Reflecting on my financial wins and losses in 2008

As we head into the last month of 2008, I am spending more time thinking about my financial intentions for the year to come. This past year, I experienced some ups and downs with regards to my financial situation. Midway through the year, I started a new job with a hefty pay increase yet when I take a look at where I stand financially today, I find myself in a tighter situation then a year ago. What happened?

For one, I experienced that bug that most get when they experience an increase in pay-an increase in lifestyle. I honestly could say that I I felt like I had the complete right to spend every additional cent that came in simply because I had it. When I reviewed my Emigrant account a few weeks back, I was amazed at how the balance had not moved. But how would it have moved, I wasn't putting any money into it.

So now as we endure through this uncertain economy, I have come to a solemn realization about my financial situation. I now realize that even though I earn what some would consider a decent salary, I have been living the typical paycheck-to-paycheck diet of the typical American.

The good news is that knowing is half the battle. Now that I find myself in a position of having the knowledge, I have no choice but to take action. I also know that action without forethought is of little value so I begin with identifying my goals and the possible barriers to my goals. One goal that I seem to be always chasing is to amass a full six months of living expenses. Because I receive the majority of my income in the form of a paycheck, I know how important this emergency fund will be in the event that I find myself without a stable income.

Diminishing my debt is another goal of mine. This month I've been able to pay off a $950.00 credit card balance with a 0% interest rate. The no interest rate offer was set to expire in a few weeks and, rather than transferring to another card, I opted to get rid of the debt once and for all. Debt is not a good thing to have in times like these. The more of your income you can hold on to, the better. With that large chunk of debt paid off, I'm left with even larger chunks of debt in the form of my student loan and two mortgages. I'm not letting the size of these obligations get to me. I still intend to remove them from my life like the debt that came before them.

Removing debt and saving is not an easy feat. One has to operate with a razor like focus with both objectives. It can be done. Achieving this goal is much easier if you have an ample amount of discretionary income. If you are convinced that you have not extra money. Think again. Gas prices are such now that you practically are experiencing abundance every time you fill up. Even if you decide to wait an extra day to fill up, you will save money.

So there is the overview of what my two main objectives are financially for 2009. I'll elaborate more on which methods I'll use to accomplish these goals in my upcoming post.

Does the thought of having money scare the heck out of you?

Everyone wants to have more money, right? "The reason why I can't move ahead in life is because I need more money!" "If only I were making a little more, things would be going much better for me."

If you find yourself agreeing with these statements, you probably think of yourself as a rich person with a poor man's bank account. If you were to receive a huge promotion, things would change for you drastically, right?
Or would they?

I've heard it said before that in order to truly get on the path to wealth, you must create a wealthy mindset. A wealthy mindset means that you feel comfortable handling and managing increasingly larger sums of money. What I mean by comfortable is that you don't feel the need to sabotage your ability to become wealthy.

For example, let's say that you were to receive a bonus check or a large tax return, how long would it before the money was long gone? Would the money be used to increase your net worth or would you buy "nice things" with the money. As your income increased over the years with promotions and better job opportunities, have you consistently increased your level of spending? What about your bank account...if you find yourself with a decent amount just before payday, do you "reward" yourself with a nice dinner or some fancy digs?

A person who quickly spends any increase or surplus is in essence relaying a subconscious message that money is too much for her to handle or deal with. This person feels much more comfortable managing and operating with smaller amounts of money.

If I were to give you a couple of kittens,for example, and you quickly put an add in the paper giving away free kittens, I could tell by your actions that the kittens were not of value to you. On the other hand, if you kept the kittens, allowed them to breed as adults, sell their kittens, and repeated the cycle, I would know that you saw the value of keeping and maintaining those kittens.

In the same fashion, you must respect the money you receive and view it as a valuable tool. You can not raise your level of abundance without first respecting the money you receive. This means not being scared of having money and using money to generate more abundance for you. Every time you spend in excess until there is little or nothing left, you are sending out a very strong message about how you feel about wealth.

If you are currently earning $35,000 a year, and you'd like to earn more, take on actions that will help you become mentally aligned with more. Set up a 401K, pay down your debt, move your savings account to one earning a higher interest rate. Do something completely different that doesn't perpetuate the same results you are now experiencing.

If the thought of money does not scare the heck out of you, then prove it! Begin taking on wealth building habits one by one. You can start by just reading motivational financial books and move on from there. Keep going in that direction until the thought of wealth creation no longer scares but inspires you to take positive actions.

Why do the rich get richer and the poor get poorer?

I heard someone say the other day that money tends to go where it is respected. The statement dind't quite sink in right away but after thinking about it for a few moments, I completely understood the truth of those wise words.

How many of us know someone who struggles to make it financially. Sometimes we think to ourselves, "If this person would just get a large sum of money, they could get themselves back together and get back on track." A short while later that person gets a large tax return, or a settlement fund, and months later, he or she is right back to where they started. What happened?

Chances are, this person did not respect the money. One of the definitions of the word respect from the Oxford Dictionary is "to treat with regard." Regard is defined as placing attention or caring for something. If the person who received the funds handled the money with attention or with care, he or would probably facing a different level of reality. Because the money was not respected, that person quickly found themselves right back to where they started financially.

So how does one show respect for money? One way is to focus on the attributes of money so you can work with (not against) it. Money likes to be multiplied. You know this to be true because of the power of compounding interest. A few dollars invested over time can multiply itself a thousand times over. Rich individuals understand and respect this aspect of money. Those who aren't wealthy view the money as a means to obtain tangible goods. This way of thinking is inherently flawed because the individual is essentially killing goose to get the golden egg.

The rich clearly understands the need to have geese producing golding eggs. In fact, a wealthy person will check on the goose frequently to make sure the goose remains healthy, steadily producing eggs. If a goose is not producing to standard, one who respects money will quickly seek out an alternate way of replacing the stream of eggs. If a wealthy person traded all of his geese for bigger barnes, or faster machines, how long would it be before that person was no longer wealthy?
Hence, even if you do not consider yourself rich, you can begin to respect your goose by placing it in an investment vehicle where it can produce eggs for years to come.

You can show your respect for the wealth you receive by placing a percentage of the money into your company's 401(k) or an online savings account. Once you begin to experience the wonderful feeling of collecting golden eggs, you can begin to seek our larger geese who will lay larger eggs. Continue in this behavior and you will inevitably become wealthy. Building wealth is not about having a priviliged childhood or lucky breaks. Creating wealth is about taking specific actions that encourage the flow of abundance. So think about your actions and consider whether you are killing your geese or if you are tending and caring for them. Even if your goose is just a tiny little one who is not yet capable of producing eggs, the way you care for it today, will determine how many eggs it can lay for you tomorrow.

Are your financial goals merely financial wishes?

If I were to ask you to share with me a list of your financial goals, you would probably be able to rattle of a quick list of things you'd like to have or accomplish. Your list may include phrases such as "I want to be financially independent." "I want to be able to buy a home in the next few years." "I want to be debt free" and so on.
Once you've completed your list I would probably congratulate you on your ambitions and ask you what you are doing to reach your goals.

If you can easily describe specific and consistent actions you are taking to reach your intentions, then you can be confident that you are headed towards your financial goals. If, on the other hand, you are at a loss for words when attempting to detail specific actions you've taken to manifest your financial intentions, then you are fooling yourself into believing that your wishes are goals.

Wishing is defined as yearning for, desiring, or hoping for something to take place. By saying that you would like to have more money in the bank, you are aspiring for money. There is nothing wrong with aspiring for more and better. In fact, without our aspirations, we would be complacent and stagnant with our growth. Vocalizing our desires is quite noble and must take place if we are ever to better our financial situation.

It is when you stop at the yearning stage that things begin to go downhill. When you desire something and do nothing to support your desire, you are wishing for it to happen. You hope that somehow, someway, you will wake up one day and suddenly be free of debt. We both know that the chances of that actually happening is slim to none. Unlike wishes, however, your goal is the object of your ambition and effort. Your financial goals must be the object of your steady efforts.

So if I were to ask you about your financial goals, you should have the ability to detail the actions you are taking to reach them just as easily as you can describe the goals themselves. Your actions should be consistent otherwise your are teetering on the wish category. Inconsistency will have little impact on your financial outcomes. If you only save money once in a while, how much will that impact your financial standings? That's like eating fruit only once in a while and expecting to lose 20 lbs.

Take a quick second to mentally review your financial goals. If your actions are consistently aligned with what you want then your desires can truly be classified as goals. Wishing, to me, is almost as bad as lying to yourself. You say you want it, but you show no true evidence of wanting to make it happen. If you are lying to yourself you need to stop it!
Today you should spend some time thinking about specific actions, even if they are small steps, that you'll take consistently, to turn your wishes in reality.

Who wants to be a millionaire and why?

How many people want to become millionaires? If this question were asked in a seminar, the majority of attendees would raise their hands. Millionaire status has now become the American Dream equivalent of the white picket fence in the U.S. While millionaire status is an admirable goal to strive for, many of us have not really asked ourselves why we truly want to become millionaires.

Sure we all want to be able to pay off our bills and have a little money set aside for emergencies, but getting to that point can easily be achieved with a bit of discipline in your money management. Do you really want to have a million dollars sitting in the bank? Is it the money you want or the lifestyle that comes with the money. Most of us would agree that if we could achieve a similar lifestyle without the exchange of currency, we immediately say yes to the change in lifestyle. If everything we free, would you even want a bunch of green paper with numbers on it?

With that said, we can avoid the dreaded feeling of lack by creating the closest thing to a millionaire lifestyle (in your opinion) as possible. So ask yourself, how would you create your version of the millionair lifestyle?


The first thing you want to do is verbalize your definition of the millionaire lifestyle. As you do, keep in mind that a million dollars ain't what it used to be. Millionaires can not honestly go around spending unlimited amounts of money on frivolities without eventually ending up in an undesirable situation (think lottery winners). How many times have we heard the stories of wealthy celebrities ending up in financial dire straits. The reason for the financial demise is because he or she did not live a realistic lifestyle in accordance with their amount of wealth, even if that person was worth a million dollars.

If you were to become a millionaire, you probably would spend most likely pay off your debt, save for the future, fully enjoy the time you have, give to the less fortunate, take on more leisure activities, and build stronger relationships. Feel free to add to this list according to your desires but I believe that this short list would be a part of everyone's agenda once they came into a ton of money.

So how can you live like a millionaire on your current budget? First of all you should let go of limiting beliefs that keep your mind closed to the possibility of living the life you've always wanted. Start by asking yourself, how can I feel more wealthy right now? One answer to that question would be to take control of your finances. Controlling what you do with your money gives you power over your finances. Watching the money grow from your actions will make you feel wealthier. The first step in creating a millionaire mentality is to start controlling your money, otherwise known as allocating your paycheck. Set up an automatic way of allocating your money properly so you can free up more time to focus on more important actions. When allocating, you should make sure to pay off debt and save for rainy days. Millionaires have money to pay for unexpected circumstances. Once you automate the allocation of your funds, you too will have money to pay for unexpected circumstances.

Another luxuary of the wealthy is the ability to better control your time. Wouldn't you want to have more time to do what you want to do? Well you do, you just aren't taking advantage of the time you have. You probably are saying to me, "I have to work forty hours a week, I don't have time do to what I'd like to do." Well I have news for you my friend, millionaires, on average, work around 70 hours a week. If you worked 70 hours, would you be able to watch the evening television shows you now are able to induldge in?

You should realize that you have been given the same number of hours in each day as someone who is worth millions of dollars. The major differences lie in how each person chooses to make use of the time given. Perhaps you don't want to spend your extra time creating or building a business, that is completely up to you. What you should do instead is figure out is how you want to spend your extra time. Yes that's right, I said extra time. Watching television can be relaxing but if you chose to watch television every single night and weekend, you are not living like a millionaire. Worse yet, you are spending your extra time on non-fulfilling activities. How many people would say that if they had a million dollars, they would spend every evening in front of the television?

If you had lots of money, you probably would involve yourself in more extracirricular activities. You may take up tennis lessons or some other past time. Why not take on your new hobby now? Tennis lessons may be expensive but if you enroll in classes from a community college or a local recreation center, you can experience a millionaire intention with your current cash flow. What else would you do if you were a millionaire? If you were purposeful with your actions, could you be able to experience some of those desires right now?

If you are living paycheck to paycheck and can not afford to spend on anything but your bills? You too can experience a life as a millionaire. To do so, you must effectively incorporate the habit of creative visualization. Yes, I know that visualization may not seem like an acceptable substitute for the real experience, but if used consistently and effectively, visualization will help you obtain the "millionaire lifestyle" in two ways:

1. You can actually see yourself as a wealthy person, and a such, over time you will begin to subconsciously take on the qualities of one who immersed in abundance.

2. You will generate the feelings associated with living in abundance. You will see your time as valuable, your relationships as valuable, and yourself as having great values. One major barrier you now have to living the millionaire lifestyle is not having the feeling of living in abundance. When you see yourself clearly enjoying the millionaire lifestyle, living in abundance will seem like second nature to you.

Stop focusing on the dollar amount you have (or don't have) and begin to pour your attention on the intangible qualities of becoming a millionaire. If you commit to doing so, you no longer will feel helpless because of the amount of money you possess. Instead you will begin to feel overwhelmed because of the amount of wealth in your life.

The right way to shop for quality without going broke

As a self-proclaimed cheap person I often feel a sense of pride when I tell myself, and others, that I refuse to spend over a certain amount on basic items such as shoes, clothes and other necessities. Sales and clearance items always caught my eye. I relished every opportunity to brag on how little I spent on my personal items. The less I paid for an item, the more I believed that I had made a great buying decision. Lately, however, I have begun to undergo a mental shift in how I perceive my buying decisions. I started to cross over to the dark side and spend a bit more money on some of my purchases.


Whenever I do spend a little more for an item that I use frequently, I usually can immediately tell the difference between the quality of the item compared to its less expensive counterpart. After experiencing this scenario on several occasions, I finally had to make the decision to allow myself to purchase "higher end" items with a few ground rules:

Purchase high quality items at lower end retailers
There's no need to overpay for quality items when you can purchase the same quality for half the price. Stores such as Marshall's, Ross, Burlington, and TJ Maxx often have a great selection of name brand items at huge savings. Why pay a few hundred dollars for a high end bag when you can buy the same brand name product for pennies on the dollar elsewhere.

Spend a little more only on high quality items I use on a regular basis
I can not tell you how many times I suffered the consequences of buying a $10.00 pair shoes at a discount store. Because shoes suffer a lot of wear and tear, I found myself on more than one occasion with broken straps and severed heels, while out in public, as a result taking the cheap route with my shoe purchases. By spending a little more on better quality shoes, I avoid additional trips to the store and end up buying fewer pairs of shoes in the long run.

Never pay too much for high quality items
There comes a point where paying more for better quality goes too far. Paying a few dollars more for an item could mean that you are paying for additional quality but paying 200% or 300% more than the median cost for an item is an extreme. When you pay that much more for an item, you go well beyond the point of paying for the additional quality and you go into dangerous territory of paying more for the name on the product. That is not what you want to do. Avoid that situation by creating an expense threshold that you make sure not to cross.

Take better care of your stuff
Before deciding to spend a bit more money on some of my purchases, I wouldn't put much effort into the preservation of the item. Another $10-$20 dollars would not be a big a deal for me to spend to replace my broken or torn product. Now that I spend a little more for some items, I find myself taking better care of my belongs as a wonderful consequence. The more care I put into preserving my belongings, the more money I keep in my pocket by not having to replace that item.

Don't get me wrong, I still browse discount store and clearance racks for sale opportunities of a lifetime. The difference now is that I ask myself if the super-discounted price is worth the possible trouble and headache of having to replace that product in a short period of time. Spending a few dollars more for the quality may be a bit painful in the beginning, but in the overall scheme of things, I feel that I am holding fast to my "cheap" nature by not having to spend more money to buy that same item again in the near future.

Earn a higer interest on your money with tax lien certificates

Ever since I read about tax lien certificates in Robert Allen's book Multiple Streams of Income, I have been fascinated at the idea of being able to earn such high rates of interest on an investment with very little risk. The basic premise of purchasing tax liens is that you are paying some one's overdue property taxes from the city government. You then wait out the redemption period, the amount of time a person has to pay back their past due taxes, and collect all of the interest and penalties accrued during that time. The rates of interest can get pretty high. In fact, in states like Florida, the interest rate is 18%. Other states can have even higher rates of interest. The best part of the process is that you do not have to live in the state that you chose to purchase your tax liens.

With my online savings accounts earning a measly 2.5% on my savings, I figured that now is a good time to get started in this type of investment. The first thing I did was read up on everything available on tax liens. Most of the information online duplicated itself but with each site I visited, I was able to learn just a little bit more about the process. I then found out when my local government would release the list of properties up for auction. After reading the information on my local city's website, I learned that I would have to register online to bid electronically. That meant that I did not actually have to participate in a physical auction at the government office. That would save me from getting into an emotional bidding war with the person across the room from me just because I want to beat him. This online process would allow me to keep my cool and bid in the privacy of my own home.

Once I was able to obtain the list online, I sorted the tax lien certificate amounts by cost. I only budgeted a certain amount for this year's investment, but if all goes well, I hope to have more to invest with next year. In the my county, tax liens ranged from $695,000 to under $100. That lets you know that you don't need a tom of money to get started in this great type of investment. Please note, however, that if you buy a tax lien for $100, the property owner has a greater chance of paying it off more quickly which means less interest on your money.

Then I researched all the properties in my price range by viewing the county's record. I looked at the address to asses the neighborhood. The reason why this step is so important is because if the person behind on their taxes is unable to pay the amount, you as the holder of the tax lien may be able to obtain the property free and clear (regardless of whether the individual has a mortgage on the home).
I have no interest at the moment of having to do a rehab on a distressed property so I visit is home to make sure that the properties I am bidding on appear to be move in ready.

The auction is coming up this Saturday so the next blog entry will detail the bidding process as I observed it. Be sure to come back.

In the mean time, here are some resources on tax lien certificates:

What you should know about investing in tax lien certificates
Tax Lien Investing Blog
Tax Lien Investing Tips