The 4 Horsemen of Personal Finance: Number 4

The purpose of the “The 4 Horsemen of Personal Finance” series is to arm you with what I consider to be the keys to overcoming your financial fears.

To recap, they are:

1. Attitude is Everything

2. Debt Will Drown You

3. Budgets Are Your Friend

The fourth and final “Horseman” is the most important.  Without it, the previous three don’t matter.

4. Have Faith

Good things take time.  Once we make the conscious, committed decision to improve our lives by becoming more financially stable, we must not become easily frustrated and stray from the path.  It will not happen overnight.  For people like myself, remaining patient for the duration of my financial journey is something I struggle with every day regardless of what stage you are in on your financial journey.  Again, we live in an age when everyone wants (and expects) instant gratification.  Staying patient as you make a major life change is never easy.  To borrow a line from Tom Hanks in “A League of Their Own,” “It’s supposed to be hard. If it wasn’t hard, everyone would do it.  The hard… is what makes it great.”

The true test becomes what we do with that frustration.  Rather than becoming discouraged and falling off the wagon, we need to learn to harness our frustration by transforming it into action.  For example, if you have $10,000 of credit card debt and only a $300 surplus each month after you pay all your bills, you are going to need almost a year and half to pay off your balance (assuming your spending stays the same).

Do this for several months, and I’m willing to bet you will quickly become discouraged at just how slowly your debt is shrinking.  This is something that everyone deals with.  The solution however is to get motivated to make it shrink faster.  Reduce your cable package.  Carpool to work several times a week.  Bring your lunch to work.  Cut out the trips to the mall.  Stop wasting food.  There are endless ways we can reduce our spending.

The big picture here is that if we start making conscious efforts to reduce our debt, cut our expenses, and to build wealth, with enough practice and repetition we will slowly begin to transform as people.  Bad habits will eventually be replaced by good habits, but you have to stay committed and give it time.  Ultimately, it comes down to faith.  If you believe that the sacrifices you are making now will be rewarded with long-term peace and happiness later, you are on your way.

Good night!


The 4 Horsemen of Personal Finance: Number 3

Now for the number 3 of my 4 Horsemen of Personal Finance series.

To quickly recap, this series is about creating wealth, and what I consider to be the 4 most important rules of thumb to help you get there.  So without further adieu…

3. Budgets are your friend

To many people, “budget” is a dirty four-letter word.  People who can’t say the word out loud without making the obligatory “eww” face are probably the same people that are juggling credit cards while they wonder where all their money went.  No financial toolbox can be made complete without a working budget.  A budget is how you tell your money what it’s supposed to do.  Spending blindly, purchasing on credit, and living paycheck to paycheck happens in the absence of a budget.  You control your money, not the other way around.

A budget can’t be created in 5 minutes.  Before you can lay out a proper budget, you need to first understand where your money has been going.  Take a look at your bills, credit card statements, and bank statements over the last 4-6 months and see if you can pick out 3-5 categories in which you do most of your variable spending.  Since many reoccurring expenses are somewhat fixed (housing, car payments, insurance, etc.) only pay attention to the areas in which your spending is truly variable.   For me that is typically groceries, restaurants, shopping, and health/fitness.  while going through this process, ask yourself these questions.  How much on average am I spending in this area each month?  Do some months vary greatly from others?  If so, why?  And most importantly, do I really need to be spending this much?  By going through this process, hopefully you will get that small knot in your stomach when you realize just how much money your sending out the door each month on stuff that you don’t necessarily need.

Once we understand where our money has been going, now its time to take charge and set a budget.  A good working budget should come pretty darn close to accounting for every dollar you spend each month.  It is a combination of fixed expenses (like your mortgage/rent) and your variable expenses (as we just completed above).  Are you making minimum credit card payments?  Put them in the budget.  Is your car overdue for an oil change?  Put it in the budget.  Do you need to make a payment to the IRS before they garnish your wages?  You guessed it, put it in the budget.

A sample budget might look like this:

    • Rent – $800
    • Car Payment – $400
    • Student loan – $250
    • Groceries – $250
    • Restaurants – $200
    • Utilities – $175
    • Gas/ Car Repairs – $150
    • Visa min payment – $100
    • Shopping – $100
    • Car Insurance – $75
    • Health and Fitness – $75
    • Personal Care – $50
    • Entertainment – $50
    • Misc – $20

Total: $2695

Since everyone generally knows what they make each month, it is also very easy to figure out what your deficit or surplus is.

Let’s say that after taxes, you earn $3000/ month.  Based on the budget above, you now know that after you do everything you need to do in a given month, you should have $305 left over ($3000 – $2695 = $305).  This is the money you could and should be using to build wealth.

Now that the budget is set, its time for the hard part – making sure that the extra $305 stays in your pocket, not someone else’s.  There are many different ways to do this.  The most basic is to set cash aside in envelopes that are marked in accordance with your budget categories.  So if we were looking at restaurants, you would put $200 cash in an envelope marked “Restaurants” and this is the only money you are allowed to use for restaurants for the month.  Once the envelope is empty, your spending in that category is over.  For this method to work (and it does), it requires that all temptation (and convenience) to overspend is removed, which means destroying the credit card (which should have already been done anyway since deciding you want to build wealth).

The method I use to track my spending is the budget tool offered in  Mint is an awesome tool that can be used on your computer or smart phone to track all your personal finances.  Once you set up your budget categories you can view them in real time to see how your doing with your spending.  As your spending in each category increases, the bar will go from green, to yellow, to red.  It can also send you emails to let you know when you are approaching the limit.  Truly an awesome tool and most importantly, its free.  I will spend more time sharing how I do this in a later post, so stay tuned.

If you employ once of these two simple methods you will have a solid footing for taking control of your finances.  As you become more familiar with your spending habits it will also motivate you to make improvements in decreasing your overall spending and to eliminate unnecessary expenditures.

Number 4 coming tomorrow… good night!

The 4 Horsemen of Personal Finance: Number 2

Welcome back the second pillar of my “4 Horsemen of Personal Finance.”

Since last night’s post may have been a little wordy… easy to talk about at length since attitude really IS everything… I will try to keep this one short(er).


2. Debt will drown you

Debt is not your friend.  Debt is like that buddy that asks if he can sleep on your couch for a couple nights while he gets his act together, but 2 months later he is still there, your favorite tshirt is missing, and all the frozen pizzas you had stockpiled in your freezer are gone.

Unfortunately, debt for most people is completely commonplace – an acceptable, everyday part of life.  Like countless others, I received my first credit card in the mail my sophomore year in college despite the fact I had never signed up for one.  My first thought when I opened that thing…”Ooh… free money!”  Touche Bank of America, touche.

As are most banks and credit card companies these days, the people that issue cards this way are smart.  In the most basic sense, they are modern-day, white-collar drug dealers.  They offer credit instead of crack, and as the consumer, you use plastic instead of a pipe.  They know that the sooner that get you hooked, the sooner you will become loyal to their brand and become a consistent, long-term revenue generator through transaction fees and finance charges.

It is very easy to fall in this trap.  When you approach a limit on one card (and assuming you are making your minimum monthly payments), you simply pick a winner out from the pile of credit offers you get in the mail every week and complete a 0% interest for 12 months balance transfer and continue your spending.  Do  I speak from experience on this subject?  You bet.

What I didn’t understand then is that credit, in its most basic form, is a tool for people who are lazy, in denial, or both.  We live in an age of instant gratification.  People no longer want to wait to purchase the things they want, nor are they willing to put in the time and effort to plan their purchases properly.  They convince themselves again and again that using their credit card is ok because that is what they are used to.  To make matters worse, when we use credit cards, we actually spend more money than we would if we were paying in cash.  Studies have shown that in some cases people are willing to spend more than twice as much on a purchase when they pay with credit.  So not only are we spending money we don’t have, we are spending more on average for our purchases.  Bad (and expensive) combination!

The title of this pillar is “Debt will drown you.”  What I’m stressing here is that if you are currently buried in credit card debt, car loans, financed furniture, student loans, etc., you really need to do some soul searching and ask yourself if you are happy going through life knowing that you will always be paying everyone else before you can pay yourself.  If you can never pay yourself, you can never build wealth.  If you can never build wealth, you will be living yourself on someone else’s terms indefinitely.  In short: you need to focus on getting out of debt.  It is still possible to still get the things you want and need without borrowing, it just takes the right attitude (and as we already know… attitude is everything!).

If that isn’t enough, here is some additional motivation for you.  Let’s assume that you have always driven new cars that you trade out of every 3-4 years with a payment of $400/ month.  Using my favorite compound interest calculator, we know that due to the power of compound interest, if you took that same $400 and invested it earning an average rate of return of 10% (which equals the average rate of return of the S&P 500 since its inception), after 30 years you would have almost $790,000!!!  Not sure about you, but to me that is ALOT more appealing than the small amount of satisfaction I would receive by always driving a newer model vehicle.

If you need a gameplan to get out of debt, there is none better than Dave Ramsey’s “Debt Snowball” method.  This method basically requires that you arrange your debts smallest to largest, and after paying your basic bills (food, shelter, electricity, etc.) and making your minimum payments on your other debts, you throw whatever is left over towards the smallest debt.  When the smallest debt is paid, you move on to the next one which, due to the extra money left over from paying off the first debt, you can now attack with greater effectiveness.  In my opinion, this method is by far and away the most effective way to rid debt from your life.

Pillar 3 coming tomorrow!

The 4 Horsemen of Personal Finance: Number 1

Hello and welcome back to Wallet Sense!

On each of the next 4 days, I will be posting what I consider to be my four most basic, fundamental pillars of personal finance.  Much like the 4 horsemen of the Bible (or Notre Dame football lore… don’t worry though, I’m not a Notre Dame fan), these common-sense principals will lay waste to any financial challenge presented before them.  Keep reading for number 1…

If you have spent any time at all researching personal finance (and I’m guessing you have if your reading this blog) you will have learned that opinions on personal finance are like… (censored – remember no profanity here on Wallet Sense!), everyone has one.

Although these opinions run the gamut from being overly simplified to hopelessly complex, common (sense) parallels can easily be found amongst those who actually have experience building and maintaining wealth.  To many, the word “wealth” in itself can be intimidating.  Some assume that in order to create wealth you need a special underground room with reinforced concrete walls and an armed security guard with an automatic weapon to stands guard as you empty daily duffel bags packed full of $100 stacks.  Although in theory you could create significant wealth this way, there are other options.

Creating wealth is the very simple act of setting money aside after you’ve met all your financial obligations with the intention of not spending it (ie, saving it).   Anyone can do this, making any amount of money.  If you make $1000/ month and after paying all your bills (and eating, drinking, living life, etc.) you have $50 left over to go into your cookie jar, you are creating wealth.  Do it for a year and you have $600, at which point I would suggest putting it somewhere safer than the cookie jar.

Simply put, you don’t need to be a number 1 draft pick to create wealth (although that is a pretty decent way to do it quickly).  To create wealth, you first need to want to become wealthy, which brings me to my first pillar…

  1. Attitude is everything

So you want to be rich?  Great!  After all, who doesn’t?  My question to you then, is what are you doing to  move closer to that goal each and every day?  You see, everyone wants to be rich, but most people never actually take the time to think, plan, and commit to a strategy that will allow them to get there.

Most people who just say that want to be rich are the same types that assume that everyone else in life who has been successful in creating wealth has benefited from someone handing it to them.  The sharp-dressed business executive being interviewed about their companies most recent quarterly sales figures on TV?  

“Must have come from rich parents who paid for a top tier ivy league school then called in a favor with some fellow members of their golf club to get a cushy job right out of school.”

The professional athlete who dominates the daily sports highlights and perhaps appears on your TV hawking the latest product or service hourly?

“Obviously, they were simply born with so much God-given athletic talent their lives were set from the day they exited the womb.”

The pop signer with the lame single that as much as you hate to admit it has been stuck in your head for a week?

“Well they clearly had the best producers and the best writers that basically spoon fed them a song that anyone could do.”

WRONG.  People like this are successful in their pursuits because throughout the course of many years, they have fought, scratched, and persevered to get to where they wanted to be.  The repeatedly set lofty goals (click for my post on goal setting) and exceeded them.  How many people start out in business but dont reach the executive level?  How many people born with natural athletic abilities dont have multi-million dollar contracts?  How many talented musicians have never sold out Madison Square Garden?  The answer is… alot.

We live in a country where every day people who came from nothing are offered the opportunity to become whoever they want.  According to Dr. Thomas Stanley, author of “The Millionaire Next Door” about 80% of millionaires are first generation.  First generation!  That means that the business executive must have done some things differently to separate themselves from their peers (that didn’t involve his parents).  The 1st round draft pick must have been out practicing when others were partying.  The pop signer was busy embarrassing themselves singing on street corners while others make fun of them in the clsoe company of their friends. 

Whether its deciding that you want to provide a more secure future for yourself and your family, or deciding you want to complete your first marathon, you have to get your head right and believe that you can do it.  If you want to give yourself a financial makeover from head to toe, you can, but only you can convince yourself of that.  Instead of looking at those who have achieved wealth and success and immediately thinking negative thoughts, be excited about the fact that they are once again proving what is possible for anyone who is willing to put in the work.  Self-improvement only comes from within.  After all, if you can’t believe in yourself, then who will!!??

Attacking the New Year – Setting Proper Goals

New Year's Resolutions

We’ve all done it…

“My New Year’s resolutions are to get in better shape, to be a better husband/wife/child/etc, and to make more money…”

Sound familiar?  

Although worthy in aspiration, resolutions (or goals) such as these are more wishful thinking than they are tangible goals.  Like most things in life, setting proper goals takes a little know-how and alot of in-depth thought.  Here are some general rules of thumb I use:

  1. You only need 3 – Jim Collins, author of “Built to Last” and “Good to Great,”If you have more than three priorities, you don’t have any priorities.”  Point being, when the list gets too long it is easy to get overwhelmed.  When setting goals, less is always more.  The idea isn’t to throw a bunch of stuff on the wall and see what sticks; the idea is to successfully challenge ourselves to be better, happier beings.  Old habits die hard, and creating new habits is even harder.  When setting goals, think KISS (the adage not the rock band) – Keep It Simple Stupid!
  2. Keep them SMART – Another popular adage, SMART stands for “Specific, Measurable, Achievable, Relevant, and Time-bound.”  When you set a goal for yourself, it should be able to meet all these requirements. When looking back at the new year’s resolutions mentioned in the beginning of this post, it becomes easy to see how these types of goals fall well short.  A better version might be: lose 10 lbs of body fat by Fourth of July weekend, cook dinner for wife at least once a week, and to increase my earnings 15% by exceeding top sales target at work.  For each of these goals you should know what needs to be done to make them happen, ie, to lose 10 lbs of body fat by Fourth of July weekend I am going to run 3X week and cut out soda and twinkies from my diet…
  3. Write them down, laminate them, and look at them every day – Doing this serves a very specific purpose.  Simply put, the body achieves what the mind believes.  Napoleon Hill, author of the timeless, renowned book “Think and Grow Rich,” discusses the power of the subconscious mind to achieve desired outcomes in depth.  He states: “You may voluntarily plant in your subconscious mind any plan, thought, or purpose which you desire to translate into its physical or monetary equivalent.”  Looking at your goals every day does alot more than reminding your conscious mind about what you want to accomplish, it also programs your subconscious mind to take the actions necessary to achieve the desired outcome.  For the same reason that we often do and say things that we didn’t specifically plan out beforehand, the subconscious mind is a very powerful tool.

For the last three years I have used this basic system.  My goals are printed on 2 different laminated cards – one placed under my computer monitor at work and one that stays in my car.  I look at them at least 5 times daily.  The result?  Of the nine goals I have written down in the past three years, I have accomplished seven.  Not perfect, but a 780 batting average to accomplish tasks that have bettered my life is not too shabby.

What do you plan to accomplish this year?


And we’re off… post #1!

Greetings and welcome to Wallet Sense – “Common sense for your wallet and your life.”

Right off the bat, I will admit that I have been debating starting a blog for a while. After all, everyone and their cousin already has a blog, so who the heck wants to read another one from me (plus, who really takes advice from their cousin)?  Well, I am hoping that someone does… so please help protect my delicate insecurities and hang around a bit!

This blog will address a wide variety of topics, but all posts will be focused on the application of common sense and tried and true principals to the personal finance and everyday life in an effort to help readers save money, build wealth, and hopefully find contentment in their lives – pretty reasonable stuff right?  Even more than that, this blog is about learning… and learning (as we all should know) is a two-way street.  I hope to learn as much (if not more) from you than you do from me.

Specifically, this blog will address topics such as making budgets, job hunting, mortgages, dealing with failure, life insurance, emergency funds, student loans, negotiating raises, eliminating debt, traveling on a budget, healthcare, goal setting, marriage, child expenses, saving money on groceries, buying cars, starting a business, etc.  If you are interested in learning and discussing any of these types of topics, this blog is for you.

This blog is not about statistical analysis, complex financial modeling, different ways to steal cable from your neighbor, juggling credit cards, analyzing the latest stock market trends, how to make a million dollars in 24 hrs, alternative investment classes, how to buy houses you can’t afford, financing furniture at 0% interest for 24 months, or how to spend your child’s college fund on a Porsche (although in this particular case I could certainly understand the motivation… big car guy here.)  If you are interested in learned and discussing any of these types of topics (with maybe the exception of cars… always happy to talk about that), this blog is NOT for you.

FULL DISCLOSURE: I wholeheartedly admit that I don’t have a masters degree or a professional designation that particularly qualify me to speak on financial matters in any great detail (unless you count a liberal arts degree as an acceptable accreditation that makes me uniquely qualified to speak on all subjects? … doubtful).  Unfortunately, I am also not a member of MENSA. Nor have I ever worked at Goldman Sachs.  My last name is definitely not Schwab, Morgan, Gates, Jobs, etc.  I don’t get paid to give lectures.  And I don’t live in a mansion.  Sorry if this disappoints anyone, but then again that is why this blog is focused on common sense and wisdom and not outlining/detailing concepts found embedded deep within graduate-level text books (thick ones).

I am actually a pretty normal everyday guy.  I have a normal everyday job.  I am married and have a wife who works a normal everyday job.  I have a 6 mo. old daughter that is lazy and unemployed (let me know if anyone knows of any good internship opportunities).  I live in a normal place.  I have worked different types of jobs in different industries (all sales oriented).  I have suffered major setbacks.  I have always learned lessons the hard way.  I have persevered.  My desire to constantly gain knowledge, my ability to learn from my mistakes, and the trial and error challenges and successes I’ve encountered in my life are what make me qualified to speak on the topics mentioned in this blog.  In short, I will never post on anything of which I am not directly familiar.

This blog will require participation.  This participation will be in the form of posts by myself, occasional posts from guests (some of which do hold specialty degrees and professional designations), and fI am not a pastor, I am not an elected official, and as I already pointed out, I don’t get paid to speak to large groups of people (come to think of it, I won’t get paid to write any of this stuff either).  Point being, I am not here to lecture.  I am here to share my thoughts, to provide a platform for you to share your thoughts (whether you agree or disagree), and to interact with other regrading their thoughts.  My only requirement here is that if you choose to participate, please keep profanity, blatant disrespect, etc. out of your comments (mean people suck).

So to recap, this blog is about:

  1. Applying common sense and simple, proven principals to help your wallet and your life
  2. Mutual learning
  3. Respectful participation

That’s pretty much it.  I will post several times a week on what I hope are interesting topics.  I look forward to hearing your feedback.  Feel free to email me with any suggestions or feedback at