Review: Essentials Of Economics: A Brief Survey Of Principles And Policies

Essentials Of Economics: A Brief Survey Of Principles And Policies by Faustino Ballve
My rating: 5 of 5 stars



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Review: Edgy Conversations: How Ordinary People Can Achieve Outrageous Success

Edgy Conversations: How Ordinary People Can Achieve Outrageous Success by Dan Waldschmidt
My rating: 3 of 5 stars



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The 21 best personal finance books of all time

This is not your ordinary list of personal finance books. When you look at the other "best personal finance books" lists out there, they tend to be a list of books that talk about investing or budgeting and very little about the thinking behind building personal financial success. I have intentionally not included some very popular personal financial books in this list.

I have read every one of these books (at least once). I believe this list of books, if studied over a short period of time, can have a great impact on a person's personal finances. I have used principles from every one of these books either directly in my financial coaching or indirectly in how I go about coaching people in their finances. To get the best benefit these books should be read and discussed as a group (at least two people). Reading, applying, and sharing (or teaching) give the greatest impact in your life.

I've ordered the books from least impactful to most impactful. This was very hard to do as they are all great books in their own right. I tried to design the list in such a way that if you could only read ten of the books, reading the last ten in the list would give you the most benefit in your life.

21. Think and Grow Rich

 This is a classic book that links how we think to the success we see. Many successful and influential business owners have recommended this book and noted its influence in their rise to success. Author Napoleon Hill states he was commissioned by Andrew Carnegie to interview highly successful business owners of the day and share their secrets of success.

This book contains a combination of viewpoints on life and success with psychology and techniques to program your subconscious. It also covers networking and techniques to use networking techniques to create better results for everyone in the network.

20. Rich Dad, Poor Dad

This was one of the first books about money I ever bought. I was at a convention that Robert Kiyosaki was speaking at. I saw the book for sale in the halls. We didn't have children at the time and I thought, from the title, that it was a parenting book, so I had no interest in getting it.

Then I heard Robert Kiyosaki speak. His tale of growing up in Hawaii with his Rich Dad (his best friends dad) and his Poor Dad (his biological father) was inspiring. This book weaves stories from his life and the lessons learned. 

The first half of the book talks about the importance of getting your financial basics down. The second half talks about the value of generating cash flow from assets. I've found that many people get so excited reading the second half of the book that they completely forget the first half (getting your financial house in order). Make sure you pay just as much (if not more) attention to the first half.

19. The Autobiography of Benjamin Franklin 

The original franchiser, Franklin set a pretty good pattern for a successful life. He mastered a skill by apprenticing under a master. He pivoted from printing to writing. He developed a way to get passive income from his mastery. Once he had enough passive income from his franchises, he was able to pursue his passions in the natural sciences and politics.  

 

 

 

 

18. The Millionaire Next Door

When people hear the word millionaire, certain things come to mind like a nice house, luxury cars, fancy clothes. In The Millionaire Next Door they gather data on actual millionaires. What kind of clothes do they buy. How do they buy cars? How do they look at money and material things.

The most common views we have of millionaires are actually from people who will never be millionaires, mostly because of this show of "wealth." This book is a must read for anyone who really wants to be a millionaire.
 

 

 

17. 7 Habits of Highly Effective People

These seven habits (Proactive, Begin with the End in Mind, First Things First, Win-Win, Understand before being Understood, Synergize, and Sharpen the Saw) are not only important in business (and your career) and are fully applicable to your personal finances. Starting out with where you want to go (Begin with the End in Mind) is critical for charting your financial course. Having targeted savings and an emergency fund is being proactive. Investing in your career development and education is sharpening the saw. And so on.

As these are habits they should be applied to all areas of your life. I recommend clients focus on a single habit they would like to acquire for 12 weeks. Reading this book and working through all seven habits will not only help you in your finances but will help in all areas of life.

16. Peaks and Valleys

We all have ups and downs in life. Its how we look at and handle these times that make the difference in our lives. Peaks and Valleys is an allegory for going through the ups and downs in life, and how to use the valleys to our advantage and not let the peaks slow us down.

 

 

 

 

15. The E-Myth Revisited

Many people dream of starting their own business. Often when they start their dream business it turns into a nightmare. They feel like they have more pressure and stress than when they had a job.

The E-Myth Revisited is a classic which has been recommended to me by entrepreneurs from just about every field. It walks through how to systematize your business and turn your dream business into a dream lifestyle.

If you are considering starting your own business, the E-Myth revisited is a must read.

 

14. The Price of Everything

The Price of Everything is an intertwining of two stories, one of the United States shortly after a natural disaster and one of Cuba. Between the two stories they explore the ideas of supply, demand, and how understanding human nature and some economic principles can affect your life.

While not about your everyday finances, this book helps understand how your personal finances fit in the overall picture. This understanding of where you fit in can help in your longer term financial planning.

 

 

 

13. How I Raised Myself from Failure to Success

Most people see the word "selling" in the title and are immediately turned off. Don't let the title fool you. This is not just for used car salesmen. The principles in this book can be used in any field where you deal with people (which is just about all of them).

For instance, as an introvert I got a lot of value from the discussion in chapter 2 on enthusiasm. Some of the principles (like understanding the law of numbers) appear to be more sales oriented, there are tidbits that can have a great impact in other areas of your work.

Applying the principles found in the book can help just about anyone be more effective in their field.

 

12. The Cashflow Quadrant

Often referred to as ESBI, the Cashflow Quadrant idea was first introduced in his Rich Dad, Poor Dad book. In this book, Robert Kiyosaki dives deeper into the four quadrants and why it is so important to understand the benefits and drawbacks of the four ways of making money (Employee, Self Employed, Business Owner, Investor).

There are valuable insights that help make sure you're not self-deceived into think that as a self-employed person you are actually a business owner. Or thinking that because you have a 401(k) that you are an investor.

He also delves into the mindsets and values of each of the quadrants. This helps you better evaluate which quadrant you are really in and what perspective shifts you need to change quadrants.

11. Financial Fitness for Teens

When I first received my copy of Financial Fitness for Teens, I thought it was going to be a watered down version of Financial Fitness (which is later in this list). Boy was I wrong. 

The original Financial Fitness book was written for adults who have made financial mistakes. Financial Fitness for Teens is for youth who haven't gotten themselves into a financial hole yet. It gives them a hard-hitting and aggressive plan to excel at building your financial future.

My children were so inspired after reading this book that they immediately started saving vast amounts for Life Savings, Emergencies, and Targeted Savings. While they haven't always followed the formula from the book perfectly, they are far better off than if they had not.

Now I do not include this book in the list for your children. This book is a great ideal to work towards. Us adults have had financial setbacks and mistakes we have to overcome. Its always good to have a golden ideal to be working towards so we do not get complacent with the progress we have made and instead realize that we are still on the path towards the ideal.

10. The Magic of Thinking Big

The Magic of Thinking Big is a classic in expanding your vision and challenging your habits. Dr. Schwartz not only inspires the reader to stretch what they believe is possible, but also gives common pitfalls that can prevent chasing big dreams and practical aspects of daily life that you can integrate into your life. 

A young Lou Holtz, after being let go from his first job as an assistant coach was pulled out of depression when his wife encouraged him to read this book. He was so inspired that he made a list of over 100 amazing things to accomplish in his life. He excitedly showed his wife, who after looking over the list replied, "Can you add one more, get a job?" Coach Holtz accomplished a majority of the items on his original list, including being the head coach of the Notre Dame football team.

9. The Go-Getter

It’s a simple story. A man is given a task to perform by his employer that seems simple enough, until it appears impossible. When you give your word, is it based on the expected circumstances, or are you willing to give it your all to ensure you keep your word. This makes all the difference to an employer, a client, or a family. 

 

 

 

 

8. PAiLS

The age old question of should you follow your passion or work for the money. PAiLS takes a more holistic approach of looking at your life's work in stages. The early stages are more about getting experience, middle stages about making money, and later stages about following your passion, if done correctly. 

Chris Brady lays out a very helpful thought process to view your work at different stages of life. He discusses actualizing your potential leading to your legacy, but allows for what he calls "spillage" or not being perfect in your journey.

While designed for those on the younger side of life, the concepts can help anyone identify where they are in the phases of work so they can more clearly outline a path to their purpose. 

7. The 12 Week Year

New Year’s Eve comes every year and it’s almost a running joke that gym space is only at a premium until February. Why do we have such s hard time keeping our goals in sight? What if instead of seeing New Year’s Eve goal’s just in January, we set them every three months. That works adore us to see measurable progress without having 11 more months (plenty of time) to see the goal to completion. This is one of the concepts I’ve baked into my coaching, setting meaning l meaningful goals every 12 weeks.  

 

 

6. The Ant and the Elephant

The Ant and the Elephant is a wonderful allegory that teaches you how to train your subconscious to work for you instead of against you. You conscious mind stimulates around 2,000 neurons when you think a thought. Your subconscious mind stimulates around 4,000,000,000 neurons when it thinks a thought. This difference is roughly the difference in size between an ant and an elephant.

This allegory of an ant riding on the back of an elephant, trying to steer the elephant, contains several practical ways in which you can steer your subconscious to do a lot of the work for you. Your subconscious is always working, even when you're asleep. It is doing so much more work than you can with your conscious mind. Using the principles in this story you can take advantage of all that raw power.

5. The Slight Edge

The concept of the slight edge is that consistent actions in the right direction can have a huge impact over time. Most people get discouraged with the slow results, not understanding the power off compounding. 

Implementing the principles in this book can have a profound impact on your progress in any area. This book was a huge post in the development of my coaching material. 

 

 

 

 

4. The Richest Man in Babylon

The original personal finance book. The content for the book started out as a series of articles on personal finance. They became so popular they were published as a book. 

I’ve have had this book recommended by more people from more backgrounds throughout my life than any other book about money. The principles are timeless and echoed on the more modern books on personal finances. For instance the idea of paying yourself 10% originates here. 

Told as a story set in ancient Babylon, they principles are shown to be timeless (although the discussion on insurance feels a bit forced). If your looking for a story that teaches sound financial principles, The Richest Man in Babylon is a must read.  

 

3. Resolved

Originally written to the author’s children, this fantastic work is patterned after Benjamin Franklin’s resolutions. The book is designed to improve your life in every facet by focusing on improvement in one resolution per week for 13 weeks. Then continuously cycling through the resolutions, you would focus on reach for four separate weeks in a year and over time you would master all 13 resolutions. While finances is just one of the resolutions, the overall affect if following this program is to have wholistic improvement in every facet of your life.

 

 

 

2. Beyond Financial Fitness

This book contains what most people want to jump to when they talk about personal finance, investing. This is the most complete primer on personal finance I have found to date. Most investing books just jump right into the topic of investing assuming that you are at the point where investing makes sense and that your risk tolerance is right for their investment advice.

Beyond Financial Fitness starts out discussing if it is the right time to start investing (do you have the basics down yet?) and then walks through the levels of risk tolerance from extremely low risk (CDs and money market accounts) to extremely risky (venture capital and collectibles). 

They dive deep into stocks (markets, sectors, capitalization sizes, etc) and bonds (US treasuries, corporate bonds, municipal bonds, foreign bonds, etc) as well as discuss shortcuts (insurances, mutual funds, ETFs, etc) as well as types of accounts (i.e. tax advantaged) and what assets works best where. 

But it’s not just a book about what’s out there. They dive into market theory, discussing the Efficient Market Hypothesis and its affects in your investing decisions, the Markowtz Portfolio Theory and the prevailing asset allocation strategies. 

While the experienced investor may find some depth lacking In areas, they breadth and scope leaves the less experienced investors with a confidence in getting started and the experienced investor with an list of areas outside his or her main focus to investigate.  

 

1. Financial Fitness

And the number one personal financial book of all time ... Financial Fitness. I have found this to be the most complete personal financial book, covering the basics, offense, defense, and playing field of money, or in other words making more money, keeping more money, and understanding what money actually is.

This book is a collection of years of experience with helping thousands of people not just improve their finances but thrive. While the touted difference of this work versus others is the completeness of offense, defense, and playing field, the real difference is the Why. 

Why improve your finances? What is the purpose of finances? How does how you think about finances and money in general affect your ability to use money effectively in your life?

This book not only set me on the path to debt freedom but has been an essential tool in my financial coaching.

The two sides of “live within your means”

Often when people hear, “Live within your means,” they think of cutting back, scrimping, and reducing their lifestyle. That can often be the answer in the near term to get you on the right financial path, however it has is own dangers in having this as your dominant financial thought.

I see the phrase as having two parts. The first part is to spend less than you make. If you are spending more than, or even everything, you make you will never get ahead financially and need to make whatever adjustments to live well below what you make. You must have free cash flow that you can invest, first in yourself and then second into a business or the market, and the more free cash flow you have, the faster it can grow.

In the book The Richest Man in Babylon, the author describes this concept as viewing money as a worker who goes out and brings you back more money. As I started working on my financial thinking, I began to see that every dollar I spent was a dollar that would not be working for me to bring back more dollars.

The danger of focusing just on spending less than you make is that you start thinking like a miser. It starts to create thought patterns and habits that limit your potential. That’s why it is so important to know why you are improving your finances. What’s the end goal? Or as Stephen Covey put it in his book 7 Habits of Highly Effective People, “begin with the end in mind.”

So to support this growth mindset, this thinking pattern that sees growth and a bigger future, I would add a second, critical part to the phrase, “live within your means,” and that would be, “make more than you spend.”

You may be saying to yourself that making more than you spend is the same is spending less than you make, and you’d be right. The difference is on the emphasis. When you emphasize spending less than you make, it tends to lead to a limiting life, a dead end of doing no better than you are right now. But when you make more than you spend, it opens up a bright future of possibilities. 

That’s not to say that just making more than you spend of the answer. You need both, making more than you spend and spending less than you make. Yin and Yang. Breathing in and breathing out. One without the other will also leave you unbalanced.

I’ve seen people who live by the mantra "make more than you spend." They say things like, “I’ll just make so much money that I don’t have to even think about what I spend.” There may come a point in your life where that is the case, but along the way you’re going to have developed some frugal habits and thought patterns to even get to that point.

Ignoring spending less than you make and just focusing on making more leads to a never ending pursuit of money. You may make more but you’ll also end up spending more. I remember being just out of college and seeing how big that paycheck looked from my first professional job. I also remember how small it looked just a few short years later, after a few raises, when it felt like I was no better off even though I was making significantly more money. I never seemed to be able to have the free cash flow to turn into little workers that would bring me back more money.

How to check your social security

My son just looked at his first paycheck and lamented everything that was taken out. One of the notable amounts withheld from his paycheck was FICA, or the Federal Insurance Contributions Act.

The Social Security Act was signed into law by President Franklin D. Roosevelt in 1935 as part of the New Deal. Originally it was 2% of your income was sent to the government to make sure you would not be destitute when you reach old age. By 1966 when they added Medicare, it had risen to 7.7%. Today between employer contributions and withholding for both Social Security and Medicare, 15.3% of your income is put into the program.

There have been several discussions about the inability for Social Security to fulfill its promises sometime around the year 2035 (about the time I would qualify to start drawing from Social Security). This does not mean that Social Security goes away, but it will mean they will either raise taxes (again), reduce benefits, or a combination of the two.

You can see what you are currently promised for Social Security by visiting the Social Security website. This will allow you to see how much you can receive per month if you retire at 62, 67, or 70. It also shows you how much you could receive per month if you were disabled as well as how much your survivors could get if you were to pass away.

We don't know how much you will actually get, but this gives you an idea of what they are currently promising.

How to check your credit report three times a year for free

Your "credit score" is a number assigned by three agencies that receive reports on your credit history, Equifax, Experian, and TransUnion. These three companies collect data about the debt you have and the payments you make (and not just debt payments) and evaluate how risky it is to lend you money.

You can get an estimate of your credit score for free at websites like CreditKarma. These sites are great for getting an idea of the direction of your credit score, but don't give you much detail about what all is taken into account. 

Knowing the details of your credit history is important because identity theft is so common. If someone gets a hold of some of your personal information, they could open a credit account in your name, rack up the balance and then default on it. If you don't want to manage your credit yourself, you can get a identity theft insurance (which you may want to get anyway). 

There are a few things you can do to minimize your risk of identity theft for free. First, you can check your score estimate at CreditKarma (updated every week). You can also freeze your credit, which prevents anyone (including you) from opening new credit accounts in your name until it is unfrozen.

The last thing you can do for free is to get a look at everyone on your credit history. Normally you would pay to get a peek at your credit history. However, there is a service, Annual Credit Report, that allows you to peek at your credit history from each of the agencies for free once a year. It is a little convoluted of a process to prove that you are who you say you are (what banks have you banked with, what streets you've lived on, etc). 

Getting a peek at your credit history once a year is pretty nice, but you can actually look at it three times a year if you do it just right. Each of the agencies will give you pretty much the same information, so you can just get your report from a different agency every four months. This allows you to get a view into your credit history three times a year for free.

When you get your report from the agencies, save a copy for reference. Then look over the reports for accounts that don't look familiar or things that may have been reported incorrectly. If you see an unfamiliar account with hundreds or even thousands of dollars balance, that may be a fraudulent account and you should report it immediately.
 

 

The problem with massive action

Tony Robbins says, "The path to success is to take massive, determined action." I really like Mr. Robbins and so it is straining on me to find fault with this statement. The funny thing is that another author I really like (who incidentally doesn't like Tony Robbins) says in one of his books essentially the same thing.

Why do I have a problem with this statement? Because I have taken massive, determined action many times that has led to something much less than success. The problem was, I was quickly heading down a path that would not lead to success. Each of these times I did learn a lot, but did not attain the success I sought.

Does this mean that massive action can never lead to success? I think it can with some caveats. For instance, you had better make sure the path you're on is going where you want. Salesmen are often showing visions of success while selling wares that lead in the opposite direction (or at least a less than direct path). 

So before you go and take some massive action, let me offer a starting point. 

Never underestimate the power of consistently developing good habits.

I like encouraging people to develop habits that lead in the direction of success over massive action for two reason. First, habits are a way of automating your life. Massive action in the right direction is terrific, but can it be sustained? Think of Aesop's story of the tortoise and the hare. Consistently building habits towards success may start slowly but builds into an unstoppable force.

Second, it gives you opportunities to course correct. As you are in the process of developing habits, you can see if you are heading in the right direction and make course corrections along the way. Often as you start taking steps in the right direction you learn more and can see new steps you need to take. It becomes obvious that the path you thought you should take was mistaken as you learn more and find better paths.

As you start building these habits into your life, you can definitely start going faster as you are more sure of the path. One way to help speed up this process is to have a mentor who is already where you want to be. They can give you hints and suggestions and you can learn from their experience instead of just having to rely on your own experience. 

If you have a mentor that you fully trust has the experience to get you where you want to be, then maybe you can take Tony Robbin's advice and take massive determined action. Otherwise, start by gaining habits that put you on the right path and keep building your success one habit at a time until you find that mentor.

Rewarding music

I love music. I was challenged in my twenties to start listening to self-improvement cassette tapes (kind of like MP3s but physical). I was torn because listening to these self-improvement audios was taking away from my music listening. 

Over the years I listened to more and more self-development audios on different platforms (cassette tapes, CDs, MP3s, apps, etc). I've heard that listening to two to three personal improvement audios a day was the minimum to have a positive impact on your performance. If you wanted to have a dramatic impact, I've heard you should listen to five to ten a day. 

That got me to thinking. I wondered how many days it would take me to listen to 100 audios. I set up a tracking sheet (scoreboard) and started tracking how many I was listening to. Over a four year period I was able to reduce how long it took me to listen to 100 audios from three weeks down to 8 days. It was a time of intense learning and growth. 

Since then I've found Rascal Radio, which I now recommend in my coaching. I'm back down to about two to three weeks to listen to 100 audios, but the biggest thing was the habit I developed. One of the tricks I used to keep myself accountable and reward myself for listening to personal development audios was to set a daily minimum of audios and then reward myself with listening to music.

So I would listen to audios while getting ready in the morning. I would listen to audios on my commute to work. I would put one earphone in at work and listen while I was working. I would be listening all the time. If I reached my listening goal for the day, I would reward myself by listening to music on the commute home. If I didn't reach my goal, I would listen to personal development on my drive home. Let's just say that I was often listening to music on the drive home.

Often people say they couldn't imagine removing certain things from their life (tasty food, TV shows, theater movies, etc). Instead of looking at it as something you are removing from your life, turn it around and make it a reward for something you know you should do. This can be a powerful way to increase your motivation for actions you know you should take and decrease how often you participate in those rewards (which in some cases can be good in and of themselves). Not only that, as you participate in those rewards less often and only after reaching a goal, it tends to increase the value of those rewards in your life.

 

 using music as a reward for listening to self development audios

http://page.rascal-radio.com/

Book Review: Financial Fitness

This was the book that finally put more over the top to not only start fully applying the good financial teaching I received when I was younger but also filled in the gaps. This led me to pay off all my debt, including my mortgage, in 3 years. I'd been looking for a book that clearly taught financial principles and when I found Financial Fitness, it fit the bill to a T.

The book is divided into four sections: Basics, Offense, Defense, Playing Field. The basics are the basic things everyone absolutely needs, a mix of offense and defense. They next launch into the offense, or how to make more money, because you need to make money before you can be good about managing it. They next dive into what most people think about finances, the defense or how to keep more of what you've already earned. They then wind up talking about the playing field. This is the the environment in which we operate. It includes what money is, what affects its value, and how the market, economy, and governments can affect your personal money decisions.

Throughout the book they pick out crucial principles and highlight 47 principles of gaining financial fitness. Just mastering the first 7 principles set me up for paying off all my debt, and I am still working on the remaining 40 principles. 

I feel so strongly that the information in this book, if applied, can have a dramatic impact on almost anyone's life that I started financial coaching using this book. I have seen so many couples get on the same page as they go through implementing the basics. I've seen business owners who can double their income each year realize they were doubling their expenses each year as well and were no better off.

Money is the receipt for the value you add to society

I find that the biggest obstacle that people have to reach their financial goals is their thinking (at least it was for me). In a free society the only way to make money is to offer something that is of more value to buyer than the other things they could purchase with the same amount of money.

So this naturally leads people to think about the question, "What do other people want?" What needs or desires can you uniquely fill? When you add value to their life in such a way that you fill this need or desire they reward your efforts with a receipt, money.

As a business owner this is pretty straightforward and it even applies as an employee. An employer looks into the world to determine what the needs and desires are and they hire people to complete parts of what is needed to fill those needs and desires. So every employee sells this part of the value society wants and the company then collects all the parts and sells the whole value to meet the needs.

They phrase I have come up with that has helped remind me that money is nothing more than an indicator of how much value I am adding to society. When I look at it this way it becomes clear what I need to do if I want to increase my income, add more value to society.

Does this mean that when you add value to society you will get more money? Not necessarily. A mother raising her children adds a huge value to society and doesn't get paid for it. Often when people start a business they will add value to people's lives for free to get experience and develop testimonials.

I find it is more the attitude of adding value first, making that a habit. Once this habit is firmly established then start focusing on collecting receipts for the value. Then the money becomes nothing more than the scoreboard for how much value you are adding, or in other words, how many lives you are blessing.

16 first time home buying tips that can put you on the path to financial independence

Buying your first home can be an exhilarating experience. It can also be stressful. Buyer's remorse is extremely common when buying a home. Is it the right house? Did we pay too much? There are so many questions that creep into your mind after buying. 

If you are working towards financial independence the preparation for buying a house starts long before you even step foot in the first potential home. You have definite financial goals and realize that this large of a commitment can have a big affect on your journey to financial independence. So don't wait to start working on implementing these tips, start now.

If you follow these sixteen tips you will be so far ahead financially. The less you follow these steps the more risk you are adding to your financial future. Don't get discouraged if you can't do every one of these tips 100%, most people cannot, but the more of them you follow the closer you'll be to financial independence. 

1. Eliminate debt

The more debt you have, the riskier you’ll appear to the mortgage lender. Not only will paying off all your debt help you get a mortgage, but the free cash flow can help pay off the mortgage faster or help in handling unexpected home owner expenses. 

For most people, debt is a major drag on increasing their extra cash each month. The average person spends about 1/3 of their income on debt payments. That’s a huge chunk of money that could be put towards down payment, paying off the mortgage early, etc  

2. Pay credit cards off every week

Even after paying off all debt, people often still use credit cards. Many feel they are being financially responsible by paying the balance on the monthly statement. The problem is they then always have a month of expenses worth of debt. If something unexpected were to happen to their income, they not only don’t have the income, they also have a month of expenses with a high interest rate.

To make sure a tragedy does not become catastrophic in your pursuit of a home, make sure your cards are payed off every week. This will ensures that when your credit is pulled you will have a low debt to income ratio, but more importantly, having the habit of paying as you go will ensure continued progress without the drag of debt, no matter what happens  

3. Auto pay your bills

Most banks have a bill pay feature that can schedule payments for your bills. This ensures that you will not have late payments show up on your credit history. Bills that are consistent are easy, for instance you can schedule your internet service bill to be paid every month. Often you can schedule a check to be sent to an individual, so payments to just about anyone can be scheduled. Things to consider are: cell phone, internet, rent, donations, etc.

You can even schedule payments for bills that are variable amounts. For instance, you can automate paying the average (or the minimum) and then make an extra payment each month if your automated payment is insufficient. This ensures you make some payment on time every month. This works for electric, gas, and water bill, among others.

You’re can also schedule occasional bills like car insurance (often paid quarterly). Many insurances fall in this category.

Lastly, you can automate minimum credit card payments. Look at your credit cards and see what the minimum payments have been. Schedule a payment for your minimum payment to ensure you never have a late fee for your cards. If you have regular charges (like subscriptions) on the card, schedule a payment to cover those charges.

You want to schedule these payments right after money hits you’re account. For instance if you get paid on the first of the month, schedule the payments for the second. This will help make sure you don’t overdraft your account.

4. Have an emergency fund

Emergencies will always happen. Most people tackle an emergency with a credit card or payment plan. Having an emergency fund of 3 months of expenses ($1,000 at a bare minimum) helps prevent the emergencies from delaying your house purchase by having a sudden increase in your debt. 

5. Open a Down Payment account

Open a new savings account (online banks like CapitalOne make this really easy) specifically for your down payment. Having this money in a separate account makes it easier to see your progress and harder to justify spending it on anything other than your new home  

Once all your debt is paid off, the money you were putting towards debt should now be put automatically into this account. Any extra money you get also goes into this account. This will be the focal point for stashing away as much money as possible  

6. Invest up to 10% in your career

What? I should spend money instead of putting it into my down payment account? Yes! You have an emergency fund savings account and a down payment savings account, also open a career investment account. Make sure 10% of everything you make is divided between this account and your emergency fund account.

I’ve heard life is like walking up a down escalator, you can never really stay in one place. You are always moving forward or backward. Make sure you are well funded so when an opportunity to make your skills more valuable comes along, you can take advantage of it without trying to figure out where the money will come from. 

This fund could be used to pay for books, audios, courses, certifications, coaching, mentoring, or training. As long as you believe it will increase your value and be able to increase your income, you can use this money for that purpose. Treat it like an investment and make sure you get a decent return on that investment by immediately putting those skills into practice. 

7. Raises go to down payment

As you make yourself more valuable to your employer or clients, you will eventually be rewarded with more income. Do not increase your lifestyle. 

If you are still working on paying off debt, then use that extra income to pay down the debt faster. Once all debt is eliminated, this extra income just builds your down payment account faster. This can be one of the biggest factors in getting the home you want and why increasing in your career is so important.

Now you won’t be able to put all of your increase towards your down payment due to taxes, 10% emergency fund and career investment, donations, etc, but around 75% should go directly towards either debt or your down payment.

8. Maximum house price

Having 20% down payment prevents you from having to pay mortgage insurance and also helps ensure you never owe more than your house is worth. It also helps in qualifying for a mortgage. Now that you have your down payment account, it will be easy to make sure you have a 20% down payment. Take the balance of your down payment account and multiply it by 5 (mental math trick: half your balance with an extra zero at the end) and let that be your price limit.

For instance, if you have $10,000 in your account you start looking at $50,000 homes. You may think that is pretty low, but the exciting thing is that for every $1,000 you put in your account you add $5,000 to how much home you can afford.

As your account grows you start looking at higher and higher maximum price for your new home. At some point one of two things will happen. The first is that as you increase your down payment you’ll start seeing homes that you like in your price range. The second thing that may happen is that you run across a steal of a deal  that dips down into your price range. Because you were patient you can get an amazing house with no financial regrets. 

For many first-time home buyers this will be the biggest challenge and there are times when buying a home with less than 20% down is the right thing to do. For instance, in a hot real estate market, with prices rising quickly, it may make sense to buy now with less down payment because you will not be able to save faster than the market is going up. Not to worry. The more of the other steps you follow the better off you'll be. For instance, if you pay more on your mortgage than the minimum, and especially if the market values are rising quickly, and you have a conventional loan, you'll be able to quickly cancel the private mortgage insurance.

9. Maximum mortgage

Most lenders will lend you up to three times your annual income for a home. Most people will tend to get closer to this limit. Most people are also not financially independent. If you want to limit the drag a home can have on your path to financial independence then you should set your upper limit on a mortgage at twice your annual income.

Similar to the 20% down payment rule, if you want a more expensive house, just save for a bigger down payment. You can put more than 20% down on a house. 

10. Maximum payment

A house payment typically consists of four parts, principle, interest, taxes, and insurance, also known as PITI. This is the equivalent to a rent payment (although rent can include a lot of extras like cable, utilities, repairs, maintenance, etc which is not included in PITI). Whether rent payment or PITI, this cost should never be more than 28% of your gross income, preferably 25%. 

This is a fixed expense. You are committing this fixed amount in your budget and is not as easy to reduce as canceling the cable subscription. This one tip is huge whether you rent our own.

11. Pay it off in 3 years

This may seem impossible, but if you can pay off your mortgage in three years, imagine how much free cash flow you'd have. All that money that was going towards paying off the mortgage aggressively can go towards maxing out your tax-advantaged investment accounts or saving up for the vacation of a lifetime (or even both). 

You may not be able to swing paying it off in three years. This is the target that if you can do, you will be well on track to financial independence. If you feel you cannot do three years, then consider five or six years. At the very longest, pay off your mortgage in ten years.

One nice benefit of paying it off in a short period of time is that your credit score has much less of a financial impact than going paying it off over 30 years. Sure, a great credit score can get you a great rate, but if you pay it off in three years the interest rate has much less of an affect on how much extra you'll pay due to a higher interest rate.

Check with your mortgage company on how to make extra payments go towards principle. Some mortgage companies will apply the extra money towards future payments instead of paying down the principle. Check with them on how to communicate your preference to pay down the principle.

This may affect your target home price more than maximum price, mortgage, or payment.

12. Get a 30 year mortgage

What! You just said pay it off in 3 years. Why would I get a 30 year loan? I know, it sounds like its contradictory, but this is a huge protection. Some people will argue that its worth getting the lower interest rate with a 15 year mortgage. But remember, if you pay it off in three years (or five, six, or ten years), then the interest rate isn't as much a deciding factor.

The real reason you would get a 30 year mortgage is for safety. You may be planning on making huge mortgage payments but if your income is interrupted for any reason (2005 through 2020 should show you that any income can be interrupted) you can drop the payments down to the much lower 30 year payment without the risk of losing your home.

13. Pay like you’ve already bought

Figure out how much more your PITI will be than your current rent. Then figure out what expenses are included in your rent that you would have to pay for after you buy your house. Then estimate how much more the utilities will be in your new home. Finally, 1% of your home cost (divided by 12 months) should be planned for home maintenance and repairs. Figure out how much more all of this is than your current rent.

Once you calculate how much more that will be, pay trial run payments for a year. For instance, say your rent is $800 and includes gas, water, trash, gym access, pool access, and cable TV. You would add up PITI, gas bill, extra electric (above what you pay now), water bill, trash bill, gym bill, pool access fees, and $83 (1% / 12 months) for repairs and maintenance. 

Let's say that all adds up to $935. You would put an extra $135 a month into your down payment account every month for a year to prove that you can live in the new house without breaking the bank. Overestimate all these expenses as you're adding it all up (and you will still probably be low).

14. Get a good realtor

Hiring a professional is important anywhere in your life where you are not an expert and you will be working with large amounts of money. A good realtor will more than pay for themselves. Let them know up front what your expectations and plans are so expectations are correctly set. 

There are two big values you get from getting a realtor. The first is experience and with that familiarity with the market. There are so many details about purchasing a house and so many tips and tricks that are not worth you learning (let alone mastering). They buy and sell houses for a living. This is their main focus. They are really good at it (even the worst are better than you would do on your own). 

The second big value is education. Make sure you are asking questions at every step to make sure you know what is going on. Don't just hand off the purchase of your new home to your realtor as an executive assistant. Treat them more as a guide on your journey purchasing your home.

15. Get the smallest house

Neighborhood home values tend to move over time toward the neighborhood average. That means that larger homes tend to not appreciate as fast as the average homes in the neighborhood. It also means that the smaller homes tend to appreciate faster. When you start looking at homes, look in neighborhoods where the house you would buy would be on the low end.

16. Get a good inspector

Once you've chosen the perfect house and you put a contract on it, you want to make sure the house is actually as good as it looks. There is a contingency clause in the contract that says you will buy the house contingent on an inspection. This is important for a couple of reasons. 

First, with the right inspector you get a long list of items that are not up to the current standards or things that need repair that may go unnoticed by casually walking through a home. This list can be a great negotiation tool. Often after the inspection you will provide a list of things that you would like the current home owner to either fix or lower the price so you can fix them. They will often counter with a reduced list. Depending on the items to be taken care of, they may just reduce the price. This is especially helpful if you "know a guy" who can take care of it for less.

Second, it gives you a backdoor. If you find things that change your mind about buying the house, you can be a stickler for getting them taken care of. If neither side budges, then you move on to look at other homes. Now this is not the primary reason and you should be respectful to the seller (he took his house off the market while you were waiting for the inspection to come back), but the contact is not complete unless you can successfully negotiate the inspection results. If they refuse to budge, you don't have to buy the house.

Scoreboard

When you go to a game and arrive late, what's the first question you ask, "What the score?" The scoreboard clearly shows where each team stands at any point in the game. What if there was no scoreboard and no score? What if the players just ran the ball back and forth? Wouldn't be enjoyable would it. Its the struggle that we cheer on.

The same can be said for your personal life. Throughout my life I have had various scoreboards. Grades are a common scoreboard in school. Retirement targets are a common scoreboard for those later in life. But you can have scoreboards for anything you are intentionally trying to improve.

When we were working toward eliminating our debt, we had a scoreboard that showed our progress and we put it on the bathroom mirror so every day we could see the score. We've also done the bathroom mirror scoreboard saving up for a new vehicle and buying a house. When you can see where you are and see progress (or the lack of it) its motivating.

I've also had personal scoreboards. I track my reading (thank you GoodReads.com for having an annual book reading challenge) and my running (miles per week, pace, etc). My phone helps me with scoreboards for steps taken, calories burned, diet components, stairs climbed, water consumed, blood pressure, weight, as well as a host of other health metrics. All of these are scoreboards. They tell us where we are at and how much progress we are or are not making.

The nice thing about a scoreboard is that it keeps you from deceiving yourself. I've heard it said that people always underestimate their expenses and overestimate their bank balances (thank goodness for apps to check your bank balance). Having a scoreboard that you check regularly can help keep your goals in the foremost of your thoughts.

There is a trick, however, to picking the right scoreboard. For instance, when I started running I wanted to track how much weight I lost so I weighed myself daily. The problem is when you run, you can easily gain more weight in muscle than you lose in fat. So when trying to lose my belly, weight may not be the best (or at least the only) scoreboard. So I started measuring my waist as well. 

As you can see on the chart, there were times when my weight was flat, but my waist was shrinking (November to December or March to April). It was also hard to hide from the scoreboard when the pandemic hit. Suddenly all my health habits were thrown into disarray as days blended into weeks waiting for the pandemic to pass. It wasn't until July that I realized that it wasn't just going to pass and I needed to make some changes (July and August were my first 100 mile months).

Without the scoreboard, I probably wouldn't have redoubled my efforts to continue to make progress. And without the correct scoreboard, I would probably have been discouraged when all my running led to no weight change, or redoubling my efforts led to very little weight loss. But because I had another scoreboard that helped me get a better view into the progress I was actually making towards my real goal (better health), I can see that I am losing more belly (and actually at my lowest point in a long time).

The other warning about scoreboards is to make sure you are paying attention to the actual goal and not just putting pointless points on the board. My goal is health, not weight loss or belly loss. If those scoreboards were to become too important to me, I may do things that actually damage my health, like starving myself to lose ten pounds a week.

So figure out what kind of scoreboard will help you stay motivated and see progress towards your goals, and then put it in front of you every day.

On the same page

One of the most common phrases I hear in my coaching is, "its so nice being on the same page." It took me a couple of years of coaching to realize the value of getting on the same financial page with your spouse. I knew it took a while before my wife and I got on the same page, at least enough to make massive progress in eliminating our debt.

So how do you get on the same page? First, it starts with communication. Talk openly, honestly, and most importantly with love, about where you are currently at financially. Then discuss where you want to go. What are your life goals and purposes? What kind of life do you want to lead? This is where both spouses will differ, but its good just to know where the other person is at.

The next step is to talk about what are the steps you'll need to go through to head in the direction of your goals and purposes. And then most importantly, what is the next step you will take. When my wife and I did this on her birthday in 2014. The first step we took was to start the cash envelope system. For the next three months we worked together to start using the cash envelope system and understanding how it could work in our lives.

Then every three months we worked on another step needed for our journey. We did this for 39 months. Every three months finding what our next step was and taking three months to figure it out and work it into our lives. After 39 months, we had paid off all our debt, including our house. Its amazing how much you can accomplish when you're on the same page.

I know nothing about cable TV

I was recently asked by leadership at my church to help a couple with their finances. I called them and scheduled a time to stop by. I knew the couple well and had visited with them in their home many times before, though it had been a while since I'd last visited. They asked what they needed to have at the ready for our discussion and seemed willing and almost excited to get things on track. I've found that to be a good sign. When I'm asked by a third party to help someone with their finances they often are not as excited which leads to no real progress.

I arrived at the appointed hour. Since COVID-19 virus is still an issue and this couple had some risk factors I made sure I had my mask on before approaching the door. I knocked on the door and the husband greeted me and quickly ushered me back to where his wife was waiting. She is not as mobile and is usually positioned in front of the TV. 

The first thing she said was, "I got a new TV with Roku and now my cable TV doesn't always show up." This was not too unusual as when I visited with them before I would often help them with technical issues around the house. She showed me how the Roku internet TV channels worked fine but when she switched the TV to cable it showed "no signal." I examined the cables. They looked fine. There was an assortment of unfamiliar boxes: Tivo, cable box, internet router. The Tivo box had a red and orange light lit up. That seemed strange. I tried restarting it to no avail.  My diagnosis was that the Tivo box was dead. However, I noted that I didn’t know much about these kind of devices and had no idea what to do next. 

The couple responded with a bit of shock, and then came a knock at the door. The husband left and returned accompanied by the cable repair man. That’s when it dawned on me. With my mask on and them expecting the cable repair guy, they thought I was the cable repair guy. 

After the repairman fixed their issue I commented on the mistaken identity. We had a good laugh and then were able to put together a plan to get them on track with their finances.

Nice trophy

Imagine inviting some friends to your home for the first time and one of them seeing an impressive trophy on the mantle. They walk over to take a closer look and see that it is a regional championship trophy. They ask you about it and you respond with:

"That is an amazing story. That year we were the underdogs from the beginning, but then we had injuries and setbacks all year. So everyone was surprised when we made it to the championship game. And the game itself was just like the season. We were behind the whole game. We didn't even score until the second half. But right before the clock wound down we made our final score to win. It was the game of a lifetime."

They congratulate you on an amazing experience. They know it means a lot to you from how you talked about the season and championship game. They also know that there was a lot of effort and teamwork behind the story that you didn't even mention.

The next week you visit your friend. Immediately as you enter their home you notice a state championship trophy (its hard to miss being so big). So you say to your friend, "Wow. Now I know that has a story behind it." They reply, "After seeing your trophy and being so impressed with it, I felt I needed to have one as well. So I went to the trophy store and chose the biggest one I could find. Boy are they expensive, but luckily they have payment plans."

How would you be feeling at that point? Why? Maybe you feel offended. You put in all that work to earn the trophy and they just went out and bought one (and couldn't even pay for it up front). Maybe you feel they are somewhat of a hollow person, having a trophy without earning it like you.

A version of this story was told to me and then it was turned on me by saying, "I paid cash for my cars and house. I worked hard to develop free cash flow so that I could earn them and they represent the lives I've blessed."

Wow. I realized that I had purchased my "trophies" and even put them on a payment plan. I realized that my friend was attempting to show me that my excuses for paying for nicer cars without earning them or a nicer house without earning it were somewhat offensive to my friend. I realized I hadn't earned them. 

One of my favorite phrases now is "Money is the receipt for the value we add to society." When I first heard that and put it in the context of trophies, I realized even more that when I bought things on credit I was even more so buying things I had not earned. I turned myself into a financial slave to creditors, selling my time because I was seduced by low down and easy monthly payments.

So is it bad to have these trophies? Is it materialistic? I don't think so. I think if you look at money as the receipt for the value you add to society, then buying these nice cars, homes, houses, and other doodads (to coin a Robert Kiyosaki phrase) are perfectly fine as long as you set them as a trophy. 

Set a goal for how much more receipts, how much more value you will add to society, and when you reach that goal you'll reward yourself with the trophy. In that way the shiny bauble becomes a representation of the hard work you put in to bless the lives of others instead of a trophy just bought on payments.

"So now that everything is going crazy, what are you investing in?"

As a financial coach I am getting this question a lot lately. "Should I invest in (Tesla, Apple, Microsoft, .........)?" Many times these are great companies that may very well be worth investing in, but I would not recommend them ahead of the one investment that has given me the biggest return on investment ... by far. Before I share with you my not-so-secret investment, let's talk about what investments are.

The idea of an investment is to take a certain amount of money and put it to productive use and get a return, or in other words, get more money back than you put in. In stocks this can be in the form of capital gains or dividends. With bonds this is the coupon payments or market gains. 

This concept can be applied to so much more. Many people consider their college education an investment; they expect a return in terms of a higher paying job. Some people say they invest in a good suit. The term invest tends to be used very narrowly (stocks, bonds, real estate) or extremely broadly (does that suit have a return on investment?). I think that looking at anything where money goes out and you are expecting more back would be considered an investment.

So the biggest return I've received on any investment (using he above definition) is in personal development. Sure, my time at the university is included in that but because I spent tens of thousands of dollars on it, the return is not as good as other personal development investments. 

Early in my career as a software engineer I found myself in an unenviable position. My supervisor told me, in no uncertain terms, that my performance was below expectations and I should probably find a position at another company. I was devastated. The employment cycles for software engineers was not at its peek and I had not networked like I should have. 

I shared my situation with a mentor. He was a successful business owner (he had to be, he had nine children to feed). He recommended I subscribe to a corporate leadership development program for $120 per month. To someone who was about to lose his job the prospect of shelling out $120 a month seemed risky. But trusting my mentor, I signed up. The program consisted of a book a month and four CDs (anyone remember CDs?). My mentor recommended I study the book each month and listen to the CDs over and over, up to ten times a day. In addition he urged me to apply everything I was learning.

Going through this training I learned that it wasn't my technical skills but my people skills that were to blame. I learned how to mend professional relationships and how to find where I needed to add value to the business. Within a year I was not only still working for the company but got a promotion and some very nice raises.

Now I won't promise that personal improvement will be recognized where you work. I've seen many people who have made themselves more valuable to their employer without being rewarded for it. However, if done well it will make you valuable anywhere. Once you master the skills with someone who doesn't reward you for them, you can take those skills where they will be appreciated.

The effort to aquire a habit

While reading Russell Brunson's book Traffic Secrets I've found two habits that I am looking to integrate into my daily life (this being one of them, blogging). So I added them to the habit app I'm using, HabitShare. I have found that it is extremely easy to develop bad habits, but hard to break them. Likewise, it is harder to develop good habits and easier to break them.

In my coaching one of the first habits I ask my clients to acquire is to read from a specific book (Financial Fitness by Brady and Woodward) and listen to two MP3 or CDs from a specific list of audios every day. I don't want to be a hypocrite, so I use HabitShare to ensure I am keeping up with the habit myself.

Now there are many more habits I could add to this list (and if you looked in my habits archive, you'd see many). For me the real secret in developing a habit is to focus on one or two habits at a time. It also helps to be held accountable by someone you respect. As you might be able to see in the image, I have at least one friend who can view my habit progress. This accountability helps me get that little bit of extra energy needed knowing that someone I respect would see that I didn't follow through on my habit.

As I begin to integrate Blogging and posting to Instagram as regular habits over the next few months, I'll start to look for what is the next most important habit I should integrate into my life. And so every few months I create a habit or two to help build my progress towards my goals. This is kind of like taking success and automating it, through habits.

What is a habit that you have been putting off (flossing? drinking water?) that you know you should pick up. Start now and if it will help, I can be your HabitShare accountability partner. Just send me an email (from the email account listed in HabitShare) and I'll help keep you on track for the goals in your life.

Home made root beer

Years ago friends of ours introduced us to home made root beer. It is a simple enough recipe, as long as you can find some dry ice, tastes amazing, and is a bit healthier (not healthy, but healthier) than most store bought root beers. We have recently revived the recipe and started to make it our own. We have made root beer more often than we probably should have. Church activity? Let's bring home made root beer. Having friends over, let's make home made root beer. We've gotten pretty adept at making root beer.

So now let me share our recipe with you. Get a 5 gallon igloo, fill it with 3 gallons of water. Add 4 lbs of sugar (an entire bag) and two little flasks of root beer extract. And the final step, get a big block of dry ice. The trick is to break the dry ice into chunks and put in about 1/3 of the dry ice in every 20 minutes. (Warning: make sure to use gloves to handle the dry ice). After an hour you have very taste (and bizarrely clear) root beer. 

We recently used a block of dry ice to keep some frozen treats cold at church activity. When we got home and started cleaning up, we realized that most of the dry ice block was still in tact. There was another carbonated drink I have been wanting to try, and now was the time to attempt it, a refreshing lemon-lime drink. I looked and we had 3 small lemons and 3 small limes. I followed the root beer recipe and replaced the root beer extract with the hand-squeezed (oi my hands are sore) lemons and limes. To my wife's surprise, it was delicious.

If I had tried this lemon-lime drink before perfecting root beer, it probably would not have gone quite as well. It was that I invested the time getting the root beer process down that allowed me to attempt another recipe successfully.

Whenever we start something new, we're not going to be good at it (that first batch of root beer, for instance). With continued practice and intentional focus on improvement, you can dramatically improve your results. 

Most people (definitely including myself in this) get started in something and get far enough along to be mediocre. Then they jump to the next exciting new start. I did this in so many areas (real estate investing, stock investing, various businesses). The two things that have been consistent for me, that I have taken the time to get good at, are coding and personal finances.

Once I had gotten good at my personal finance, I set on a journey to see if it could be reproduced. I started financial coaching and over a period of a few years, I determined that the process could be reproduced (of course there were several tweaks to the recipe over the years). I think I've got a pretty good process down for financial coaching. There is only one problem. I am very limited in how many people I can help coaching them one-on-one. 

That's where the course comes in. I am now looking to take my proverbial root beer recipe (financial coaching) and produce a similar result with a different flavor (financial course). There is a lot more to learn about the mechanics of doing a course, so I am under no illusion that I'll get it right the first time, but I plan on blending coaching with the course so I can tweak the course over the next few years until we can start reproducing results reliably through the course.

Do you tend to jump from one area to another, a jack of all trades? What are the areas that you are good at and can take those skills to the next level and then shift them from root beer to lemon-lime?