Seriously, I really do. I want you to take a long, hard look at your financial decisions. I hope that at least one of my posts has made you question my sanity – I hope it also made you question (at least ponder) your financial strategy.  I’m hoping at least one of my posts made you feel a little uncomfortable (maybe even guilty?); uncomfortable enough to change?  If you have read my blog posts and I didn’t challenge at least one of your financial habits, then I would call that an epic fail (stole that phrase from my son).

How are you doing financially? If you think that’s a sufficiently vague question, then let me ask more specific questions:

 

1)            What is your net worth?

 

2)            What is your credit score?

 

3)            How many months will your emergency fund carry you?

 

4)            What is your retirement savings percentage?

 

5)            What is your debt-to-income ratio?

 

6)            What is your giving percentage?

 

If you want more information on any of these questions, see below a link to my previous post on 6 ways to measure financial success

 

https://jimmysmoneytips.com/2017/08/11/6-ways-to-measure-financial-success/

 

I want you to exercise your critical thinking. See below a link to my previous post about critical thinking.

 

https://jimmysmoneytips.com/2017/07/24/improve-your-critical-thinking-skills/

 

I know some of my recommendations sound a little crazy, but remember

 

If you always give what you always gave, then you’ll always get what you always got.

 

I realize you probably think some of my recommendations are downright unrealistic – I agree!  Sometimes I struggle to make smart financial decisions myself.  I am frequently preaching to yours truly (in my blog), in search of determination and will-power to do the right thing; to do what it takes to get ahead (the right way). See below a link to my previous post about financial independence

 

https://jimmysmoneytips.com/2017/07/12/financial-independence/

 

Financial independence is difficult – if it was easy, everybody would be rich. Our society usually has more excuses than valid plans to improve our finances. I’m striving to help us overcome these excuses; excuses that only serve to encourage a life of mediocrity. Let’s review a few of these excuses/myths:

 

1)            Budgeting is hard and takes way too much time. It actually used to be a lot more difficult and time consuming; but, it turns out, there’s an app for that. I am aware of two excellent solutions to help automate/simplify the process: mint.com and everydollar.com. They both have mobile apps. Start with the basics: food, transportation, and housing – probably 2/3 of your budget right there

 

2)            I simply can’t afford a 15-year mortgage – it’s too unrealistic. I will admit it’s not easy.  I still recommend you follow the advice from http://www.lifeandmyfinances.com and buy a starter house that is no more than 2 times your annual household income. There’s some logic behind his recommendation.   If you stick to his methodology, your monthly mortgage payment will be, at most, 25% of your take home pay. This way your mortgage allows you to live your life now (sorta) and hopefully not bring your mortgage with you into retirement (that’s one friend you don’t need tagging along).  Besides, you’ll pay way too much interest expense with a traditional 30-year mortgage.

 

3)            It’s simply not reasonable to ask me to buy a car that’s only 20% of my income. You might be right again! Used car prices have definitely increased in the last few years and this indeed might be an area that you end up going over budget;  however, your budget is a zero sum game  – if you go over in one area, you have to be under in another area to compensate (whack-a-mole, anyone?)  I have a separate post about cars, but to over-simplify I strongly encourage you to avoid going into debt for a depreciating asset. If you already have a car payment on an expensive car, consider selling the car and buying a less expensive car (especially if you have credit card debt), or alternatively, keep the car – if you can payoff the note in 2-3 years.

 

4)            It’s too difficult to reduce my spending on food. I too struggle in this particular arena. I encourage you to limit your food budget to 10% of your total expenses. You can find tips about food budgeting from http://www.usda.gov. If you don’t have the time (nor the inclination) to do that much research, then start by limiting your dining out – eating at home is much less expensive than eating at a restaurant. You already knew that – moving on.  Eat healthy though – you only get one body.  It’s not that life is too short, it’s that you’re dead for so long.    .     .

 

5)            I don’t need to set goals. It won’t take that long but goal setting really is part of the secret sauce you will need to be successful; short, medium, or long term? yep – you need ’em all.  This is the perfect time of year to set some goals for 2018. Start small and set a goal to create (and keep!) a monthly budget (every month!) with everydollar or mint.com Set a medium term goal to pay-off your credit card debt and those evil student loans.  Set a long term goal to be debt-free (freeeeeeeeedom!).  Tell someone that you are setting these goals and give them permission to hold you accountable.  If you are married – this is a great opportunity to sit down and communicate (you can binge Netflix later); set these goals together – remember, you and your spouse are a team!

 

 

 

 

A: Plenty actually, let’s explore

You probably already know that Americans love debt. Actually, I guess it would be more accurate to say we love our stuff and are willing to spend more than we make to get, and keep, our prized possessions (my precious).

 

I found some average debt levels from http://www.investmentzen.com (see link at the bottom). Total owed, by average US household, by debt type:

 

1)            Mortgages            $176,222

 

2)            Student loans               $49,904

 

3)            Auto loans               $28,948

 

4)            Credit cards                 $16,748

 

Those numbers are pretty ugly but how much interest does that cost annually?

 

1)            Mortgages            $7,474 at 3.95%

 

2)            Student loans            $2,225 at 4.29%

 

3)            Auto loans            $921 at 3.24%

 

4)            Credit cards            $2,766 at 15.59%

If you were fortunate enough (insert sarcasm) to have all of those, you would be paying over $13,000 (each year), in interest alone!

 

Let’s look at our savings accounts.

Q:  How is the average US household doing?

A:  I found some good stats from http://www.makingsenseofcents.com (see article link below)

 

1)            26% of us have no emergency savings whatsoever – yikes!

 

2)            37% of us have about $1,000 in savings for the proverbial rainy day

 

3)            24% of us have less than 3 months worth of living expenses set aside

 

4)            23% of us have 6 months, or more, in their emergency fund (woo hoo!)

 

Q:  How about retirement?

A:  I’ll give you a hint, the average US household isn’t prepared.   .   .

The median amount saved for retirement is less than $60,000

 

1)            $12,000 saved by households younger than 35

 

2)            $42,700 for households ages 35-44

 

3)            $69,500 for households older than 75

 

Those stats are only for households that have actually started saving for retirement, 45% of households do not have any retirement savings.

 

Michelle (of makingsenseofcents.com) lists other stats that will make you go HMMMMMM .     .      .

1)            68% of people live paycheck to paycheck, with less than $800 to cover             expenses until the next paycheck.

 

2)            $220 per person is spent annually on the lottery (craziness I say!)

 

3)            300,000 – that’s the number of items the average home has – that’s a lot of             clutter – which leads me to another stat;

 

4)            tripled – the size increase of the average home from 1950 to now. It was less             than 1,000 square feet in 1950 and now its over 2,600 feet (those 300,000                   items had to go somewhere right?)

 

5)            10% of households also rent a storage unit. 2,600 square feet apparently             isn’t enough to store 300,000 items.   .     .

 

6)            12 days – the average person spends 12 days per year looking for things they             can’t find – I would say craziness, but that actually probably makes sense;             based on the size of the home, the number of household items, and the fact that the item might be in the storage unit.   .     .

I think I am out of time – I didn’t even address the average person’s eating, sleeping and exercise habits – I’m not even going to research those – you know they’re not good.   .       .

 

http://www.investmentzen.com/data-visualization/average-household-debt-in-america/

 

https://www.makingsenseofcents.com/2017/11/money-minimalism-statistics.html