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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]
In This Episode / Listener Questions
- One of my friends had a loss of income topped off with big medical bills. Listen to the a plan to take her from surviving to thriving.
- How do you not get complacent with your budget and daily goals (Dustin)
- What index funds are available for Norway residents (Mikael)
- Is there anything else I can do to minimize my tax besides maxing out my 401k, HSA, and IRA (Sam)
- Should we pay off our house before retirement. We owe $173,000. (Jodie)
- Are mastermind groups an expensive risk (Jim, Central New Jersey)
- Be aware of pension shortfalls (Red Alert Warning)
- My credit card bills keep rising. How can I pay them off faster (Christopher)
- I had no idea what we were paying for fees and now I do (The Dog)
I was giving a friend of mine some counseling this week. Not on the best cupcake shops to visit, but real money advice. She started a business a couple years ago. In fact, she built a six-figure business from what started as a side hustle. She was crushing it. But she ran into a problem. The business was in her boyfriend’s name. And his social security number. And on paper, it was his business. Not theirs. You already know how this ends up.
They started the business together. They built the revenue together. And then the relationship ends. He keeps the business and all the money. Which is a huge jerk-face move in my opinion. She gets the short end of that stick and her income goes to next to nothing.
She is a single parent. Daughter. The daughter has health issues and – big medical bills. All the medical bills went on the credit cards. That plus the cost of everyday life.
We start going through her debts, her income, and coming up with a plan. What’s the quickest way to turn this thing around?
- $20,000 in credit card debt, from medical bills.
- $15,000 car loan
And not much income right now. As I said, she was crushing it. She’s got the motivation to make money. She’s got that covered. We just need to go through and figure out these debts so she can get back to thriving from surviving.
Previously, she took some money out of her retirement accounts to hold her over. Ok. I ask did you set aside some for taxes in 2020?
She said, “Yep. I did that.”
I said awesome, you’re already going to avoid that tax torpedo next year.
Listen when someone is in a situation where it’s pay the rent and the only money is in a retirement account. Picking the 40% tax and penalty hit is usually preferable to getting evicted. You can always make more money.
That’s much different than the financial mistakes people make where they take the 40% tax and penalty hit for a new house down payment, the Disney vacation, or to pay for a wedding with the 18 tier cake and the vanilla butter cream frosting. Which I almost don’t fault. Cake is good. But one is taking them from surviving to thriving, the other from thriving to surviving. Make sure you know the difference and think those things through.
Next question for my friend – “have you sold stuff? That will give you some quick wins.”
She said “I just moved, and I sold everything before moving. There is nothing left to sell.”
Except this old engagement/wedding ring. And it was quite valuable. We talked about how to find out what it would fetch. I suggested getting 3–5 quotes. Visit a couple local jewelers.
Hear me on this – jewelry is not an investment. Just think of those cash for gold shops that are in every strip mall. Those places pay about 10% on the dollar for what someone paid for a gold necklace. There is a big financial hit when selling jewelry, but if it can help, take the money.
I suggested to wait on that decision. We needed a multi-point plan of attack, but plans have steps. Let’s do them one at a time, pause, and review before moving on. It’s like baking a cake. You don’t put on the frosting while the batter is in the mixer. You cook and cool the cake first, right?
“Turner, I don’t know how to bake a cake.” Now you do. Don’t put the frosting on the batter. Your welcome.
Then I try to put on my happy face, and share my car story. The biggest financial turning point in my life was getting rid of an $800 a month car payment, to having a paid for car. I get we love our cars. Our cars are often are attitudes. We take pride in owning them.
I saw a funny Instagram quote yesterday. I’d be more comfortable crying in a BMW than a Kia. And that might be true. But wouldn’t you be more comfortable crying over spilled milk if the you a paid for dairy farm with 100 cows. I think so.
Oh, we spilled some milk! So Sad! Let’s get Bessie up here and milk some more.
We did some quick math, if my friend sold her car she would get $10,000, and no longer have a $550/month car payment. Which I then pointed out is about $7,000 a year extra.
Sell the car, buy something nice for $10,000 in cash. Between hammering the debts with more cash, increased income, this $35,000 in debt is gone is 6–9 months. Twelve on the high end.
You know, it’s hard when there is a big, unexpected life event that – boom – takes out your plans. They can be wonderful things that can change a plan too. Babies. Adoption. Meeting Mr. or Miss Dreamy. Even a big change in someone’s life view.
Many of you know my story. When my girlfriend of many years dumped me, my dad had prostate cancer, and I was burnt out at work, all at the same time, that changed my life view. There wasn’t a financial torpedo in there. But it was a turning point.
This made me smile when talking with my friend. She gets it. She gets it, she got it, and she’ll win at it.
Listen to what I mean. She said, I’m not one of those people that are stuck on stuff. I don’t need to have the nice car, even though I like what I drive. I’ve been using the same purse for 7 years.
By all means, I don’t judge. If you own 18 purses, one for every day of lunar cycle, use those things with pride. But you can replace stuff later. People can always buy more stuff. Never put off having piece of mind. We can’t get time back.
With my friend,
- By the end of 2019, she should have this whole financial mess cleaned up and turned around.
- By the end of 2019, she should be debt free
- By the end of 2019, she should be looking forward to a much brighter 2020.
Because she’s taking the bold moves necessary to not have this stress in her life. And I’m proud of her. I know you get some inspiration from that. Sometimes it takes big, bold, brave moves to radically alter your course. To go from the broken finances to the beautiful life. Expect the best out of life, but plan for the worst. And if the worst comes or you’re not happy with where you are in life.
Think Big. Think Bold. Think Brave. Because you are.
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