Ok, so I missed one very important reason for being childfree in my last post, and that’s the insane cost of having children. It’s alright though, I did it on purpose! The exorbitant cost of having children deserves it’s own post.

Kids are expensive!

I mean like, really, really super expensive!  According to the latest data, the cost of raising a kid is approximately $233,610. And that doesn’t even include college! That breaks down to a little less than $14000 per year. That’s a lot of money, especially when you have other financial obligations.

Childcare

The bulk of this outrageous cost of having kids is childcare. This cost can vary wildly by state and by metropolitan area, but the variation tends to follow variations in minimum wage and income, so families everywhere are feeling the crunch. Childcare costs around $500 per month in Alabama, and almost $1000 in California, on average. In a lot of places, childcare is more expensive than rent!

No wonder so many families opt to have one parent stay home with the children while the other works. A second income would barely cover the cost of childcare in many cases. Some families are lucky in that they have a grandparent other family member that can help with the childcare while both parents work, but I always knew I would never be able to depend on my family for that. If I had a kid, I’d have to figure out how to balance working with caring for her. This is something that my boyfriend and I will need to discuss when the time comes.

Hospital Bills

Birthing children is expensive too, and apparently hospitals even charge you to hold your own baby! All jokes aside though, the physical act of having a baby can cost anywhere from $6000 to $70,000!!  That doesn’t even include caring for the infant after birth! I have decent insurance through my work, so this shouldn’t be too much of a burden for me, but not everyone is as fortunate as I am. And they wonder why so many people are turning to mid wives and home births.

But hospital expenses don’t end with the birth. Kids get sick. A lot. They run into stuff and bang their heads open. The eat things they shouldn’t be eating. They fall down. And most parents would rather be safe than sorry, so they bite the bullet and take their kids to the hospital when these things happen. Hello hospital bills. 

"cost of having children"

Stuff and Things

Kids need stuff too. Lots of stuff. First, they are going to need the basics: food, clothing, diapers etc. But they are also going to need furniture and cribs and bottles and bibs and toys and educational stuff and probably a million other things that I haven’t even thought of. And they grow so quickly!  I haven’t bought myself new clothes in years, but I’d have to buy a baby new clothes every few months!  That can really add up.

Then they need to go to school, so you have to buy them all their school supplies. And you don’t want your kid to be an outcast, so you have to buy them decent clothing by the time they are school-aged. They will probably also join a few after school clubs and activities, so they will need all the appropriate equipment and gear for that.  I’m hoping my kids join the chess club; a chess board is way cheaper than sports equipment or musical instruments.

Travel/Vacations

As you all know, I love to travel, especially to exotic locations. Airfare for one is bad enough, could you imagine having to pay for three seats on an international flight?  My travel budget wouldn’t be able to handle it! I know a lot of people don’t take this into consideration when thinking about the cost of having children, but honestly it was one of my reasons for remaining child free. But I decided to really look into the feasibility of traveling with children and read a bunch of blogs from family travel bloggers who are doing just that. If they can find a way I’m sure I can too!

Related: The Exorbitant Cost of Having Adventures

College

I know I don’t technically have to help my kids out with college expenses; student loans and grants exist for a reason. But do I really want to saddle my kid with outrageous debt when they are just starting out in life?  College is crazy expensive, and the cost seems to increase exponentially year after year. By the time my non-existent kids go to college it may be upwards of 100K on average!  I’d definitely encourage my children to explore non-4-year-university options, but if they are hard working with an aptitude for academics, I’d want them to be able to study wherever they chose. Therefore, I’d feel obligated to start a college savings plan for them when they are born, to ensure that they have those options. It’s going to be expensive though.

The exorbitant cost of having children

I know I didn’t cover everything. Random expenses crop up everywhere. Kids need a lot of stuff, and some kids need special attention – tutoring, therapy, private schools, medication, whatever the case may be. But there is no doubt in my mind that having children is insanely expensive. The advantage I have is knowing that and having a stable job to pay for some of it prior to having them. And hopefully, it will be 100% worth the cost.

What did I miss about the cost of having children?  I’d love to hear about your experiences!

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Making the Decision to Cut the Cable Cord

Making the decision to cut the cable cord was a long time coming. We hardly ever watch anything on cable (ok, we had Direct TV satellite, but it’s basically the same thing). The only two shows we religiously watched on cable were Supernatural and The Walking Dead. We’d sometimes throw on reruns of the Big Bang Theory or Family Guy, but that was really just background noise. Is it worth one hundred dollars a month to watch two shows and occasionally have some background noise? I don’t think it is.

I want to Quit the Gym

Of course, like any good company, Direct TV wouldn’t let me off the hook so easily. They tried to offer me discounts or offer me a package change. At one point they even tried to take off the additional movie package that I was paying for (even though I had already called two months ago to get it taken off; somehow it was still on there). They used high pressure sales tactics to try to convince me to stay and to bundle my phone with them for even more savings! But I declined all these offers. I wanted to quit cable (or satellite, same thing) and I did! 

(Bonus points if you get the “I want to quit the gym” reference!)

CANCELLATION Fee

Of course, nothing is ever free. Apparently, I had entered into a two-year agreement with Direct TV, so I couldn’t just cancel. I had to pay a $150 cancellation fee. I did the math, and as it turns out, $150 is much cheaper than $100 per month for 12 months (which most likely would have increased after the first 12 months to who knows how much!) So, although I’m not a fan of paying stupid cancellation fees, I sucked this one up and paid.

Related: Bad Investments for Beginners

What will we do now?

I’ve had some type of cable for my entire life. I’ve never envisioned life without it. That’s why, although I rarely use it, I struggled with the decision to cut the cord for good. My biggest worry is finding a way to watch Supernatural when it returns in the fall. It’s on a network, so I should be able to get one of those converter kits and I should be able to watch it for free (like before we had cable when I was a kid!). But if I have to wait a year for the season to get to Netflix, I can do that. It will suck, but I can manage.

My other reason for keeping Direct TV was NFL season ticket. I love my Chicago Bears, and I live in Falcons Country. That means the networks will rarely be showing Bears games. But the Bears have been pretty terrible lately, and I can always go to Buffalo Wild Wings or Chili’s to watch any important games (which will probably be cheaper than paying for Direct TV all year anyway!)

Other Options

We already have Netflix, Hulu, HBO on the Go, and Amazon Prime. We can watch pretty much everything we want on these four platforms. And, these four platforms combined are cheaper each month than our direct tv was!

                                                              

It’s Done

The cable (satellite) cord is cut. I’m done paying $100 for a service I don’t ever use. I’m going to put that extra $1200 per year in my savings/investment accounts and watch it grow rather than squander it!  Talk about an easy way to increase your savings!

Have you cut the cable cord yet? What was your experience with it?  And if not, what’s holding you back? 

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"Destroying my credit"

I’ve been nostalgic lately, thinking about my past, my upbringing, and some of the wonderful financial decisions I made when I was a teenager. I’ve written about my middle class upbringing and about my stellar education on taxes. But there was one more area of my financial life that I really messed up in when I was young, and it took me a very long time to dig my way out.

Destroying My Credit

My parents never really taught us about the dangers of credit card debt. When I turned 18 and started getting offers for free money, I took them. I don’t know why it was so easy to get credit as an eighteen-year old with no credit history, but man, it was.

I had three regular credit cards and three store cards before I turned 19. Why wouldn’t I get an Express credit card? I even signed up for an Abercrombie card despite never ever shopping in an Abercrombie in my life!  Free money is free money, right?

Not All Impulsive

Yes, I was a stupid teenager buying all the things with fake money. But I did actually make one legitimate purchase that I couldn’t afford!  My dog, Shadow (I miss him!) had a problem with his nose. It always looked like the skin was peeling off. Since he seemed healthy outside of that, my parents didn’t take him to the vet. Well, I wasn’t going to let my lack of money prevent me from taking care of my pup, so I took him myself and charged it. I think it cost around 500 bucks if I remember correctly (this was a long long time ago). Either way, I didn’t have the money to pay. That was future Melanie’s problem.

Related: Managing Your Money All-In-One For Dummies – Get it on Amazon! 

But Mostly Bad Purchases

The rest of my purchases were stupid. The hottest trends in clothing, stupid toys, long distance phone calls, things I can’t remember. I had a lot of fun destroying my credit!  Unfortunately, I was thousands of dollars in debt by the time I turned 20. And I had no money to pay it. I did manage to make the minimum payments for the first few years, but that barely covered interest, and before long all the cards were maxed out. Even the minimum payments became overwhelming for a poor college student. Most of the debt went to collections, and I effectively destroyed my credit.

Digging Out

I finished college and realized that if I ever wanted to have a decent job and a decent life, I needed to fix my credit issues. I was able to settle with a few of the collections agency for less than owed, and I payed off other balances in full. It took a lot of saving, budgeting, and negotiating to dig my way out, but I made it.

Having numerous charged off credit accounts had lots of negative repercussions for many years though. It takes about seen years for those things to fall off your credit report, and life was hard for those years. It was hard to rent a nice place with such a poor credit history. I had to pay higher interest rates on any loans I tried to take out.  I couldn’t even consider buying a home.

 

Helping Future Melanie

I’m glad that I finally dug my way out and that all those negative statements are off of my report.  I currently have a healthy credit report, and a much healthier relationship with future Melanie. Instead of thinking “well that’s future Melanie’s problem”, I think “How can I help future Melanie?” and life has been much better.

Have you had problems with credit in the past? I’d love to hear your stories!

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my mom taught me about finance

Last week, I came across an amazing post by Lean Fire ATL called “A Man is NOT a Retirement Plan”. This post really resonated with me for a lot of reasons, but the number one reason is my mom.

Mom’ s retirement plan

I love my mom. She’s sweet, she’s caring, and she taught me to be kind to animals and those less fortunate then us. She didn’t have any real goals outside of motherhood, but she was a great mother.

My mom did what a lot of young women in the late seventies/early eighties did. She got married and stayed home to take care of the children. Unfortunately for her, being a mother doesn’t pay anything, and her story is one of the main reasons why I decided to strive for financial independence.

Mom’s story

My parents got married and had their first child at relatively young ages. My dad was 19 and my mom was 22 when they had my sister.  They had my brother and I shortly after, so they had three young children before they turned thirty.

They did alright for themselves despite having kids so young and not having college degrees. My mom was a stay at home mom while my dad sold insurance, and when they started their own flyer delivery service my mom chipped in with that. Things weren’t perfect, but we were a family, and that’s all my mom ever wanted.

Related: From Lower Middle Class to Financially Literate

Divorce

Then one day, seemingly out of nowhere, it all fell apart. My father had an affair. He moved out of the house when my mom found out. He stopped paying the mortgage and focused on running the business (which was in his name). My mom wasn’t able to keep up with the mortgage. She was a stay at home mom the majority of her life, and she had no marketable skills. She got a job cleaning out kennels at a pet store, but that paid barely enough to keep the lights on.

 

My mom was able to stay in the family home for quite a while the bank went through the foreclosure process. She tried to find a way to stay close to us kids in Illinois, but it was too expensive (Before anyone tries to chastise my mom for not staying with her kids, my sister was 20, my brother was 18 and just started college, and I was about to be a senior in high school by the time she moved. She knew I was going away to college after senior year). Her parents lived in Northern Wisconsin and offered to help her buy a home if she moved up there. With no other options, she packed up and moved up North closer to her parents.

Moving on

After about 20 years of being miserable and lonely in Northern Wisconsin, my mom decided she had enough. My sister helped her move to California. She currently lives in the Mojave Desert and works part time. She likes that it doesn’t snow, and my sister is able to visit her about once per month and help her with things around the house. She’s planning on moving to the East Coast with my sister next year.

What my mom taught me about Finance

My mom didn’t directly teach me anything about finance, but her story served a valuable lesson. I learned that the only person I could ever depend on is myself. My mom thought her marriage would last forever. She depended on my dad to handle the finances. She didn’t realize that he sucked with money, or that he had a more fleeting view of marriage than she did.

I know it’s a cynical view to take, but I learned that even if I get married, I have to look out for myself first. Maybe that’s one of the reasons why I haven’t gotten married yet. I have a hard time trusting a guy to do small things to take care of me, like cooking me dinner (which probably stems from this, now that I think about it). I can’t even imagine putting my financial security and my entire future into someone else’s hands. My mom got screwed because she trusted the wrong person with these things. I learned from her example to do not the same.

What valuable money lessons did your parents teach you?

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In my last post, I described my lower middle-class upbringing. I mentioned that my parents were terrible with saving money, and that we weren’t really taught to save either. That isn’t entirely true. We did have one person that tried to help us save money. Unfortunately, it didn’t work out the way she wanted it to. 

Grandma’s Help

We got a small bit of help in learning to save from our Grandmother on our mom’s side. When we were born, she convinced my parents to open a savings account for us. She gave us a check on every birthday and Christmas with “for deposit only” written on it, so we would be forced to deposit it into our savings accounts. We had the option to deposit the rest of our birthday money as well, but we rarely did.

My grandma didn’t have a lot of money, so she was only able to give us each $25 on special occasions. Over time, that does add up, and by the time I started working for my parents, I had about $800 saved up. That’s a lot for a fifteen-year-old!

I Learned about taxes the hard way

Unfortunately, the savings account didn’t work out the way my Grandmother intended. You see, when my parents started paying us for delivering papers, they set us up as independent contractors rather than wage employees. That meant that no taxes would be taken out of our paychecks. We didn’t make a lot of money, but as we all know, that doesn’t matter. The IRS still needs to get their share.

When tax season rolled around that first year, my father did our taxes for us. We each ended up owing the man around $700. My parents took us to the bank and drained our savings accounts so we could pay our taxes. They said we should have known better. We should have been putting money aside each pay check to pay. How we were supposed to know the subtleties of the complicated tax code at age 15, I’ll never know!

 

Making it worse

Unfortunately, I didn’t learn my lesson. I continued working for my parents as an independent contractor, and continued spending all of each pay check. When tax season rolled around, I just ignored it. I did the same thing the following year. Eventually, I stopped working for my parents and got a normal part time job. Unfortunately, by this time, I already owed the IRS almost two thousand dollars. Even worse, my father accidentally switched mine and my brother’s social security numbers on our tax returns, so we didn’t even know who owed what!

Digging out of the hole

I was a senior in high school when I realized how big my problem with the IRS was. That’s when I decided to take steps to dig my way out. Surprisingly, it was super easy to get the mess with the social security numbers straightened out. But what was even more shocking was that they were really nice about helping me set up a payment plan and get the tax debt straightened out. They are super willing to work with people who are trying to do the right thing!  It took me about a year to fully pay off my debt to the IRS, but it felt good to make that last payment.

 

Lessons learned

Learning about taxes the hard way had some advantages. I learned to always think about how taxes will work with any job, so I don’t get surprised with a giant bill at the end of the year. I also learned that the IRS isn’t as terrible as everyone thinks they are. One of the reasons I waited so long to call and get it taken care of is that I was terrified of calling them!  All I ever heard was horror stories about going to jail for tax fraud and IRS agents being super rude to people. Maybe it was my age that helped, or maybe it was the fact that I was actually trying, but every time I called, the agent was super nice and helpful. I never had a bad experience.

One final thing I learned is to always check over all the important forms.  One little mistake can cause huge complications down the road (on the plus side, I still have my brother’s SSN memorized, because I thought it was mine for so long…devious, I know!).

What lessons did you learn the hard way?  I’d love to hear your stories!

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"cosigning"

Today I’m writing a cautionary tale for all my readers (because it’s too late for me!). As you know from reading about the Worst Financial Decision of my Life, I cosigned on a car for someone when I probably shouldn’t have. But unfortunately for me (and please learn from my mistakes!) this wasn’t the only time I’ve cosigned. I haven’t even only done it twice. I’ve cosigned for stuff on three separate occasions!  And to be honest, I’m probably going to do it again (because obviously I don’t learn).

The First Time I Cosigned

My first experience cosigning came about 11 years ago. I cosigned on a type of student loan for my then boyfriend. We were getting ready to move from Illinois to California, and we didn’t have a lot of money. He was just getting ready to start college, and we found a student loan program that would give us cash for tuition and expenses. He couldn’t qualify on his own, so I cosigned.

I actually don’t regret this one. We were together and we needed the money. Having this loan really helped us survive during our first year in California. I am a bit annoyed that it’s been 11 years and we’ve only paid about 6K on the loan, but it is what it is. On the plus side, we still get along well and we are working together to pay it off.

Cosigning my life away for family

I don’t really regret the second time I cosigned either, even though I had to pay a bit more than I intended. I helped my brother buy his house. He is terrible with finances (most of my family is) and has horrible credit, but he makes decent money.  His wife has decent credit but works a low paying job. He could afford the mortgage, but with his credit he couldn’t qualify.

I have a little niece and nephew who mean the world to me. They are adorable little kids and I wanted them to have a house to grow up in. I also love my brother, he was my best friend for the first 16 years of my life. I want him and his family to be happy. So, I agreed to cosign. However, I only agreed under the stipulation that I would be co-owner, not just cosigner. This is a very important distinction, as it means I have ownership stake in the house; whereas if I was just a cosigner I would be financially liable but I wouldn’t be part owner.

My brother swore up and down that he would always pay on time and he wouldn’t do anything to hurt my credit. He promised not to screw me over. My brother may be a jerk sometimes (aren’t all brothers?) but he’s loyal to a fault and takes pride in keeping his word. So, I believed him.

How it screwed me

Unfortunately, his family fell a bit on hard times last summer, and he didn’t want to tell me that he missed a payment because he was planning on making it up in the coming months. It would only be behind by one month each month, so he didn’t think I would ever know. He didn’t want me to know because he didn’t want me to be disappointed in him.

Unfortunately for him, this was around the time when I got the job offer for Savannah. That meant I was selling my house and buying a new one, yay!

 

Imagine my surprise when I applied for a mortgage and was told that my other mortgage was thirty days behind. That’s not something you want to hear!  I was livid!  I called my brother and cursed him out like crazy. My sister had my back, she did the same.  He apologized and promised it wouldn’t happen again. I had to pay the one month that he was behind; because I wouldn’t be able to get a mortgage if I waited for him to pay it. I told my brother not to pay me back, but also to not let it happen again.

So of course, it happened again. I checked my credit score in January, and the mortgage was late again. He gave me some lame excuse about the homeowner’s insurance being wrong so they weren’t paying because they were trying to get it fixed. To his credit, he paid right after I called him out, so I guess he was telling me the truth (at least about having the money). It’s been a few months and I haven’t seen a late notice yet, so hopefully he will keep up with it.

The Third (and Worst Time) I Cosigned

I’ve told this story before (remember, the worst financial decision?). The third time I cosigned was on a car for Jonathan. Yeah, lets’ sign my life away to someone who I know is an alcoholic with absolutely no financial literacy. Great Plan Melanie! The good news is that I’m actually the primary on the account, and he’s the secondary so I do have some legal rights to the car.  He’s supposed to take over the payments starting in May, and if he doesn’t I’ll have to “recover” the car from him. I’ll let you all know how that one goes!

Why I’ll Cosign Again

You’d think I’d have learned my lesson by now. But alas, I probably haven’t. My sister really wants to leave California for cheaper pastures. She’s also planning on taking my mom with her. They want to move someplace on the East Coast with a much lower cost of living. Great idea, right? Unfortunately, they suck with money too. My sister has terrible credit and owns her own business, so has very little income to show. My mom gets by. There is no way that they are going to be able to get a house on their own.

They are family. My sister has stood by me when pretty much everyone else I’ve known in my life turned their backs on me. My mom is my mom. I have to help them if I can. So, although I know cosigning is a terrible mistake, it’s probably one I’ll make again. On the plus side, at least cosigning for a house gives me assets. I’ve got that going for me, right?

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"hidden costs"

Houses are expensive! The median home price in the United States is about $200,000 (Median is a better number to use than average, because it takes away the crazy expensive outliers). That’s a lot of money! But unfortunately, that’s only the upfront cost of buying a home. Make sure you factor these 10 hidden costs of buying a house into your budget!

Hidden Costs of Buying a House

Moving

Do you remember when everything you owned fit into your small two door sedan? I remember that too. I don’t know how I acquired so much stuff, but it most definitely did not fit in a sedan (or an SUV for that matter!). I did downsize a whole lot, so I just used a small pod to move everything that I didn’t want to throw away. The small pod cost me nearly three thousand dollars! Granted, I did move to the opposite side of the country, so that gets a bit pricey, but even moving across town will cost you.

Furniture

Are you going to buy new furniture to go with your new home? If you are moving your furniture, do you have enough to fill the new house? When you go from an apartment or condo to a single-family home, you generally have a lot more space to fill up. And it’s not just furniture! You will need shower curtains (I learned that the hard way!), area rugs, lamps, décor, and all the other items that make a house a home. My first trips to Bed, Bath, and Beyond after buying a new house cost me upwards of a thousand dollars! Granted, I hardly took anything with me when I moved, but it is still something to be aware of and to budget for.

Are you a realtor who wants to provide the best experience for your clients? Check out ClickyHomes!*

Closing Costs

Closing costs aren’t exactly hidden costs, but they are expensive and it’s definitely not something that everyone considers when buying a home. Closing can cost up to 10% of the price of your home!  I paid about ten thousand dollars to close on my house. This includes attorney fees, the first home inspection, escrow fees, and bunch of other miscellaneous things that all the companies involved in closing charge you for. You need to budget for this huge expense at closing so you aren’t caught off guard.

Warranty

Unless you are buying a brand-new home (which usually comes with a warranty) you should definitely look into purchasing a home warranty at closing. In my area, the top- level warranty costs about five hundred dollars. It covers plumbing, electrical, appliances, and anything that goes wrong with the house for the first year. It offers piece of mind.

I’m really glad I got the warranty with my house, because about 3 months after purchasing it, I had a pretty serious leak. I called the warranty company who hooked me up with a plumber; and I was able to fix the problem without having it affect my insurance.

Insurances

Speaking of insurance…homeowner’s insurance is a must have when financing a home. Usually, your lender will discuss the approximate costs of this with you well before you sign the final paperwork. But homeowner’s insurance might not be the only insurance that you need.

Did you know that homeowner’s insurance doesn’t cover floods or earthquakes? If you are purchasing a home in a flood zone, you will be required to purchase the FEMA flood insurance. Even if you aren’t in a flood zone, with all the crazy weather we’ve been having these past few years, flood insurance might not be a bad idea. You never know when that freak storm will dump 40 inches of rain on you. If you live in an area prone to earthquakes, you may also want to consider earthquake insurance. 

Renovations

If you are buying your absolute dream house, you may not have to worry about renovations. But most houses have at least some minor cosmetic issues that you will want to improve upon. The house I bought had hideous carpet and paint. These were super easy fixes, but they were definitely something that I needed to include in my budget.

Related: Check out these helpful tips for home buyers!

Inspections

I already mentioned the house inspection when I was talking about closing costs, but did you know that there are numerous other inspections you can get that aren’t included in your closing?  One of the most important additional inspections you should look into getting is a termite inspection. Nobody wants to buy a house only to learn that it’s been eaten away by these voracious pests. It’s much easier to prevent termites than it is to get rid of them when they are established.

HOA

Are you going to live in a community with an HOA?  Sometimes, there is no way around it. Pretty much all of the homes I looked at in Savannah had some sort of HOA. Some of the fees are outrageous! I looked at one house where the HOA fees were almost 300 bucks a month!  To be fair, that neighborhood had amazing amenities, but I wasn’t looking to pay that much. The HOA fee in my current neighborhood is only forty bucks a month, which is way more reasonable.

HOA fees aren’t always bad. Having an HOA helps to maintain the property values. Many of them also offer a club house or a pool. However, be sure to think about the monthly fee before committing to a mortgage payment.

 

Taxes

Ah taxes. One of the few certainties in life. We all know that property taxes are a thing that need to be paid; but the cost can be a surprise. Make sure that you speak to your lender about estimated property taxes before you agree on a purchase. Most lenders will include them in your total monthly bill, but some will only show you the total for the principle and interest. These customers are then shocked when they receive a monthly bill that’s two or three hundred dollars more than they expected.

Related: Check out the one thing I wish my realtor had!

Services

Owning a home is a lot of work. And there are a lot of things that you need to consider once you have one. Do you live in the South? Yeah, you’re gonna need an exterminator. Do you live anywhere near a city?  You’re probably gonna need a security system. You are also going to need to set up your trash, water, sewer, and utility services. And some cities don’t even include fire protection as part of the property taxes, you have to pay for it separately (WTF Savannah??). These are all things you will need to consider and budget for when purchasing a new home.

Bonus!

Miscellaneous expenses – because stuff always comes up. Always! Make sure you have an extra one to two thousand dollars set aside for that one thing that no one warned you about. Because it will come up, eventually.

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"pay yourself first"

Pay yourself first is one of the first pieces of advice you will here from pretty much any financial advisor or finance blogger. It almost doesn’t even need to be said. Almost.

Unfortunately, a majority of people in the United States don’t follow this tried and true advice. According to a recent survey of Consumer Finances published by Business Insider the median amount in American’s savings account is only about five thousand dollars. This tells me that most American’s aren’t paying themselves first.

Why Should I Pay Myself First?

You should pay yourself first because future you will thank you! Future you will be able to live comfortably in retirement. Future you will have the money to take that dream vacation. You should pay yourself first because you want to be secure and comfortable in the future. It may take some sacrifice now, but even saving a little bit today can pay off big years down the line.

What does paying yourself mean?

Paying yourself first means setting a portion of your paycheck aside for future you before paying your bills and before buying stuff. Many people pay all of their bills and buy all of their stuff first, and then decide if they should save something from the (usually) paltry leftovers. I get it, sometimes you have a lot of bills, and there isn’t a lot of paycheck to go around. If you are in this situation, I understand not being able to put aside some money for savings. But before saying you can’t, investigate your budget and make sure that you don’t have any fat that you can cut. Most people have at least a little fat; but we all know how much harder it is to lose that last tiny bit.

How should you pay yourself first

There are a few ways to pay yourself first, but I think the most tried and true way is to put it on autopilot. I have 7% of my paycheck automatically put into my retirement account, and I have another 3% automatically placed into various savings accounts. So technically, I never even see a full 10% of my paycheck. It goes to the most important thing – Me! The remaining 90% is used for bills, fun, incidentals and additional savings (technically, I pay myself first, and then I pay myself again with whatever is left over after the bills are paid).

What should I do with my paycheck to me?

In my opinion, the best way to pay yourself is by contributing to some type of retirement account; especially if you have an employer match. There are other options as well; you can put money into a savings account or a regular investment account. The main point is to put it someplace where you won’t accidentally spend it or include it in your monthly budget. If you need some tips on how to get started, check out our Beginner’s Guide to Investing.

 

It’s impossible to overstate how important paying yourself first really is. We want everyone to succeed and everyone to achieve the type of financial independence that works best for them. Paying yourself first is the first step to getting there.

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Have you ever heard of Regal Assets?  If not, you’re in luck, because that means you probably haven’t invested with them. 

Regal Assets is an IRA company that specializes in gold. It’s a company that basically lets you convert your cash/investment holdings into gold and other precious metals; supposedly for safety in retirement. 

High Paying Affiliate

I first heard of Regal Assets in a blog post that was discussing the top paying affiliates. Regal Assets was on the list, and the writer stated that they paid super high commissions. This was one of the only companies on the list that was in the financials sector, so like any awesome PF blogger I immediately signed up for the affiliate program. And then I started doing some research.

I found so many blog posts avowing the awesomeness of Regal Assets. This company was featured in Forbes, the Huffington Post, and Smart Money!  But I didn’t stop there, I decided to find out what these major players in the financial industry were saying about this amazing company.

The Unraveling

Unfortunately for Regal Assets, this is where the amazing opportunity started to unravel. I could not find one legitimate article on Regal Assets from any of these big publications. The only legitimate thing I found was that it was featured in INC Magazine’s list of 5000 growing companies back in 2013-ish but there is very little information posted about the company in that article, and I couldn’t find them anywhere else on INC’s website. I did find the Forbes article that they mentioned, but it was written by the CEO of the company, and it isn’t even posted on the Forbes website. That seems a bit fishy to me.

Related: Terrible Investments for Beginner’s

The Regal Assets website itself even lists that it was featured in all of these places, but there are not any links to the articles. I would understand this if the company has been around since the 1980’s, and all of their featured articles were from before the time of the internet. But Regal Assets was founded in 2009, and we all know that anything posted on the internet stays forever. So why wouldn’t the company link to the articles? And why couldn’t I find any of the articles through a google search?  That seems shady to me.

 

So is it a scam?

But is Regal Assets a scam? To be honest, I don’t know. I have found some stories on mainstream finance websites about their new bitcoin IRA, which seemed like a really interesting idea to me. There was a post featured on Market’s Insider (a subsidiary of Business Insider I believe) about this new fund.

Unfortunately, the article was a Press Release issued by the company. It wasn’t written by an independent journalist. This seems to be a common theme with this company. I haven’t found any non-affiliated journalists, market insiders, or financial experts talking about the company at all. To me, this is a huge red flag.

Red flag number two is that a great deal of the affiliates (blogs, you-tubers, etc) open with “is regal assets a scam?”.  If you have to get customers by promising you aren’t a scam, you’re probably a scam.

No Solid Proof

I can’t say for sure that Regal Assets is a scam. It may be a totally legitimate company who’s marketing just rubs me the wrong way. But I am not going to invest with them. I would advise you to do your own research and make your own educated decision before investing with them, but then again, you should be doing that all the time anyway. Happy Investing!

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"Realized vs unrealized gains"

Realized vs Unrealized gains and losses

The stock market is freaking nuts! The Dow is up, now it’s down, now it’s the highest it’s ever been, now its dropped the largest percent in history…what the hell is going on?  You’ve lost big, then you’ve won big, and now you’ve lost again. But have you really lost?  Did you realize your losses? Knowing the difference between realized and unrealized gains and losses is incredibly important.

The Big Secret

The truth is that neither gains nor losses are real until you make them real! (Of course, there are exceptions to every rule. The one exception to this rule is if an individual stock you hold goes bankrupt…that loss is usually real!). But in most other cases, you don’t score big until you realize your gains, and you don’t lose big until you realize your losses.

Unfortunately, a lot of people don’t always understand this. Maybe they do on a logical level, but when emotions get involved, that logic can fly out the window. When stocks plummet, people tend to freak out and sell.  So, what ends up happening? They realize their losses at the worst possible time, and lose a whole bunch of money. If they would have stayed invested, the markets would eventually improve and they would never have realized the loss. In effect, they wouldn’t actually have lost money!

Related: Check out our Beginner’s Guide to Investing!

Exceptions to every rule

There are caveats to this. Owning individual stocks is way riskier than owning index funds. Your initial investment may be decimated, and it may never regain its value. When I was a novice investor, way back in 2007, I bought a whole bunch of individual stocks. One of them was this random European shipping company. During the crash of 2008, the company lost more than half of it’s value. It’s been 10 years and it still hasn’t improved. I’m still holding onto it (because at this point it doesn’t really matter) but I doubt it will ever improve. However, the losses haven’t been realized yet, so there’s always the possibility (albeit slim) that the company will somehow turn itself around and I’ll recoup that initial investment. There’s also the possibility that the company will go bankrupt and I’ll lose everything I have in it. You win some you lose some.

 

Housing

Housing is a huge sector in which people don’t consider whether gains have been realized or not. People love to claim how much their house has risen in value and talk about how rich they are because their house is worth a pretty penny. But you can’t buy food with that money (unless you take out a home equity loan, which is a terrible idea!!!). You can’t actually make money on your house until you sell it.

That’s the reason why I wanted to move out of California. My house’s value skyrocketed!  It was amazing! But I was still paying the same in mortgage, and the increased value wasn’t helping me financially in any way. I was sitting on a pile of unrealized gains. However, when I sold, I realized (and pocketed!) the gain. I wasn’t going to be left holding the bag when the housing market drops again!  And It will, eventually. All markets have peaks and valleys.

Related: Getting lucky with Real Estate

Never sell?

I hope you aren’t taking away from this post that you should never sell. I’m not! Sometimes it’s prudent to take a loss. If an individual stock is plummeting and its fundamentals are poor, you may want to sell it before the company goes bankrupt, before you lose even more money, or if you aren’t happy with the amount of risk in your investment. Or maybe it’s time to diversify. There are plenty of good reasons to sell even in a down market.

My point in writing this is to explain that losses (and gains too!) aren’t actually real until you pull out. No money is gained or lost until you sell your investment (again, unless the company goes bye-bye or something drastic happens – exceptions to every rule and all that!). So don’t freak out about things that are happening on paper only. Keep investing, stay the course, and win big in the future!

 

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