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Thread: OT managing personal finances

  1. #41
    Join Date
    Aug 2004
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    Sunny So Cal
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    4,551

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    From 18 to 43 I invested most of my income. Maxed 401k, maxed deferred compensation.

    I retired at 43 with a take home of 4500/mos. Outstanding credit.

    I bought my first house at 26. Sold it and moved into a new house with high mortgage, at the time. Always buy more house than you can afford. Its now a very manageable amount. Fixed 3.25%

    My wife still works and thats just fine. She makes very good money and her 401k is also maxed.

    For me it was about living with very little and investing wisely so I could enjoy my mid years.

    Worked out very well. House will be paid off when wife retires and that is a SoCal home.

    Like said before. Homes are for living in, not a source of money. We just happened to get into a very good city so the equity has went through the roof. In 08 it only decreased about 100k and snapped back within a year.

    Now I do what I want when I want.

    Sacrifice is key.

    All my pay raises were invested so for 25 years it was like I never got a pay raise when in actuality it was closer to 50% over that time. JR
    My old yahoo group. Bridgeport Mill Group

    https://groups.yahoo.com/neo/groups/...port_mill/info

  2. #42
    Join Date
    Mar 2015
    Posts
    2,581

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    With exception of cashing out two weeks of vacation pay to buy a CNC mill and make updates to my workshop, I only keep $250 a paycheck for my toys, plus I split any over time with my wife for toys.
    It also helps to net 6 figures.
    We are following Dave Ramsey, going to pay off the house next.

  3. #43
    Join Date
    May 2002
    Location
    SE Texas
    Posts
    11,864

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    Around 20 years ago I was working for a company that had credit problems. This was a problem for me because I had to buy replacement parts for maintenance of their equipment. And some of those parts were quite expensive and often/usually I needed them right away, not in a few days or weeks. I spent a good amount of effort establishing charge accounts when I was suddenly given a credit card and told to use it for all purchases. If the limit on that card was not enough, I was to use one of the higher limit cards that the company had.

    I was confused. I had finally gotten some credit established and now I was told not to use it. Why? Well, I figured it out. Airline miles and cash rebates. The credit cards returned at least 1% on every purchase that I made. Same price. Same delivery. But effectively it cost 1% less.

    Credit Cards! Money Maker! Wow!

    I thought about it. I had heard all the dangers of using credit cards. They are a trap that can bring you to bankruptcy. So I was worried. But what did the company do to prevent this? Well, controls. I was not allowed to just buy anything that I wanted with that company credit card. I had to get the prices first. I had to submit a PO for approval. When it was approved, it went straight to accounting office where they recorded it and gave me an official PO number. Only then was I allowed to buy the items. And they knew what was being spent, UP FRONT. Controls!

    So I figured that if I was going to try using credit cards for my personal spending, then I also needed controls. I created a Household Budget spreadsheet in Excel. It lists all my spending for the year and I create new sheets for each new year. Except for a few, relatively low cost items, ALL my household expenses are recorded on that sheet. And it also has my predicted expenses for the remainder of the year. I simply correct the estimated amounts and change the background color when the estimates become the actual amounts spent. Also all income is listed there; first as an estimated amount and then changed to a green, actual amount when I receive it. Even the cash expenses are really there as an ATM withdrawal. But I keep them to a minimum.

    One important feature of this Budget spreadsheet was the ability to record the credit card purchases AND add the amounts spent to the estimated payment to that card company at the end of the month. I created a rather complicated macro for making entries on the sheet and it included an automated process for the credit card expenses. It also records the credit card purchases to a separate sheet for each credit card so I always know where I stand with them and what I can expect to pay on the next bill. No surprises.

    With the ability to predict my expenses and with my actual expenses recorded I can tell at a glance just where I stand. For over a decade now I have used credit cards for as many household expenses as possible. Some companies will charge a fee for their use, but most do not. With this system I have always been able to make a payment on the credit cards. 99% of the time that payment is for the full amount of the bill so NO INTEREST is generated. I get 1% cash back and it costs me zero dollars; just some time spent managing and controlling my spending. In the odd instances where I am late with a payment I lean on my good credit rating and call the bank that issued the card. I can usually talk them out of all or at least most of the penalties and often the interest as well.

    In a typical year I get over $500 cash back. Real money. And my credit ratings are EXCELLENT. And I am constantly receiving offers for some of the best credit cards available. I pick the cream of the crop. About six months ago I got an offer for a new card that had a $500 bonus if I spent X dollars in the first three months and it paid 1.5% in points for all purchases. I normally spent that amount on my previous card in two months so I took them up on it. And I did get a check for $500 plus the 1.5% point money that the card regularly pays. Over $500 just for switching my household spending for three months. Wow! I am sure I will exceed $1000 this year in cash back.

    When I have a major expense I can tell at a glance if I have the money for it or if I have to do some maneuvering. With a constant barrage of credit card offers I can often, no always get a new one that I can use for that purchase. I wind up with at least 1% off the purchase price AND zero interest while I pay the balance. Of course, the payments on that balance are scheduled on my Budget sheet. Right now my wife wants a new car. I am looking into ways to finance it this way.

    So, a cash based household may be good, but a credit card based one, WITH CONTROLS, is a lot better. Control is the key. You must have solid control.

    I also add extra to the capital payment of my mortgage when I can.

    This won't make me a millionaire, but it does control my expenses and earns a discount on many of them.
    Last edited by Paul Alciatore; 01-08-2019 at 05:50 PM.
    Paul A.

    Make it fit.
    You can't win and there is a penalty for trying!

  4. #44
    Join Date
    Aug 2018
    Location
    Tai Tokerau - NZ
    Posts
    129

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    Quote Originally Posted by rmcphearson View Post
    .
    2) Find a way to get to work (8 miles each way) without going into debt, or at least minimal debt, for a vehicle.

  5. #45
    Join Date
    Jan 2009
    Location
    Central Ohio
    Posts
    1,049

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    The score depends on the scoring method. There are several FICO scoring versions. My score has been as high as 876.

    From my credit card statement:

    What score model was used to calculate my score?

    Your FICO® Score is calculated based on data from Equifax using the FICO® Bankcard Score 8 model and is the same score we use, among other information, to manage your account. This model has a FICO® Score range from 250 through 900.


    Why is this score different from other scores that I received from somewhere else?

    The FICO® Score Citi provides is based on information from your Equifax credit report based on the “as of” date included with your score. This may differ from scores you obtain elsewhere that may have been calculated at a different time using information from a different credit bureau or even a different score model. If you have additional questions regarding the FICO® Score model and how it’s calculated, please refer to the FICO® Score FAQ and Understanding FICO® Scores links under the “Useful Links” section below.

  6. #46
    Join Date
    Nov 2008
    Location
    SF East Bay.
    Posts
    6,153

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    Like RB211, I have a toy budget. $100 goes into it every two weeks, even when I was consulting and getting paid monthly or quarterly. After a while I had most of the toys that I wanted, and the "toy account" reached more than $5000 last year.

    But the real key to good financial management has already been mentioned. It is to start with spending less than you earn. On top of that, when you are making more money, spend it as if you are still making the same rate of pay that you did last year. An example is that if you make $2500 a month last year and make $2700 a month this year, use a budget based on that $2500 paycheck.

    You don't have to make millions to be self sufficient. I did, but it took decades to make that $1M and most was spent on living expenses.

    Dan
    Measure twice. Cut once. Weld. Repeat.
    ( Welding solves many problems.)

  7. #47
    Join Date
    Nov 2008
    Location
    SF East Bay.
    Posts
    6,153

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    Re: FICO score. They are somewhat meaningless. I have a 840+ score and have no income except Social Security. Until last month I had no real property in my name. The rumor mills nurture the "you have to have debt for a high score" myth but that is obviously wrong.

    Dan
    Measure twice. Cut once. Weld. Repeat.
    ( Welding solves many problems.)

  8. #48
    Join Date
    Jul 2007
    Location
    West Michigan
    Posts
    2,912

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    Quote Originally Posted by rkepler View Post
    I'm not really sure there's an upper limit, and they might be relative to the rating agency (usually one of the big 3?). I know I've seen higher than 850.

    On edit: I should add that the primary thing a poor credit score will do is to increase the cost of money that you borrow. It may also increase deposits that are asked for in the extreme cases (prior examples of deadbeatism, etc.)
    Auto and home insurance rates are also higher if you have a low credit score, even if you don't have any loans.

    Brian
    OPEN EYES, OPEN EARS, OPEN MIND

    THINK HARDER

    BETTER TO HAVE TOOLS YOU DON'T NEED THAN TO NEED TOOLS YOU DON'T HAVE

    MY NAME IS BRIAN AND I AM A TOOLOHOLIC

  9. #49
    Join Date
    Jul 2007
    Location
    West Michigan
    Posts
    2,912

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    I grew up in a family with seven children and only one paycheck so we never had any extra money. I told myself that when I grew up, I was going to have some of the nicer things in life. My parents had taught us kids how to live within our means, meaning don't spend money that you don't have.

    I bought my first house at 20 years old. Sold it a couple of years later to my brother for what I had into it and bought another house with some acreage. Still live there over 40 years later. That is key to financial success. It usually costs money to change houses.

    My wife and I never had children. It just wasn't in the cards for us. Would have loved to have them but didn't. We've been married for over 35 years. Changing spouses is probably more expensive than changing homes in most cases.

    When we were in our mid to late 20's we met with an investment adviser. We had about $5,000 to invest. The adviser told us to pay the money on our mortgage instead of investing it with him. Honest adviser there. He also asked us what our goals were. I said we really don't have any specific goals as far as money goes. He said we should. I told him that I would like to retire at or before age 50 with a million in assets. We did both.

    We both worked steady good paying jobs. We maxed out our 401K's and invested in some real estate and now own four homes, two of which we rent out. Also some other vacant land.

    I have a friend who has filed bankruptcy twice. One day we took a ride out to our cottage. On the way home I told him that I had to stop at the hardware to pick up a bolt for something that I was working on. I went and paid fifty cents or so for the bolt and my friend spent almost ten dollars on a coke, some candy and a flashlight or some other overpriced crap by the checkout counter. The main difference between us as far as I could tell is that my parents taught me about money and his didn't.

    The rental properties are some work but they pay real well. One of them is on a lake. Beautiful beach. We paid $50K for it in 1991. Tenants have probably paid for everything that we put into it twice aside from my work on it. It's now worth around $250K.

    That's how you build wealth.
    OPEN EYES, OPEN EARS, OPEN MIND

    THINK HARDER

    BETTER TO HAVE TOOLS YOU DON'T NEED THAN TO NEED TOOLS YOU DON'T HAVE

    MY NAME IS BRIAN AND I AM A TOOLOHOLIC

  10. #50
    Join Date
    Jan 2004
    Location
    Missouri
    Posts
    30,054

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    If you work 40 years, and your average yearly pay in that time is $25,000, you will have a million dollars pass through your hands.

    So...... everyone says they want a million dollars. There it is, what you gonna do with it? You gonna keep any of it? You gonna blow it all on candy, soda and gewgaws like bborr's friend? Your choice.

    We asked our advisor one time where he finds clients. We guessed it would be in places like "Frontenac", a local high income suburb. He said "no way", apparently those folks have incomes in the 200k to half million area, and cannot live within them. They have no excess investable money, but they DO have an expensive house, two or three luxury cars, and two kids in school at "MICDS", a local expensive prep school, expensive vacations, etc, etc.

    He finds his clients in places like "South St Louis", which is generally an area of modest homes, and low-middle income folks. Some of those folks DO have a million or more invested. They understood saving and living within their incomes.

    BTW, a million dollars is not very much money, actually. To be what people think of when they think of a millionaire, you need about 100 million dollars these days. But there is nothing at all wrong with "only" a million bucks, you just have to be careful with it.

    A million bucks should get you about $40,000 per year (the guy with 100 million gets 4 mil a year). That is generally a long term stable income from a million dollars. Not too bad, when added to some SS income. If you can't get that much per year out of a million, get a new investment advisor.

    Speaking of advisors, the best bet is a "fee only" advisor. They do not get any kickbacks, they do not sell you any investments, so their advice is "clean". There are advisors with similar descriptive titles ("Fee based" for instance) who DO, so be sure it is "Fee Only". There are a lot of advisors out there who are looking to make more money off you.... They advise you to do whatever pays them a kickback, no matter if it makes sense. They think nothing of putting a tax free investment inside a tax deferred vehicle.... if it pays. And they may stick you in a high fee, high load investment if it gets them a few bucks. And they may convince you to sell one thing and buy another too often. That can generate too much in taxable capital gains, but it's no skin off THEIR nose, they get paid when you do that.

    Stocks? You are better off in an index fund than almost any small group of stocks. And very few people are in a position to "buy the index" the way the mutual funds can. If you have some stocks that DO pay well, that's one thing, but be prepared for that to change, by getting into index funds as well.

    Bonds are a good counter to stocks, as they tend to go opposite to stocks. Not always, but the tend to.
    Last edited by J Tiers; 01-09-2019 at 12:59 AM.
    1601

    Keep eye on ball.
    Hashim Khan

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