Are You Driving a Million Dollar Car???

What you need to know about your car loan. Written by Matt Wegner Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

With all the talk in the news about the Big Three automakers in distress, you may be thinking it’s a good time to buy a new car.  Car dealers are in trouble and looking to make a deal to stay afloat.  Financing incentives abound and the sellers are motivated.  But before you spend a lot of money on something that will drop in value like a rock the minute you bring it home, here’s some information you may want to consider.You’ve heard it before.  Car payments are a way of life.  You just can’t pay cash for a car.  You should take advantage of low interest rates and finance your c ar.  If you keep trading up, your car payment stays the same and you can keep driving a new car.Depending on the source, most reports list the average car payment today at around $400 over sixty months.  Most people own five or six cars in their lifetime.  Many trade up for another car at the end of the loan or before the loan is paid off.  If you continually do that, you effectively have a car payment for life.  Is this really just a fact of life?Let’s take a look at what that car payment is really doing for you.  If you own six cars during your lifetime, and you finance each for sixty months, you will have 30 years of car payments.  Let’s take that $400 per month car payment and invest it in a good mutual fund that averages 12% return, which is the stock market average over the last 70 years.  We’ll invest it for the thirty years that you would be making payments, say from age 25 to 55. After 30 years that car payment invested in your mutual fund would be worth $1,411,966.17.  That must be one heck of a car to be worth over a million dollars! And don’t forget the hidden costs of the new car(s) you bought during that 30 years.  There’s the interest rate you’ve been paying.  Then there’s the cost of the loss in value of the car.  The average car loses 50% to 70% of its value in the first four years.  That’s a pretty huge loss of buying power just for the “privilege” of owning something new.”But wait,” you say.  You can’t drive the same car for 30 years!  It will never last that long.  What if I told you it’s possible to have a free car for life?  What if you took that $400 per month and saved it for twelve months.  Without having paid any interest, you have just saved $4,800.  Without looking too hard, you can find a reasonable car to suit your needs for $4,800.  If you keep saving the same payment of $400 per month for another 48 months, you will have $19,200. Now, had you invested that money in a good mutual fund (again, assuming a 12% return), you would have over $31,000.  All in the same amount of time your friends took to pay off their new car. Now what if you bought a $21,000 used car that has already suffered the mass depreciation of its first three years of life?  You’d still have $10,000 in your mutual fund.  Leave it alone and after five more years you have over $18,000.  Your eight year old car is now worth somewhere around $13,000.  Sell it or trade it in with $8,000 out of your mutual fund and, well, you get the picture.  You now have a self-sustaining car buying fund.  And you only made “payments” for sixty months.  And, if you continue investing the $400 per month for the rest of the 30 year period, you’ll have the newer car every five years plus $669,000 in the bank.  Give it a few more years and you’re up over the million dollar mark, as I mentioned earlier.  I’d say that’s a pretty good deal, and well worth driving a used car for a few years! Yes, I know the stock market is unpredictable, and yes, I know that many of you don’t have 30 years left to invest a car payment’s worth of money.  Keep in mind that these are average numbers and average returns.  Your situation may be different.  But the lesson here is clear.  Buying a new car doesn’t make a lot of sense, despite what common knowledge may dictate.  And buying a car with payments is definitely dumb.  Be content with a vehicle that meets your needs instead of your wants.  Resolve to pay only cash for a vehicle.  Be disciplined in your budgeting and saving.  Be patient and you will be richly rewarded.

Living In Financial Excellence Upcoming Event

Written by Matt Wegner
Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

As you may already know, I serve on the Money Smart Sheboygan County planning committee.  I’m pleased to announce that this year we are sponsoring a Financial Makeover Challenge, open to all Sheboygan County residents.  We are accepting applications until the end of June.  Six families will be chosen to work with one of our partner financial counselors for three months.  Before Money Smart Week (October 10-17) begins, we will award $1,000 to the family with the biggest positive financial outcome during the three months.  2nd and 3rd place will receive $250.  Those who aren’t chosen as finalists will still receive a free consultation from our partner counselors, so everyone really wins here.

  For more details or to enter, click here to download the application.
 
  If someone you know could use an extra $1,000, please forward this to them.  In fact, please forward this to everyone you know in Sheboygan county.  We only have a short time to accept applications so we need to spread the word as quickly as possible!
 
Thanks for your help!!

  Remember, our ultimate goal in everything we do is to bring you one step closer in a continuous journey toward truly Living in Financial Excellence!

 

                                         – Matt Wegner

Pushing the Envelope

How to keep from over-spending Written by Janelle Wegner

Do you have trouble keeping track of your debit card receipts?  Do you remember what you purchased on those receipts?  Are you an impulse buyer?  If you answered yes to these questions then maybe it’s time you started the envelope system.  What is the envelope system?  It’s a simple and easy to use method to control your spending and stick to your budget.    Using the envelope system was something I put off for a long time.  I thought it was easier to make purchases with my debit card.  I wasn’t the one balancing the checkbook every week so going through all the debit card receipts wasn’t a big deal to me, until Matt would call for me wondering what I purchased and sometimes I couldn’t remember.  Several months ago I decided to give the envelope system a try and I haven’t looked back since.  Every month after Matt and I do our budget together, I make a list of what envelopes I need.  I go to the bank, cash a check and divide all the money in to the appropriate envelopes.  Each category has its own envelope, i.e. groceries, dining out, babysitter, gifts, etc.  By doing the envelope system I can see how much I’m spending on each category.  When the dining out money is gone then I know there’s no more eating out.  The gifts envelope works about the same.  Matt and I figure out what we will spend on birthday and Christmas gifts for each person we buy for.  I total all the amounts for the entire year, then break it down into a monthly amount.  I take that much out every month and place it in the gifts envelope.  When a birthday comes up I just take the cash out of the envelope and go shopping.  This works very well at Christmas time when we all typically spend a large amount of money on gifts.  All the money is there in the envelope.  This way you can also take advantage of the early sales!    Another thing I really like about the envelope system is I (we) don’t over-spend anymore and the impulse shopping has ended!  Part of the reason for that is I request large bills when I go to the bank.  It may sound strange, but it breaks my heart to break that 50 or 100 dollar bill.  If I have a lot of 1’s, 5’s, 10’s or 20’s I’m more likely to impulse buy.  The more small bills I have the more money I think I have!  I guess it’s a mind thing.    The envelope system is a change that will be hard to accept but I challenge you to give it a try!

Running the Distance

Why the current economy is the best time to invest. Written by Matt Wegner Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

If you’ve watched the news in the last three to six months, you’ve likely heard more than your fill of how bad the economy is and how bad investments are these days.  It’s a bear market and nobody is investing because everything is so bad.  But did you know the stock market is actually up more than 28% in the last seven weeks?  That’s right.  The Dow Jones Industrial Average has risen from 6,547 on March 9th to 8,426 as I write this article.  You haven’t heard about it because it doesn’t make good headlines. Investing is not a sprint.  It’s a distance race.  It’s a race you have to train a very long time for.  You have to start small and develop good fitness and running habits.  You can’t listen to all your out of shape friends as they give you bad advice.  They’ll tell you if you start running you’ll have a heart attack.  Or they’ll say you’ll hurt your feet or knees.  Or they’ll tell you there’s a great diet pill that helps you lose weight without exercising. “Nobody exercises anymore. The quick and easy way is…” they’ll say. Maybe they’ll give you advice on their favorite running workout that they started but never finished.  Get the picture?  If you want to get better at running, learn from experienced runners who have been running for years.  If you want to get better at investing, learn from people who have made money investing over a long period of time. Now, I’ve never been a good distance runner but when I was in the military we were regularly required to run long distances. I had to work hard to get to the point where I could hold my own.  Here’s what I learned from experienced runners about how to get good at running long distances.  Start first with running short distances.  Gradually build up your distance until you’re used to running on a regular basis. Keeping a routine such as running at the same time every day helps keep you going and stick to it. Now you’re in the habit of running.Once you are in the habit of running you can work on improving your technique.  Work on your stride, your body motion, your arm movements.  Fine tune the mechanics of running to improve your time.  Over time, small changes in technique can add up to make a big difference in your energy levels and speed.  The more you focus on repetition and sticking to the strategy, you not only build stronger muscles but you effectively train your muscles to follow the best movements.  The better you get, the more trained your muscles become, and the more they are comfortable with the movement.Even in training, though, you have good days and bad days.  These are plateaus and valleys.  Sometimes it takes something extra to break through the plateau but it always takes consistent, persistent “training” and sticking to a long term strategy and game plan. The point is, you can’t let short term events dictate your long term strategy. In the last year tons of people waited until the market crashed and then sold their mutual funds to buy fixed income investments.  Their short-term vision caused them to buy when things were good (buy high) and sell when things were bad (sell low).  This is exactly the opposite of common sense, but when fear sets in, people do irrational things en masse.  The stock market will go back up in due time, and if you want to ride the wave now is the time to buy.  There’s a stiff tailwind right now waiting to push you down the long road to success.  Don’t be afraid of the wind.  Use it to your advantage and run with it! - Matt Wegner

We Need Your Help!

We need your help!!  We’re on a campaign to grow our subscriber list so we can reach and help as many people as possible.  Here’s why:  Think of all the people you know.  70% of them are struggling with their finances.  That means a lot of people you know could benefit from the articles and information we provide through our blog and monthly e-newsletter.  If you haven’t subscribed, don’t wait any longer!  If you know a friend who could use the help, spread the word and encourage them to take a step toward changing their future.  It’s easy to sign up – simply visit our website at www.mattwegnercoaching.com and enter your email address to subscribe.  As an added bonus, when you subscribe we’ll send you a free copy of The Real Inconvenient Truths – What the Financial Industry Doesn’t Want You to Know.  This short e-book will change the way you look at conventional financial wisdom forever!

My Daughter is Going to College!

What are my options to help her?

Written by Matt Wegner
Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

Dear Matt, My daughter is going to college this fall. We did not prepare for this financially. She will have some loans but we want to try and help her out if possible. I feel that we should stick with our plan of eliminating debt and when we are done with that step go right on to building our emergency fund. Possibly in 2010 then we might be in a better position to help her out. Any thoughts? Thanks, Terry B.

Hi Terry,First, congratulations on working your plan to eliminate debt. You’re on the right track! I agree, I would wait until you’re farther along in your debt reduction process before I help her out with her school costs. Many parents feel guilty about not being able to help their children go to college. Unfortunately many of them let that guilt drive them deeper in debt in the form of cosigning student loans or giving their kids a credit card, etc. Don’t fall in to this trap! You have an obligation as parents to take care of your immediate household and provide for your future (retirement) before you help the kids with college or other school costs. Part of providing for your household is eliminating debt so your income can actually work for you in the form of retirement savings (and college savings if there’s time). That doesn’t mean there aren’t options for you to help your daughter. The first option I typically recommend is Jill Howell of N2 College Consulting. Jill’s a scholarship coach who can help your daughter find more scholarships than you probably knew were out there. Last year her average high school senior was awarded $63,500. Not bad in my book. I am currently working with her on scholarship options for my 8 year old daughter to help us plan for her future. Aside from scholarships, there are a few other options out there. She may not qualify for grants but it’s worth applying. There are work-study programs where she can work for the college while she goes to school. She could always get a part time job (or full time and take fewer credits). Working while going to school almost seems taboo these days but it actually teaches time management and builds character, and when I went to college it kept me out of trouble by keeping me busy. There are also military options (some people cringe at this option but it worked well for me in addition to the part time jobs). The military will pay for a complete college education in exchange for serving our country. It’s a great option for many people who don’t have other options. Some companies will pay for an education too. Depending on her major, she can go to an inexpensive local college for the first few years while working and saving money for her last few years. Also, some career paths offer programs that will pay for your education if you agree to spend the first few years after graduation working in certain areas of the country. For example, there is the Teach for America program that pays your student loans if you work in an under-resourced school system for a specified period of time. There are tons of opportunities out there to graduate from college debt-free. It’s not easy, but the trade off is huge. While most of college students will graduate with an anchor chained to their feet, the few that are able to graduate debt-free are able to hit the world running free. What a great opportunity that is. If you haven’t prepared your kids for the moment, don’t give up at the first roadblock. Look for innovative ways around the roadblock. The road less traveled has more rewards hidden along the way.

- Matt Wegner

Don’t Be a Fool!

A tax scam you need to know about.  Written by Matt Wegner Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

Over the last year or so, I’ve been receiving an email from the “IRS” telling me there is an extra tax refund available to me.  Sounds great, especially in tax season but there’s a problem with the letter.  This letter is a phishing scam.  Don’t fall for this.  If you think your tax return was filed incorrectly, contact your accountant to help you review your tax situation.  Here’s a copy of the email as it gets sent out, followed by commentary by my accountant.“After the last annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund under section 501(c) (3) of the Internal Revenue Code. Tax refund value is $189.60. Please submit the tax refund request and allow us 6-9 days in order to IWP the data received. If u don’t receive your refund within 9 business days from the original IRS mailing date shown, you can start a refund trace online. If you distribute funds to other organization, your records must show wether they are exempt under section 497 (c) (15). In cases where the recipient org. is not exempt under section 497 (c) (15), you must have evidence the funds will be used for section 497 (c) (15) purposes.If you distribute fund to individuals, you should keep case histories showing the recipient’s name and address; the purpose of the award; the maner of section; and the realtionship of the recipient to any of your officers, directors, trustees, members, or major contributors. To access the form for your tax refund, please click hereThis notification has been sent by the Internal Revenue Service, a bureau of the Department of the Treasury. Sincerely Yours,John Stewart Director, Exempt. Organization Rulings and Agreements Letter Internal Revenue Service “ Now for some notes on the scam from my accountant, Joya Cox: “The above phishing letter contains several warning signs that it is a fake letter by scammers.  It does hold some truth in it to make it seem plausible.  Here are the items that I noticed. - IRS never sends emails or makes phone calls to taxpayers. - IRS never will look over taxpayer returns to see if there are any further tax credits that can be used to increase refund. - If the IRS plans on contacting a taxpayer, it has its own series of letters to send. - IRS wouldn’t refer to financial activity as being fiscal in nature because the vast majority of taxpayers are calendar year filers. - 501(c) (3) is the filing status for tax exempt organizations only.  An individual can’t file for this and get a refund.  A person can donate to these organizations and claim a deduction on Schedule A.  This may or may not be helpful to the taxpayer. - IRS letters wouldn’t have specific time tables for refund processing. - This letter has numerous spelling, grammatical errors, and texting lingo.  These items would never appear on an official letter from the IRS. - Section 497(c) (15) doesn’t exist.  The real section is 4947 (a) (1).  This refers to Nonexempt Charitable Trust treated as a Private Foundation.  This has no bearing for private individuals. - IRS doesn’t allow a deduction for contributions given to private individuals. - IRS never closes letters by telling the reader the letter came from IRS bureau of the Treasury. - Job title for IRS is too long. Phishing letters are just ways scammers get personal information from taxpayers.  This information is used to steal identities or steal money from people.  Never respond to these letters.” Joya’s words ring true.  Even if you’re not an accounting expert it’s pretty easy to pick out the obvious flaws in their letter but there is just enough legitimacy to the letter to lure you in.  I actually visited the link provided in the email and it brought up a form asking for my social security number and credit card number so they could “deposit the money to my account.” This is a huge warning sign right there because the IRS already has my SSN and they would never deposit funds on a credit card account.  The bottom line:  If it sounds too good to be true it is.  And if they ask for your credit card number and SSN, run!

What Should You Do?

The smartest thing(s) you can do with your tax return.

Written by Matt Wegner
Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

So you filed your taxes and have a return coming. Or maybe you waited until the last minute to file and you’ll have a return coming soon. Have you thought about what to do with the return? If you’re like a lot of people you haven’t even given it some thought yet. Or you’ve got three or four ideas but don’t know which one to do. Here’s the deal. If you don’t have a plan for your money, it will come into your hands and go right back out before you even know what happened. Here are some tips to help you plan ahead with your tax return.

1. If you are behind on any bills, get caught up quickly. If you ignore late bills or debts it will come back to haunt you. Start with your necessities. Get current on your shelter and transportation first.

2. Set aside some money for emergencies. Get $500 to $1000 in the bank and don’t touch it! Save this money for a true emergency like when the transmission breaks or the heat goes out.

3. Build up your emergency fund until you have 3-6 months of expenses in a savings account just for emergencies. In today’s economic times you’ll want to be closer to the 6 month level.

4. Start investing 15% of your income for retirement. Now is the best time to invest. Investments are on sale at 50% of what they sold for a year ago. I call that a good bargain. A prudent investor buys low, holds for the long term, and sells high.

5. Start planning for education expenses. If you want to send the kids to college or maybe yourself, the best way is to graduate debt free. Start planning ahead for scholarships and take advantage of tax-advantaged investments for education.

6. Pay off the house early. If you’ve followed the above steps before now, you’re debt free except the house. The only step left is to pay off the house. You’ll be surprised how fast it will go. And how good it will feel!

7. Build wealth and give more than you ever thought possible. How great would it feel to be completely free from the chains of debt and be able to give to any cause you wish at any time? Better than you can imagine!

There are a lot of other things you can do with your money, but by our society’s norms, they all involve spending more and borrowing more. This year, why not use your tax return as a kick-start to a lifestyle change. Don’t settle for normal. Choose to be different. And Debt Free!

Boosting Your Resume.

Tips for selling your skills.

Written by Matt Wegner
Founder and Lead Counselor, Matt Wegner Financial Coaching, www.mattwegnercoaching.com

As unemployment rises the competition for new jobs is heating up. This means you need every competitive advantage available to help put your best foot forward. The most basic tool out there for selling yourself to a prospective employer is the resume. Many people make the mistake of thinking the resume is what gets you the job. This couldn’t be farther from the truth. All the resume does is get your foot in the door and lead to the interview. However, one of the first things that will COST you the interview (and consequently the job) is a poorly written resume. Think of the resume as a sales brochure convincing the employer that they need to get you in front of them to learn more about the product (you). If you send them a sales brochure full of spelling errors and sentences that don’t make sense, they’re going to move it from their desk directly into their trash can. In my own interviewing experience, nothing turned me off faster than a poorly written resume with no relevant substance.

Here are some tips to help you build a strong resume.

- Avoid fancy fonts. Keep the typeface simple.
- Keep the information in short, easy to read paragraphs. Use bullet points when possible instead of paragraphs.
- Double and triple check for grammatical errors & misspellings. Have someone you trust (or several people) review the resume specifically for these types of errors.
- Be specific, especially when stating accomplishments. Don’t state you improved sales. Say you increased sales by 15% over the previous year.
- Never lie. It will catch up to you.
- Your resume should be reviewable in 30-40 seconds. Keeping it to one page is helpful, but never have one more than two pages.
- Never include salary information on your resume.
- Skip the objective. Don’t waste time with the generic lead-in. The interviewer knows what you want. The objective only states the obvious and wastes space that can better be used to sell yourself.
- Begin the resume with a skills summary, profile, or expertise.
- Use descriptive terms like: managed, supervised, instructed, planned, organized, trained, directed, edited, recruited, wrote, sold, marketed, created, etc.
- Cover the last ten years (at least) of work experience. If that’s not possible, draw from areas of competence gained in your personal/extracurricular life.

My son-in-law passed away. What should my daughter do?

Dear Matt,

My son-in-law just passed away at the age of 38. He and my daughter were married for 15 months. They live in a suburb of Chicago. They have a house that is fully mortgaged. He had some life insurance. I’m guessing around $100,000.

I guess my question is….where does she begin? She can’t afford to make the payments on her own. Does she take the insurance money and Pay off some of the mortgage? I think they owe around $175,000 on the house and now it is not worth that much. Just looking for some advice.

- Mike Q.

Hi Mike,

First and foremost, I want to express my deep sympathy at your loss. We may never truly understand the Lord’s ways but my prayer is that you and your daughter can find comfort in the knowledge that he is with the Father in heaven.

Your daughter first needs to take some time to grieve. Let the dust settle and finalize the estate issues. While she is mourning her loss she is in no position to make good financial decisions. She needs to wait until the grieving process has settled a little and she is ready to make decisions without so much emotion attached. It’s tough to say when that time is right; only she can tell but we’re talking 3-6 months typically.

Once she is ready there are a few things I would recommend. First, a few questions come to mind. Is she employed? Does she have outstanding debts? Does she want to stay in the house?

Without any specifics, here’s the general plan I would propose (if she’s already past these steps, that’s great!). Let’s start with getting her on a monthly written budget. Then let’s pay off all her debts up to but not including the house. Next, set aside three to six months of expenses in an emergency fund. From there it depends if she wants to stay in the house or not. If she does, I would look at paying down the mortgage with the remaining money and then refinancing the remaining balance to get a lower payment. If she doesn’t want to stay in the house I would hang on to the remaining cash and use it to make the house payments until the house is sold. If the house sells for less than the mortgage balance, she can use the remaining insurance money to pay off the difference.

While life insurance is usually designed to replace the lost income when a loved one dies, it doesn’t sound like she will have enough to replace a significant income stream. I think her best bet is to eliminate as much debt as possible and go from there.

I hope this helps and gives you both a source of strength and inspiration. I am here if she needs some help walking through the financial process. Feel free to call or write back with any more questions.

Blessings,

Matt Wegner