Started from the Bottom Now...Wait..I'm Still Here

 A lot of my readers really enjoyed one of my previous blog posts, "Started From the Bottom", where I quoted a famous hip hop song by Drake. The target audience was for young junior enlisted, but was general enough for anyone just starting out in the finance world. But some readers reached out to me and they were concerned about being over 30-years old and having very little flexibility to start improving their finances. They felt like they were at the bottom and couldn't go anywhere. Here are some steps to take if you're at the bottom and nearing the breaking point with your finances.

• Find flexibility. Most people feel like they have no flexibility with their finances. They've reached a point where there is no money left over between paychecks and they may even be adding more to their credit cards each paycheck just to get by. This is the standard negative snowball effect which will ultimately lead to bankruptcy. You must stop this process. A good way to find additional savings is to track everything you spend for 30 days. Inevitably, you will find some savings; whether it is: not going out to eat one night, reducing your cable or phone bill or finding a cheaper alternative to a routine expense. Use the flexibility you find to stop using your credit cards each paycheck.
• Finding this flexibility is the single most important step. A lot of people start to feel "suffocated" about their financial position and they ignore it making it worse. Track everything for 30 days and find the flexibility. I know it's there. Contact me at bjone6@gmail.com anytime and I'll help you find the flexibility (for free, I'm not selling anything, absolutely free). 
• Pay down your credit cards. Some people find themselves having no money after they pay their normal bills and their credit cards. You must pay down your credit card debt quickly, even if it's only adding $5 to your minimum payment. This extra $5 will go straight to the principal and it will start building momentum to paying of the credit cards quicker. You'll start noticing the minimum payments go down and you'll start to open positive options in your financial life.
• Seek assistance. If you're a military member, go see your First Sergeant or your service-specific Family Readiness center. The Family Readiness Centers are an underutilized benefit we all have in the military. They employ or have access to professional money managers who could help you with your finances for free. Financial advice in the civilian world could cost $50-$200 an hour.  If you're financial situation is really bad, they can grant you a no- or low-interest loan to help prevent bankruptcy.

Starting from the bottom can be difficult but there are many ways to get out. If you're staying up late at night because you're worried about your finances then you need to find help. Finding flexibility and paying down your credit cards can be a slow process but it'll be worth it when you can finally say, "Started from the bottom, now I'm here."

How Do Celebrities Go Bankrupt?

Have you ever been confused about how celebrities lose their money so quickly? Has one of your favorite musicians or athletes just filed for bankruptcy even though they just signed a multi-million dollar contract?  How do lotto winners lose their money so quickly and end up worse than they started?  All of these situations happen because these celebrities aren’t watching their expenses. They know they have a lot of income, but they rarely track their expenses. This is an important lesson we all can learn from.

Let’s consider a musician, 19 years old, who has $3M in income and he purchases, in cash, a $2M mansion and a $100K car.  In his mind, he has $900K to live a lavish lifestyle and his recording company is telling him, “It’s just the beginning.”

But what these musicians don’t realize is it’s expensive to have a lot of money once taxes, insurance and maintenance is included. Think about your own car insurance compared to what you drive and your age and then consider how expensive it would be for a 19-year old with a $100K car or two $100K cars. Property tax is based on the value of the house, so the more expensive house, the more taxes. 

But even including all the recurring expenses, our musician would still have a lot of income compared to our standards. Most musicians have money managers handling their finances but never actually see the income and expenses. The money manager may recommend to our musician to stop spending so much, but the lavish lifestyle is addicting and the industry promotes “keeping up” with other celebrities. Eventually, the mathematics catch up and it happens quicker if the musician stops selling records, or the celebrity falls out of popularity, or the athlete gets released.

While we may not have any sympathy for those making $1M or more every year, we can be able to learn from their mistakes and apply to our own income levels. Here are some lessons learned from celebrities:

1.      Know where your money is going. Try my 30-day challenge I discuss in this blog post: http://militaryfinrep.blogspot.com/2014/02/the-secret-to-becoming-financially.html

2.      Sometimes our income is out of our control, but almost always, our expenses are within our control. Like we’ve all seen with celebrities, we’ve seen plenty of “rich” people go broke and I’ve seen plenty of “not rich” people live financial sound lives. Our income determines how much we make but our expenses determine how much we have.

3.      If someone, like your spouse or money manager, tells you to control your spending, then you might want to listen.

4.      “Keeping up” with other people can be a very expensive habit. If you’re concerned with “keeping up” with what other people are spending, then be equally concerned with what they are making to be in line with them.

What’s the most surprising or crazy celebrity, athlete, or lotto winner, financial story you’ve heard?