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What do rich people do everyday that’s different?

American flag with fireworks for the 4th of JulyAJ: We’ve been busy lately, REALLY busy. When I came across this article (Entreprenur.com), it provided a welcome perspective as to why we keep cramming things into our lives even when our cups already runneth over. This post feels like a good post-holiday reset as we all drag our way through life until Labor Day (am I right!?) just praying for a snow day.

I’ve pulled out a few of the stats that resonated loudly with me, and I’d love to know how you all feel about these. Full disclosure – there are a few on the list that don’t resonate with us all of the time: they don’t watch TV (I’m a TV-aholic), They read…but not for fun (I read for fun like a maniac), they’re big into audio book (NO THANK YOU)! So maybe I’m not quite “rich people” material yet, but I like to think we’ve got the fundamentals down.

    Rich people always keep their goals in sight.
    “I focus on my goals every day.”
    Rich people who agree: 62%
    Poor people who agree: 6%

    Not only do wealthy people set annual and monthly goals, but 67% of them put those goals in writing.

OF COURSE wealthy people set goals and they probably accomplish them, too! I think the thing that fascinates me more about this set is that only 6% of poor people claim they make goals. We’ve posted several times about our goals which are a huge priority for both of us as individuals and as a household. We love accomplishing goals together and while sometimes that’s more exhausting than anything else, it’s still a way that we thrive in our relationship together. I would love to know how these statistics change within the community of retired, wealthy people. Even when we’re on vacation I find myself setting goals – sometimes that goal is to get out of bed by 11, but it’s a goal none the less!

KJ: Goals are such an important part of personal (and professional) success and fulfillment. If you’re not setting goals – and keeping them in front of you – then how do you know where you’re headed? Be sure to make your goals specific, measurable, assignable (i.e. who will do it), realistic, and time-related (the S.M.A.R.T.).

    And they know what needs to be done today.
    “I maintain a daily to-do list.”
    Rich people who agree: 81%
    Poor people who agree: 19%

    Not only do the wealthy keep to-do lists, but 67% of them complete 70% or more of those listed tasks each day.

AJ: A to-do list seems like such a simple thing but whether the intention is to accomplish everything on the list in one day or over the course of six months, it’s a living, breathing representation of what it means to be a forward-thinking person. Rarely do people earn money by sitting in the wings waiting for money to come to them. Without a proper to-do list, my meal planning, incidental planning and over and above spending would go haywire. I have to actively plan to manage our expenses and staying on top of that means staying ahead of our retirement goals.

KJ: I am a fanatic for to-do lists. There’s just something about writing down your goals or task list for the day and being able to physically cross them off as you complete items that is quite rewarding. It creates a sense of accomplishment, and it gives you the buy-in that you are working toward something. Sure, not all items are accomplished each day, but the exercise I find is quite valuable!

    They aren’t hoping to win the jackpot.
    “I play the lottery regularly.”
    Rich people who agree: 6%
    Poor people who agree: 77%

    That’s not to say that the wealthy are always playing it safe with their money. “Most of these people were business owners who put their own money on the table and took financial risks,” explains Corley. “People like this aren’t afraid to take risks.”

AJ: I love this one. We know MANY people who play the lottery with the empty hopes of improving their means. Lottery-minded people are not traditionally saving-minded, financial goal-driven people. Why not redirect those hopes and dreams into something you can control – like investing in yourself through a potential promotion, education, or certification? Personally, if I’m going to take a chance on burning money, I’d prefer to do it in a way that results in a bigger reward, one that would help me achieve my goals of course!

    What else do you think differentiates the truly rich from the rest of the general population?
    Why aren’t rich people watching TV and reading for fun?
    What happens when rich people also become the least interesting people in the world? :)

Image courtesy of nirots / FreeDigitalPhotos.net.

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How often do you look at your net worth?

Growing Dollar Tree Photo
KJ: How often do you look at your net worth? Weekly, monthly, quarterly, yearly, never? Why or why not?

I track our net worth on a monthly basis, and we review it together during our quarterly presentations. Yep, you read that right. For those of you who do not know us, we actually have a presentation that we review each quarter with information on investment performance, net worth changes, and other financial highlights for the quarter. We used to do a comprehensive cash flow each quarter, but since I’ve fallen behind on tracking it in Quicken, the numbers aren’t as reliable. Sure Mint.com has a lot (or mostly all) of the information, but since we stay on top of our net cash flow each month, the quarterly figures aren’t as useful. It’s fun (and shocking) to look at periodically even if you know what you spend each week or month. There’s something about seeing some of the figures on a quarterly or annual basis that makes you wonder, “we spent how much at [insert retailer or restaurant]!?”

AJ: I know we’ve talked about our quarterly presentations before but looking at our net worth on a quarterly basis helps me understand where we are without getting too caught up in the tiny details that occur month to month. Ensuring we’re on track monthly helps keep us from having to catch up later, but I leave the monthly net worth review to Kirby so I don’t go crazy :).

Why track monthly?
So, why do I track our net worth monthly? Short and simple: to see if we’re on trend with our goals. It helps keep front of mind when we have a lot of goals that are very long-term in nature. Otherwise, it’s easy to let them slip by the wayside and lose sight of what the end goals may be.

Tracking it on a daily or weekly basis would probably make you go insane, but tracking it on a monthly basis still gives you the regular updates you need in order to stay on track. Plus, if you start tracking it regularly when you are younger, you’ll begin to learn how much investment performance and the whims of markets can impact an account in the short-term – a valuable lesson to learn sooner rather than later!

What do we track?
Well, everything we can think of to track that represents an asset we own except household valuables and furnishings. We include our house, cars, cash value life insurance, investment and retirement accounts, savings, etc.

What don’t we track?
For administrative simplicity, we don’t track jewelry, silver, furniture, furnishings, etc. in our overall picture. One-off expensive jewelry, art, wine, etc. could be included if you felt it were meaningful, but in most instances, it’s not something you would look to sell to raise cash anyways.

We also don’t track checking accounts or credit cards on our net worth. Since we keep relatively minimal amounts in our checking account from time-to-time other than to meet cash flow obligations, it’s not useful to show in our net worth figures. Same goes for credit cards, since we pay them in full each month, it doesn’t do any good to show the value. Technically, we could show the difference of the checking accounts and credit cards to come up with the net figure each month, but for simplicity, we do not. However, if you do have any type of credit card or loan balance that is carried over from month to month, then you would want to make sure it is properly included (i.e. reducing your net worth).

How do we get values?
Some items are easy to value like your 401(k) or investment accounts that have regular daily values. These most often come from online account summaries or statements that are easy to access. Try to use the same date for valuations, otherwise you might be double-dipping! If you have a deposit or transfer in transit, you could be including it in the value of the receiving account, yet it still hasn’t been deducted from the sending account, so make sure you’re not overstating a value.

Other items like a home and cars are a little less easy to value.

I try not to make any adjustments to the value of the house unless a meaningful event has happened (mostly a significant decline in prices in the neighborhood like 2008 and 2009 showed most of us), but I seldom increase the value of our home. In fact, I even take off 6% of the estimated value to show the true, net estimated costs of selling with all the realtors fees and transaction costs involved if we were to sell it.

For the cars, probably about once or twice per year I’ll head on over to Kelly Blue Book.com to check out the current values of our cars. They don’t change a whole lot, but it’s good to be realistic (and conservative) about the values we’re showing them at, so I usually round down.

If we had business interests, we would include that, but we don’t at this point in time. That part of your net worth may be the most tricky to value, and it is likely to be infrequently valued (probably at most once per year).

Do we use after-tax figures in our net worth?
The short answer is no, but if you really think about it, shouldn’t you show the after-tax value of your retirement accounts? Seeing as how we’ve tried to put as much as we can in Roth accounts, they’re essentially after-tax funds anyways, so we don’t make any adjustments. However, Angela has a 401(k) that is pre-tax that we could consider reducing by our tax rate. Maybe this will be a change we make going forward, but this has just added one more step in complexity to tracking it, so I haven’t taken the plunge to make the adjustment to show our after-tax net worth specifically. It’s really not difficult to do, and I would highly encourage you to make the adjustment particularly if it’s a very significant part of your net worth.

Take the value of your account and multiply it by (1-Tax Rate). So, if you’re in the 25% tax rate, and your account is $10,000, then you would take $10,000 (1 – 0.25) to get a result of $7,500 to show on your balance sheet. A pretty meaningful adjustment though when you think of the impact on a large pre-tax account!

    How often do you look at your net worth?
    Do you exclude the value of anything from your net worth?
    Do you look at the after-tax figures?

Image courtesy of scottchan / FreeDigitalPhotos.net.

How often do you look at your net worth? is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Smart 401k planning must knows

Heart monitor on piggy bankKJ: We recently came across a quick 401(k) article talking about 7 ways to avoid a 401(k) disaster. In my opinion, there’s never too much you can read or understand about your retirement plans, so we’ve created our own set of do’s and don’ts when it comes to common 401(k) mistakes to avoid. We’re not forgetting about those of you who have a 403(b), as this list applies the same to you! Read the full MSN Money 401(k) article here.

Take full advantage of your employer’s match
Mistake #1. Don’t leave money on the table. Even if you think you can’t possibly save money because your cash flow is too tight, chances are you actually can come up with a solution. Even if it’s an extra $50 or $100 per month, that can make a huge difference in getting you on track for your goals. You may not be able to make a change in one area to come up with the extra $50-100, but maybe you can adjust a few categories. Cut out that movie channel package, get a cheaper electricity provider, cut out dining out once per week (this alone could save most couples $120 per month), or shop around for some deals and coupons before you make a purchase. Stop making excuses, and do whatever it takes to at least get your full employer match!

Take advantage of the 401(k) Roth feature
Sure, not every firm has this, but more and more companies are offering it nowadays. If you’re young, in a low tax bracket, and have a LONG time until you retire, then not participating in the Roth feature of your account is a big no-no. You pay taxes on the money this year (i.e. you can’t deduct your contributions like you can for a traditional pre-tax 401(k)), but money withdrawn in retirement is tax-free! Huge win for us young savers.

Know your fees
All investing involves not only risk but also fees, so be aware of what you’re getting charged. New regulations enacted in 2012 require your 401(k) plan to provide detailed fee expense information. Not all fees may be paid by you, but it’s important to know what they are. In addition to administrative and record-keeping fees, there are also mutual fund fees (commonly known as an “expense ratio”). Each mutual fund is different, and various strategies have differing amounts of fees. However, just because a fee is higher than another fund, doesn’t mean it is not appropriate. Large company domestic stocks are usually lower in expenses compared to an international stock strategy, so know the differences and make sure you’re comparing apples to apples.

Know your investment options
Pay attention to the options you have to invest in. Much like you probably shop around for the best retailer when making a purchase, do your research to make sure you are picking the right funds for your goals and risk appetite. If you aren’t prepared to analyze all the factors in making an investment decision, then hire out proper counsel!

Diversify your investments
Just because yesterday’s top performer did well, doesn’t mean it will be tomorrow’s best performer. The purpose of diversification is to build a more stable portfolio over time, so some funds will underperform while others outperform in different market conditions. As we’ve seen twice over the last 13 years, stock markets (or real estate) don’t always go up! It’s part of the cyclicality of markets, and knowing that is half the battle.

An important component of this aspect is periodically watching how your investments are positioned. If you own a fund that is considered an “asset allocator” (meaning it could be invested in stocks, bonds, cash, etc.) or target date fund, then it’s important to watch what they do in conjunction with your other investments. Digging into the numbers may help you realize you’re either way LESS or way MORE positioned in one area – too much Europe, too much U.S. small cap?…

Know your retirement needs
Chances are you may not be equipped to know realistically what you need to have for retirement (is it $500,000, $1,000,000, or $5,000,000 – all entirely contingent upon what your expenses are). Work with a knowledgable advisor to help you navigate not only how to position your portfolio, but also what milestones you’re trying to reach for. If you don’t know where your “financial independence” ship is headed, how can you ever expect to know when you’re there?

Use your account for retirement purposes ONLY
While there are a few IRS tax provisions to allow you to avoid penalties for withdrawals prior to retirement (or at the earliest of age 59 1/2 as set by the IRS), using your retirement funds for non-retirement purposes can be disastrous. Don’t dip into the account before it’s time. You may not even realize the compounding effect of the $1,000 or $5,000 you “need” now and what that could do for your long-term retirement plan!

    Are you maximizing your 401(k) or 403(b) contributions?
    What would motivate you to take advantage of the employer match?
    Is there anything you would add to this list?

Image courtesy of hin255 / FreeDigitalPhotos.net.

Smart 401k planning must knows is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.


Someecards.com I'd like to run something past you and stick with my decision regardless of your opinion.

AJ: Over the course of my life I have become increasingly aware of the amount of feedback people have about other people’s lives. We’re all guilty of inserting our opinions where they might not have been requested, but what happens when other people’s feedback begins to impact your financial decisions? Learning from the experiences of others can be incredibly helpful, but sometimes it’s important to take feedback with a grain of salt especially if it impacts your financial well-being.

We got married.
AJ: Kirby and I were an “us” for many years before becoming engaged and as soon as we became engaged we were bombarded with opinions of why we should/shouldn’t (mostly shouldn’t, honestly) get married at all – from other married people, no less! It seems that things always go south according to these feedback-givers: bills pile up, you begin to resent each other, you get tired of seeing the other person’s face. All very fair concerns (maybe). But in those pre-wedded months it became abundantly clear to us that we needed to remain a united force which is a great lesson for not just your marriage but for your financial success as a couple. The most positive piece of feedback we receive is one we hear often: Kirby and I make a great team. And we DO make a great team because when we receive feedback from the world, we already know where we stand financially and are able to make the best choices for us based on actual math, not wants and wishes.

We bought a house.
AJ: Buying your first home is an invitation for feedback. A little of my own feedback – if you decide to buy a home, don’t tell people, just do it! Everyone has a list of must-haves when looking for a home but before you let anyone else tell you what you absolutely must have in your first home know what you absolutely can afford based on the guidance of an advisor. That’s your end-all, be-all, thank-you-for-the-feedback resting place. It’s lovely that your best friend loves carrera marble and pendant lights, but your best friend isn’t financially responsible for your house, you are, so go on and be responsible.

KJ: Studies show that it’s best to not spend more than 2.5 times your annual household income on a home. So, if your family’s income is $50,000, then consider looking at the $100,000 – $125,000 range for a home. If you make $100,000, then stick to the $175,000 – $250,000 range. For those families that are really serious about keeping their expenses low, look instead to buy a house that’s 1.5 times your yearly income.

We bought a second house.
AJ: The problem with the second house we bought, based on feedback, is that it had incredible bones, but it needed updating. Person after person came through our new home with thoughts of ways they would personalize and update our new home and we suddenly found ourselves considering a myriad of changes (most of them costly, mind you) that we hadn’t previously considered. People have opinions, you have a budget. Stick to the budget at the expense of the door pulls, carpet on the stairs and lack of color on the walls!

KJ: Learn to separate the wants from the nice-to-haves. Sure, it may be nice to make every single update and completely personalize your house, but chances are that your budget isn’t limitless – and if it is, then it shouldn’t be! Figure out what it is that is most meaningful to you and your family for those personal touches and put pen to paper to see how realistic it is for you to accomplish them. For some, it may be immediate, but for others, it may take a couple years to really get there!

People have kids.
AJ: We don’t, but some of you do, so I hear. I’ve also heard that you’re not crazy about people telling you how to raise YOUR kids. That seems perfectly reasonable to me. However, when they start going to school and all your friends are trying to convince you that there’s only ONE school for your little dude/-ette that’s WAY out of your price range, remember where you came from. You’re a reasonable, financially-savvy person who can balance the necessity of education with the long-term goal of providing a well-rounded life for your entire family.

Focus on what is right for you and your family
KJ: In today’s world of instant access to everyone and lots of data on a limitless amount of goods and services, there’s definitely not a shortage of other’s feedback! Learn to sift through the noise to find what information you need to make sound decisions for you and your family. Be conservative in your estimates, and don’t just assume tomorrow’s income can subsidize today’s lifestyle!

AJ: Professionally group think suits me beautifully. It helps me achieve things much more quickly. Personally, however, group think is a recipe for financial disaster. Keep in mind that outsiders don’t necessarily have all of the information necessary to make appropriate recommendations for your financial well-being. Stay strong, people. Listen to the feedback, acknowledge the feedback, make your own choices outside of the feedback.

    What do you do to filter through the feedback?
    Have you been swayed into making financial decisions for your family that you wouldn’t have if you had the chance to do over?

Feedback is copyrighted by TheSimpleMoneyBlog.com without consent to republish. Card courtesy of www.someecards.com.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Finding financial faith

Success image - Stuart MilesKJ: How do you find financial faith? Those times in your life when you’re struggling with “is it enough” or “am I on the track that I need to be?” With so many unknowns – especially in your more long-term goals like financial independence, children’s education, etc. – sometimes it can be difficult to keep perspective on the here and now. It’s this moment that you’re living in now, so learning to periodically take a step back and review your progress is important.

AJ: We’re only four months into this year, and it has already been a doozy. Sometimes I get so caught up in moving forward that I forget to acknowledge where we’ve been, which is a constant theme in my life.

Do you find yourself, like me, in a perpetual state of planning for the future at the expense of the everyday? Someone please say yes :)

Kirby outpaces me beautifully when it comes to really just living in the moment, trusting that we’re doing the right things for our future and that we’re on track to achieve our goals. Me? I like to track every time we don’t put as much into savings as we planned to, every time we go over budget on any given category and every time we have an unexpected expense. Clearly I enjoy that feeling of constant panic and always feeling like I’m chasing my tail, right? Nay.

I know I’m already chalk full of New Years Resolutions and that it’s no longer the new year (hello, Q2!) but I am going to actively resolve to find more financial faith. I have no trouble believing that the money we put into our 401(k)s, IRAs and mutual funds will be whatever they’re going to be but what is it about those variable day-to-day things that bog me down? Here’s my plan for combating my lack of financial faith and trusting that it will all be okay:

1. Create a goal
- Not all goals are met, accomplished, defeated, whatever you want to call it. Sometimes goals are just a place you look at, consider and keep walking past, but they’re important to ensuring you’re paying attention to the state of your business.
- Write. It. Down. Whether your goal is to save an extra $100 a month, pay down debt, or like me, make yourself whole on areas where you feel you’ve over spent, know what that number is and keep it somewhere that you regularly will see it.

2. Create a plan
- Create a timeline upon which you hope to achieve the goal. Whether the goal is realistic or not, give yourself check points and guardrails. Saying I want to recoup what I’ve overspent by 2018 isn’t a huge accomplishment but it keeps me from slipping into the abyss of things I MEANT to do.

3. Take action
- What’s a goal without concerted effort? Track what you spend, track what you save, track what you DON’T spend, track what you DON’T save. Awareness is key.

4. Celebrate the successes
- This is the most important step I always forget to take. Achieving wealth of any magnitude is a process, and creating a strong financial foundation is a huge accomplishment. Pat yourself on the back, say the serenity prayer and celebrate!

KJ: One of the important parts of setting goals is taking time to step back and reflect on the successes (or failures). Sometimes it’s a reflection on what you could have done differently, and other times, you get to reflect on what you did correctly. Goal setting isn’t about just setting unachievable goals and never accomplishing them, it’s about a process and what you do along the way is just as important as the end goal itself.

    What do you do to keep your goals in front of you?
    How do you track your goals progress?
    What do you do to reward your successes?

Image courtesy of Stuart Miles / FreeDigitalPhotos.net.

Finding financial faith is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

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