5 Five.docx

Five Were you or are you looking forward to the day you turn eight-teen and graduate from high school, and you think or thought you are grown? Usually by the age of 18 - 21 is the time by law you are an adult ‘in training’, as known as ‘Adulting’. The stage of becoming an ‘independent financially re...

Five Were you or are you looking forward to the day you turn eight-teen and graduate from high school, and you think or thought you are grown? Usually by the age of 18 - 21 is the time by law you are an adult ‘in training’, as known as ‘Adulting’. The stage of becoming an ‘independent financially responsible’ adult. You must begin this next stage of your life’s journey whether you are prepared for it or not for it. Some of you have plans to continue your education or attend a trade school to learn a job skill. Others may have to leave home when they become eight-teen years of age. Some of you may consider joining a branch of the military to serve our country and acquire future marketable job skills. These are career skills that will allow you to earn a living once to transition back into civilian life. Then there are those who choose to remain at home, find a job, and take time to decide what they are going to do with the next phase of their lives. Some of you may have the option to remain at home while working to save enough money to move out on your own within one to two years. These are critical decisions you will have to make corrections to because a wrong decision can deplete your savings and ruin your credit rating and your financial future. If you are living at home with your parents, you should be more than willing to contribute to the overhead monthly bills and household expenses. Your responsibilities are to pay rent, and food, maintain your room, and contribute to the household chores. The act of paying for experiences will better prepare you once you move out and live on your own. These are your previews to performing 'Adulting’ responsibilities. If you don’t have the option to remain at home your financial challenges will begin immediately. You must find a job and a place to live. Your job is the key to your financial wellness. Most of you who probably don’t have any experience managing your own household, this can be a very stressful time for you. Then you must figure out your living expenses such as rent, heat, utilities, phone, and cable bills may be required to have a co-signer to rent or lease an apartment. When attempting to lease an apartment without a cosigner you may be declined due to your lack of income and/or credit history. You may find the cost of living alone too expensive, you may need a roommate(s) in order to afford and split the monthly living expenses. This will make the apartment’s monthly expenses work better for your financial situation. Having a roommate will allow both of you to save money, eliminate the chances of ruining your credit ratings and provide opportunities to start building toward a very good plus credit ratings and savings. You must be very selective in your choice of a roommate(s), they must have a similar mindset and moral values as you. If you choose to co-habitat, please make sure all persons living in the apartment names are listed on the lease agreement. This way you all will be equally legally responsible for the lease payments. If you fail to choose the best roommate(s) or they are not listed on the Lease, they have no legal or financial responsibility to pay the rent. If they leave the apartment, you alone will be legally responsible for the entire lease amount. If the rent is not paid on time or not at all you can be evicted. An eviction can ruin your credit score and ratings, and any other Lessees listed on the Lease Agreement. So, please choose your roommate(s) carefully. Please talk and discuss in depth what the house rules are, and you all agree to live by them. You should agree your home is not a hangout for significant others or friends, with no overnight guests, and no pets. Make sure there is a clear understanding of the chore responsibilities for the common living areas. You should put your house rules and chore duties in writing for future reference to refresh the minds of someone who may conveniently forget what was agreed to in the future. If you lived away from home when you attended college, your college roommate, sibling, or best childhood friend may be a good candidate for a roommate. They probably have similar moral values and goals and might be a better choice. Therefore, neither one of you is likely to break the lease and you get stuck on the balance of the lease payments and perhaps a lawsuit. Select a roommate(s) who is reliable, gainfully employed, and has the same long-term goals as you do, not just friends. Here’s an example, if you plan and choose a person with similar goals and agree to co-habitat for a two-year period, you both will have an equal opportunity to save money monthly. If your two-bedroom apartment’s rent is $1,250 per month, the one who gets the larger bedroom with its own bathroom may pay $700 and the other roommate pays only $550 per month, with all utilities to be split in half. If you both live within your means, plan, budget, and purchase things you need that are affordable, you should easily reach your savings goals. For example, you each plan to save $400 to $600 per month, that’s about $5,000 to $7,000 annually for two years creating a savings bundle of $10,000 to $14,000 over that two-year period. After two years of sticking to your plans, you both have enough money to branch out on your own if you choose. If you decide to renew your Lease agreement for another two years, this is another opportunity to save even more. You both could end up saving up to $20,000 to $28,000 or more over four years. This may be enough money for each of you when supplemented with other savings to repay student loans, put toward a 20% plus down payment on a condo or townhouse making your mortgage payments a lot more manageable. Those of you who are under 25 years old have a unique set of additional expense challenges known as ‘the expenses of inexperience’. For example, if you are able to purchase a vehicle, your auto insurance will cost more. You may have to pay 30% to 40% more for car insurance because you are not an experienced driver and don’t yet have a driver’s history record. Therefore, your insurance premiums are based on the insurance industry’s actuarial science statistics of all drivers in your age group. The insurance industry’s statistics indicate drivers under 25 years old have a much higher accident rate per thousand drivers than those drivers over 25 years of age. Therefore, these higher insurance premium rates are assessed. Another example of ‘expense of inexperience’, those creditors who are willing to give you a credit card or loan without a credit history won’t offer you the best interest rates available. Therefore, you will also end up paying a higher interest rate APR on your financed purchases simply because you haven’t yet established a credit payment history. So just focus on building a very good to excellent credit history portfolio early to establish yourself as a very good credit risk in the future. These times are like mini-training periods to see how well you can manage future adult responsibilities. If you can start out by building a very good credit score you are well ahead of the game, it will be easier to keep it very good to excellent. You will have to plan and make some sacrifices at this stage in your life to manage your financial responsibilities. There are many recommended strategies for you to reduce your overhead living expenses such as finding a cell phone plan that may be closer to $40 per month and offers a free phone versus choosing a plan costing more than $80 per month. It may not be the latest and greatest phone available but right now it’s affordable, what you need and will get the job done. Another option may be to consider joining a plan with family members or your responsible roommate or friends. Please find folks that you trust and have jobs, you may need a written agreement. This works out much better if all are willing to pay at least two months in advance for a safety buffer zone and keep paying monthly, so you are always two months ahead of your payments. Remember the family joint plan can save you 40% or more versus an individual plan. If you can pay for your own plan this should be a heck of a lot easier. There’s no reason not to pay your fair share on time unless you are just plain trifling. Your payments should be with checks or money orders so that you will always have a receipt. There are options to save and reduce cable bills; one way would be to have Internet services, a streaming stick, and streaming Apps for TV as opposed to high a two -year cable contracts if you don’t watch much television. Be careful of all those new Streaming Plus Apps that cost only $4.99 to $12.99 or more per month. If you have several of those Streaming Plus Apps before they can add up very fast to $40 to $50 a month and be mindful of all your Auto Pay Apps and services. If you are not paying the monthly bills yourself, you may forget you even have all these streaming Apps services especially when they increase the monthly subscription fees by $3 to $5 a month. FYI, just remember for every $100 dollars in expenses you have it requires that you to earn about $130 in income before all income taxes. Another savings plan is to purchase more Wash & Wear, no-iron clothing to reduce dry cleaning expenses. You should consider planning and developing a savings strategy by putting money into a savings account before you splurge on entertainment and eating out often. You can better budget and manage your personal care and pampering expenses by stretching out the time between the services or learning to do some of them yourself. They might include but are limited to haircare, nails, pedicures, vehicle washes, and detailing, etc. The lesson here is to learn the difference between a need and a ‘want’, then determine what you really ‘need’ versus what you may ‘want’, in order to ensure you always live within your means. Here are a few examples of needs versus wants, if you are hungry and ‘want’ a steak dinner, however; a less expensive chicken dinner would satisfy your hunger. The cost at a restaurant for a steak dinner is maybe $45 plus versus only $15 for a chicken dinner, having the steak dinner is three times more expensive. Then there’s the huge cost saving for preparing these dishes at home which could be only $15 for the steak dinner and only $5 for the chicken dinner. The cost savings for eating these dinners at home would be $30 and $10 respectively or 200%. If you need a new functional handbag to satisfy your needs it would cost from $120 to $200, but the purse you really ‘want’ could cost anywhere from $450 and $1,000 or more. As you become successful in your career earning more money, you will be able to afford those things you ‘want’. However, you have matured to a point where you no longer place as much importance on those higher price designer items and may not ‘want’ them anymore, you would rather save the money. Here’s another interesting example, while determining your food budget it is important for you to know what your average breakfast, lunch, and dinner meals cost to prepare at home versus buying and eating them out. For example, in 2020 a breakfast of two eggs, four pancakes, and two pieces of bacon with juice and coffee at home cost about $1.50. At a fast-food restaurant, the cost would be a minimum of $7.50, that’s about 500% more. Preparing your lunch at home would cost about $3 versus about $13 out of a 75% savings. While dinner at home costs about $5 per serving versus eating dinner at a Quick Serve restaurant is about $25 with a tip or 500% more than eating at home. The math shows and confirms eating one dinner out can cost as much as eating five dinners at home. Let’s look at the cost of buying a cup of coffee at one of those quick-serve retail coffee stores. Their coffee averaged about $3 per cup if you are having one cup every day for a year that would be $3 x 365 days equals $1,095 per year. However, a cup of coffee from gourmet coffeehouse retailers could cost up to $6.00 plus per cup, which would double your annual coffee expenses to $2,190 per year. A cup of coffee made at home would cost you about $0.25 per cup or $0.25 x 365 days equals $91.25 per year. That would equate to a $1,003.75 annual savings just on coffee alone, over ten years you would save over $10,037.50. Over twenty years the savings would be $20,075. The saving from the gourmet coffee would double the savings. This same saving scenario would apply to energy drinks, sodas and juices. This is quite a bit of money you did not have to spend. These savings can be used to pay down your debt, buy a vehicle, or save for a down payment on a house. Other benefits of eating and having coffee at home could be weight loss and saving money by not having to buy larger-size clothes. You are now able to fit and wear all the clothes in your closets that have gotten a ‘tad bit’ too tight. Let’s review cable TV packages, the average American household spends $217.42 per month on cable bills with the Internet. This means some people are probably paying up to $350 or more for cable TV with sports packages, premium channels, and all those paid Streaming Plus services. You should revisit your cable bill and see if all the premium and sports channels are necessary. How many hours of television are you actually watching monthly? Are you getting your money’s worth? If you could cut your cable bill down to at least $60 -$100 per month with internet that would equal an annual savings of $720 - $1,200 per year. It’s okay to tell yourselves and or your children No sometimes. It’s good preparation for the many ‘Nos’ they will hear and receive many times when they enter the real world. These types of expense analyses should be applied to all your pleasure expenses such as cigarette or other smoking products, alcohol consumption, lottery or sports gambling, and other habits as well. If you are a two-pack-a-week smoker and cigarettes cost $10 per pack, the simple math would calculate the numbers as 2 packs x $10 equal $20 a week or $80 per month. If you multiply, $20 per week times 52 weeks that equals $1,040 per year. Over ten years, quitting smoking saves $10,400 and over the next thirty years it would save you over $31,200. You can save a small fortune for the money you are wasting on these habits. These saving are based on the assumptions there have been no cigarette price increases and not only would you receive the financial rewards from quitting smoking but there are also many health and medical benefits as well. The $80 per month saved from no longer smoking could be repurposed and used to purchase a Whole Life insurance policy for future financial security. This is a huge benefit that has a saving component that can be yours with the commitment and discipline to just quit smoking. Add your saving from eating out, coffee, and cigarettes, and how much would you save annually, over ten to thirty years? Just a little ‘Food for Thought’, something to think about. If smoking is a nervous habit for you, you may want to consider switching to chewing gum. To find opportunities where you can save money, sometimes you just need to revisit and reevaluate what you are currently spending your money on and make some necessary changes. This will be stated several times in this book, ‘every dollar you spend today on something you ‘want’ or don’t need is a dollar you won’t have to spend on something you may need in the future’. If you add up all the money you spent on things you didn’t need, the total amount of money spent on frivolous spending is so much more than you could have ever ‘guesstimated’. These are just a few examples of some of the many conveniences and habits you developed which are opportunities where you could cut back to better manage your spending habits and these expenses simply by modifying your behavior. Once you are aware of the monthly dollar amounts of these expenses you can make the choice to terminate, modify, or continue them depending on what best fits your lifestyle or more importantly your budget. These savings illustrations can be used to pay down your debt, credit cards, and student loans. It’s very important to have an emergency savings account and to save toward a down payment to purchase of a house. The choices are always yours how you plan, budget and spend your money on what best fits your life’s schedule. So those of you who are under the age of twenty-five and just starting out on your life’s financial journey, there are a lot of things you are just not going to know at this stage of your life. ‘Soaring Toward Financial Freedom’ will provide you with amazing knowledge and foresight to navigate through the mazes of financial complexities. This financial literacy knowledge will prepare and give road maps to avoid many common pitfalls and poor decisions throughout your financial journey. You’ll be amazed at how many opportunities you have to save a huge amount of money just by spending wisely, managing your credit score and being financially responsible. “So, let’s get started, reading and trying to understand the information presented”.