7 Simple Ways to Improve Your Personal Finances

I love personal finance! Check out these tips and send me a message on Instagram @honorandequity and let me know what you think! 

Disclaimer: This article does not constitute legal or financial advice, so you should consult professionals before making any important decisions. 

Don’t Keep Lots of Cash on Hand

Maybe you’re already a great saver! You track your expenses, you have a budget, and you live below your means. However, if you’re keeping all of your money in a checking or savings account, you are losing money! This is because of inflation: the gradual increase in price of good and services and corresponding decrease in the value of money. $1 today is worth more than that same dollar 5 years from now! So don’t keep your money in your checking account – put it somewhere that money will compound for you like a retirement account, money market account, or lend it to real estate investors. 

Use Personal Capital for Budgeting, Tracking Net Worth, Tracking Expenses

You’re probably on your phone too much already, so you might as well use your phone to increase your awareness of what your money is doing. I prefer the app Personal Capital, but there are many other options like Mint and YNAB (You Need A Budget). If you are going to be in control of your personal finances, you need to know where your money is going and how much you have! It might take an hour or so to connect all your accounts to Personal Capital, but I promise it will be worth it. Sync all your accounts and view your financial world in one app. Set short-term goals for your monthly expenses, long-term goals for your net worth and use Personal Capital to track it all. 

Review your TSP – Don’t Use the G Fund!

If you make automatic contributions to your TSP (Thrift Savings Plan – the low cost retirement account plan for federal employees) then I think you’re awesome and you’re way ahead of most Americans. However, up until a few years ago, when you started a TSP account the default fund was the G fund. This is a very low risk, low reward fund made up of non-marketable U.S. Treasury securities guaranteed by the government. This is a great fund for people in retirement age who just want to preserve the money they have, but unless that describes you, you should put the money into a different fund! Which fund to use is a whole other discussion, but you can’t go wrong with the Lifecycle funds which target a future retirement year based on your age and automatically adjust the allocation as the years go by. Bottom line: if you’re under the age of 60, your money shouldn’t be in the G fund. 

Refinance Loans while Rates are Low

As I’m writing this in October of 2020, interest rates are the lowest they have ever been. Lots of people are refinancing their home mortgages to lock in the lower rates, and if you haven’t done so you should look into it immediately! Personally, I think rates will stay low for at least the next year or so while the Federal Reserve tries to keep the economy propped up, but you never know what the future holds. 

You should also look into refinancing any other substantial loans like auto loans or student loans. It may not be a good idea to refinance those depending on your specific situation, but its worth looking in to. For example, if you are doing the the Federal Student Loan Forgiveness Program (working in the Federal government for 10 years so the government pays off your loan) you likely don’t want to refinance out of that federal loan. Consult with a professional before doing any refinancing! 

Don’t Play the Stock Market!

I am not a big fan of purchasing individual stock, because there are just so many variables and and if you are not a student of that company and how it operates, you probably don’t know enough to throw money at it. Professionals like Warren Buffett invest hundreds of millions into individual companies, but they also have teams of people poring over data such that they know everything there is to know about the company. Many people purchase stock in companies based on emotions or 1-2 nuggets of information the read about the company in a Forbes article – that is not enough information to make a truly informed investment decision! 

In my opinion, it’s a much smarter long-term play to invest in an index fund that owns shares of many different companies. It’s not sexy investing, but you’re statistically more likely to make money in the long-term as opposed to investing in single companies. 

Make Sure Your Daily Purchases Align With Your Long-Term Goals

This one is huge! So many people make impulsive decisions with their daily purchases. These purchases can add up and over time prevent you from accumulating wealth. Sit down (with your spouse if married) and think about your long-term goals, then decide on a budget that fits those goals. Stick to it! You should absolutely allocate some fun or discretionary money into the budget, but your spending should be intentional. No more impulsive Amazon or Target shopping! You know who you are! 

Get a Will!

If you don’t have a will, talk to an estate planning attorney ASAP! Even people that are good with money frequently fall short with their estate planning. People don’t like talking or thinking about death, so they just ignore it for years until it becomes a huge pain for their surviving family members. If you’re in the military, you can go to your base legal assistance office and get a will for free! You need to designate who will get your X-Box and rights to your TikTok account, otherwise who knows what will happen to it! Seriously though, even if you’re in your 20s, you should get a will to save your family the time it will take them to sort through all your property and financial accounts. 

Check out @honorandequity on Instagram and Facebook! I love connecting with people and chatting about personal finance and real estate so please reach out!

How to Earn More and Save More While Active Duty

Photo credit: Diego Gonzalez via Unsplash.com

Military members have unique opportunities to both earn and save more money while still active duty or in the reserves. You might be familiar with some of these, but it’s easy to forget about them if it’s not built into your habit pattern. Let’s get after it!

Travel and Per Diem

I travel a lot for in my current billet (1-2 weeks per month) and I get per diem for every day I’m away from home. The amount varies depending on location and whether there is a base galley nearby or not, but you’re going to get some money no matter where you go. So travel on as many work trips as you can, be frugal while on those trips, and you’ll have extra cash hitting your bank account a week after you get back.

Shop at the Commissary

This is a no-brainer. Food is the third highest expense for most households (after housing and vehicles) so you can save a ton of money by shopping at the commissary. I do most of my shopping there and the prices simply can’t be beat by local grocery stores, especially here in San Diego. The U.S. government spends an enormous amount of money subsidizing commissaries for military members, so take advantage of this one. Also, make sure you make a list and don’t go hungry!

Bonus Tip: Always refuel your vehicles on base. It’s cheaper.

Ask for Military Discounts

You already know about this one, but how often do you take advantage of it? Most companies have military discounts, but they don’t advertise it, so make sure you ask whenever you’re shopping. Retailers with military discounts include Lululemon, Lowe’s, Patagonia, North Face, Mountain Hardwear, and many many more. Also, if your credit card has an annual fee, give them a call and they will likely remove it.

Don’t Buy that New Car

This isn’t unique to military but it’s so important and service members make this mistake all the time! Don’t buy new cars and don’t buy cars you can’t afford! Vehicles are depreciating asset, which means their value tends to decrease with time. So that sick $45,000 Mustang GT you bought two years ago with a 18% interest rate is probably worth $25,000 today. Wouldn’t you rather spend $45,000 on something that will increase in value – or even better – pay you every month! This is why you need to put money into passive income streams. (Check out my article about Turnkey Real Estate Properties to learn more)

Deployments

You can make a LOT of money while deployed. Obviously this one depends on your branch of service, your military occupation, and many other factors, but it’s worth thinking about. Extra pay while deployed can include: imminent danger pay, combat pay, hazardous duty pay, sea pay, and Family Separation Allowance. These, like your BAH and BAS, are not subject to federal or state taxes as well – that’s a big win! And if you deploy to a combat zone like Iraq or Afghanistan, your base pay will not be taxed either! This can be substantial depending on your pay grade and time in service. Also, if you’re in a combat zone you can participate in the Savings Deposit Program which enables you to earn 10% interest on up to $10,000.

Additionally, your expenses generally decrease significantly while deployed. You’re probably not going out to eat or traveling while deployed, so you can cut expenses while increasing your income.

Most civilians don’t think of military service as the type of occupation that leads to wealth building. This is an over-generalization. Remember, wealth is not determined by how much money you make, its determined by how much money you save and what you do with that excess. It’s very possible to build wealth while in the military, you just have to create the right habits and plan ahead for many years from now. If you only plan two weeks ahead to your next paycheck (like most Americans do), you will never become wealthy.

Thanks for reading! If you enjoyed this article, please share with a friend and follow Honor and Equity on Instagram @honorandequity.

Are You Financially Ready for Your First Investment Property?

There are countless stories of individuals buying multiple homes they could not afford in the buildup to the 2008 housing market collapse. Many of these individuals had to file for bankruptcy as a result of their financial decisions. Every day, people buy homes they shouldn’t buy, and this is true for investment properties as well. Just because the bank will give you a loan for a property, doesn’t mean you are financially ready to buy that property. The banks are looking out for their bottom line – not yours.

So what are some things you should think about before you get that first investment property? Let’s dig in.

Get Your Personal Finances in Order

Ideally, you should have no consumer debt with the exception of a mortgage on a primary residence. Consumer debt usually comes with higher-interest rates and includes ‘bad debt’ like car payments, credit card debt, and pay-day loans. Before you buy investment properties, you should aggressively pay down these loans and free yourself from them. Dave Ramsey has a great strategy for helping people become debt-free. Paying these loans off ties into the next step: raise your credit score! Lenders need to see that you are a ‘good borrower’ which means you have steady income and you pay all your bills on time. You should target at least a 700 credit score.

You will also need cash reserves to cover surprise capital expenditures, vacancy costs, and repairs. I set aside $5,000 in a high-yield savings account per property. There are different ideas and techniques for addressing cash reserves, and I’ll admit mine is more conservative than most but it makes me sleep better at night. For example, if Stephen owns three properties, he would need to have $15,000 set aside for cash reserves, and get that number to $20,000 before he buys a fourth. Important disclaimer: These real estate cash reserves are different from your personal ‘emergency fund’ for unexpected personal expenses.  

Ok let’s sum up these up:

  1. No consumer debt.
  2. Raise your credit score to at least 700.
  3. Have sufficient real estate cash reserves.

Make Sure Your Spouse/Partner is 100% on Board

People love surprises – but surprising your husband or wife with an investment property is a terrible idea. It’s a big financial decision, so you should make sure you and your spouse are in agreement. Many times, an individual will have a much higher risk tolerance than their spouse – and this is totally normal. You should sit down and have a serious conversation to determine your shared risk-tolerance, long-term goals, and strategies you are comfortable using to achieve those goals. Maybe your spouse isn’t ok with you doing a long-distance fix-and-flip with someone you met on the Bigger Pockets forum, but they would be ok with investing in an apartment syndication with someone you both know and trust. The bottom line is: you have to communicate with your spouse/partner and ensure you’re both on the same page before you commit to investing in anything – especially real estate.

Educate Yourself about Real Estate

This one may seem obvious, and if you’re reading this article you’re already doing it! You must educate yourself about the type of real estate in which you want to invest. There are so many fantastic and free resources out there. I’ve learned most of my real estate knowledge through podcasts and there are hundreds of different shows to choose from. The Bigger Pockets podcast is a great place to start, and I will probably do another article soon about my favorite real estate and personal finance podcasts so make sure you check back often and follow @honorandequity on Instagram for the latest updates.

My second favorite way to learn about real estate is through books. The real estate book I recommend the most is Chad Carson’s “Retire Early with Real Estate” which is designed for a beginner real estate investor. Chad – who has an excellent podcast as well – does a great job of explaining the basics of real estate investing.

Real estate is a powerful way to build long-term passive income, but it’s a big commitment. You and your family must be financially and mentally prepared before you begin the process. Otherwise, you may find yourself in a terrible financial position.

As Warren Buffett wisely said: “It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes”.

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Creating A Legacy

My mom recently sent me an email about my grandparents and their approach to wealth and saving. She said at one point when her parents had a home and three children and two cars and a comfortable life, they decided they had everything they needed. From then on, all bonuses and extra money went into a savings account and into assets such as stocks and bonds. Christmas was generous but not over the top. They paid cash for all big expenses and lived well below their means. Family vacations were spent traveling to the Carolinas from Texas to visit relatives.

What was their goal? Why did they do this? They could have had much nicer cars and clothes and vacations. Their ability to live below their means and invest money wisely enabled them to pay for their children to attend college and for many of their grandchildren to do so as well. My mom expressed to me how grateful she is for this, despite not fully appreciating it at the time. My grandparents recognized that if they spent money intentionally, they would be able to create a legacy for their children and grandchildren. It’s not just the college tuition they paid for: they created a situation in which their children and grandchildren would not have to go into debt to pay for college, like so many people have today.

What do you want your legacy to look like? How do you want to be remembered? You don’t need children to inspire a legacy. You don’t need a lot of money either. It can be purely philanthropic, it can be a modest real estate portfolio, it can be art or books or even just journals or letters to friends and family. Your legacy should be authentic and true to who you are.

Something we should all do to build a simple legacy is strive to be a good person every day, treat others the way we want to be treated, and be generous with what time and money we have. These are modest things that can have an enormous impact on people in our lives. You don’t need a lot of money to be generous, to be good, or to treat others with respect.

Personally, I want to be able to spend as much time as possible with my future children and grandchildren, which is why my wife and I are so enthusiastic about acquiring real estate. We recognize this is a great way to build generational wealth. I believe that time is our most valuable commodity, and if we’re able to acquire enough passive income streams, we can spend more time with family and friends than we spend working and achieve this well before traditional retirement age. This takes sacrifice though. We have a high savings rate and forego buying many things others our age buy. We still go out to eat and go on vacations, but we are not impulsive with our money: we try to focus on needs not wants.

Our legacy is about more than real estate and passive income streams, though. We want to be generous with both time and money. My wife and I really enjoy parrots, and there are many of these birds in need of a good home. Some species have a lifespan of up to 80 years, so it’s common for them to have multiple owners during their lives. We have begun the process to start fostering some of these birds while other volunteers search for permanent homes. Also, this blog is a way that I personally try to give back to the military community through articles and discussions on personal finance and real estate. Financially, we donate to charities through the Federal Government’s Combined Federal Campaign (CFC), which is a fantastic way to find a cause that interests you, and be able to donate money automatically out of your paycheck (Federal employees only).

The concept of legacy creation can seem daunting and far-away, but there is no reason to delay. Start with a simple conversation with your spouse, or write your thoughts on your legacy in a journal. Every marathon begins with a single step, and legacy creation is no exception. Take action today. You’ll be glad you did.

Please share your thoughts on legacies in the comments below. Or if you would prefer, send me an email at doug@honorandequity.com and let me know your thoughts. Be sure to follow @honorandequity on Instagram as well.

Why Aren’t You Tracking Your Expenses?

If you want to build wealth and become financially free, there are two levers you must be in control of: money coming in (income) and money going out (expenses). Each of these come more naturally to some than others. Some people are great at earning income, but they may also spend a lot. This is called living “paycheck to paycheck” and though usually associated with low income households, many high-earners live paycheck to paycheck as well. But we are not going to live this way no matter how much we make! We want to spend way less than we earn, take that difference, and invest it into things that generate more income for us (assets), such as stock market investments, real estate, businesses, and invest in ourselves through education, personal development, mastermind groups, and more.

As military members, our ‘money-in’ lever stays fairly stable thanks to the Federal government. Therefore, tracking our expenses and being intentional with how we spend money is a crucial skill to master in order to build wealth. My dad calls this “living below your means.” If we make $4,000 per month but only spend $3,000 per month, we have $1,000 left over – $12,000 per year – to invest in assets, education, and personal growth.

There are many people, companies, and websites trying to get our hard-earned cash. Some of our expenses are necessities like groceries (I hope you shop at the commissary), rent or mortgage, gasoline, clothing, etc., but Americans spend a lot of money on things that aren’t necessities. We must make sure we’re spending only on things we need, and buying things we want only after we have already set money aside for our future. Let’s dig deeper into why you should know where your money is going.

Benefits of Tracking Your Expenses

Hidden Fees – Finance and banking companies make a ton of money from fees. According to chime.com banks in the United States can make $33 billion per year from overdraft fees alone! Other fees include foreign transaction fees, ATM fees, and maintenance fees. Most of these are only a few dollars here and there so we don’t really notice it – unless we are tracking our expenses.

Fraudulent Charges – A few years ago, I had a $250 charge on my credit card from a Yankee Candle store in Oklahoma. Now I like candles, but not that much, and I certainly hadn’t been in Oklahoma recently! So I contacted my credit card company, explained the issue, and they removed the charge and sent me a new card. Thankfully, I track my expenses regularly so I noticed the charge. Many criminals will make a few smaller purchases with your stolen credit card information before making a big purchase, so make sure you’re checking your expenses and contact your bank immediately if you notice a charge you don’t remember making.

Recurring Expenses – One of my recurring expenses is Netflix which is $14.99 per month. My wife and I watch Netflix nearly every night, and we definitely get our money’s worth from this service. It’s easy to forget about small recurring expenses like this, so go through your monthly transactions and get rid of stuff you don’t use anymore!

Budgeting – This is a great strategy to keep your expenses down and could be a whole other topic of discussion. If you create a budget (and I recommend you do), you have to be able to know how much you are spending on each category (groceries, clothing, etc.). It may sound daunting to try and figure out how to track all of this stuff, but don’t worry because its surprisingly easy.

So How Should We Track Our Expenses?

Thankfully there are free resources that can help us out. The two most common ones are Mint and Personal Capital. I have used both and prefer Personal Capital, but I have heard Mint has updated its user interface in recent years so you should check out both before deciding on one. Did I mention these are both free?!

Once your Mint or Personal Capital account is set up, the next steps are simple:

  1. Add all your financial accounts including checking/savings, credit cards, mortgages, Venmo, everything!
  2. Go through your transactions and make sure everything is in the correct category. For example, sometimes a gasoline charge will auto-categorize as ‘groceries’, so you just need to make sure it’s all accurate. This is important!
  3. Do regular assessments of your income and expenses to have greater situational awareness of how you spend your money. I recommend doing this at least once per month. Set a reminder on your phone, or add this task to a habit you already do once per month, like paying rent and other bills.

Tracking your expenses is a simple way to start taking control of your money and build wealth. It only takes a few minutes to get started and you’ll be amazed to find where your money is actually going. Once this becomes a habit, it will help you be more intentional with how you spend money.

Take action today!

Do you know of other good reasons to track your expenses? Comment below! You can also send me an email directly at doug@honorandequity.com

Make sure you follow me on Instagram! @honorandequity