Monthly Archives: May 2016

Money Ideas For Great Finance Manage

My “awesome ideas” folder is piling up over here,  so I thought I’d release some of them on you today to help turbocharge your goals 😉 All these come from emails and comments that YOU ALL have sent over the months, so big thanks for dumping out your smarts on us! It all helps!

See if any of these ideas stick with you:

#1. The financial notebook

This one comes from Sarah who shared it on Millionaire Day this year:

“I started keeping a financial “notebook.” I write in it every time I do something that moves me closer to the FI mark. (Ok,  so I am rather liberal with what counts… reviewing the kids’ 529s counts, as much as paying an extra $100 to the debt monster.) Flipping through it helps keeps me motivated in the dry spells and reminds me when it’s time to review some bill or policy!”

So pretty much, a financial diary. Which is much more juicier than a normal one, if you ask me!

#2. An awesome way to charge your kids rent 😉

From Paul:

“I am going to provide my kids a (mostly) judgement free place to live when they are done schooling. My only Caveat is I will charge them rent, and that rent will be in the form of proof that they are maxing their 401(k) and IRA, and investing 50% of their net pay. As long as they do that they can live here ’till they get married.”

Another great benefit: they’ll be able to move out faster with all that money saved! 😉

#3. Chart your net worth progress against your goals!

LOVE LOVE LOVE this from Bill Furst:

“I wanted to pass along a neat little tracker I put together that I use monthly (now, and previously just yearly) with my own net worth updates.  It basically tells me that I am on track for my retirement goal ($$ and time) with a visual chart.  The larger the green section, the more ahead I am.  You just input in the grey boxes and the yellow parts calculate for you.

I filled this in with your stats dating all the way back from 2008… I did yearly from 2008-2015, and then monthly from 2016 on. Line 8 is your historical net worth amounts. I don’t know what your time line is for your cool $1M, but if it’s 2020, you’re ahead of the game.”

So smart, right? Looks like the first year and a half I was falling short of my goal of “a million,” but from there we took off and are set to hit it earlier than expected. I really like this because it gives you a super fast idea of how well you’re doing or not in relation to your OWN goals and not anyone else’s. And it’ll now be yet another addition to my sturdy spreadsheet I’ve been tweaking over the years – woo!

I’ll have to make a template of it one day for y’all, but for now here’s the spreadsheet Bill created above for any of you who’d like to copy/test it out yourself: Net Worth Comparison Chart

Thanks Bill! (And your wife is right – you totally need to share your thoughts online somewhere! Start a blog already so we can check out all your other ideas you’ve got brewing :))

#4. “How much freedom will this cost me?”

Great way to think about all your purchases, by Free-Range-Nation.com:

“I ask my clients to think carefully about every purchase, and ask themselves how much freedom do they have to give up to work for someone else for this item? 15 mins … ? One hour… ? One day… ? One week… ? One month… ? One year… ? And then, is it worth it? If it brings tremendous value or return on investment, go for it. If not, sit on it awhile. Then, when they decide not to make the purchase, I suggest putting that amount into their Freedom Fund, or FU fund, as many like to call it. How about the Middle Finger Fund to keep the fun there and the profanity out. 🙂

#5. Pay enough extra towards your mortgages to see a $1.00 decrease every month

Another interesting idea by Richard, in response to staying motivated paying off your debt:

“One of the things that made it simpler for me is focusing on a small detail. I call it my magic number: $310. That is the number (rounded up to next $1) at which the extra principle payment reduces my monthly interest by one dollar. It is great to know that by paying that extra amount, all my future payments will include $1 more principle, and $1 less interest. It’s a benefit I can see on paper. I can also see the compounded effects of making those extra payments over the years. It soothes the number crunching addiction I have.”

I used to love seeing the interest portion of the payments going down by a dollar too. I never calculated “my number” to make sure that happened every month, but I did round up to the nearest hundredth every month – for both our mortgages – which sped up the debt killing immensely.

Boost Your Organic Motivation

My biggest weakness is being unable to generate enough organic motivation to keep on hustling. I used to get up by 5am every weekday to work for 2-3 hours before work. Then I’d get home by 8pm and work another 1-2 hours on my side hustles. There was this massive internal drive to go all out to one day break free.

Now that I don’t have a day job, I get up around 6am and then zone out on my phone for 30 minutes before checking the refrigerator several times to see if there’s anything good to eat!

No wonder why my weight continues to creep higher. I’m just not trying hard enough. I admit it. Reaching financial independence has made me less productive by at least two hours a day. What a shame to no longer reach maximum potential.

Then one day I realized I had been sitting on two, $2,100 rent checks from my Pacific Heights tenants for one week. They’ve been great so far in terms of paying promptly. The only reason why I remembered carrying these checks is because I told my tenants to just take the cost of fixing the leaky kitchen faucet off their rent.

They reminded me they had already sent their rent checks, and given rent wouldn’t be due for another 3.5 weeks, they’d rather just get reimbursed directly. Oh yeah, that’s right.

The main reason why I forgot to deposit the $4,200 for a week is because I paid off the mortgage in 2015. After 13 years, the bank is no longer helping me stay financially disciplined.

Quarter Life Crisis

There’s so much history with this Pacific Heights rental property because I bought it when I just turned 26 in 2003. At the time, I was also losing my organic motivation after saving up around $200,000 and making $150,000 in a fortuitous internet stock four years after college. I knew I was lucky, but I was also tired of working 70+ hours a week.

Waianae Mountain Range

9/11 was fresh on my mind and I was constantly wondering what was the point of working so long to make more money. I was incredibly tempted to just leave San Francisco and move to this beautiful 6.2-acre property my grandparents owned nestled in the Waianae mountain range in Oahu. Due to their advanced ages, they were no longer actively tending to the dozens of mango trees, pomelo trees, avocado trees, and orange trees they had planted decades ago. What a shame to see their hard work fade.

As I contemplate this quarter life crisis now as a middle-aged person, I realize how dangerous it is to grow up in a household with some wealth. As grade school teachers, my grandparents weren’t rich by any means. But they did buy this amazing property for $50,000 in the 1960s. If there wasn’t this property, I wouldn’t have even considered leaving work in my mid-20s due to a lack of options.

Taking on a $464,000 mortgage at 26 super charged my organic motivation. I changed from wanting to kick back in Hawaii to wanting to get into the office by 6am and outwork everybody every day. The last thing I wanted was to get laid off with such a large amount of debt. Debt saved me from short-circuiting my career by eight years.

If I moved to Hawaii at 26, I might be an incredible surfer by now. But I would have always wondered how far I could have gone in my career had I stayed. Now I have no regrets because I tried my best to get to Managing Director and failed.

The Debt Snowball

When it comes to paying off debt, there are two popular strategies that are typically encouraged:

The Debt Avalanche method or the Debt Snowball method

Both of these winter-themed strategies are effective for getting you to debt-free, but each has pros and cons.

The Debt Avalanche method

The Debt Avalanche method consists of paying off your debt with the highest interest rate first. Once it’s paid off in full, you then focus on the next highest interest rate debt, and so on, until you pay off your lowest interest rate debt last. Because you get rid of your highest interest debts first, the Debt Avalanche method saves you the most money overall. For this reason, it is mathematically the best solution to paying off your debts. Using the Debt Avalanche method, you will likely focus on paying off things like credit cards and lines of credit before you tackle traditional low-interest debts like student loans.

The Debt Snowball method

The Debt Snowball method has you paying off your smallest debt balance first, regardless of the interest rate. Once the smallest debt is paid off, you then roll the payment into the next largest debt and so on, until you pay off your largest debt balance last. By tackling your smallest debts first, you rapidly feel a sense of accomplishment whenever you pay off a balance. This gives you momentum to tackle the rest of your debt. For this reason, it is often psychologically or emotionally the best solution to pay off your debts, even if it does end up costing you more money in the long run.

What about the emotional weight of debt?

What many people tend to neglect about debt is the weight behind the balances and interest rates. Some debt simply feels emotionally or psychologically painful to carry around. This could be money we owe a friend or family member, or debt from silly mistakes like unpaid parking tickets. Whether these are small balances or 0% loans doesn’t make them any easier to ignore. Sometimes it makes sense to get rid of your emotionally heavy debts even if they are not your highest balances or highest interest rate loans.

How to Pay Off Your Debt

When it comes to deciding between the Debt Avalanche and the Debt Snowball (or any other debt repayment strategy) the first thing you have to do is make a list of all your debts, their interest rates, balances, and minimum payments.