Setting financial goals

Hi Everyone,

I have a question about setting and executing financial goals. I have made a goal of what I want my net worth to be by the time I am 30 years old. I need help in regards on how to get there. I have been a spender most of my life and I am curbing those habits by doing the following:

  1. Using QUicken to check my spending
  2. Checking my bank balance
  3. Putting all my savings in a Roth IRA that I do not have access to:
  4. Understanding the root of my spending habits and how to deal with them effectively.
  5. Developed a list of where I want to be financially in the next six years.

You’re doing a great job! And, it’s so smart to have that goal. My recommendation (to anyone) is to read “Total Money Makeover” by Dave Ramsey. If you follow his plan, you will get out of debt and could accumulate millions. You are definitely young enough to do it!!

One of the things that I believe worth tracking, but most people don’t, is spending as a percentage of net worth. For example, if your net worth (not income) is 100K and you spend 50K (after taxes) then your ratio of spending to net worth is 50%. Over time, you would like to see this ratio go down. When you get the ratio down to around 3% then it is time to start to think about retirement.

I am also wondering if some of your money should be in pre-tax account such as a traditional IRA or a 401(k) plan. Just in case, the income tax goes away and we have a national sales tax instead.

Thank you for the support. According to the book, how long would it take to reach my goal of being a millionaire? Is six years too short of a time? I know for someone my age there are many benefits to a ROTH-IRA. How many should I have if I wish to accumulate wealth? Thank you.

That depends on several factors like what kind of debt you have to get rid of and what your income is. If you’re serious about doing it and really buckle down, I think it’s possible in 6 to 10 years. How long it takes to become a millionaire depends on where you start from. If your salary is 100K (gross) and your have 200K in
savings, it will be very difficult to get there in 6 years but possible. Now, if you are starting with 400K in savings, it is quite feasible. Basically, all you need is a double.

For purposes of this post, I am assuming a millionaire is somebody who has a net worth of a million dollars not a million dollar income.
Also, if you are using a pre-tax account to grow your money, you should discount the value of that account by the amount of tax you will have to pay when you take the money out.

I am 24 years of age and I want to be a millionaire by 30. I decided that I need three to five streams of income to make this possible. I have great talents. As of now, I am mathematics major which I hope to utilize as a financial engineer on Wall Street. I am also developing my writing so that in the next three to five years I may publish it. I also am buying shares of stock in great companies such as XM Sirius, Global Green Solutions, ABK, and others. Is there anything else I could be doing to help me get to where I need to go? I will have between $50,000 to $70,000 of school debt and I have created a payment plan already. Thank you.

Playing hardball with your Credit Card Companies

Please consider the following hypothetical situation. A certain person is barely making minimum payments on his/her credit cards. He has 15 cards with a balance of 2000 dollars each. In addition, he has no savings and no assets. He is a prime candidate for bankruptcy.

Now, suppose he does not want to go bankrupt. So, he stops paying on all the cards. He lets cash build up in his checking account. When the account reaches 1000 dollars he calls up the first credit card company and offers to settle 50 cents on the dollar. If they agree he pays off the card. If they do not agree, then he calls up the second card and makes them the same offer. I am thinking that this person will be able to settle most cards for 50 cents on the dollar. If the plan back fires, he can always file bankruptcy. What do you think of this idea?

Try calling the card companies to see if they can help. Others have done this and gotten interest knocked down for a short time but it can take several calls each. Read past posts for more info. Also, Dave Ramsey includes a pro rata plan in some of his books. I’m not going to suggest you find another job because in this economy that isn’t so easy.

But if you save up the money talk with the company and make the offer. Be sure to explain that their choices are limited: get some money or the person goes bankrupt and the credit card company gets nothing. Some companies will accept getting something rather than nothing but others will refuse to accept less than the full amount.

Also keep in mind, depending on how long it takes to save up $1000 each to try to pay off each card, some of them may sue you before you get around to them. Some cards are known for sueing pretty quick. They can look at your credit report and see that you are paying others (by settling). Thats actually why many people end of filing bk, because they get sued by thier credit card companies.

Just something to keep in mind also is depending on the card but most will sell your debt to a collection agency at 4-6 months of no payments so at that point you would no longer be dealing with the banks but CAs. Some are known to sue by the 6th month or before. Also keep in mind that interest, late fees, over the limit fees etc will continue to accumulate so a 2000 debt could turn into a 4000 debt a year down the road.

One suggestion is something that worked very recently for me (and may have for other people as well). I was overlimit on a card that had a 29% interest rate. Late fees and overlimit fees were $600 on the $2000 I already owed. I paid $100-200 a month, but was still overlimit so the fees outstripped what I could pay. I just wanted to get down below my limit so I could make regular manageable payments again, but I could not get the CC company to stop the fees each month so that I had a chance to catch up.

Then I went to a debt counseling service (Consumer Credit Counseling in my area – LINK) and talked about a getting on a plan … I decided against doing that however. I decided to keep trying on my own. So I called the CC company back and told them … and these apparently were “magic words” for me … that I was considering going on a debt management plan. The very next thing I knew, the CC company put me on a plan — with all fees suspended and at a reduced interest rate! — allowing me to pay over four months until I got back under my limit.

I then went to two other of my CC’s and told them I was considering a debt management plan, and they too put me on their own plan at a reduced interest rate until I could get to a manageable place with the debt I owed them. I hope my experience is helpful. I would say this person is taking a big chance with wage garnishment etc. Anything. You are ‘assuming’ the ccard companies will deal at .50 on the dollar in the first place. They may not deal at all. Once they turn it to collection also it might be out of their hands as well. The one thing Bankruptcy affords you is protection- once you file you are protected, they cant take any further action against you. Also this whole ‘idea’ of letting ‘cash build up’ in his checking account. Wrong. They can seize that. If one of those cards decides to actively pursue him and seek a judgement he can kiss that checking account goodbye probably. I was just recently told by my bank manager at Washington Mutual right before Chase took them over that you cant even have bank accounts in ‘secret’ anymore. Meaning your creditors can just put out there your social sec. # and a request and no matter how many bank accounts you have that you thought ‘they’ did’nt know about, it does’nt matter the banks are now all obligated to honor the request and give up your info. So if you have a bank account in this country you are at risk. You cant hide it. If you owe them and they can get a judgement they can take what you have in those accounts.

Question about cars

Today, many people buy cars (and other item) by taking out a loan. I feel that this is a mistake. That is, in normal circumstances, if you cannot pay cash for your car then you should not buy a car. I am tempted to say that is true for (personal) real estate also. Am I being realistic?

By the way, I current rent and I have hopes of buying my first home for cash.

Cars depreciate in value and it does not make sense to get a car loan for a car. I think with proper investments, one can buy their home with cash. It all depends on the type of car and loan they are offering. Some dealers are offering not interest or low interest loans which can be a good deal. I purchased a car in January with no interest for three years. Why give the car company your cash if you can pay a monthly amount with no interest.

My general experience is that when I talk to car dealers about their interest free financing (or very low rate financing) it normally comes with some kind of catch like you do not get the manufactory’s rebate. So in effect, you are paying the interest for the car loan by losing your rebate. Therefore, I believe that the best way to buy a car is to pay cash. I also believe that for most people, leasing turns out to be an expensive (wrong) choice.

Because a paid for car cannot be repossessed for non-payment. Because in some cases, you can get lower insurance if you own it and not the bank. Because you can take then take what you would have paid in monthly payments and start investing, save for your next car, etc. Because you can often get a better deal from some dealers if you pay with cold hard cash. Because debt is a 4-letter word. You are on the right track Bob! I wish I knew 30 years ago what I know now.

To me, the reason to pay cash for my cars is that I cannot earn (after taxes) a rate of return on my money greater than the rate I am charged for borrowing the money. If I could deduct the interest on a car loan, and rate was reasonable, I would seriously think about buying my next car on time. I consider a 5% rate reasonable. I do not consider a 8% rate reasonable at this time.

From what i have read from financial advisers, you would be realistic in stating it is preferable to buy a car in cash, but not realistic in stating to do the same with a residence. the two have very different costs. buying a house is considered an investment. what you should do is be realistic in the residence you buy and not go way over what you can realistically afford. There is not catch with a no interest loan. Who ever informed you no manufactures’ s rebate is incorrect. I purchased a Mazda 6 received the rebates and no interest for three years. The money I would have paid cash for the car is earning interest in a three years CD.

Finance question

We have a first mortgage, a consolidation loan which is really a home equity loan, and an RV loan. We live in our RV in a warmer climate 3-6 months a year as my dh has healthy problems if he stays up here in the NW year round. My question is: in my budget would all 3 of these loans be considered housing or is only the 1st mortgage housing and the rest are debt?

umm i’m not sure but i would think a home equity loan is debt… the first mortgage is housing and i am not sure abou the RV loan..i would think that the loan that your in for at least 6 months out of the year would be housing? i am not sure though…. GL nad hope you find the answer you need :)

I think the RV is considered a vehicle loan??? I would think that the mortgage is the only one considered housing. Can you claim the interest for your equity loan on your taxes under property taxes??? If so, then I would think you could consider that one housing too; same with the RV. If not, then I would consider those to be debt.

Yes I can claim the taxes and interest on all 3 of these loans on my tax form. we are only a week late in paying our mortgage, and this is the first time that we have been late, ever, in the 2 years that we have had the mortgage. my question is, the mortgage company has called my work to ask about payment. And what really makes me mad is that I was not here to answer the phone, so one of my co-workers took a message. Can they do that?

What kind of message did they leave ? If they just left a message indicated their company name and asked you to call back, they are ok. If they left the message mentioning you were late for the payment, they violated Federal Fair Debt Collection Acts and you could complain them.

I realize that it took me awhile to get where I am. If I sell the car, I will not get enough out of the sale of it to pay all of it off. The truck pretty much pays for itself with the hobby farm and what I make there but then again, I could make do with a truck of less quality. I will look into the Dave Ramsey website and see what I can glean from that.

Need help with collection account

When my daughter moved out of her college apt last summer, she left a balance on her internet that I didn’t know about. Unfortunately the cable account was in my name. I had worked 2 years to clear all debt from my credit and am trying to re-establish credit. Anyway, when my credit was pulled in December 09, there was a collection for $61 for Charter Fort Worth. I didn’t even know what it was!

I immediately called the credit agency and arranged full payment of the $61 and explained I did not know about the debt. The lady said she couldn’t remove it, only Charter FW could. I called them and they said their account w/me is closed and that it was the collection agencies decision. The account is listed as ‘paid’ on my credit reports.

The collection agency informs me that can not remove it, it was against their policy. MyFico report shows ‘recent collection’ as a red flag against me. The reason I was hopeful that they remove it is because my daughter had a few small medical bills on her credit totalling $82 and paid it and they removed it from her credit. I really need my scores to improve!!!! Is there anything else I can try to get this off? Thanks!

You typically would need to negotiate a “pay for delete” with the collection agency at the time you pay them. Once you have already paid them they have no motivation or reason to delete. Maybe somebody else knows something you can do, but once you have paid them they typically won’t delete. Medical collections are a little different then regular collections because of the HIPAA laws (learn more from this document).

I used to work for a collection agency. The agency is suppose to remove it once paid…You can actually go to the credit bureau and have it removed yourself by sending a copy of the payment to the agency showing it was paid and ask them to remove it. They will remove it for you.

I got spending problem

Ok, i have a spending problem and i was wondering if anyone knows something i can do. If i don’t figure out something it may ruin my marriage. The thing is that i don’t go out and buy expensive things or anything. But i think that i am doing good and next thing i know, my car payment is gone.

I understand and have been working on myself and my finances for years.

To truly succeed at staying on a budget, you do have a budget? I highly recommend working on overcoming emotional barriers, whether they’re based on life’s anxiety-factors or emotional traumas.

There is no greater enemy to your health or finances than high stress. Many people initially succeed at implementing a budget — but then fall back into old habits… Why? Because the emotional barriers were never overcome in the first place.

keep working, one day at a time.

I would tell your Husband whats going on before it gets worse about your spending habits. Then, get all your bills out and see how much you owe together with your hubby. Start making cuts with little things – groceries, utilities, etc. Then work on the big stuff loans, credit cards etc….

I have a spending problem, too. It’s a hard one to deal with, but I’ll tell you two things that I did that had a PROFOUND impact:

1. I tracked my spending for 3 months– saved every receipt and wrote out every other non-receipted purchase/payment on an envelope that also held all the receipts. I have to say, I was SHOCKED at how fat the envelope got and how much money I was spending. All those little amounts here and there really added up quite quickly. I was spending WAY more than I thought I was. I also learned a lot on how to get 1000 dollar loan with bad credit from WeGot1000 company. Anyway, I then simply sorted the receipts: Bills, Household Expenses, Personal Purchases, Medical, Gas & Car, Dining out. Guess which two were the highest? Hint– it was not the bills!

2. I started (and I’m really embarrassed to admit that I got into the habit of NOT doing this) to track my spending in the checkbook register. You know, write a check, write it down in the register. Get cash for the ATM, write it down in the register. Make a debit purchase, write it down… There’s nothing like seeing my balance draining out to slooooooow down the spending on my end. I found myself getting pinchey and stingy. If that’s what it takes to get financially healthy, I’ll take it! And I’ve reduced quite significantly the number of overdraft charges I was getting because I now know down to the last penny how much money I actually have. I know this should be very obvious, but I thought I was keeping a pretty good loosey-goosey mental track of things, and of course, by checking my balances online. It’s not enough, at least not for me! Esp since some banks like to play games. Granted, it’s still my fault, but the damage could be much less if the banks didn’t have certain practices.

It really helps to actually see where you’re spending money and how much, kind of like keeping a food diary when you’re trying to lose weight– it’s no longer a guessing game or an estimating game, it’s cold hard facts. This would be a pretty good place to start because it’ll allow you to not only see what your particular weakness(es) may be, but also perhaps give you an “a-ha!” moment about why you spend. I waste money when I’m stressed, sad, happy, and bored. So, knowing that gives me an opportunity to see what else I can do about my stress levels, sadness, happiness, and boredom. Anyway, then, you’ll have to make decisions about what you can cut out (or what you NEED to cut out), what you can reduce, and what you can’t go without (for example, gas, or your monthly bus pass). It’s not necessary I don’t think to track for 3 months. I just did because it took me that long to feel “strong enough” to look inside the envelops and analyze my spending habits.

HOpe this at least gets you started in the right direction– you may find other methods work better, like the envelope method.

Trying to get out of debt…

I thought I paid off all my cards but I ran a credit report and found 2 cards open.

  1. card states transferred, closed $3739 written off.
  2. account charged off $1715 written off, $2929 past due

Card # 1 has gone to a collection angency. I have not received any letters or request for payment. But on the credit report show $4322 past due. Should I contact credit card company or collection angency

Card # 2 should I contact credit card company via phone or letter. what are my options?

Did you check all credit reports or just one it may be payed off it might not be showing up.
I had that happen to me mone credit report showed i still owed on a credit card and the other showed it payed off. I would call credit card company on both.

You have a few options, but first make sure they are in fact you are in debt with this credit card.

To answer your first question, the credit card company releases its responsibility once it charges it off to a collection agency, hence the name charge off (which is shown on the credit report). If you look at your credit report, you should see another inquiry on there showing the agency and contact information with the amount (which you already know). So, you need to contact the agency at this point, as it looks like this account has been closed by the creditor.

It is not uncommon for you not to receive correspondence from them, but that doesn’t mean you are still not responsible for them. I would contact the collection agency.

As for the answer to your second question, I would start by calling them on the phone and cordially talk with them regarding your obligations. They should (and legally will) remain pleasant to deal with. More than likely they will come up with a deal for you to make half the payment or a third if you can pay things in full with them by a certain time. If things need to be monthly, they’ll work with you. They have numerous avenues of help, as it becomes a win-win situation for both sides: you pay off the debt, and they get some of the money as well.

I hope this will help you get started.

Main topic of website changed

Hi, guys,

It’s been a while since we last talked. We promise you to update our blog on a regular basis.

We have also decided to change main topic of our website and now we are going to talk about personal finances, budget management, debts, loans, credits etc.

Let us know what you think!

The FARE Walk for Food Allergy in Virginia Beach on November 2, 2013

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