Welcome to LendItToMe.us

aresauburn™

Welcome to LendItToMe.us! As a loan officer at a popular bank (I won’t say which one), I often times see people making terrible financial decisions. Sometimes it’s people who want to borrow more money than it’s obvious they will be able to pay back, or sometimes it’s people wanting to make terrible investing decisions. As a loan officer I can offer my advice in a professional manner, but each loan we offer is business for our bank, so I am often instructed to not discourage our members from taking out a loan that they qualify for.

Due to the constraints of my job, I am restricted from telling people what I’m really thinking inside, and what they probably need to hear. This happens on a daily basis. For this reason I have created this blog. For those of you who are easily offended you may want to leave now. Not that I will be using profanity or vulgarity, but I will calling things as I see them. If a financial practice is stupid, I will explicitly say so. If you’d love some free advice investment advice from someone who has been in the business a while, I invite you to stick around.

So, just what topics will we be discussing here?

Loans

Regardless of how risky it is to go into debt, let’s face it, sometimes loans are needed. As a general rule there are certain situations where getting a loan is fiscally appropriate and any other reasons (with a very few exceptions which we can discuss later) just do not make sense.

MORTGAGE LOANS - Most people cannot pay for their house right up front in cash. Buying a home is an investment. Obviously you want to purchase a property that will most likely appreciate in value over time and that you won’t end up pouring pocketfuls of money into for repair (unless you are getting a killer deal and renovating was part of your investment strategy). Also you always want to limit that amount of interest you will end up paying on your home. The best way to do this is to qualify for a 15 year mortgage loan instead of a 30 year loan. If you can afford the 15 year monthly payments, you will end up saving cutting your interest payments by more than half. You can see what these savings mean for you by using this mortgage calculator. Also by putting down a sizable downpayment and putting a little more money each month towards extra principal, you can work to whittle away at the interest you will end up paying.

AUTO LOANS- You’ve probably heard this before, but just in case you haven’t I’ll say it again. NEVER purchase a car brand new. The only exception to this would be if you are insanely rich and have more money than you know what to do with. But for the rest of us peasants who have to budget to meet ends meet, a brand new car is never the way to go. A new car depreciates by 11% the very minute you drive it off of the lot, and then in the first few years it depreciates an additional 15% – 20% each year. Yes an auto loan is another example of when it may be appropriate to use credit and go into debt, but do not overspend on a car. Buy a vehicle that is not fancy, but stable and that will get you from point A to point B without breaking down.Once again go for the minimum number of payments that you can afford so you don’t pay as much money for interest. Remember interest is just money that you are throwing down the toilet.

BUSINESS LOANS- You won’t go very far in life with taking risks some of the time. When you do take risks they should be calculated, and you need to make sure that you are prepared to deal with worst case scenario if they you do fail. There principals apply to the risk of taking out a business loan as well. You need to be certain that there is a market for your business. Have a plan of how you will be marketing, and have realistic expectations for how much business you will be doing your first year, your first month, and what your ultimate goal is. Have every detail planned down to the tee. If possible test drive your business as much as possible, before taking a risk and going into debt for it.

CREDIT CARD LOANS- These are by far the riskiest kinds of loans. More people fall into bankruptcy because of these than any other type of debt. Interest rates on these cards are intentionally ridiculous and designed to keep you from being able to to pay them off in an acceptable amount of time. As a general rule most people are not disciplined enough to use credit cards wisely and should avoid them like the plague. That being said, there are some acceptable uses and best practices to follow with credit cards. Most businesses will have a company card which they pay off at the end of the month so that a vast amount of interest does not accrue, this can be done with a personal credit card as well although it does take discipline. I’ve also seen people, myself included actually make money off of using credit cards. Once again this is only for the very financially disciplined, but rewards cards without out a yearly fee can be used to accrue points that can be redeemed for prizes or cash. If you pay off the balance before your cycle hits you can avoid interest, but still get points thus “making money” off your cards. Also some credit cards come with offers like $500 in Amazon gift cards after you spend a certain amount. A couple of years ago my wife and I paid for an entire $1000 worth of Christmas by signing up for a similar promotion, paying bills, paying off the credit card balance immediately and reaping the rewards. After a couple of months we cancelled the cards, because they did have a yearly fee but we ended up profiting about $900 off of credit cards in this instance. I am a little hesitant to share this because most people don’t handle credit cards correctly, but if you’re reading this blog and interested in being fiscally savvy, then you probably do not fall into that category.

Investment and Savings

In addition to loans, we’ll discuss different investment and saving opportunities. Keep in mind that no one ever reaches their financial dreams without investing and saving. Most people are familiar with the concept of trading their time for money. They go to work 8 hours a day, 5 times a week, and at the end of that period they know to expect a certain hourly rate for each hour they worked. While this is an important part of meeting ends meet, this should only be part of your financial strategy. Investing is putting you money to work. So that not only are you personally making money from your job, but the money you have invested is also making more money for you on the side.

Since investing (like most things) involves taking a risk, saving money helps to buffer against such risk. When things do take a turn for the worst that money is there as a fallback until you get your income streams flowing again. You should plan on having a savings account with enough money to pay all your bills and sustain your needs for 6 months. This may take time to do, but you should start working towards this goal today.

 

3 Steps To Be More Financially Responsible

Sleep

Today I’d like to share 3 steps that all of us can take to better our financial situations. These are things that you might not have thought of, and when you hear them you may initially struggle to see a connection between them and your finances. Don’t worry I will explain. I ask that you remember that change is difficult and nothing worthwhile was ever easily achieved. Some of these suggested steps may be uncomfortable for you to take and they will require you to change your habits and establish better ones. I make no claim that these steps are “easy,” but I promise you they will be worth it and overtime will help you get out of debt and have a brighter future as far as money is concerned.

#1. Wake Up Earlier

I know. Everyone needs their sleep, but trust me the body is very capable of adapting its sleep schedule if you want it to. You can use these methods to make this transition of waking up early much easier (and potentially even pleasant). There was a time when I would sleep in until noon if I could. In fact, I often did on weekends. It was during this time that I was also very unwise with my money and my budget. I can directly correlate my rise into financial freedom to when I started waking up earlier. Why would that be? Waking up earlier in the morning, and not letting yourself sleep in, signifies to your mind that you are going to take your life more seriously. It also signifies a desire to be more productive with your days. Your increased productivity will eventually lead you to increased income. This will not come immediately, but overtime you will have opportunities for income that would have never come to you if you would have stuck to your old lazy “sleep-indulging” self.

#2. Look at Your Budget Daily

Waking up earlier will also give you more time in the day to follow my 2nd step of looking at your budget daily. Why will this help you? Looking at your budget daily will cause you to have your financial situation in the back your mind at all times. It will help you make wiser decision on a daily basis. You will be more motivated to look for ways to increase your income. Perhaps looking for other jobs, if your current financial situation is not sustainable. You will be less inclined to be a compulsive shopper, and you will look for ways to take action towards my 3rd step.

#3. Save Money And Invest

All of us have stupid little indulgences that we take money out of our budget for each month. It could be smoking, eating out, drinking, video games, or purchasing pay-per-view.  Now I’m not going to go a rant about health (although increasing your health will do miracles for your efficiency), but the point here is that most people say they don’t have any money to save, but if push came to shove they could live without these unnecessary indulgences. Find something, anything, that you can cut out of your monthly expenses. Even if it’s only 20 bucks worth, and put that money towards something that will bring in more income overtime. Invest it. You can invest it in your education and save up to take some cheap online courses to further your skill set, or start saving up to go back to school. You could invest it in the stock market or mutual funds. You can use that money to pay of your debt more quickly. You might want to start saving up for a laptop or a tablet so you can be more efficient when commuting or at work. I don’t want to say it doesn’t matter what you invest it in, because it does. There are things that will be more productive for you to invest this money in, no matter how small. You’ll know better than I. The bottom line is that anything you choose will be more worthwhile than what you were previously spending that money on.

 

 

Minimizing Costs, Maximizing Profits

StartingABusiness

Do you have your own business? If not do you hope to have your own business some day. It seems to be almost everyone’s dream to be their own boss (especially after you’ve had some of the bosses that I’ve had!). Owning your own business greatly increases your potential for income. At a job where you are paid a salary or paid on an hourly basis, you have a set income limit. Sure you may be eligible for promotions and raises in the future, but even then you are limited to a capped amount of how much you can make each month (The exception to this is if you are also earning a commission). The great thing about owning your own business is that you keep 100% of the profits you make. If your business is scalable, you’re income could rise exponentially.

First Steps to Starting a Business

The first thing you need to do before you waltz into your local bank and meet with a loan officer, is come up with an idea. It can just be a “spur of the moment” idea. It needs to be a carefully thought out and planned concept for a business. What you’ll want to do is start by brainstorming. Think of as many ideas as you can come up with. As you brainstorm write down each idea on a sheet of paper and then take a few minutes to seriously think through each idea. Decide what you would need to start the business and how viable of an option it really is. Be very critical of each idea, and narrow your list down until you are left with 3-5 of the most realistic options.

Then go crazy and research each of those options. Go as in depth into each business proposal as possible. Find out exactly how much it would cost to set up the business. Determine what your marketing strategy would be. Think about how much you could realistically expect to pull in the first months and years. Once you’ve done all of your research you then need to decide which of the business plans has the best balance of low risk and high potential. This is the business idea you’ll want to run with. As you can imagine most lenders have very strict loan underwriting guidelines, and if you plan on taking out a business loan your business plan will need to be airtight. Here are some templates you can use when drafting up a business proposal.

Think Big and Small

The trick to running a successful business is minimizing costs and maximizing profits. Realize that saving money on business materials and supplies is essentially the same as increasing profits. At least it has the same effect on your bottom line at the end of the month. Especially when starting up a business look for every possible way to get what you need at the smallest price possible. I cannot stress enough how important it will be to conduct internet research to find the cheapest prices available for everything from renting an office space to buying furniture, down to the minute details like finding the cheapest fountain and ballpoint pens, pencils, and paper. Pen Review Sites  will go a long way in helping you find the lowest prices for your business materials and office supplies. Keep in mind that many people have already done the research as far as which products are the cheapest. Don’t underestimate how much money you can save by finding good deals on things as little as writing pens. All you have to do is find these websites.

After you’ve found the most cost effective way to start your business, focus on the best opportunities you have for maximizing profits. Think of how you can reach the most people. Think about how you can structure pricing. Make sure to include all of your details in your business plans as well as your business goals. Before presenting your business plan to the bank, have a few family members and friends look it over to make sure you haven’t missed anything.

The Importance of Education in Your Financial Plans

YoungScratch2

Very few things you do (especially in early life) will better your financial situation in the long run more than getting a solid education. The more education you receive the more developed your skill set will be. You will be better qualified in the job force than will other candidates. Another oft overlooked benefit of getting a solid education is that you learn how to manage your time, write papers, research, and meet the deadlines set for you. These skills will transfer over when you enter the work place.

Now let me be clear on a few points. I am not saying that if you do not get a post-high school education you will never make good money or be financially stable. I know a few people who never went to college (a couple of them actually dropped out of high school) who earn a very healthy income. So I’m not saying it’s impossible or that a lack of an education is some damning quality, but let’s be frank. Such individuals are exceptions to the rule. In fact the level of education Americans receive is directly proportional to income levels. So on average the more an individual progresses through the education system, the more money they make in the long run.

What Type of Education Should You Get?

Now when I talk about getting an education, I don’t mean just a typical associates or bachelors degree. Vocational skills, certifications, and apprenticeships are also great ways to further education while at the same time getting hands on experience. Now obviously y0u shouldn’t waste money paying for tuition just for the sake of getting an education. You need to find something that you are passionate about it. Sure when decided upon a career, you can factor in the prospective income that a certain career might provide, but if income is the only thing you are considering you will burn out long before you find success in that career.

How To Be Successful In Learning

Now just “getting an education” entails so much more than just passing your classes. I know student who have aced their classes, and received a degree without ever picking up a text book. Getting good grades (while important) is not as important as mastering the concepts and actually gaining a fundamental understanding of the course material. You need to stay motivated and stay inspired in your educational pursuits as a student. If you can stay focused in your educational pursuits, you will gain a true knowledge of the information and principles in your field, and you will have the discipline to succeed in the work place.

A word of caution, it’s very easy to let little things get in the way of your education. For those of you with jobs, you know how difficult it is to come back to work after a vacation. Likewise, after taking a sick day from school it can be tempting to overdue it. Sure there are different types of illnesses and varying degrees of symptoms. Occasionally bed rest and extended leave from school, but these should be rare exception. During times like this it can be helpful to have friends in class who can take notes for you when you are ill, and you can return the favor for them when they take sick days. You can record quotations from class for them and even perhaps include a little note for them about getting well soon. If you want to put in a little effort, you can find some cool quotes for the sick here. When you are sick every little bit of support helps, and feeling the love and care of others can actually help you feel better. Don’t feel weird about showing others how you feel about them, and help inspire them to recover faster.

If you don’t have the money to pay for college or to get any formal schooling at this time, do not fret! The wonderful thing about the internet is that there is free information EVERYWHERE you look. You can work to further your education on subjects that interest you. You have an infinite number of resources to help you research them. You will find free or cheap ebooks on the subject. You can read blogs of people documenting their experiences with that particular subject. Often times you will be able to find free online courses or websites that will begin teaching you virtually anything you want to know about your chosen topic. Even though you won’t get any school credit for your efforts the knowledge you gain will be invaluable. It will hold you over until a time when you are in a better position to further your education and get a formal document stating that you know the material. If you take this route, it will take a lot of self discipline. You won’t have a teacher giving you deadlines and grading your work. You will need to pace yourself to make sure you are taking you pursuits seriously. But always keep this in mind: “The more education you gain, the better prepared you will be to prosper in today’s (and tomorrow’s) economy.”

Types of Income

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Most people that I meet think of money as just a way to pay the bills. The mentality seems to be that as long as I can keep earning just as much or more than I spend any given month, I am doing okay. We humans are such short sighted creatures. What we fail to recognize is that if we only ever live month to month paying bills and hoping that nothing changes, we are going to find ourselves severely disappointed and in a financial bind. Bad things happen everyday. Almost nothing ever goes completely according to plan.

We get sick. We get fired. Our homes flood. We got old.

Since the majority of us Americans do not have a requisite savings account balance, we put ourselves in a very tough situation. Now obviously putting money into your savings account and building up a substantial amount will help to buffer against your rainy days/weeks/months and will do a TON to help you out in such situations, but there is a better way!

First let me point out what too many fail to recognize: There are different types of income

If you believe that the way to be financially stable when you reach retirement is by just working full time until you are 65 and make regular monthly deposits into your IRA account then you are ill advised. The world in changing. Sure this strategy works for some people, but they’re never as financially set as they’d like to be. Besides, do you want to wait until you are 65 to be able to enjoy your wealth?

Earned or Active Income

The first type of income that everyone is familiar with is Earned Income. This is where you work for 40 hours a week and then you get a paycheck. This type of income is very important and we all need to utilize this income source in order to achieve financial freedom, but only relying on this source of income is a grave mistake. This income stops going into our pocket the minute we stop working, meaning that when we retire we stop getting paid. I’m sure we’d all retire earlier if this wasn’t the case!

Passive Income

You may have heard this term. It is commonly misused. The natural connotation with this phrase is that you don’t do anything and you just get money. This is far from the truth. A bunch of hard work is required to set up a passive income opportunity, but once you’ve got this income source coming in, it takes much less effort to maintain it’s momentum. The income earned from this is often times referred to as a passive income stream. I found a site that does a decent job of explaining the passive type of income source here: GoodnightSam.com . I would recommend working to set up this type of income to whatever extent possible. Some examples of passive income are: Rental Income, creating and selling intellectual property through an automated system, and any business income earned that wasn’t dependent on the amount of time and effort you put into it. These types of income will continue flowing long after you’ve stopped working on them or retired.

Portfolio Income

You gain this type of income by selling things for more than you paid for them. Most people are familiar with the term “buy low, sell high.” That is the idea here. This is another smart method of earning money as you do not have to directly work for it and thus like passive income, should be used to help supplement your earned income. Stock, Bonds, Mutual Funds, and Real Estate all fall into this category.

Building up all 3 types of income will not only help you in the short run, but will increase your chances of being financially stable in the future.