment), a tennis player with a superior mindset will have a better chance of overtaking the match and winning.  A negative attitude can be detrimental to a tennis player’s game and once it starts, it can be very difficult to reverse.  If you want to win, you need to have the mindset of a champion.  This mindset does not come to most overnight and does require time to build.

Confidence is a major ingredient needed to start developing the mindset of a champion.  If you are a tennis player, you need to win a few matches to start building your confidence.  In other words, positive experiences are a great starting point to begin building confidence.

Ownership is another ingredient for developing the mindset of a champion.  Acting like a victim when you do not get what you want is simply lack of ownership.  By taking ownership of your results, you are going to work harder to do better and achieve excellence.

Optimism is also key in developing the mindset of a champion.  This should not be confused with creating false hopes.  Do not stress and create a negative environment because automatically you are creating the conditions to fail.  Keep your head up and believe in yourself and your teammates.  This will further solidify a health mindset and help you reach success faster.

So going back to the question, if you have two individuals with similar talents, skills, and abilities, how does one set themselves apart from the other?  Confidence, ownership, and optimism are going to be key ingredients in developing the mindset you want.  As mentioned, these are not characteristics mastered overnight.  As badly as we may want to be confident, it does take time to build confidence.  The more positive experiences you have, the more confident you should be.  It is also easier to take ownership of successes than failures, but we need to take ownership of both.  Optimism is also a feature that may not come natural to some of us and we may need to keep reminding ourselves to be optimistic.

These are just a few things I think about when I think about the mindset of a champion.

Perspective change

Today I had my first child with my wife.  It was a very magical moment, which cannot be described in words.  I am sure most fathers and mothers would agree.  My website http://www.civilaccomplishment.com is meant for sharing useful information to those interested in improving their financial situation.  There are many factors that can impact your financial situation and not all factors are directly related to money.  A new family member can be a significant life changing event, which will impact your financial situation.  It is an event that will make you think about your world differently.

Immediately, I am now thinking I am not going to go out and drink too much.  I am responsible for another human-being in this world and need to be competent at all times.  I am also thinking I need to manage my money without error.  I have always been good at managing money, but before if I made an error it would only impact my wife and me.  Now we have a child that is solely dependent on us to support him.

Further down the road my son may want to play sports (i.e., ice hockey, baseball, tennis) and these sports can become very expensive.  I will need funds to support my son’s desires to play sports.  I always think back to my dad when he was young and his family did not have enough money to let him play sports.  It makes me a little bit sad to think about.  I want my son to have every opportunity possible.

Even further down the road, my son may want to go to college and the cost will only increase as the years go on.  I will need to save up roughly $100,000 per child to put them through college.  Knowing all of this stuff, what should we be doing now to make sure we are prepared?  We should be managing out money the best we can.  We need to assure we are making the best career decisions we can because the difference between a good and bad decision could be huge in the long run.  I will be thinking about all of these things from this day out.  It is my duty as a father and I am excited for the journey ahead.

C.A. progress thus far

I started blogging 02/11/18 on http://www.civilaccomplishment.com and have blogged about many topics.  Some of these topics include Mortgage RemovalWorking from home2018 Tax SeasonEating out versus eating in, and many others.  I am still working to fine tune the mission of civil accomplishment.com, but feel I am getting closer each day.  There are far too many with financial issues and far too few with financial stability.  How does this happen?  Why is it so difficult to become financially stable?  It appears there are more forces working against you than with you.

It can be super stressful to be low on funds and not know if you can keep your electric on.  It can also be frustrating when you know you are putting in many hours at your job and only scraping by.  As I discuss in Mortgage discouragement, people are likely to become discouraged and not end up successfully paying down their mortgages in a timely fashion.  Once a person becomes discouraged, it can be very difficult to get them motivated again to push forward and succeed.

Since it has only been a month since I first started http://www.civilaccomplishment.com, I do not expect an overwhelming number of visitors.  I will say, we are not doing too bad considering the limited advertising.  I ask you to share this blog out with your friends, so we can grow our discussions on the topic of financial stability.  This is important to me and should be important to you.  If we all grow together financially, our economy can do better and will.

Creating a business plan

Similarly, setting goals in your personal life, a business plan is crucial to running a successful business.  If you own a business or are starting a business, you will want to have a document titled, business plan.  In my experience, you will want to review this plan at least once per quarter.  As guidance to help you create a business plan if you do not have one, I laid out the crucial parts and briefly describe each one.

Business statement

Defines business purpose.  For example, a financial business can say to develop and implement financial solutions to assist small businesses leverage cash in the marketplace.

Goals

I typically divide out the business goals into long term (>5 years) and short term (<5 years).  It is most effective to list a maximum of 3 goals per long term and 3 goals per short term.  This will help you stay focused on the large priority goals versus a bunch of smaller goals with less impact on your overall business.

Business history

This portion is used to describe the beginning of your business and how it was created.  The story can be used further down the road when selling your products to your customers.  A good story about your company can help your customers better relate to your business and potentially persuade to purchase from you instead of your competitors.

Business information

Any additional information such as your business type, address, phone numbers, e-mails, and so on can be added into this section.

Personnel and organization

In this section, you would lay out the hierarchy of your company.  You may even want to add specific areas of expertise for different departments and people.

Target market

This section lists the market you are selling to (i.e., food & agriculture industry, automotive industry).

Product / services

You would list out the products and services you are selling.  If you sell 1,000s of items, then you may want to just classify the items into different categories.

Financial information

This section would contain sales, expenses, profits, and any other financial information you find pertinent.  You can list financials on how much you sell to the largest customers or list financials on how much you buy from the largest vendors.

Lessons & key takeaways

I am not sure if a lot of people put this in their business plans, but I find it very important.  Since I update my business plan yearly, I like to list the lessons and key takeaways I’ve learned from the previous years.  It has been quite helpful.

2018 plan to follow

This is another one that I am not sure if other people use in their business plans, but I also find this very helpful.  This list is usually produced from the information collected from lessons and key takeaways.  These are the things you will want to execute to make sure your company is successful.

Projects

The last thing I put into my business plan, which may or may not belong is big projects.  These will be the projects I am pushing to complete in the upcoming year.  I list out the project name, objective, and budget.  This may be optional for your business plan, but I thought I’d mention it anyways.

Defining personal success

If you look up the definition of success, you may find a definition like this – accomplishment of a purpose.  We also know when we talk about something personal, we are talking about one’s private life.  A lot of times when people think about success, they often think about being a millionaire, living in a mansion, having a supermodel wife, and maybe even vacationing all the time.  Even though these things sound fantastic, they are not always realistic.  When we think about personal success, we should think about goals pertaining to us as an individual.  Not all people associate success with being a millionaire or living in a mansion.  In my opinion, there is more to success than materialistic things.

When you set your personal goals, you should be thinking about the things truly important to you.  These can sprout family values, personal experiences, role models, or maybe somewhere else.  Think about the steps you will need to take to achieve each goal.  Prior to purchasing a home, I knew I needed to identify a home I wanted to purchase, apply for a mortgage, and be approved for a mortgage.  I thought about the process of purchasing a home early on to make sure I was prepared and had everything I needed to succeed.  This falls under my key strategies, gather information/data to better prepare yourself for the future.  You can read more about this in my blog titled, C.A. strategy exploration.

Personal success is defined by the individual and not everyone will have the same set of goals.  The process of setting goals and thinking about how the goals are going to be achieved may be similar.  Another example I can share involves my career path.  In high school, I was stocking shelves at a local grocery store making roughly $6 per hour.  I knew this was not the job for me for my entire life and I wanted to make much-more money.  In order to get a better job and start my professional career, I knew I needed to graduate college.  To better prepare for a professional career I knew I needed to perform well in high school, get accepted to a college, and finish college with decent grades.  This would be a long term goal (>5 years).

Try thinking about some of your goals (both long term and short term).  Work through the process and the steps required for you to be successful.  Keeping a journal as mentioned in my blog titled, Keeping a journal for success may be beneficial.  As mentioned a journal will help you keep yourself accountable for your goals.  It is important to create realistic goals, but do not be afraid to stretch them a little bit to challenge yourself.

Please share your personal success stories.  Both success and failure stories are welcomed.

 

Mortgage discouragement

When you look at your mortgage and see the remaining balance, you may feel discouraged.  Some will say, I have been paying my mortgage payment for years and still do not see it decreasing by much at all.  Even if you are adding more money to the principal, in the beginning it may appear the balance is decreasing very slowly.  This is when most people will reduce their payment to the minimum each month and by doing this, you can be certain the remaining balance will move like a snail throughout the rest of mortgage’s days.

My previous blog titled Mortgage Removal briefly talks about paying off your mortgage as quickly as you can.  I discuss how financial advisors may tell you to invest your money in other investments instead of putting extra money towards your mortgage.  I strongly believe in most cases, putting your extra money towards your mortgage is a better investment.  Although this is an interesting topic, I want to really dig into the discouragement of a mortgage balance not moving fast enough.

Since I purchased my home I have always been consistent in putting the same amount of extra money towards my principal each month.  I am adamant about not reducing the extra principal payment throughout the year.  I only change this amount in January when a new year starts.  At that point, in the new year I increase the amount of money I put towards my principal.  Just as an example, if I am paying $250 extra on my principal in 2017, I may increase my extra principal payment to $350 starting January of 2018.  In 2019, I may add another $100 to my total principal amount making it $450.  I would never decrease my extra principal payment unless unforeseen circumstances forced me to do this.

The important thing is to remain consistent and not get discouraged.  In the beginning, the principal will reduce at its’ slowest rate.  As you progress through the life of the mortgage, I assure you will see faster decreases.  It is important you keep going and remind yourself that it is important you continue paying extra towards your principal.  This will help you build equity in your home, which I would advise you not to use.  It is just a nice to have in my opinion.

Let me know your thoughts on this.

Working from home

Not all jobs are work from home type of jobs.  For example, if you are a maintenance mechanic, then you will most likely need to be on site to do your job.  If you are a project manager, you may have flexibility on where you can work from.  There are both advantages and disadvantages to working from home.

Starting with the advantages, you are saving yourself time and money when you do not have to drive.  The 15 minutes in the morning and 15 minutes in the afternoon could be an extra 30 minutes you are working.  You may also be able to save a few dollars on gas and tolls by working from home.  When you are working from home there is no one for you to chit chat with to consume extra time that way.  In my opinion, your productivity increase when you do work from home as long as you are discipline and motivated.

On the disadvantage side, you are not getting the same face time you would when you are in the office.  It is easier to build relationships face to face than on the phone or via email.  You may also miss out on some common knowledge being shared in the office.  In my field, a disadvantage is not being able to run into the lab to use equipment to run a quick test to confirm what a supplier is telling me.

I do believe working from home is beneficial, but should be mixed in with working in the office.  Working from home one day a week seems reasonable to me.  In my situation, I drive 30 miles each way.  With traffic this ends up costing me roughly 90 minutes per day of travel time.  I am spending $7.50 per day on gas because my Jeep gets 20 mpg and gas is roughly priced around $2.50 per gallon.  The toll each way is $0.75, so in total I am spending $9 each day I go into the office.  If I work from home once a day for the entire year, I am saving $468 and 78 hours.  In this example the money piece is significant, but more importantly I could be using 78 hours more effectively.  This is nearly two extra weeks of working where I can get more done and possibly set myself apart from the rest of the pack.

2018 Tax Season

The Internal Revenue Service (IRS) announced the nation’s deadline to file taxes is April 17, 2018.  The fastest way to receive a tax refund is through e-file and direct deposit.  [IRS information]  The IRS offers Free File Fillable Forms for those who have the time to put the effort into filling it out.  To avoid common mistakes, the IRS does provide a User’s Guide (PDF) to help users file their taxes using the Free File Fillable Forms.

You may also be interested to know TurboTax does offer an AbsoluteZero tax filing service for no money.  To use this, you need to meet the following criteria:

  • Made less than $100,000
  • Don’t own a home or rental property
  • Didn’t sell investments
  • Don’t own a business or have 1099-MISC income
  • Don’t have any major medical expenses

H&R Block also has a zero federal and state filing service.  Similar to TurboTax, H&R Block will charge you money depending on your situation.

  • Have children
  • Own a home
  • Have an HSA
  • Freelance / contractor
  • Have investments
  • Own rental property
  • Self employed
  • Own a business

So, I guess you can say nothing is really free unless you have a simplistic situation.  For my current situation, I require an accountant because I own a home, have an HSA, do freelance / contractor work, have investments, am self-employed, and own businesses.  I feel more confident working face to face with an accountant to make sure everything is captured.  You can try saving a few dollars, but if your taxes are not done correctly, it can end up costing you more in the long run.

Tax season is not always necessarily fun, but required by the state and federal government.  Make sure to ask your accountant each year what you need to do to benefit the most.  What situation do you need to be in to gain the maximum tax benefits?  This question needs to be asked each year because tax laws are constantly changing.  This year may not be the same as the next year, so there may be different tactics you can work on to get better tax breaks.

 

The importance of managing your career

I have talked about Budget by indicators, which is a method you can use to track your income and expenses each month.  I have also talked about the Battle of increasing bills, which discusses the importance of not letting your service providers raise your rates without a fight.  Managing your budget is a crucial piece to financial success, but without income growth year-over-year, you may not be able to hit your targets.  So, lets explore this a little bit more.

Each year inflation on average is between 3% and 4%.  If your salary increase each year is between 3% and 4%, then you are not really making more money each year due to inflation.  Your extra 3% to 4% is going to the increased cost of goods (i.e., food, clothes, gas).  You will want to beat inflation, so on average you will want at least a 5% salary increase per year for at least 1% income growth.  To accomplish a >5% increase on average per year, you will need to consciously manage your career.

To get ahead of the pack, you need to equip yourself with the tools and a good track record.  The tools may be schooling, trainings, certifications, and/or experience.  The track record is proven results showing your contribution and value to the company. In managing your career, you may need to jump from position to position to gain different experiences from different roles.  With more knowledge and ability to contribute, your pay should increase.

Why is it important to manage your career?  By building your capabilities and worth to the company, you are going to have the opportunity to earn more money.  Earning more money helps you grow and build financial stability faster.  If you have debts, you are able to pay them off faster.  A larger salary will allow you to contribute more to your 401k.

It is highly unlikely someone will tap you on the shoulder and give you a raise for no reason.  It is completely on you to build the talents necessary to get to the next level.  It is also completely up to you to present yourself as promotion ready.  As they say, the squeaky wheel gets the grease.  You do need to be a squeaky wheel to get the grease, but make sure your squeakiness is meaningful.

Key takeaways

  • It is important to manage your budget well
  • Average annual inflation rate is roughly 3% to 4%
  • It is completely up to you to manage your career and build the skills you need to take on larger roles with larger salaries
  • A larger salary comes with many financial benefits including faster debt removal and faster financial stability

Don’t promise the world…

Have you ever met someone who says they are going to achieve great things time and time again?  At first, you think they are very driven and are going to achieve great things.  After a while, you realize they are not doing anything they said they would.  As time goes by, you increasingly realize they are simply worthless.  You do not want to be that person who promises the world and delivers absolutely nothing.  Even if you deliver 99% of what you say you will deliver, there will be disappointment based on the 1% not delivered.

I feel the best approach is to gather as much information as possible and make a real estimate on what can really be delivered.  You will need to set a plan forth to accomplish what you promise and the hope is you overdeliver.  This can be applied to your personal life, career, school, and so on.  We really need to think about what we are promising because others may be counting on your promises.

For example, if you are a salesman or saleswoman and you promise 10% growth in sales this quarter, then you must deliver 10% growth in sales for the quarter.  If you fail to meet the promise or goal, you will lose believers.  If you repeat this overpromise and underdeliver scenario enough, you will have no one believing in you.  It is sometimes better to promise less and deliver more to grow your reputation.

I really try to gather information/data to better prepare myself for the future.  I really try to understand the entire situation and predict the various scenarios that may come out of me choosing different options.  I also think about where and how I can be most effective.  It varies for different situations, but your mindset and how you think about each situation will be similar.

Things to know

  • Do not overpromise and underdeliver
  • Gather information/data to better prepare yourself for the future
  • Understand the entire situation and play out each outcome before making decisions
  • Understand where and how you can be most effective