Sunday, January 31, 2021

Good Value or Poor Value

 My family often goes shopping for different products including clothing, food and small appliances.

When is something a good value and when is it a poor value. My wife often likes to purchase things she thinks she will need in the future. Many times we use the item but as time goes on some of the things that are purchased are never used. End result, the items she has purchased that are never used are a poor value. Just because something is on sale it is not a bargain if you do not use it. It becomes a waste of hard earned money. Before you purchase something that is on sale be sure that you really need it. I can look in my garage and a spare room that we have in our home. There are many things that we have collected over the years that we do not need and the items were used very few times. My suggestion is when you are thinking about purchasing something make a list of the reasons why you need the item. Then make a list of reasons not to purchase the item. The reasons you put on either list is anything that comes to mind. Go hog wild with your reasons. When you get done count the number of reasons on each list. I give everything on the list to purchase 1 point. Every reason on the list to not purchase an item gets 2 points. If the list not to purchase has more points then we do not purchase the item. Another method is to wait for a day and see if you still need the item. If you still think you need the item, wait 2 more days. On the 3rd day if you still need the item the wait 3 more days. If you can say you still need the item then go ahead and purchase it. One caveat, be sure that you do not use credit to purchase the item. Only use cash. This way you do not incur debt. Our plan to control our money is to avoid debt

Tuesday, January 26, 2021

My Story

I'm Veit Johnson
My friends call me Andy

Our Family Motto
Life is Fun
Life is Exciting
Life is an Adventure
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I started life out 74 years ago in 1946 and I was debt free. As a child my Dad and Mom taught me different things that I would need in life regarding how to take care of my self and face the world in the future.
As a youth I learned a lot of things about money. I learned that I could spend it, save it and give it to others. I have not been able to figure out what else I can do with it. During my teen years I learned to work for money and I did not get all that much per hour since the minimum wage in the 1960's was just $1.00 per hour. I worked at mowing lawns, milking and feeding goats, and delivering newspapers. I was able to save enough money and purchase my own car when I was 16. It was a great car, a 1955 Oldsmobile Hardtop with a Rocket 88 engine. Wow! Had great fun with it. I even had a Chevron Oil credit card for gas. I worked most weekends to earn money to pay for gas and repairs. Did not really understand the implication of having a credit card. Since I was earning money during high school my Dad introduced me to the stock market. He taught me how to invest in stocks.
At the age of 17 I was unable to find jobs out in the world since most places wanted someone who was 18. As a result I join the U.S. Navy and became a corpsman. I spent a short time being stationed in San Diego and at Lemoore Naval Air Station before proceeding to San Francisco to be on a Hospital Ship bound for South Viet Nam. From their I was on troop carriers ferrying troops from the U.S. and South Korea to South Viet Nam.
During my time in the navy I found I was not in the need of much money. As a result I put most of it in a mutual fund that grew nicely for my 3 years, 2 months and 23 days of active duty.
Upon getting out of the Navy I started working for Pacific Telephone and Telegraph, first in a central office and then as a telephone installer/repairman. During that time I was able to share an apartment with two friends where we split the rent and food three ways. I needed transportation other than the bus so I was able to purchase a motor scooter for cash with my savings from the money I saved while I was in the navy. Later I moved in with two other friends renting a three bedroom home. Also during this time I was able to get a credit card with a local clothing store and started wearing a lot of spiffy clothes. Now I had to pay on a credit card each month and because I did not pay it off I had to pay interest on the outstanding balance. I was giving away money because of interest. I was also eating out a lot so there was little to no money left from my paycheck each week. I was living paycheck to paycheck. 
After a period of about 5 years it was now 1972 and I had a few small pay raises and since my room mates had married I was now on my own renting different apartments. Room mates were no longer working out and I was still eating out much of the time. Now I was paying full rent, and also now had a car payment along with the payments for my gas and clothing which was getting larger each month. I had no money left over. Since I was single I was also trying to support dating which was usually centered around church activities, concerts and plays along with a few movies here and there. 
About 1967 or so I was talked into purchasing a home. I bought a 3 bedroom home in Fremont, California where I was paying $333 a month for house payments on a home that I purchased using a VA loan with nothing down. This was about 30% of my income. I had stared saving about $100 a month in a 401k. Since I was still spending money on the high life with a new car (cost $3001) in 1971I was making a car payment of $83 a month. My life from about 1970 until 2005 was spent every month making car payments. I hate to think of how much I spend on interest. During that time I purchased 4 used cars and 4 new cars. I was still living paycheck to paycheck and often I was borrowing money from different companies at high interest. I even took money out of my 401k to make ends meet.
In 1993 I met my wife and we got married. By selling my home and her condo we had a lavish wedding and put a nice amount of money down on a new home for about $250.000. We were still living paycheck to paycheck and the only item being saved was my 401k. My wife was a spender and I was still one too. We were taking great vacations to local areas in California, Oregon, Washington, Idaho, Nevada, Hawaii, Utah, Missouri, England, Scotland, Switzerland, Spain and Wales all with the help of credit cards and more credit cards. During this time we upgraded to a nicer home for about $500,000. With the sale of our first home in 1997 we were about to put down 20%. We were also able to pay off all of our debts with nothing left over. About 2 years after upgrading to a nicer home that was about 50% Our income we both lost our good paying jobs. Now we were depending on the money in our 401k's. We were able to find some temporary jobs here and there which allowed us to maintain a lavish lifestyle. We were slowly accumulating more and more debt. (This met we were giving away a lot of our money to interest. Interest is money that we would never be able to spend on the things we needed or wanted.) Our payments were about $1500 a month.

September 11, 2001 happened and our investments that were paying our house payment and paying for part of our lifestyle suddenly disappeared. We were drawing from our nest egg now faster than it was growing and it was quickly dwindling to nothing. We had to do something quickly. In 2003 we sold our very nice 4 bedroom home with spacious closets and 3 car garage and moved into another not so nice new home in Tracy, Ca. We were able to put down 20% and pay off our debt. We were debt free except for the monthly payment on the mortgage. 

Did we learn our lesson? No!!! We were still using the credit cards and financing vacations. Suddenly we found that we were $60,000 in debt. What do we do? We trotted down to the local bank and signed up for a variable interest loan to pay off our debt. Again we were debt free. Guess what? We still were using the credit cards and went into debt again of about $60,000. We could not see the surface. We filed bankruptcy. We stopped using credit cards since all of our accounts were closed by the bankruptcy court. We were now operating on a cash basis. We were managing but just barely.

In 2010 I had a stroke. I recovered quickly and was cleared to work by my doctor and a Neurologist. Problem was since I was working as a truck driver the Department of Transportation said I could not work for a year as a driver. I was not successful in finding other work and we had no money to live on and no income. I was able to start drawing social security of about $3200 a month since I had a dependent child and my wife declared she was a stay at home Mom. Since our income was not enough my wife during this time took out student loans for us to live on to the tune of $60,000. In addition I was able to find a temporary job a year later as a truck driver that brought in about $15,000 a year. During the last year my son turned 18 (no more ssi). My wife applied for SSI and is getting about $2,400 a month along with my 2,000 a month. In addition I work as a truck driver earning $5,000 a month or a bit more. For the last 2 years we have been at $100,000 a year. Our debt at this time is $60,000 in student loans, $60,000 second mortgage, $40,000 interest free car loan and an $8,000 lien on our home from a lawsuit that we had to try and recover our retirement investments because of poor management on the part of our investment advisor who provided us with investments that did not meet our needs.

In September of 2019 I discovered Dave Ramsey and his plan to get out of debt and become wealthy. My wife has not been willing to get on board. As a result we are not following the plan laid out by Dave Ramsey.  Instead because of my age and the need to build a nest egg we are investing in a ROTH and building a emergency fund. (I do not recommend this to my clients). This makes the road to being debt free very much longer. I decided that I wanted to help others to avoid my financial mistakes and decided to become a financial coach. My wife and I now have a spending plan and discuss all of our spending. Although I have tried to get her to follow a spending plan I have been unsuccessful. I have started writing down everything we spend and show it to her so we can develop a full budget. I can say this, no one is ever too old to start. One never knows how long they will live. In my family many folks live into their 90's. At 74 I could still live another 20+ years.


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Monday, January 25, 2021

Roth IRA

Roths differ from traditional retirement accounts in how they’re taxed. A traditional 401(k) or IRA allows investors to make tax-free contributions, deferring the taxes until the money is withdrawn. Roth IRAs are the opposite in that investors pay income taxes on the money as it goes in, not when it comes out. The benefits of Roth IRAs include that you can make early withdrawals from contributions without a penalty.