Friday Financial Tidbit-Washington can’t change our finances

Like many of you, I’m already sick of the election coverage. No matter where we are or what we are doing, whether it is Facebook, Twitter, watching TV, listening to the radio, or driving on our morning commute we can’t escape it. It seems like there is always an article, opinion piece, analysis or advertisement trying to persuade us to one side.

On the national level, one of the often talked about issue that gets my attention and makes me chuckle has to do with each candidates tax proposal, or how their tax plan will “fix” the economy. Everyone has an idea that will help balance the budget, help the middle class, protect small business from paying high taxes, etc.

In these proposals it’s almost like they are coming across as the “savior” and their plan will save all of the country from economic despair. That doesn’t include the fact that their proposals first need to get passed by Congress, which the American public doesn’t have a high level of confidence in currently.

Now this is not being written as anti-Democrat or anti-Republican, but, whoever is in charge, Washington can’t change our finances! If we plan on Washington fixing our mess, we will probably be waiting a lifetime.

Washington, might mean well, but they can’t control your spending, incoming, or how much you save. They can’t help you develop habits that will let you succeed with money and they can’t care as much about your personal economy as you can.

Spending a lot of emotional energy on worrying about what they will or will not do is pointless; we really can not control it.

You do need to focus on the one thing you can control . . . YOU!

Do get involved in the political process by voting, but remember the real obstacle to changing our finances is ourselves.  The person who will change our finances the most is in our own house, not the White House.

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JW’s Financial Coaching Podcast Lesson #117-Don’t Be Average 2016 Edition

Play
  • The average US household financial stats
  • What these stats say about your economy
  • What to do to be better than average
  • Motivation to not be financially average
  • Quote of the lesson from Steve Siebold

The JW’s Financial Coaching Podcast_117

When I first started the blog and the podcast, one of my most popular posts that gained some traction was the Don’t be Average blog post. In this post I shared some average financial statistics on income, debt, and savings which I tried to paint a picture that the average financial situation in America isn’t all the great. Since the original post back in 2010 I updated it for 2011 and did one of my original podcast lessons on the same topic.

But I realized I hadn’t had an updated version since 2011 so on today’s lesson we’re going to cover the average financial stats in America for 2016. Among some of the statistics discussed in the show:

  • The Median Household income is $53,657 [1]
  • 1% of households that have a credit card have a balance at the end of each month with an average debt of $16,000[2]
  • The average car payment is now $503(!) over 68 months[3]
  • The average car lease payment is now $400 [4]
  • 2016 college graduates had an average student loan balance of $37,000[5]
  • For all households that have a student loan, one in seven, the median balance is $13K[6]
  • The savings rate is currently 5.3%[7]
  • 50% of Americans would have to borrow or sell something to pay for a $400 emergency[8]
  • 1 in 7 Americans have a negative net worth [9]

We go into depth more on each stat and explain why these are troubling statistics.

But we also explain why it can be used as motivation to get out from under the rut of being at or below average and what you can do to having a good personal economy.

This is just a great reminder that we can’t go through life taking advice from “He said, I heard, and everybody does.”

Other resources mentioned in today’s show

Today’s quote of the lesson is brought to you by Audible.com

“Average People live beyond their means. Rich people live below theirs. ” ~ Steve Siebold

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW’s Financial Coaching Facebook Fan page.

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[1] http://www.deptofnumbers.com/income/us/

[2] http://www.valuepenguin.com/average-credit-card-debt

[3] http://www.cnbc.com/2016/06/02/us-borrowers-are-paying-more-and-for-longer-on-their-auto-loans.html

[4] http://www.cnbc.com/2016/06/02/us-borrowers-are-paying-more-and-for-longer-on-their-auto-loans.html

[5] https://studentloanhero.com/student-loan-debt-statistics-2016/

[6] https://www.brookings.edu/research/the-typical-household-with-student-loan-debt/

[7] http://www.tradingeconomics.com/united-states/personal-savings

[8] http://www.federalreserve.gov/econresdata/2014-report-economic-well-being-us-households-201505.pdf

[9] http://www.whig.com/20160808/household-debt-concerns-economists-lenders#

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Interest rate is *not* the problem

When I’m working with a client on getting out of debt, especially on student loans or credits, one of the first things they ask about is how to lower their interest rates on the loans.

Interest rate isn't the problemI understand why we go there first. Interest rate impacts the monthly minimum payment and if you can lower your interest rate a few percentage points why not? It’s low hanging fruit.

However, the interest rate is only about 5-10% of your problem and therefore you should only spend about 10% of your time on lowering the interest rate.

The real problem is the actual DEBT that you owe!

Instead of spending all of our time trying to find 0% interest rate credit cards to transfer your balance to, put 90% of our time and focus into paying the credit cards off.

So often we think that lowering the interest rate solves our problem, but it doesn’t. Having student loans of $40,000 at 6.2% and refinancing them down to a 4% loan helps. But the real issue, the $40,000 of debt, is still there! Lowering the interest rate doesn’t change that fact.

Instead of spending all of our time and energy trying to save on interest, instead spend the time to find money in your budget to apply to principle reduction instead. Or think of creative ways to earn extra income on the side.

Again I’m not against lowering the interest rate if you can, but just simply lowering the interest rate and thinking that will solve your debt issues is foolish.

There needs to be more action on reducing the actual debt itself, not the interest rate.

Think of it another way when you pay the balance off, your interest rate will then be 0%  . . .forever so focus more on the real issue, paying off the balance instead of reducing your interest rate.

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JW’s Financial Coaching Podcast Lesson #116-How to decide between enjoying your money now vs. enjoying it later

  • How to balance enjoying money now vs. enjoying it later
  • The three questions Lisa and I ask when making a purchase
  • Why the amount in your bank account doesn’t tell you what you SHOULD do, it tells you what you CAN do.
  • Should I be spending on luxuries when I’m in debt?
  • Quote of the lesson from Warren Buffett

The JW’s Financial Coaching Podcast_116

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Friday Financial Tidbit-Three Questions I ask before making a big purchase

This past week on the JW’s Financial Coaching Newsletter I wrote about how one of the common issues I encounter when working with clients is how to balance long term goals like saving, investing, or paying off debt vs. making a big purchase such as a car or a fancy vacation. Continue reading

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Friday Financial Tidbit-Planning is more important than the plan itself

If you have have read, listened to, or watched any of material on the blog you know that I am a big believer that planning is an important piece of a healthy financial plan.

Because of that I write a lot about goal setting and planning what you want your life to look like 6 months, 3 years, 10 years, 25 years, etc down the road.

But if I’m being honest, looking back at it, the process of Lisa and I planning our spending has been a lot more important than the actual plan itself. Continue reading

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JW’s Financial Coaching Podcast Lesson #115-A Review of Feex.com

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  • A Review of FeeX.com
  • Why Feex.com is a good way to learn about the fees you are paying on your investments
  • What Feex.com won’t do for your investing
  • How fees aren’t the only thing to look at when it comes to investing
  • Quote of the lesson from Geeta Iyencar

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JW’s Financial Coaching Podcast Lesson #114-Why the 401(K)’s are not the safe investment we’ve been led to believe with Guest Greg Whitaker

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  • Guest Greg Whitaker joins us to share his take on 401(K)’s
  • Why fees cut into our retirement saving and what you can do to avoid paying them
  • What to do to learn about investing
  • How the inability to delay gratification is impacting our retirement
  • Quote of the lesson

The JW’s Financial Coaching Podcast_114

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JW’s Financial Coaching Podcast Lesson #113-The result of 30 years of frugal living with guest John Pugliano

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  • Guest John Pugliano joins us to share the result of 30 years of frugal living has had on his finances
  • Simple rule that allow the Pugliano’s to become financially independent
  • The crucial element to building wealth
  • Why you need to focus on what is really important to build wealth
  • Quote of the lesson from Jon Acuff

The JW’s Financial Coaching Podcast_113

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JW’s Financial Coaching Podcast Lesson #112-How good old fashioned anger led to becoming 100% debt free with guest Phil Danley

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  • Guest Phil Danley joins us to how he and his wife paid off their debt, including the mortgage
  • What led Phil and his wife to dump debt and be done with it forever
  • The difference between knowing what to do and actually doing it
  • Life after debt and what Phil did that he could only do if we was debt free
  • Quote of the lesson from Helen Hayes

The JW’s Financial Coaching Podcast_112

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