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Archive for October, 2007

Upside Down In A Car?

October 31st, 2007 at 12:35 pm

Almost every day, I have a financial counseling meeting with someone who has a car loan that has a balance that is much more than the car is worth. They are "upside down". They owe more than the car is able to be sold for.

During the counseling session, we develop a written spending plan (budget - start yours

Text is HERE and Link is http://www.josephsangl.com/?page_id=151
HERE) and calculate their Debt Freedom Date (calculate yours
Text is HERE and Link is http://www.josephsangl.com/?page_id=151
HERE).

Let's look at a sample of what I am talking about. Here is a person's Debt Freedom Date calculation.



This person owes $19,000 on a car that is only worth $14,000. They want out of debt! They have had enough! Thirty-six months - THREE YEARS - is NOT good enough! They want to become debt-free now!!!

So how does one get rid of a car that they are upside down on?

There are many options. Here are a few:

1. Sell the car and use $5,000 of savings and use it to bridge the "gap" so the car's title is clear for the sale. Use another $1,000 to purchase a "beater" vehicle that will get you from point A to point B.
2. If you don't have $5,000 in savings to bridge the "gap", approach the current loan holder. Tell them that you want to get out of debt and are going to sell the vehicle. Obtain a secondary loan for $6,000 ($5,000 for the "gap" and $1,000 for a beater vehicle).
3. If the current lender will not provide the "gap" funding, approach your local bank or credit union and obtain a signature loan for $6,000 to cover the $5,000 gap and purchase a $1,000 beater.

If you use $6,000 of savings to get rid of the car and buy a $1,000 beater, your Debt Freedom Date will now look like this!



By using $6,000 from savings, 16.7 months were ELIMINATED from the Debt Freedom Date!!! This person will be DEBT FREE in less than 20 MONTHS!

If this person followed options 2 or 3, here is what their Debt Freedom Date will look like.



By obtaining a $6,000 loan and selling the car, this person ELIMINATED $13,000 worth of debt and will achieve Financial Freedom 11.4 months SOONER!!!!

Selling a car can many times be THE CATALYST to achieving Debt Freedom!

Are you going to get rid of your "upside-down" car?

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Mr. Pursuit of Unrealistic Goals

October 30th, 2007 at 12:54 pm

Some people believe that I have too much energy and enthusiasm. They believe that I am

Text is quixotic and Link is http://dictionary.reference.com/browse/quixotic
quixotic - so much so that a group of folks created a desk nameplate that says "Mr. Quixotic" and provided me a printed definition of the word "Caught up in the romance of noble deeds and the pursuit of unreachable goals; idealistic without regard to practicality".

I would agree that I am idealistic. I do get caught up in helping others win with their money. I do believe in people!

Here is the part of the definition that I take major exception with - the pursuit of unreachable goals

I am here to tell you that the God-given goals that I have are not unreachable! I do believe that everyone who sets their focus on becoming debt-free CAN become debt-free! I KNOW that those who set their attention to providing a more stable financial situation for their family WILL be able to do so!

Whenever I provide financial counseling for someone (hundreds per year), my goal is to show them two things (1) There is a better way, and (2) exactly what that way is as it pertains to their situation. Each person who has debt leaves with their own Debt Freedom Date calculated. Each person who does not have a working monthly spending plan leaves with a plan that starts immediately and carries for at least the next month (start your own budget spending plan HERE).

What do I do when someone falls off of the wagon? I mourn for them. I am saddened by the fact that they won't achieve financial freedom. BUT, when they are ready to try again, I have an excellent wagon stapler in the office and we will meet together to get them back on the wagon.

At the end of each day, I clearly know that I am doing exactly what I was put on earth to do! I KNOW that lives were impacted for the better. I KNOW that skills and tools were taught that will change lives!

So call me Mr. Quixotic if you wish. I won't hear it, as I am out here in the arena, knee-deep in the messiness of life and finances, helping all that I can hear a message of hope and freedom.

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How do I budget? Part 05

October 28th, 2007 at 10:12 pm

In this series of posts, I am sharing the process that Jenn and I followed to develop a budget that actually worked! We have developed a monthly spending plan (budget) every single month since that first one way back in July of 2003!

Here are the steps that have already been shared.

STEP ONE Understand that budgeting is nothing more than "telling your money where to go"

Telling your money where to go is so much fun! Especially when you tell it to take you on vacation or go golfing!

STEP TWO Determine the income (take-home pay) you will receive during the NEXT month.

Planning ahead allows you to determine if there are any gaps. By being ahead of the game, it provides you an opportunity to avoid "budget-busting" events.

STEP THREE Enter all of your expenses for the NEXT month.

Tell your money where to go!

STEP FOUR INCOME - OUTGO = EXACTLY ZERO

Whether you make $1,000 per month or $40,000 per month, it is limited. If you spend more than you make, you will erode savings or turn to debt!

STEP FIVE Follow the budget!

You have followed all of the steps. You now have a spending plan for the next month. It is time to live by it! After all, it was YOU who told your money where to go! Why wouldn't you follow YOUR plan?

As I have helped others develop their own spending plans, I have seen people completely break free of debt. I have seen people pay off their mortgages! I have seen marriages restored! I have seen the hopeless become hopeful!

That is what your budget will allow you to do! Develop a spending plan every single month BEFORE the month and the money arrives and then FOLLOW it! You will never regret this decision.

Maybe you have read this series in a guarded, protected way while wondering "I wonder if this will work for me? I don't want to get my hopes up. I've tried this before." I say that YOU CAN DO THIS!!! I believe in you! Why? BECAUSE I WAS THERE!!! I had an average bank balance of $4.13 and the STRESS was awful! The shame was real. I did not know how to break free.

Planning my spending one month in advance was what broke Jenn and me free! It will work for you too!

Why not pull up a free budgeting tool and get started winning with your money today?

If you have enough money in the bank to pay all of your bills at the start of the month, use the Monthly Budget Form (Excel) in the

Text is TOOLS and Link is http://www.josephsangl.com/?page_id=151
TOOLS page.

If you are living paycheck-to-paycheck, use the Weekly Budget Form (Excel)in the
Text is TOOLS and Link is http://www.josephsangl.com/?page_id=151
TOOLS

How do I budget? Part 04

October 26th, 2007 at 01:27 pm

In this series of posts, I am sharing the process that Jenn and I followed to develop a budget that actually worked!

Here are the steps that have already been shared.

STEP ONE Understand that budgeting is nothing more than "telling your money where to go"

It is so important to tell your money where to go - instead of wondering where it went!

STEP TWO Determine the income (take-home pay) you will receive during the NEXT month.

This income is what you will be spending on paper BEFORE the month, the money, and the bills ever arrive!

STEP THREE Enter all of your expenses for the NEXT month.

Enter ALL of the real actual expenses that will need to be paid NEXT month into your budget form.

STEP FOUR INCOME - OUTGO = EXACTLY ZERO

Your income is limited. If you bring home $3,000 during the next month and spend $3,208, your spending plan will not work! Where will the $208 come from? It will have to come from savings OR from debt - usually in the form of a credit card.

YOUR INCOME IS LIMITED! Let me take it one step further. Let's say you are really blessed and bring home $70,000 during the next month (don't laugh - many people do!). If you spend $71,320, your spending plan will not work! The $1,320 will have to come from somewhere - and many times it is made up with debt.

In STEPS TWO and THREE, we entered all of the income and expenses into the budget and, no surprise, the OUTGO exceeded the INCOME. You can see the entire budget

Text is HERE and Link is http://www.josephsangl.com/wp-content/uploads/Blog%202007-10-24%20How%20do%20I%20budget%20i-o%20budget.gif
HERE.



There are two options when the OUTGO exceeds INCOME:

1. Increase the INCOME - 2nd job, Overtime, side job
2. Decrease the OUTGO - Decrease the expenses

In this budget, let's say that this family receives salary. They cannot quickly increase their income, so they are going to focus on reducing their outgo! They need to eliminate $320 of spending.

NOTE: This is not a "perhaps, perhaps, perhaps" type budget! This is how the family will ACTUALLY spend their money next month! Remember - if your budget is not 100% relevant to you and your family THIS MONTH, you will ignore the budget and use it to start a fire in your fireplace!

What expense can they eliminate? Again, you can pull up a copy of the budget
Text is HERE and Link is http://www.josephsangl.com/wp-content/uploads/Blog%202007-10-24%20How%20do%20I%20budget%20i-o%20budget.gif
HERE.

After working together on their budget, the family decides on the following changes:



SUCCESS!!! INCOME - OUTGO = EXACTLY ZERO!!!



If you want to see the entire EXACTLY ZERO budget, you can view it by clicking
Text is HERE and Link is http://www.josephsangl.com/wp-content/uploads/Blog%202007-10-25%20Blog%20Entire%20Budget%20Is%20EZ.gif
HERE!

You might be saying, "These people are CRAZY! They cut out 1/2 of their dining out, entertainment, blow money, and all of their babysitting money! They are crazy!"

I would say - "NOPE, they have had enough. They are so sick of living paycheck-to-paycheck that they are willing to live differently and change their lives forever! All because of a little sacrifice now!"

Jenn and I prepare a written spending plan every single month before the month begins and before any of the money gets to us. This is THE REASON we have won with money.

Enjoyed the series?
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How do I budget? Part 03

October 25th, 2007 at 02:06 pm

In this series of posts, I am sharing the process that Jenn and I followed to develop a budget that actually worked!

Let's review the steps already shared.

STEP ONE Understand that budgeting is nothing more than "telling your money where to go"

It is so important to tell your money where to go - instead of wondering where it went!

STEP TWO Determine the income (take-home pay) you will receive during the NEXT month.

This income is what you will be spending on paper BEFORE the month, the money, and the bills ever arrive!

STEP THREE Enter all of your expenses for the NEXT month.

This is where you spend your money on paper! In Step Two, you determined your total income for next month, and it is now time to spend it on paper BEFORE the month arrives!

These expenses are the real, actual expenses that will happen. I have seen many people include average expenses for the year. Averages don't work!!! Enter the real expense because this budget needs to be highly relevant to the next month!

If the expenses are not relevant to the next month, it is highly possible that you will consider the budget irrelevant for the next month!!! Smile

If you don't know the ACTUAL cost (utilities, gasoline, etc.), enter an educated guess based on recent spending.

Enter all of the expenses into your budget. You can obtain your FREE COPY of budgets by clicking

Text is HERE and Link is http://www.josephsangl.com/?page_id=151
HERE.

The budget form has some excellent features built into it.

* If OUTGO exceeds INCOME, the TOTAL will turn RED and tell you how much you have overspent!
* If INCOME exceeds OUTGO, the TOTAL will turn YELLOW and tell you how much more money needs named!
* When INCOME = OUTGO, the TOTAL will turn GREEN … This is the ultimate goal!

Even if the budget TOTAL turns RED, keep typing in the expenses that you know are going to happen in the upcoming month. The goal is to get all of the known expenses for the next month on paper.

YES, you will later have to remove some expenses or boost your income to get to GREEN, but the goal right now is to get all of the expenses into the budget form! By having all of the expenses in the budget, you can make a much more informed choice on what will be removed from the budget.

Click
Text is HERE and Link is http://www.josephsangl.com/wp-content/uploads/thumb-Blog%202007-10-24%20How%20do%20I%20budget%20i-o%20budget.gif
HERE to see an example budget with all of the expenses loaded.

How do I budget? Part 02

October 24th, 2007 at 01:21 pm

In Part 1 of this series, I wrote about the negative feelings that some people have when they hear the word "Budget".

In reality, a budget is nothing more than telling your money where to go. I have heard Dave Ramsey take the definition a humorous step further - a budget is nothing more than telling your money where to go instead of wondering where it went!

EXACTLY!

So our first step in budgeting is:

STEP ONE Understand that budgeting is nothing more than "telling your money where to go"

Step One is the largest hurdle of any part of budgeting. The rest of budgeting is a breeze once you understand what a true budget is. Once you have internalized Step One, it is time for Step Two.

STEP TWO Determine the income (take-home pay) you will receive during the NEXT month.

There is a very key word in Step Two - the word "NEXT". I have learned that preparing a budget for money that has already been spent is not very fruitful. It is like being a Monday-morning quarterback for your finances. You want to get that money back. You wish you could have that money back. But it is GONE!

The budget must be completed BEFORE the month begins and BEFORE the money ever arrives. You are developing a spending plan for your money BEFORE you ever get it. The only way I have found to stop saying "I can't believe I spent my money that way" and "I wish I could have that money back" is to develop a spending plan BEFORE the money was paid to me for the month.

So think about it. What income will you receive during the next month?

Here are some common ways that people receive money during the month.

* Paycheck
* Bonus
* Side Job Income
* Child Support
* Alimony

Whatever your source of income is, write it down. In fact, write it down and put the dates that you will be paid this money during the next month. If your income is unpredictable, write down the amount of money that you can count on.

The series continues ... tomorrow!

How do I budget? Part 01

October 23rd, 2007 at 02:31 pm

Budget. The word alone sends chills to many people. Here are some things that people equate with budgets.

Budget = Restricting

Budget = I Am Broke

Budget = Controlling

Budget = No Fun

Budget = Constricting

Budget = Not going to do it!

Most people have tried budgets ... and failed! It was a bad experience, and many will say that they aren't EVER going to budget again.

I want to make a deal with you. How about reading this series of posts for the next week? How about trying for just one month this method that I will teach you? How about giving one shot? Just one. My hope is that you will try a budget for the month of November,

In this series of posts, I am going to share with you the exact process that Jenn and I took to prepare a budget that works. Guess what? THE VERY DAY that we started budgeting was THE VERY DAY that we started WINNING WITH MONEY!

Some might say "I hate budgets" and "I don't need no stinkin' budget", but I would ask them the following questions:

* How are you paying for Christmas this year? I am paying cash.
* How much is your car payment? I paid cash for my car.
* How much did you invest this month? I have invested for retirement for over 130 months in a row and my daughter's college for over 60 months in a row.
* How much money do you owe to your credit cards right now? I owe $0.
* When is the last time you had a great discussion on finances with your spouse? Not a fight. A great discussion. Jenn and I develop a spending plan TOGETHER every single month.
* If your car broke down tomorrow, do you have money in the bank to pay for it? Car repairs are not financial emergencies. I am not surprised when my car breaks down. Why? There is a car repair joint on every corner of every street of every town and city in the country! It is normal for cars to break down!

At the end of this series, some might call me crazy. Some might call me insane. Some might call me a wacko. I would say to them - call me whatever you want, just don't call me broke anymore!

You see ... I Was Broke ... Now, I'm Not!

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Money - Right vs Wrong in my world

October 17th, 2007 at 06:06 pm

Observed on a sticker - "I know the difference between right and wrong, but I choose to ignore it."

When it comes to finances, I have learned a lot about what is right and wrong. I hope I do not EVER choose to ignore it!

I have learned that:
- saving money is right and that spending all of my money is wrong
- having an emergency fund for emergencies is right and using a credit card for emergencies is wrong
- giving to worthy causes and individuals is right and not giving at all is dead wrong
- paying cash for purchases is right and paying on payments is wrong
- including your spouse in the budgeting process is right and not including them is wrong
- calling our money "ours" is right and our money "mine" and "yours" is wrong
- working together as husband and wife toward common financial goals is right and working separately is wrong
- having medical and life insurance is right and not having this insurance is wrong
- dealing with your financial situation is right and just throwing up your hands and declaring bankruptcy is wrong
- developing a plan and following it is right and handing your financial mess over to rip-off credit counseling is wrong
- facing your finances is right and choosing to ignore it is plain wrong

I would love to hear some other truths you have learned as you have dealt with your finances!

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"Overpriced College Degrees" - A rant by Joseph Sangl

October 17th, 2007 at 12:38 am

I am SO sick of hearing story after story of people who obtained a worthless college degree and have nothing but $60,000 in student loan debt to show for it! I am even more sick of hearing stories of people who did not even obtain the degree and have piles of student loan debt to show for it!

As a person who teaches about personal finances to thousands and having counseled hundreds of people one-on-one, I see situations of immense student loan debt nearly every single day!!!

Here is how the situation unfolds. The individual graduates high school and really has no clue about what they want to do with their life. They end up attending a very expensive private school and obtain a degree that has low market demand.

How did they pay for the education? They financed it!!! Now they are in a position of huge debt and have a degree that won't support the debt. Even worse, they don't even finish the degree!

I know that the private school education may be prestigious, but there are very few instances where the private school education is any better than a great state school! And the prices are way better at the state school!

Consider this. I attended Purdue University and received a fantastic mechanical engineering degree. This degree is in great market demand, AND it was VERY CHEAP since Purdue is a state school! I then studied at Clemson University and received my MBA. This degree is in great market demand, AND it was VERY CHEAP since Clemson is also a state school.

I had the option of attending a private school for my engineering education. Even with the incredible amount of "scholarship" offers, I would have had to pay TWICE the amount of full-price at Purdue! For a private school MBA, I would have had to pay FOUR to EIGHT TIMES the amount of full-price at Clemson!

Listen, I want you to get an education. I want you to get that degree! But please consider the overall cost of the degree!

PLEASE! PLEASE! PLEASE! PLEASE!

PS - Student Loan Debt is not bankruptable. You WILL have to pay it back someday.