| |
by Miata on January 26th, 2012
Ah, late January… a time of colder temperatures, snuggling around a warm fireplace…and December’s credit card bill waiting like a bomb in your mailbox.
Nightmare!
Did you overspend during the holiday season? If not, many people you know made up for you. According to this Bloomberg Businessweek article, consumer debt rose more in November of last year than it had in 10 years.
Although analysts call this a “good sign” for the economy, doesn’t this statistic frighten you? Weren’t we just talking recently about many people losing their homes because of too much debt? People in the arts, especially, shouldn’t take on debt they can’t afford. In many cases, our income streams bounce around enough that we shouldn’t be spending next month’s paycheck that may never arrive.
But, if you overspent over the holiday season, there’s nothing to do now but clean up the mess. It won’t be easy, but with a good plan and the right tools, you’ll be back on your financial feet in no time. Here are my four steps to curing your credit card hangover:
- Write out all the debt. On a spreadsheet or piece of paper, write the total amount, monthly payment, interest rate and due date of each bill. People avoid this step, because it’s painful to have all of your debt written in one place in front of you. This step is supposed to be painful! If it doesn’t hurt to look at your debt, you may not be motivated to pay it off quickly.
- Create a small cash reserve before you start. If you have to make minimum payments while you accumulate cash, that’s okay. You won’t regret having a reserve when your dishwasher breaks down and you don’t have to use a credit card to have it repaired.
- Attack the lowest interest rate or small balance cards first. If you can tackle a small balance credit card to gain more monthly cash flow, do that first. If not, focus on the card with the highest interest rate so you pay less money over the long run. Maximize your effectiveness when paying down this card by only making minimum payments to the rest.
- Take the credit cards out of your wallet and pay cash for as many transactions as possible. Half of avoiding a credit card problem is to live a cash-based lifestyle. You’ll always have the money you need and won’t have to worry about your next booking to make the next payment. By working from a budget, you should be able to effectively pay down your debt and stay within your means. This step sounds easy, but if you’ve been using a credit card for a long time, you’ll notice immediately what a reflex action it is to reach for the plastic when the cashier asks for money. You can’t use it if it isn’t there!
One other point: If you are in a relationship, come clean about your debt and your plans to eliminate it, with your partner. Sure, this may put pressure on you, but in this case the pressure is constructive. Plus, having a friend to help cheer you on while you pay down debt is more likely to work than going it alone.
I read yesterday that many divorce attorneys call January “divorce month” I was amazed that I’d never heard this before. But apparently, after all the parties end and people are left with only memories and financial problems, couples decide it’s easier to part ways. That felt really sad.
2012 is a great year to promise yourself that you’ll clean up lingering debt problems and begin living a life of prosperity. Often, I meet people who tell me that their goal is to get out of debt. I believe that goals are best expressed as positive things: buying a home, becoming physically fit, or improving your craft in a specific way are all “goals.” Debt is a negative, strangling your ability to reach those plans. That’s why it’s so important to tackle debt now. You can’t reach your goals until your debt plan is operating effectively.
You have better things to do than to worry about holiday overspending. You’ll feel great when you take control of your debt and begin the road to recovery.
by Miata on January 20th, 2012
 I’m thinking of buying my first home! One quick question: how do I decide between a 15 and 30 year loan?
Gary
Congratulations, Gary! That’s a big step, and I’m happy to help you with this huge question. For most people, taking on a mortgage is the largest debt they’ll ever owe. It’s important to do it right.
I’ve noticed some advisors like one type of mortgage better than another. I think each type exists for a specific reason. Unfortunately, this means I won’t be able to answer your question directly, but I can give you some tips to help along the way:
First, you didn’t ask about adjustable rate mortgages–where the initial interest rate is low but can adjust to a higher amount after a specified period of time–but for the vast majority of people, they aren’t a great idea right now. Interest rates are at near all-time lows, so locking into a fixed rate mortgage is best for most home buyers. The exception? If you are absolutely certain you’re going to move again soon, an adjustable rate will save you money.
15 year loans are best for people who want to pay off their mortgage quickly and need the forced discipline of a larger payment. The upside of a 15 year loan is that you’re guaranteed to be mortgage-free in 15 years (assuming you remain in the home). The downside? If you lose your source of income, the monthly payment on a 15 year mortgage will be much harder to meet than a 30 year payment.
30 year loans work best for people who want the flexibility of a lower mandatory house payment. It’s a mistake to think that people with 30 year loans will pay them off over a long period of time. On the contrary, I’ve met quite a few successful savers who chose a 30 year loan and then paid significantly more than the amount due each month. Why? If they ran into financial trouble, their monthly payment was pretty low, and the chances they could meet the payment was better than if they’d bitten off the higher 15 year payment.
Don’t take out the 30 year loan and “hope” to make extra payments. Set up an automatic payment plan for more than the requested amount so that you’re still forced to pay your home off early.
I hope this helps and I wish you happy house hunting! Send us a picture! 
by Miata on January 12th, 2012
 Ah, a New Year. Like a brand-new car, the New Year is full of the smell of promises and opportunities. Last year’s dirty slate is wiped clean and you’re free to dream about a whole list of things you’ll do better than last year.
…which lasts until about February 15th.
By then the shine is off the New Year and the “real world” has caught back up and strangled any resolutions that managed to live that long.
Working out? I don’t have time.
A cleaner home? I need to make more money and hire a maid.
Resolutions, written excitedly with so much love in January, become dirt in the bottom of the trash bin before the first quarter is over.
But it doesn’t have to end this way.
There is a better method to resolutions. There are some actions you can take right now which will give you the lift necessary to make sure that whatever you dream for yourself and your craft stands a chance of becoming reality. Read the rest of this entry »
by Miata on December 29th, 2011
 This time of year I like to look back over the last twelve months and reflect. For me, life is about making mistakes–mentors have told me that if you don’t make any mistakes, you aren’t moving fast enough. This year has been a whirlwind, so I must have made some real doozies!
While it certainly can be difficult, I try not to dwell on my missteps as long as I learn from them. At this time of year, I also like to learn from events and the mistakes of others. There are five that I think are well worth reflecting on before we march into 2012:
1) Don’t Wait on Government…In Fact, Don’t Wait.
Politics seemed to enter our life more than ever this year, with Republicans and Democrats waiting to the last minute before passing legislation in several key areas, including funding to keep the government open!
I’ve met people who’ve said that they can’t do any long-range planning because they’re unsure what measures the government is about to pass, or they aren’t sure if the tax structure is going to change, or they want to wait and see who the next president is.
Most artisans work on a 1099 income basis, so some important areas such as health care and small business taxes can have a big impact on your bottom line.
….but does this mean you should wait?
Waiting on the government doesn’t make any sense to me. Is it better to have a plan in place that you may need to adjust or to have no plan at all? I’d always prefer to revisit my plan when the government finally decides their actions, than be held hostage to whatever political problems crop up.
The Bottom line: Plan now and adjust as events occur. Read the rest of this entry »
by Miata on December 26th, 2011
 Hi Miata,
Lately, a bunch my friends have been talking about buying gold. With the problems in Greece and Italy, should I be buying precious metals, too? Thanks!
Chris
Not necessarily Chris. All you have to do is watch late night television to know how sky-high metal prices are right now. When commercials tell you they’ll buy your gold, recommend that you buy real estate, or announce that the Snuggie is the next wonder of the world, buyer beware. (Although they may be right about the Snuggie…) Rule #1 of high school economics is to “buy low and sell high.” I’m always nervous when the price of any investment is through the roof.
That doesn’t mean that I think the price of gold is going to come down. It only means that I’d be cautious. Here are some things to think about:
- If you’re a beginner, make sure you have a cash reserve in place before purchasing any investment that will fluctuate. If you run into an emergency, you need a safety net. According to CNN’s Walter Updegrave, gold prices are three times more volatile than stocks, so don’t listen to people who talk about gold as a “safe haven” unless they ride roller coasters to cure insomnia.
- Only purchase a small amount. Many financial experts recommend only having 10 percent of your entire investment portfolio in precious metals. Start with mutual funds or exchange traded funds that buy stocks and bonds. Then move into more aggressive investments like gold.
- Don’t try to time the market. I know prices are high, but could they go higher? Sure. They could also plummet tomorrow. If you’re buying gold as a long term investment using the parameters I’ve outlined above, great. If you think gold prices are headed “to the moon”, you’re just gambling.
by Miata on December 15th, 2011
 I have to admit, I’m a perfectionist about planning my business. While making dinner, my mind races through lists of ways to perfect my craft. When folding laundry, I’m usually strategizing about my next potential project. My mind seems to always be at work on the next “better” idea, even when daily mundane tasks rule the moment.
I was reading management guru Tom Peters recently, who stated that balance is baloney. Top people in any field don’t have balance. They obsess. They strategize non-stop. They’re always looking for the better idea, the perfect “new thing.”
As a bit of an obsessor myself, I mostly agreed with his statement, except in one area. You shouldn’t obsess about your money.
It’s actually easier to obsess about business if you’ve done a good job of setting up a sound financial structure. By taking care of some small details today, you’ll be able to focus all of your energy on your craft. Read the rest of this entry »
by Miata on December 8th, 2011
 Contribute to your 401k even if you don’t plan on staying with the company long enough to claim the matching dollars.
A 401k plan allows an investor to place money into investments on a pre-tax basis. Let me explain what that means: when you collect cash from an employer, they’ve already taken out federal tax, state tax, FICA tax, and in some cases, city taxes. Yuck. When you invest in a 401k, your money avoids ALL of these taxes until you take it out. That means you’ll have more money invested than if you tried to save these funds in the bank. Even when you take money out, it’s distributed as ordinary income, circumventing FICA taxes. The 401k is a powerful tool you should be using right now! When you leave your company, you can often leave it alone or roll it to an IRA until retirement.
by Miata on December 1st, 2011
If I were forced to choose one time of year that was about making smart choices, it’d be hard to choose against this one. What should you wear to the next holiday party? Who should you invite to a gathering you’re holding? How much should you spend on gifts? Probably the biggest one of all is this: what should you eat?
I was out with a friend recently for lunch and as she perused the menu, I heard her mumble, “Oh, that looks good, but I want that cake!” I felt a bit envious because if I eat frosting at noon, I’m struggling to stay awake by 2:00 PM. But I was surprised when the waiter arrived and she ordered a healthy salad and water.
She never ordered cake.
I asked when the bill arrived, “You aren’t getting the cake?”
Her answer was surprising. This healthy, fit woman told me that she was on Weight Watchers. She enjoyed this particular program because it was less about diet and more about making wise choices. She hadn’t been talking about the cake from that restaurant’s menu. Instead, she was already thinking about the awesome cheesecake a woman was serving at a holiday party we’d both be attending later in the week.
In short, she was making choices today that would affect what she was going to eat in the future.
If you extend this type of thinking to your whole life, powerful results are right around the corner. Read the rest of this entry »
by Miata on November 22nd, 2011
Miata,
I know I shouldn’t tell you this, but I really don’t have time to sit down and write out a  complete budget! I know, I know, it’s horrible. Could you give me some quick tips to keep track of money without writing it out?
You probably know how I’m going to respond… The bad news is that until you take the time to write out your expenses, it’ll be impossible to make real, effective changes to your budget. There is a slice of good news, though. We can speed up the process of budgeting to make it easy until you find time to attack your budget head-on.
- Use a website like Mint.com to help you budget on-the-fly. You can link Mint to your checking account so that it gives you a quick rundown of how you spent cash. The best news? Mint lets you set parameters to warn you when the checking account is worse off than you’d wish. Don’t want to use Mint or another similar site? Many banks are adding robust budget tools. Check with yours to see if this’ll make it easier to keep track of your spending.
- Communicate regularly with those who share your budget. If you’re married or setting goals with a partner, schedule time to review bills, investments and upcoming big ticket expenses. You won’t regret it. For many families, this single act allows them to effectively plan because everyone is on the same page regarding how money should be spent during the week.
It’s understandable to feel overwhelmed by the prospect of creating your budget. But I promise it really doesn’t have to take that long. Check out Artist’s Prosperity 101 for a clear and affordable program that will take you step by step through the process of getting completely financially organized. You’ll create a strong financial foundation - including a budget - in just 4 weeks of extremely manageable actions!
by Miata on November 17th, 2011
 Remember the three little pigs? Sure you do. The moral of the nursery rhyme was simple: build your house right the first time and it won’t be blown over.
In the arts, we’ve all heard this advice before. It’s the quality of our work that brings people back. We’ve watched suspiciously as performers with gimmicks shoot to the heights of fame for a few brief moments; but it’s only quality work that helps ensure a long, prosperous career.
Or in other words, using three little pigs speak: If you’re building your house, make it brick.
I’ve often heard financial planning referred to by professionals as a house. A foundation laid on the sandy ground of debt and scattered income is bound to fall later. For the average person, building consistent, dependable income and paying down debt are jobs number one and two.
But we aren’t average, are we? Read the rest of this entry »
|
|
