Personal Finance from the Broke Perspective
As I made mention of earlier, I’ve been playing around on twitter for a little while. I’ve mainly been using my personal account, but thought that it was about time for Beating Broke to get some representation there.
So, you can now follow Beating Broke on Twitter. The user name is @beatingbroke and, while I have it set up (I think) to update with the posts I do here, I also plan on adding other updates as well. I’m hoping to stoke the conversation a little.
Up until now, we’ve all heard about the various ramifications of one Presidential candidate over the other. We’ve heard about what differences will be made to the tax system and how it will affect you. And sometime after midnight tonight, we’ll know which set of changes might take effect.
So, now what? Regardless of who wins, if you put yourself in a position for it to not make a huge difference to you, you won’t have to worry.
Following a few principles we call the Beating Broke rules, we can set ourselves up financially such that changes to the tax code and other programs like Social Security and Medicaid have a very minimal impact on us.
Begin by paying off all of your debt. Most debt is bad debt anyways. Pay it off and you can afford to pay a little extra in taxes if you have to. Nobody likes taxes, but the law is the law and there is very little that you can do about that. Having fewer bills to pay frees up some money to compensate without having to take the money from another place like food or rent. While we’re at it. Stop acquiring more debt. Get debt free and stay that way.
Start Saving. Begin with an emergency fund and go from there. Once you have an emergency fund set up, start saving for retirement, college, and that new car and house. If you can pay cash for all those things, you don’t need to care whether social security or welfare or medicare or any other social program they put in place will still be available to you when you need it. Financial independence from those programs frees you to worry less about those policies and worry more about where you’re going to vacation this year.
With those two steps, you can make yourself nearly financially independent from the policies of our political leaders. They won’t help you much with their policies on foreign war, foreign relations, immigration, or many of the other policies. You’ve still got to decide on a candidate for those things. But if you can relieve yourself of worrying about their fiscal policies, you can focus more intently on their other policies.
Start now. The next election is in only 4 years.
I’ll spare you the pre-story except to say that my wife and I both did a lot of things wrong financially in our college years. Lots of college loans, credit card debt, and little to no savings to speak of. We got married, and still we continued on our merry way. We bought a house long before we really could afford to and even added a dog. Then we got pregnant and our financial inproprieties caught up with us. We struggled and struggled and eventually, just months before the birth of our son, we saw the light.
That light, courtesy of a book called Total Money Makeover by Dave Ramsey, may have saved our financial lives. Maybe we would have continued to barely make it, but we would have never made it to where we are now. It’s been a little over a year since we started our makeover and we’ve seen some pretty amazing results so far.
When we started the plan, we were struggling financially. Our debt to income ratio was well over 40% and the best we could do was to pay the minimum on everything and hope that there was still money in the bank when the checks came through. All told, we had debt of over $100,000 and total income of less than $50,000. We may have been on the verge of bankruptcy. Our net worth was a horrible -$85000. But we turned it around.
We started with a budget and built up a $1000 emergency fund. We still have that $1000 in the bank earning interest at etrade. We still use a budget every month. We’ve paid off one of our cars, several credit cards and have moved a couple credit cards to 0% intro rates. We’re nowhere near being out of the fire yet, but we are getting there. Our one year review shows a net worth of -$58000. An impressive increase. It was helped by a nearly $10,000 increase in the value of our home, but still reflects the work we’ve put into our finances.
We’re on our way to financial independence and a debt free lifestyle.