Stacking Chips, Tens and Hundreds of Dollars at a Time

Hey everyone.
So in the past two days, I made $600 from legal work and the way that I allocated that money was as follows: $100 towards my credit card bill (I now have a balance of $961), $100 toward my 2013 tax bill (I now have a balance remaining of $1,100), $110 towards my professional liability insurance bill, $50 towards my Roth IRA, $25 towards my regular investment account, $40 towards tithes, leaving me with $75 in checking until the next time I receive money. Which will be tomorrow.

Currently, I make about $150 a day, 7 days a week, 365 days a year. I aspire to make $300 a day next year, which will put me in the six figure income bracket. $300 a day translates into $109,500 a year. Having more income means that you can save more. I advocate saving anywhere from 7 - 15% of your income, even when you have credit card debt. However this is only provided that your credit card debt is $1,000 or less. When your credit card debt starts to creep above $1,000, that's when credit card interest really starts to burn a hole in your pocket.

I do agree with financial talking heads that one should pay off credit card debt as aggressively as possible. However, I believe that there is a place for saving, no matter how small your income is, if you have credit card debt at $1,000 or below. I believe that if you have credit card debt above $1,000, you should use 90% of your money allocation for savings/investing to pay it down and just save 10% of the amount you would normally have saved. (Example: You have $5,000.00 in credit card debt. You were originally planning to save $250 per month. Instead of saving that entire $250, use $225 of it to pay down your credit card debt and allocate $25 towards your savings.)

The reason that you are not using the entire $250 to pay down your credit card debt is because having some reserve makes it less likely that you will have to rely on your credit card to fund future purchases. And for me, I feel much richer when I can look at my bank statement and see money in my account/see that I'm a member of the investor class, as opposed to calling a loan company representative and hearing how much debt I've paid off.

As I've mentioned in my previous post, my most immediate goal is $10,000 in savings/investments by the end of the year. After getting $1,000 in savings/investments, the next major milestone, in monetary terms is $10,000. The reason for that is primarily psychological for me, but I also feel as if $10,000 allows one the ability to make a significant investment in an individual stock or several stocks. By significant, I mean that the amount of capital you invest in a stock can generate a nice bit of money if the investment doubles. (If you buy 2 shares of a $200 stock, and it doubles, you've made $400. But if you buy 200 shares of a $200 stock, and it doubles, you've made $40,000.)

When making purchases for my own stock portfolio, I usually buy in amounts of $500. That is to say, I usually invest $500 at a time. Although it's not a lot, I believe that waiting until I have $500 to invest forces me to take time to evaluate the merits of each investment I purchase. Speaking of investments, as of today, my investment account stands at $1,341.41, with $1,210.12 of that being in my Roth IRA and the remaining $131.29 in my regular investment account. I made $14.36 today in my 2 shares of  BIDU and $6.15 in my 3 shares of LMT for a total of $20.51. My portfolio is down .3% and I started my portfolio at the beginning of September.

At any rate, I think that's more than enough for a post. I hope to see everyone again soon and thanks for reading.

Opening Up My Financial Life

Hey everyone.

So as I promised in my last post, I'll be disclosing my own personal financial state, in my quest to become a millionaire. But before I do so, I'd like to say that while I don't endorse everything that Suze Orman says on her t.v. show or in her books, she once said that she believes the three impediments to achieving wealth are fear, anger, and  shame. I wholeheartedly agree.

There were times in my life when I was fearful about when I would make money, or whether I would make money, or generally around the topic of money. There have been times when I have been angry at how little money I had, while jealous at the amount other people have had. And I have definitely been embarrassed about my financial state at various times in my life. However, I have managed to resolve my money anxieties and I realize that I am always able to generate income if and when necessary. I have also managed to resolve my anger around not having the same amount of money as some of my peers. And through opening my financial life up to the public, I hope to resolve my issues regarding shame and money.

Money in general, and debt specifically is such a taboo topic. I am a 31 year old male and I have a total of $90,000.00 of federal and private student loans from my undergraduate education at Duke University. I also have another $122,000.00 in federal and private loans from law school. I owe my mom $5,000.00 for a loan she gave me after I passed the bar exam and I have $1,069.00 in credit card debt. The credit card debt has been mostly from paying monthly healthcare premiums and for a $500.00 plane ticket I had to buy unexpectedly for my grandfather's funeral. So my total debt is $218,069.00.

As of today, September 23, 2014, I have a total of $1,253.99 in my investment account, $1,147.70 of which is in my Roth IRA. I currently own 2 shares of Baidu.com (BIDU) and 3 shares of Lockheed Martin (LMT). Although most financial planning experts advise paying off credit card debt - which I am doing aggressively - I feel a certain sense of security and financial well-being when I know that I am making my money generate money for me. My investments have acted as a kind of make shift savings for me also over the past few working years.

The most money I've ever had in my savings/investment account is $15,000.00 and I had that amount right after Duke. I saved and invested while living at home and working while paying no rent. Over the past decade, I have saved and invested several 4 and 5 figure sums. However, life and more specifically paying for education expenses over the past few years, rent and groceries in New York City, along with sporadic employment prior to late 2012, has dwindled my safety net.

Fortunately, I am beginning to rebuild my savings and investment portfolio and I recently moved into a spacious new one bedroom in Manhattan. My rent is currently $1,100 per month; my professional liability insurance is $90.00 per month; my phone and internet service costs $250.00 per month; my office rent is $500.00 per month (but it's sometimes abated); my health insurance is $354.00 per month; my disability insurance is $180.00 per month; my life insurance is $107 per month; and my student loan payments that I am currently making total $1,000.00 per month. I'm on track to make $55,000.00 this year as a solo practitioner lawyer and  on my quest to be a millionaire by December 31, 2016, I am aiming to have $10,000.00 in liquid assets by December 31, 2014. The road to major goals is paved with smaller, more attainable ones to promote perseverance.

Aside from ridding myself of shame surrounding my financial situation, I want to chronicle my journey toward millionaire status and show people that anyone with a sufficient income ($45,000.00 in major cities and $40,000 in smaller towns) can become rich - myself included. As I journal about my own personal journey, I'll be sure to include money/personal finance/investing lessons, as they pertain to my personal situation. Lastly, please send in any questions or comments about any personal finance topic you'd like to see me discuss. Thanks for reading and good night!

Reality Finance - The Millionaire Challenge

Hey everyone.
I read an article today that talked about Federal Reserve Chairwoman Janet Yellen and her insight that the poorest of Americans have not benefited from the economic recovery that has taken place over the past five years. I've always believed that anyone can learn to manage their money well and become a millionaire - myself included. But sometimes it's harder for those who 1) aren't earning enough; 2) don't understand what to do with their savings, if they are able to save; or most importantly 3) haven't seen anyone close to them become wealthy independently. I would like to remedy the problems I just mentioned. That's where my Reality Finance - Millionaire Challenge comes in.

You see, I WILL BE A MILLIONAIRE BY DECEMBER 31, 2016.  More specifically, I will have paid off all of my debt and have $1,000,000.00 in cold hard cash in my bank/investment account by December 31, 2016. But in the process of becoming a millionaire, I would like to expose to the world how I do it. That's the "reality" part of Reality Finance. I want to show people that with perseverance and hard work, it is possible to achieve financial independence. I also want to help specifically groups that have been ignored by the financial/wealth management industry such as younger people (ages 6 - 30), women, and people of color. I remember interviewing with a wealth management company some time ago and the interviewer telling me that I couldn't make money working with a person who did not have a lot of money. That concept really rubbed me the wrong way - mainly because it's not true!

At any rate, I've decided to open up my finances for the world to see. I will disclose my debt load, my investment account balance, how much I save and spend on various things throughout the day, how I choose investments, and any other thing readers/viewers would like to know. Tomorrow and in the coming days, I'll be opening up about these pieces of information about myself. I'll be doing this in an effort not only to chronicle my own journey toward  $1,000,000.00, but to show the entire world that anyone with drive and an income can become wealthy, no matter what their financial starting point is.

The World's Best Investment Is an Investment in One's Self

For the longest time, I've had an interest in the stock market. The whole concept of making money from just using my brain turned me on. And don't get me wrong - being invested in the stock market over the long term is an excellent idea. A dollar invested in the S&P 500 Index (a group of companies that are generally thought to be a bellwether for the United States economy) in 1970 is now worth $77.79. For a shorter time frame example, imagine buying an index fund in 1994 - twenty years ago. If you invested $10,000 in that index fund, today you would have $106,960.86, for a compounded annual growth rate of 12.98%! 

All of the above goes to show that the stock market can be a fabulous investment. However, I do not believe that the stock market is the best investment.

After learning so much about personal finance and travelling along my own journey to being at peace with money, I've realized that the world's best investment is an investment in one's self. An investment in one's self can be obtaining higher education, getting coaching, getting training, doing something enjoyable that relieves stress, building one's self esteem or one's business.

The primary reason that I believe that an investment in one's self beats investing in the stock market every time is that the returns from the stock market, over the long-term, are capped at around 20% per year. That is an astounding compounded annual growth rate, but it's not one that the majority investors can achieve. In fact, the only investor who has achieved such a feat by investing in companies/stocks over a 40 year period is Warren Buffett. So unfortunately, it's unlikely that we can achieve the same sort of rate of return. When we invest in ourselves though, the potential return is unlimited.

Investing in ourselves allows us to get and maintain a job, which allows us to save money to even put to work in the stock market or other prudent risk taking endeavors. Without employability or marketable skills, there is no ability to build wealth. Also, Warren Buffett is famous for saying that in all risk taking endeavors, one should stay within one's circle of competence. That is to say that if you are most interested in fashion or the culinary arts, then you should devote all of your time and energy to becoming the best couturier or chef/restaurateur, and not to picking stocks. You can have a professional do that for you.

When you invest in yourself, you increase your human capital and financial capital to invest in things outside of yourself!

How to Save for Your Child's Education - 529 Plans vs. Coverdell ESAs

Hello everyone.
I'm sure a lot of us are acutely aware of the growing student loan debt crisis in this country. According to the Wall Street Journal, student loan debt topped $1 trillion last year. Such being the case, not only is it much more important nowadays that students make wise choices about where to attend college, but it's also more important that parents do as much they can to give their children a leg up financially by saving for the child's educational expenses when she (the child) is young.

According to the College Board, the average cost of tuition and fees in 2011 for a private college was $28,500, and this doesn't even include room and board. At private universities like my alma mater, Duke University, the total cost of the college experience is $56,056 per year! But don't let this number scare you. When it comes to saving for college, there are a number of options that you have available to you.

529 SAVINGS PLAN - PREPAID TUITION PROGRAM

A 529 Savings Plan comes in 2 flavors - the prepaid tuition program and the college savings plan. A 529 plan is an investment vehicle, akin to a Roth or traditional IRA, which allows you to set aside funds to invest, and which are never taxed, in order to pay for a beneficiary's (student's) college expenses. Once a 529 Plan is opened, it is managed (the assets within it are invested) by a trustee. Depending on who you open the plan with, you can sometimes also choose how the money is invested. And fortunately, its existence does not affect the beneficiary's (student's) eligibility for financial aid. Moreover, contributions to a prepaid tuition program decrease a donor's state income tax liability.

The prepaid tuition program allows the people who contribute to the student's 529 plan to lock in tuition rates where they are right now, regardless of how much higher they are at a later date, at a predetermined university/college or from a list of predetermined colleges. With a prepaid tuition plan, you can prepay all of a child's tuition if you happen to come into a windfall. However, because  prepaid tuition programs vary from state to state, availability of prepaid tuition 529s might be limited to residents of the state where the college is located.

Lastly, if the beneficiary of the prepaid tuition program 529 was to die, the amount in the plan can be transferred to any of the following qualifying relatives: spouse, child (includes foster and stepchildren), father, mother, brother, sister (includes all step-siblings), and a first cousin.

529 SAVINGS PLAN - COLLEGE SAVINGS PLAN

The college savings plan version of the 529 Savings Plan is very similar to the prepaid tuition version, but it is infinitely more flexible. It has all of the perks of the prepaid tuition program such as transferability and tax deductibility, but you can use it for any university. Also, you are not locking in tuition prices with this plan. You are just saving/contributing a specific amount of money that is to be invested and will cover the beneficiary's qualified educational expenses. The lifetime contribution limits in each state tend to rise with the cost of college, so many states have current contribution limits upwards of $300,000.

It should be noted however that the government does not permit you to use the assets in the plan for anything besides educational expenses, so it is important not to overfund this type of plan. And be sure to coordinate with grandparents and relatives who may want to contribute to the plan. Doing so prevents overfunding of the plan.

Lastly, this type of plan, as I mentioned before, is the most flexible plan. You should use it if you want your child to be able to choose his own college and want the ability to allow the child to use the funds when she desires. There is no age or time limit by which the beneficiary must use the assets in the plan. Unfortunately, the prepaid tuition program does have certain age limit and time for use restrictions and these vary by state.

Here's a quick summary of the major differences between the two types of 529 Plans before we jump to Coverdell Educational Savings Accounts.

COVERDELL EDUCATIONAL SAVINGS ACCOUNTS

Coverdell ESAs are also tax free educational saving investment vehicles. However, in contrast to 529 Plans, Coverdell ESAs can be used to fund elementary and secondary school expenses if you would like to send your children to expensive private schools when they are young.

These types of plans, in my opinion, should rarely if ever be used though because even though the maximum contribution to the account was $2,000 per year per child for the past ten years, it is scheduled to be reduced to $500 per year per child at the end of this year. Moreover, Coverdell ESAs require that the balance in the plan be used for educational expenses by the beneficiary's 30th birthday, or else the plan will be hit with taxes and penalties. As you can see, a 529 Plan is way more preferable than using a Coverdell ESA. And if you want to save money for your child's K through 12 school expenses, you'd be better off investing as much as you possibly can in an individual investment account and bearing the tax burden rather than being hamstrung by a $500 maximum contribution limit per year per child.

I hope this post was informative. If you'd like to begin planning for your child's future, you can do so by clicking here or here.  Until next time...

The Six Pillars of Financial Independence

Hey everyone.
In my last post, I spoke about limiting beliefs and how they restrict us, especially when it comes to money. Removal of limiting beliefs is actually one of the pillars of financial independence I have developed, but I will discuss all six today. Let's get started.

In order to achieve financial independence, which means being able to live without financial worries, debt, or wondering about the stability of your income source, you must abide by these six precepts. They follow an order and the higher up on the list a pillar is, the more important it is. They are as follows:

1) Accepting responsibility for your financial situation.

2) Acknowledging and removing limiting beliefs regarding money from your life.

3) Identification of goals for your money.

4) Saving.

5) Investing.

6) Patience.

ACCEPTING RESPONSIBILITY FOR YOUR FINANCIAL SITUATION
Look, all of us make mistakes. Some of us have made more than others, but no one gets off the spinning dirt ball without making mistakes. This includes financial ones. Financial mistakes include taking on too much student loan debt, using credit cards to buy stuff we don't need, not paying attention to our credit score and making late payments when paying bills, and the list goes on and on.

As we get older and wiser, hopefully we stop making these mistakes. But it's easy to look back on your life and beat yourself up about how much money you wasted making imprudent financial decisions. Forgive yourself and move forward. Forgiving yourself doesn't mean you are letting yourself off the hook for your poor financial decisions. In fact, it's quite the opposite - it means that you are aware that YOU are the only one who made you make those financial decisions in the past.

Until you accept that you are in control of your decisions, and not someone else or some outside force, you will never be in control of your money.

ACKNOWLEDGEMENT AND REMOVAL OF LIMITING BELIEFS
Check out my last post on limiting beliefs regarding money. It provides insight on what a limiting belief is and what you can do to get rid of it.

IDENTIFICATION OF GOALS FOR YOUR MONEY
Money should be a 'means' in your life, and not an 'end' in itself. A lot of people want to amass money so they can see it sit in a bank account, as if that would bring them tremendous joy. The thought of having enough money to do whatever is necessary might be comforting, but eventually you would use that money in that bank account to enjoy yourself along with family and friends. Working toward a goal is that much more fun when you know specifically what your goal is.

Do you want to travel the world and stay in five star hotels the whole way? Do you want to open a bakery and paint on the side? Money can help you do all of these things, but when you know what you are working for, making tough decisions becomes easier for you than if you have an amorphous goal of 'having a lot of money'.

SAVING 
Trying to achieve financial independence without saving is like trying to cook without ingredients - you can't do it! Saving money allows you to have capital that can work for you, even when you are not working. I know that it takes discipline, but you have to ask yourself if that new iPad or having cable tv is more important to you than achieving your dream some day.

INVESTING
Investing allows your money to make money for you. Just look at the fact that even in these economic times, the U.S. has a record number of millionaires. Why? Because the rich don't get most of their income from their paychecks - they get it from investing in assets. There are lots of posts on this blog about getting started with investing (particularly in stocks). I recommend that you check them out.

PATIENCE
In most aspects of life, patience is a virtue. It is no different with regard to becoming wealthy. Patience will keep a saver from getting frustrated and abandoning her savings plan. It will keep an investor from trading too much in his account because he thinks he can 'time' the market. Most importantly, it will allow investors to take advantage of the power of compound interest and tax-deferral if s/he is using a Roth IRA, traditional IRA, or 401(k).

It takes time to implement all of these pillars into your life. But if you make a commitment to do so, bit by bit, your financial 'house' will be in order. Until next time...

Money and Limiting Beliefs

      "Whether you think that you can, or that you can't, you are usually right." - H. Ford
Hey everyone.
Today's topic is limiting beliefs and how they restrict us, especially when it comes to money. Let's jump in.

So, what exactly is a limiting belief? I think that we have to begin by defining a belief. A belief is defined as an acceptance that a statement is true or that something exists. Another definition is something that one accepts as true or real or a firmly held opinion or conviction. However, not all beliefs are true. If a belief can be an opinion or conviction, then of course all beliefs are not true!

For the longest time, people believed that the earth, instead of the Sun was the center of the universe. Then, a brilliant mathematician and astronomer came along and shattered people's beliefs in 'geocentrism' and replaced it with 'heliocentrism'. And for the longest time, people believed that no one could ever run a mile in under four minutes, but then came Roger Bannister who ran a mile in under four minutes in 1954! And even after that, Bannister's record has been broken over and over again.

The point is that a lot of times, humankind believes things and these things turn out to not be true. And there are myriad reasons for these beliefs - sometimes our minds cannot comprehend things being different than they appear to be. I mean, before we as humans landed on the moon, it was pretty crazy to think that we could be on the moon! But we did it. Which leads me to my next point. A lot of times, we (myself included) look at life as it is at the moment and not how it could be, even though we wish life could be different or better. Such is what a limiting belief is - a negative belief about things as they are, and not a positive one about how they could be.

Limiting beliefs do not serve us as humankind very well. Can you imagine if Barack Obama just moped along with everyone else and said "there's no way a Black man can ever get elected President"? If he had 'believed' that statement, then he would have never taken action and run for President. And if you don't run, then how can you win?

Limiting beliefs show up a lot in our lives. Some of us believe that we are unattractive, unintelligent, unlucky, or whatever. And even though not all of us believe the things in the sentence above, a lot of us who were not born into money believe that money is hard to come by or that we will struggle for the rest of our lives or that  we just can't get a break. This system of beliefs that I just described is known as a 'poverty consciousness', as opposed to a 'wealth consciousness'. And, believe it or not (and I hope that you will believe it), the more that we think and feel these things, the more they become a part of our identity and we will continuously see the manifestation of that belief in our life.

Let's be real. Our thoughts are usually on overdrive. We let things play over and over again in our heads and sometimes we feel as if we have no control over them. The subconscious mind is essentially our slave and whatever we tell it to believe, that's what it will believe. Which is why it's so important to never, even in a tough economy, let words of discouragement and despair, be the predominant thoughts in your head. Stop listening to news about high unemployment or complaining about how you're having a tough time making ends meet. What you might be saying or thinking probably is very much a reality in your life. It does not matter what problems you are having (and we all have them) in you life though. Start repeating and thinking to yourself the things that you would like to see in your life. The more you think something or say it, the more you will believe it. And when you believe something, you will take definite action to make that belief become a reality. Here are a few statements that are positive affirmations about money that you should try on and see how you feel about them:

1) Money comes easily to me.

2) I have more than enough and am at peace with my finances.

3) I am a truly rich wo/man.

For even greater impact, try stating/thinking these affirmations when in a heightened state such as eating good food, listening to music you enjoy, or even orgasming. When you attach a positive emotion to these thoughts, your energy is heightened and the message sent out into the ether is that more powerful.

To wrap it up, no matter what your financial circumstances, you can make things better for yourself. However, you must begin speaking and believing the things that you would like to exist. When you believe that deserve money, you will make better financial decisions. When you believe that you have more than enough, you can donate to charity, which makes room for more money to flow into your life. I recognize that not everyone wants to be rich, but I'm sure everyone wants to be at peace with their finances and live comfortably. Such is possible by being aware of and ridding ourselves of limiting beliefs regarding money.