Disposable Income

What is disposable income? It is the amount of money that households have available for spending, saving and investing after income taxes and mandatory payments (i.e. mortgage, food, transportation and health insurance) are accounted for.

A recent survey initiated by Money Magazine disclosed that the disposable income of American households is disbursed as follows:

Travel: 30%

Home and Beauty: 22%

Eating Out: 20%

Clothing: 17%

Recreation: 11%

Did you notice anything missing?  Yes, you got it!  Based on this survey most American households apparently aren't using any of their disposable income  to put towards savings or investments.  We can not expect our finances to grow if there is no system of saving and investing.  

This is  a huge problem that will result in Americans having to work far longer than their parents and grandparents had to.  Let's get in front of this and begin developing a plan to save and invest.

Seven Steps To "Get Your Money Right" In 2016

Did you know that 76% of Americans are living from paycheck to paycheck according to 2013 research done by Bankrate.com? Here are seven steps to break that cycle in your household:

1.      Establish and follow a budget.

Your budget is your spending plan for your money.  Without a plan you are bound to work outside of the boundaries of your income.  It is important to establish and then follow a budget on a monthly basis.

2.      Educate yourself financially.

An educated choice is always the best choice to make.  Educating yourself financially means to begin reading books, articles and blogs that are related to finance, especially personal finance.  It also a good idea to listen to some podcasts and television shows that relate to the subject area.

3.      Clean up your credit.

There may be some things on your credit report that is causing your score to be lower than it should.  These are the items that need to be straightened out.  Your credit report should also be checked for accuracy – late payments, credit balances, etc.  Have your report review and make it a priority for the first quarter of 2016 to “fix” your reports and scores.

4.      Establish and Continuously Fund Five Funds.

There are at least five funds that everyone should establish:

Ø  G.O.O.D. (Get Out Of Debt) Fund

Ø  Vacation Fund

Ø  Retirement Fund (outside of your employer sponsored fund)

Ø  Investment Fund

Ø  Replacement Savings Fund

5.      Investment Plan.

Create an investment plan.  Simply saving money is outdated and no longer works effectively in this economy.  Therefore your ability save money has to be mixed with a good investment plan in order to generate wealth. Be sure to read my free e-book entitled, Income Producing Assets, which can be found at www.fredericktowles.com.   

6.      Put your blindfold on.

Forget about the Jones’ unless they are related to you!  Don’t look at what anyone else acquires.  This is the largest cause for debt – living like the Jones’.  Therefore set your plan, stick to your plan and put your blind fold on, enjoy the ride.

7.      Get a professional finance coach.

There are several benefits of working with a professional finance coach: your coach offers a fresh perspective on your financial challenges, enhanced decision-making skills, increased confidence and a depth of financial expertise.  For more information on working with a finance coach please visit: http://unlimitedexp.com/services/. 

DNA of the Rich

A recent article in Forbes entitled, “A Recipe For Riches” spoke of similarities of those on the Forbes 400 list. Forbes findings were that the following attributes were the most common amongst most of the list: (1) many of their parents had a high aptitude for number crunching, (2) many were born in the fall season, (3) many of the self made billionaires never started or finished college, (4) some on the Forbes 400 list have graduate degrees from the top three graduate schools and finally (5) many have worked for Goldman Sachs or one of its subsidiaries.

Sometimes we can look at something like this and believe that we don’t fit this criterion and can never be rich. Although the Forbes article is not stating this, it is easy for one to interpret it like this. We should interpret this by realizing that there are things about ourselves that we must improve in order to position ourselves for wealth. The recipe for wealth creation is 45% the ability to retain wealth, 35% the ability to generate revenue and 20% of the intangibles. The ability to retain wealth has to do with improvement.

The challenge for the next ten days is to identify everything that you want to change about yourself. Make a list. This could be weight loss, economic status, relationships, etc. Once identified, now it is time to select two of the items on your list. Create a plan detailing how you are going to improve these two items. Constant improvement is the key to wealth creation. Whatever we weren’t born with we can improve on, wealth is not innate.

If you need assistance with identifying what you should improve about yourself - here is a free tip – ask three or four close people to you what these areas are.

The Enemies of Your Wealth

In life there are always opposition, in like manner while you and I are building wealth, we face oppositions called, “The Six Enemies.”

The first enemy is bad relationships. These relationships rob us of our time and precious energy. In some cases many are robbed of more than that. My advice is to select your relationships wisely. Spend less time with people who have a different mindset than you. They will only deplete your strength.

The second enemy is bad health. I am a fan of Jim Kramer. The following is an excerpt from a blog he recently posted. He states “One illness, a couple of hospital visits – they can destroy the capital you have.” This is very true. Let’s stay as healthy as we possibly can.

The third enemy is poor information. We must do our due diligence when it comes to building wealth. Check the opportunity, the investment, the asset meticulously – whatever it is. We want to ensure that the vehicles we select to drive our wealth building are conducive to the current financial environment. I am not saying to become overly anxious, simply explore your options.

The fourth enemy is lack of personal development. Everyday there must be time set aside to engage in personal development. Read a book or listen to a CD. This allows for the mind to focus on success or sets the atmosphere for success. If we don’t do this the negativity of the world around us will interrupt success every time. Personal development also defeats the fear factor in our lives.

The fifth enemy is the lack of a guide or coach. We all need someone to assist us navigate the mountain of success. I suggest that you select a coach or a guide. Yes you may have heard stories where some have found success on their own. Far more however used a coach or a guide or a team to experience success.

If you are seeking a success coach or guide send an email to info@frederickotowles.com for assistance.

Making Money During Cramped Times

Many say that this is a time to save all that you can before the financial conditions get any worse. That is good advice for those who have no money to risk but it is not the best advice for those that do.

If you have some money to risk, the best thing to do now is invest some of those dollars in the stock market right now. That's right I said the stock market.

You might think I am crazy but this is great advice.

If you find quality companies that have a relatively low stock price right now, you should buy stock in those company. You must however look to hold the stock for the next 3 to 5 years though.

The stock market now is like giving birth to a premature baby. You will go crazy attempting to check the progress of the child everyday. Doctors say that progress of the premature child's growth should be evaluated from month to month. This holds true for your stock purchase, look at the month to month development of the stock.

Another bit of advice is to buy stocks that pay dividends. The idea here is to see yourself holding that stock for the next 3 to 5 years as well, but reinvest the dividend into purchasing more shares of the same stock.