· Buy a good used car instead of a brand new one. Were you aware that when you drive a new car off the lot, it immediately loses at least $7,000 in value? If you bought a new car for $27,000 and drove it off the lot ten miles, then decided that you did not want it and came back 4 days later, they would consider it a used car and possibly give you only $20,000 back. It’s called depreciation, and businesses all over the country use it by buying cars on December 30th or 31st and taking a large deduction on their business tax returns. Buying a good used car will speed up your retirement by five years. Spent money is gone, so you may as well spend less on a car, drive it until it will not drive anymore, and get another good used car. When you do this, you save thousands each year in car notes, and can put that money toward retirement or starting your own business. People who think they have to have new cars every year or two are either wealthy already or will be perpetually in debt. Buy a good car from a rental car company, car dealer, or, if you are brave enough and have a good mechanic, from a private owner.
· Discipline your family to wear practical clothes. These days families, especially teenagers, are caught up in name-brand clothes. One pair of gym shoes can cost $120, when it actually costs the manufacturer $5 to make them. Our youth are learning to be in debt by spending their money, or their parents’ money, on impractical items. We need to wear washable, practically priced clothes and stop paying to impress others. As long as we try to keep up with the Joneses, we will be in debt like they are.
· Use proper care for clothes to prolong them—if it says dry clean, dry clean them. When we buy clothes, we can save by keeping them in good shape. Buy wash-and-wear as much as possible to save hundreds in dry cleaning expenses.
I go to the cleaners once a quarter and spend about $60 because I try to wear more wash-and-wear clothes rather than dry clean only garments. Don’t buy too many “dry clean only” clothes. Wash and wear clothes are less expensive.
· People who sew may save 45–60% on clothes. If you have the gift of sewing clothes, you can save thousands. Take time to perfect that gift, learn that gift, or refresh your sewing skills to make clothes for you and your family. Often the clothes you make yourself are more durable and well made. They will last longer and save you even more because of the durability. Note that sewing may also be a means to increase your income, which we will discuss later in the book.
· Buy clothes out of season for the greatest savings. Smart shoppers will buy summer clothes at the end of summer and winter clothes at the end of winter. For example, one year I had to make a trip to Central America in October; I had no summer clothes appropriate for business, so in September I visited a local major department store on a friend’s tip that summer clothes were on sale all week. I found summer business casual pants and blouses for $4 each! I bought enough for the trip and for the next summer. Since then, if I shop at department stores, it will be during the off season.
· Buy clothes at thrift stores. I said “if” I shop at department stores because I do most of my clothes shopping at thrift stores, where I have purchased $700 in name-brand clothes for $70 in one three hour shopping spree.
Make sure you have a few hours to shop, and take your time going through each rack to find things that you like and think will fit.
My favorite thrift store does not have dressing rooms, so I wear a full bodysuit under jogging pants when I go; after I gather up all of the clothes in a buggy I go to a large mirror and strip down to the bodysuit. (Interestingly enough the traffic of men in the area increases significantly when I go through this ritual). I try on everything, purchase the things that fit, and use the money saved to have the mostly designer suits and blouses dry-cleaned and altered if necessary. Then I invest the rest of the money. I have had people I’ve counseled tell me that they won’t shop at a thrift store because the clothes stink; I tell them to wash the clothes or dry-clean them. They still don’t want to go to the thrift store and are still in debt, even to the point of bankruptcy, yet they dress in designer labels from head to toe. What a waste!
· Mend clothes and shoes instead of throwing them out. If we find a good alteration shop or learn to mend clothes ourselves, we can save hundreds even thousands of dollars a year. I found a good, inexpensive place to have clothes altered and shoes mended. I once tore a very nice blouse that I really liked; the tear was not at a seam and I was not sure that it was repairable. The seamstress was able to repair the blouse and I could not even see where the tear was! This may seem trivial, but I have saved hundreds by having coats, suits, and even shoes repaired. Repaired heels are very durable, much less expensive than a new pair of shoes, and they often last longer than the original heels.
· Exercise daily and drink lots of water, and you’ll save thousands on doctor bills and medications. We go and go and don’t tend to listen to our bodies when they need care. If we get regular checkups, and go to the doctor before we get so broken down that we can hardly walk, we may save money as well as our lives. People who exercise spend less time in medical facilities and less money buying medications. Medical expenses are near the top of things that can quickly get people into debt.
· Shop around when getting prescriptions filled. Prescription drugs are a big rip-off in my opinion; unfortunately, many people opt to take them. If you purchase prescription drugs, shop around for the best prices; there could be a $50 difference in the price between stores, or between generic or name-brand prescriptions.
· Take care of your teeth to minimize dental costs. If we just brush and floss our teeth and keep that candy away from our children, we can save thousands in dental bills.
· Try to do some home repairs yourself; it could be very expensive if we called an expert every time something went wrong on our homes. Home Depot gives classes on simple repair techniques, and you can save money by learning how to do some things yourself. For example, a vent cover flew off of my roof and was not found, so to temporarily take care of the problem without going into debt I got a 5-gallon bucket and some duct tape, climbed on the roof and secured the opening until I was able to pay cash for the proper repair.
I would caution you, however, not to try to fix electrical sockets or plumbing unless you are very sure of what you’re doing. Not only could you make things worse, you could get hurt.
· Don’t use overdraft protection. If your bank offers overdraft protection, leave it alone. Overdraft protection means that when you have used more money than you have in your account, the bank will give you a loan to make up the difference. For example, if you have $428 in your account and you used checks and the ATM over the weekend, bringing the total spent to $562, the bank will put $134 in your account and charge you up to 28% interest on it along with a $35 fee! Most of the interest rates that I have seen can be considered usury!
· Get a prepaid credit card for booking airfare and rental cars. Some people need real help controlling spending, and a prepaid credit card is a good way to start the process of learning how to combat overspending. You can purchase prepaid cards almost everywhere; load the cards with a certain amount of money and when it’s gone it’s gone. If the prepaid credit card has a major credit card logo you can even book airplane tickets and rental cars. The prepaid card is also a great tool to give your teenagers for class trips, birthdays, or Christmas. These cards will help them manage spending because when all of the money is gone they will not be able to continue to spend until the card is reloaded. If they have a job, they can use their earnings to reload the card, and establish credit this way.
· Make your lunch and your children’s lunch instead of eating out. We have discussed eating out earlier, but in the context of lunches, let it be known that you can save thousands of dollars a year by making your lunch and your children’s lunches instead of buying at school or eating out during lunchtime. You will be much healthier, also.
· Eliminate nonessential expenses like cable TV. Read instead. When you are in debt, the luxury of cable TV, which averages $70 with tax, is some
thing that you really need to do without. You need to spend less time watching TV and more time devising ways to improve your finances, so one of the first things you should do is cancel the cable TV contract.
· Cut and wash your own hair. Although it may be inconvenient if you do your own hair, you can save hundreds each year. I tried that, but I can’t make my hair look half as good as my beautician, so I opt to cut costs in other ways when my finances are in good shape. When finances are tight, I just do the best I can with my own shampoo and conditioner.
· Keep your thermostat at 68 degrees and wear sweaters around the house in the winter to save lots of money. Also, get your house better insulated so that you can keep the heat inside in the winter and outside in the summer.
In addition to the above, there are many other methods that I have employed and recommended to immediately improve cash flow without working harder. The problem that I sometimes have is that people aren’t so open to utilize these strategies.
Most people have been persuaded that they have to work hard for years, grinding themselves to the bone in order to be wealthy somewhere down the road. This is so sad, because it’s just not true. That’s the poverty mindset. The misinformed, conventional mindset about wealth creation says:
· If I spend the majority of my life working hard to survive and (maybe) doing something I don’t really want to do for the sake of my family, then if I’m lucky I will earn the right to continue to “survive” when I’m older.
· Work hard, pay your bills on time and keep your credit score high. Save your pennies in a piggy bank for your children’s college education and your “retirement”. When you have enough money, give it to your stock broker or financial planner and hope that he or she will do well for you.
· Keep contributing to your IRA; trust that it will support you in your later years.
· Buy a home since this is your most important “asset”
The Core Belief that people have been fed about wealth creation is: Since I can’t possibly understand investments, I had better go to an expert who has studied this area, someone who is licensed, therefore approved by the authorities and knows what they are doing.
The old-timers and media guru’s have been teaching you using this accumulation mindset. And while the numbers may seem to make sense, the concept is functionally bankrupt in this day and age because most Americans live paycheck to paycheck.
The old-fashioned financial world puts their trust in this outdated wealth formula. Their formula says, if you want more wealth, you have to add more money to the prescription. Or, if you want more wealth, you have to take on more risk to boost your rate of return. Or, just wait it out 30 or 40 years because given enough time you will become wealthy. I hope that all of you reading this book are beyond believing that crock!
There is always a better way! If you change your mindset and think about wealthy living in terms of cash flow, not accumulation, you will probably wind up wealthier in the end and you will probably develop a wealthy lifestyle as you move forward with the proper strategies.
The key to increase is to improve your cash flow without having to work longer and harder, without being required to invest more in losing investments and without embracing more risks.
Three great ways to achieve those goals are (1) stop overpaying the government by having so much taken out of your check each pay period, (2) stop overpaying the banks in exorbitant interest payments, and (3) stop overpaying Wall Street and big insurance companies with brokerage fees, excess insurance and insurance that doesn’t serve your purposes. You may be able to save thousands of dollars annually by making adjustments in these three areas! The bottom line is that you must stop the bleeding.
You can utilize these three cash flow strategies as a catapult to acquire the life of your dreams because positive, consistent cash flow leads to wealthy living now and in the future, as opposed to 30 years down the road like the retirement planners advocate.
First, let’s talk about how to stop overpaying the government.
Studies show that over 60% of individuals and businesses overpay taxes. I believe that the reason this happens is because their tax preparers are too afraid to push the limit on lawful deductions. I don’t advocate overstating expenses or understating income when filing tax returns. But I have personally seen hundreds of tax returns on which the preparer left off valuable deductions, causing their clients to pay more. A recent incident was told to me while I was at my doctor’s office. She told me that her husband’s practice (they are both doctors) sold some equipment and their personal tax return was heavily taxed. One of the partners in her husband’s practice had a different tax preparer and as the two doctors talked, my doctor’s husband felt like he needed his colleague’s accountant to look over their return. Turns out they overpaid by over $12,000 because their preparer didn’t handle the sale of the equipment properly as it flowed through to their personal tax return. When my doctor and her husband confronted their tax preparer about the improper treatment of the transaction and subsequent overpayment of tax, he shrugged his shoulders and told them that he wouldn’t charge them to prepare next year’s tax return. Then she looked me in the eyes, and in the midst of a few colorful expletives said he wasn’t getting their business next time.
This scene plays out all over the country because tax preparers are afraid to have their client’s tax returns selected for audit. They make individuals and business owners suffer financially because of their fear.
I think people should try out new preparers every other year, or at least have two different tax preparers complete the return in the same year and see which one has you paying the least amount, especially if you are a high income earner.
Now let’s talk about how to stop overpaying the banksters.
Business owners and individuals may be able to improve their cash flow by taking a closer look at their loans. One strategy that may help is to consolidate several loans into one to acquire a lower minimum payment, and maybe even a better interest rate. Just walk into the bank and see if they will consolidate your loans without closing costs or with a very low closing cost.
Another possible way to stop overpaying the banks may be to cash out low-performing investments and use the money to pay off high-interest loans.
That strategy will more than likely get you a higher return. Understand that if your investment is earning 3% and your loan interest rate is 9% you will benefit by using the funds to stop the bleeding on the 9% interest loan.
And there are other productive strategies as well, such as refinancing vehicles or mortgages at lower interest rates, to access money to pay off your high-interest loans.
It is entirely possible that you could free up $500, $1,000 or even more per month just by restructuring your loans. If you are successful at restructuring some of your loans please don’t go create additional expenses to use up this new cash flow. Start a business. We will discuss starting businesses later in this book.
Next, go and review your insurance policies. It’s entirely possible that you could be paying for policies that you no longer need, or overpaying on policies because you have improved your lifestyle. For example, your home owner’s insurance may be reduced by $1,000 a year if you increase your deductible or if you’ve installed safety or energy saving features and appliances.
There’s one other unconventional technique that I want to propose. What would happen if, instead of putting tons of money into unpredictable retirement accounts full of mutual funds, like the financial guru’s tell you to do, you kept the money for extra cash flow to use in your own business? That’s what I do. Ponder that thought and we’ll discuss starting your own business later in this book.
So let me make this clear; instead of investing money in other companies that you don’t know, understand or control, you have money available to invest in your own business where the returns are going to be much greater than they will from other avenues.
Just by taking these steps you can pu
t yourself in a position in which you are bringing in more money than you are spending, and you don’t have to work harder, invest more money or take on additional risks to accomplish this result.
Last but not least, there are websites that post unclaimed money. These are insurance payouts, mortgage overpayments, law suite winnings and other payouts that were processed but never claimed either because the organization couldn’t find the rightful owner of the funds or they didn’t do a proper search. The government and other organizations are supposed to post the available information for at least three years before adding the unclaimed funds to their coffers. If you go to one of the websites and search for your name and everyone else that you know, you may be able to find unclaimed money. I first learned about unclaimed funds in 2011 and I took about an hour and looked on all of the sites that I was informed about, searching for my name and the names of all of my family members. Sure enough I found an insurance policy belonging to my father’s father. Although my granddad had already transitioned, my grandmother was still alive and living with my aunt. I immediately called my aunt and she moved on it, obtaining granddad’s records, death certificate and marriage information. She was able to receive a check within three months and she used the funds to help take care of my grandmother. My aunt was very grateful for my research and I’m sure she continues to browse those sites regularly, as I do.
The sites that I know about are listed below:
How to Escape the Rat Race Page 2