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What you missed
In the last episode, FRS007, you can hear about how to get out of debt faster.
Topics and your questions answered on the show
- Myths Broke People Believe Part I
- Bankruptcy and Employment
- How to budget with inconsistent pay period
- Entrepreneurs and Retirement Plan
- Money Hacks
- Saving money by getting rid of a car loan
Read the Transcript
You can download a complete, word-for-word transcript of this episode here or click the toggle button to read online.
Myths broke people believe Part 1
Welcome Rockstar Nation to the Financial Rockstar show. I’m your host Scott Alan Turner ready to help you get out of debt, save more money, and retire early. In the studio with me is producer Katie, who is the world’s okayest mom. On the show today we will be answering your questions about money, business, and life. If you have a question you would like answered on the show visit GoAskScott.com
On yesterday’s show we covered tips on how to get out of debt faster. If you’re in debt you will definitely want to check that out.
Discussion of the article: https://scottalanturner.com/30-myths-broke-people-believe/
Next time I’m going to be sharing some more of these with you. But right now I want to get to your questions.
QUESTION: Brandon asks if he can be fired for filing bankruptcy?
ANSWER: The short answer is no, legally you can’t be fired for declaring bankruptcy. Once you’re in a job at your current employer, unless you’re telling your co-workers what’s going on, the company should never find out about it.
That being said when you go to apply for a new job at another company in the future, there is a chance they will pull your credit file as part of their background check. The bankruptcy may raise a red flag as part of the background check for the prospective employer.
That’s why it’s important to have a good credit record – pay your bills on-time, etc. You can get passed over for a potential job based on what’s on your credit report. Not your credit score – employers can’t see those. And you have to give permission for a prospective employer to access your credit report. They’ll get a modified version of what a mortgage lender would see.
Thanks Brandon for the question.
QUESTION: Ok got a question here from someone who didn’t include their name. But they are a musician so they go to the front of the line. I get paid in cash as a musician, and seem to have a much bigger issue with saving money than I used to when I was paid in weekly or bi-weekly paychecks. My issue would be in budgeting. How do you budget when you get paid inconsistently?
ANSWER: I used to get paid once a month. It requires some planning but when I think back I found it easier than getting paid twice a month or every week. If you have a budget for the month, and you get paid once a month either on the first or the last day of the month, you can set the budget for the month and you have all of your income to divide up at the same time.
The key for you will be to get everything on paper (or in software) to set where the money is going before it comes in. If the money comes in inconsistent amounts or at inconsistent times I would make it a goal to have a large enough reserve or buffer in your checking account so that it never matters when the money comes in or if it’s higher or lower one month. If you have a big enough buffer you’ll always be covered for the month when you’re paying the bills. It will take you some time to get to that point and you’ll learn as you go along how big that buffer needs to be.
If you have an inconsistent income like a commissioned salesperson, make sure you cover all your basic needs first – housing, food, transportation, utilities. Then you work on funding your emergency fund and retirement. Once you get those things covered you work on your living expenses, or your wants. Eating out, gifts, cable TV, clothes.
The reason you want to beef up your emergency fund is in case you have a bad month and you don’t have enough buffer in your checking account to pay the bills.
That system is pretty simplistic, and that’s why it works. It’s simple.
Thanks for the question.
QUESTION: Kara is a self-employed contractor. What is the best way for me to save for my retirement?
ANSWER: USA Today did a study and found that a third small business owners and entrepreneurs haven’t saved a dime for retirement. Now some people will say ‘the business is my retirement, it has value and I’m investing in it.’ When I hear that I think of comic books. You can have Superman #1 in mint condition. But unless someone writes you a check for $1M and the check clears, your Superman #1 isn’t worth anything. Until you have the cash in hand I wouldn’t count the value of your business in my retirement projections. They don’t accept business cards at the checkout line of WalMart.
If you don’t have access to a 401(k) the preferred place to start investing is to set up a Roth IRA. Roth IRA is on of the best investment vehicles going because you’re investing after-tax dollars which grow tax free until you retire. The 2015 limit for the Roth IRA is $5,500 per person. Let’s say you’re just starting investing at age 30 and you invest that amount every year for 30 years. Now the maximums increase occasionally, but let’s just say we stick with $5,500 every year, in good low cost index funds earning 10% which is the average amount the stock market has returned over the past 80 years. You’ll end up with $1M at age 60. Keep investing until you’re 70 and you’ll have $2.5M. All of that money you don’t have to pay taxes on. That’s different than a traditional IRA where you invest pre-tax dollars and you pay the taxes in retirement as you withdraw the money.
Once you max out your Roth IRA first, then you can look at a Simplified Employment Pension plan or SEP IRA. The SEP IRA works like a traditional IRA but it’s for small business owners. Setting up a SEP is very simple to do, and you can open them wherever you want to, like at a low-cost investment brokerage. And they are usually free to set up.
In 2015 the maximum for a SEP is $53,000 or 25% of your income, whichever is lowest. You can put in a little or a lot, which makes them very flexible. If you’re able to sock that away from the income you make in your small business, you are doing gooooood. And if you’re in a slow period in your business where you can’t put as much in, that’s ok, that’s why they are flexible.
Like an IRA you get a tax deduction now, and the investments grow tax deferred. You pay taxes when you take the money out in retirement.
Remember, starting early gives your money more time to compound and grow your retirement savings. Compound interest is the powerhouse that puts your money to work for you and grows your wealth easier without you having to work at it. Put your money to work for you.
Thanks Kara for the question.
I want to hear from you
If you have a money-related question you would like answered, please visit GoAskScott.com to get in touch with me. That website has my email address, twitter, and you can also leave me a voicemail. Please contact me, I’m here to help you.
Segment: Money Hacks
Did you know there could be unclaimed money out there just waiting for you? This is true! In 2014, a relative of mine was tracked down by eTrade, an online investment brokerage. It turns out he had an investment account with $900 in it that he had completely forgotten about.
$60 billion (that’s Billion with a B, as in Britney Spears) is the estimated amount of unclaimed money according to Money magazine.
This is money from:
and it goes back as much as 20 years!
This is legitimate money folks. The owners couldn’t be located so the money goes unclaimed. The money is held in the unclaimed property division of each state.
So how can you find out if you have any missing money?
Visit – you guessed it – missingmoney.com and you can search for your name or a relatives name. Search for every state you’ve lived in to see if anything comes up.
If you have a common name like John Smith it may take you more digging to see if there is anything for you. If you have a unique name like Schwarzenegger, your search will go a little quicker.
The cool thing is using missingmoney.com is completely free!
When I used it I ended up finding $100! It took me about 2-minutes to fill out the claim form and print it. The money was a credit card refund/rebate that had been sent to the wrong address. So that was pretty sweet.
I also searched for one of my relatives. I found a $20 refund from the power company that had been unclaimed. Check it out and see what you kind.
Now back to your questions rockstar nation.
QUESTION: Eve says I’ve been working on a science fiction book and want to go the self-publishing route. What’s the best way to do that?
ANSWER: I’m now reading a science fiction series called Spinward Fringe. Spinward Fringe Book 0 was free. There are now 9 books in the series. I’m up to eight which I just started a couple weeks ago. The entire series is published to the kindle. And while the first book was free, all the others in the series are $3-$4. Cheap for a book. But all totalled the author has thousands of reviews. At $3 a pop that’s a lot of money. And most people don’t review books so he’s sold way more than that. I love a success story.
So the days of having to work with a publisher are long gone. In the old days there were a lot of scammers out there and rip-off artists who would charge you a huge up front fee to get you published. They would claim to have relationships with publishers, they would shop your book around, get you a deal. The devil was in the details though their contracts weren’t worth spit and they sold you a worthless bill of goods.
There are a lot of websites available now where you can self-publish.
Kindle, which is Amazon’s book reader, has a direct publishing service where you can publish your book for free. Now you do have to submit your book in the kindle format, but you can find pay somebody a small fee to do that for you. There is also a Kindle Textbook Creator program for Mac and Windows if you want to convert your work into the Kindle format yourself. It’s probably a good idea to learn how to do that if you’re computer savvy. If you can use the software then you don’t have to pay anyone to do the updates or fix any grammatical errors for you.
CreateSpace is a service you can use to create, publish, and distribute your book in printed format worldwide.
Both of those options are great because you can publish at no cost, sell at no cost, and when someone buys your book you and the publisher get paid. There’s no risk at all.
Lulu.com is one of the world’s largest self-publishing companies, you can check them out as well.
Getting back to the book series I mentioned earlier. When you self publish to the Kindle or iBook, you can give away your book for free. If you’re thinking of doing a series for fiction, or you have a non-fiction book you want to use to gain other business, eBooks are a great way to get free marketing of your products or your future books that you want to charge people for. Some people are out there killing it.
Thanks Eve for the question.
QUESTION: Paul writes how can I get rid of a newer car for a older car that runs well? I have $656 a month going out in car payments. I HATE car payments. In 2012 my wife and I got a 2010 Chevy Malibu. I’m paying $330 a month until 2018. In other words a six year loan with 18.99% interest. Our credit stinks.
Even worse than the Chevy Malibu car payment is the 2012 Chevy Sonic car payment. In November 2014 while I was at work, I was so angry that my wife went to visit a car dealership and came back with a newer car. I told her no to a new car yet the sales manager saw $$$ signs.
It’s costing us $326 a month for this car and I and $92 is going towards principal and $233 towards interest. Before the Chevy Sonic, we had a 1999 Chevy Malibu. It got wrecked and recently had some issues overheating. The car would run fine as long as the fan was kept on. It ran good other than that.
I feel this car payment is kicking my a! How can i get rid of this car payment for a lower one that doesn’t take 6 years to pay off?
ANSWER: You’re obviously mad at the situation, and that’s actually a good thing. Because when you get mad and can channel that emotion properly, that’s when change happens. When you see that statement coming in every month with the $233 in interest, that’s a big motivator. But don’t just think in terms of monthly payments because that’s what got you in trouble to begin with. That $233 a month is $2,800 a year in interest payments. $2,800 in cash will get you a reliable used car you can drive for a year or two, while you save up in cash for the next car.
Here’s the steps I would take. And you’re going to have to get aggressive and go whole-hog on these car payments or you’re right – you will be paying them for the next six years.
Create a written spending plan of where you’re money is going each month. It’s nearly impossible to get out of debt until you know where you’re money is being spent. With a spending plan you can cut back in areas that aren’t important in your life. Maybe you spend a lot of clothes but don’t realize it. Or eating out. It doesn’t mean you can’t eat out, just that you might eat out less. Because not wasting $3k a year in interest is more important than eating out five times a week.
Write down on paper how much these cars are costing you, and will continue to cost over the next several years. You mentioned your wife purchased a car without discussing it with you. That’s a marriage issue, but it’s over and done. You guys have to move on and fix this mess together.
Come up with written goals that you can both agree on. Discuss how getting rid of this debt is going to help you reach those shared goals together, and in record time. Is it a vacation? A new home? Retirement security? Think big, and think long-term. Have some short term goals to. Sometimes it’s hard to get buy-in from someone about saving for something that’s 20 years away. Find a short term goal that excites your wife. Your goal is clear – get rid of the nasty car payments. She got suckered by the salesperson on a new car, but she also voided your trust during the process by not consulting you. You have to work through that too so it doesn’t happen again.
Sell one of the cars and buy a cheaper one with cash. Your wife may love her car so you might have to be the one to sacrifice yours first. Ideally you would get rid of both of them as quickly as possible and buy two cars in cash. Think back to those big goals you want. When you get rid of those huge interest payments and save up, you guys can have some really nice cars free and clear.
To pay cash for a car, sell as much stuff as you can, pick up some overtime, or work a part-time job to get some quick cash. Based on the ages of your cars, you might be underwater on the one you bought last year, but you should at least be even in the other one. Even if you are underwater, I would still start figuring out how you can come up with the money to unload them. Then pay cash for a good used car to drive for a couple years.
You can get a decent vehicle for a few thousand dollars. I know because my mother-in-law just got rid of hers for $1,500. It has 190,000 miles on it. It had some issues but it drove. And that’s all you need – get to and from work.
I can’t express enough the difference in my life it made when I sold my expensive sports car for a big loss, and bought a beat-up used truck for $6,500 in cash. Not having a car payment is critical to achieving your financial goals, whatever they may be. It was for me. And when I got married one of the first financial decisions we made as a couple was to sell my wife’s expensive car that had a $10,000 loan on it and pay cash for a new vehicle. That’s an extra $340 a month we had to do what we wanted with.
Remember all that interest you’re paying. $2,800 in interest for six years is $16,800. Now it wouldn’t all be interest but just call it $10k in interest for simplicity. That’s two cars right there you’re giving away in interest right now if you keep doing what you’re doing. I think that’s a big motivator to do something, starting today.
Thanks Paul for the question.
Welcome back, everyone.
The Words: Wanting something isn’t enough
Everyone wants a good marriage, good health, money, and good relationships. But wanting something isn’t a strategy for getting something. It’s just not enough.
Your circumstances can only get better in one way – you have to get better. And to get better you have to commit to get better. Consistently, every day, by taking actions that will make things better.
Those are the words.
That’s it for this episode. I’m your host Scott Alan Turner. Rockstar Katie is my producer. All the links mentioned in the show are available in the show notes on ScottAlanTurner.com
Tomorrow we’ll be wrapping up this two part series on myths broke people believe. Make sure you tune in for the conclusion.
Today’s episode was powered by Ben & Jerry’s ice cream. We won’t quit until we get a flavor named after the show. Or at least some coupons to give away.
Thanks for listening!
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