Courage
You can not teach that what you do not know. You can not lead where you
are not willing to go yourself. If you are trying to teach your spouse
how to improve upon your finances, you need to be willing to do all
that you ask of the other. Same applies to you children. They see more
of what you do, than what you say.
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Case Study : Stan & Arlene Harbrecht
"We’re Already Tight...We Won’t Find Any More Money"
Stan
and Arlene Harbrecht were from Tennessee. Stan was a truck driver,
making a modest income of about $24,000 a year. Arlene was a
schoolteacher. The Harbrechts had a daughter in college who was in real
need of some money, but Stan was concerned because he just didn’t feel
they had anything to send her. The daughter’s housing had come due and
they needed an additional $110 a month to cover this expense. The
Harbrechts had come to Money Mastery for some basic coaching, but Stan
was only mildly interested, and as their coach explained Principle 2,
Stan said “I know how tight we are with our money. I can’t believe that
you think tracking our spending is going to help us find extra cash.
That’s bologna!”
Their coach promised the Harbrechts that they
would be able to find the extra money they needed and then told them
that on average, Money Mastery clients find one percent of their annual
income each month that they are wasting on unneeded items. That means
that a person making $30,000 annually will easily find $300 per month
extra if they will learn to track their expenditures. Because Stan was
making $24,000 a year, his coaches knew he could easily find the $110
he needed for his daughter.
Stan and Arlene agreed to give it a
try and his coach committed Stan specifically to this challenge. She
asked him to send her a copy of his expenses once a month so she could
review his progress. Stan sent in his first month’s spending, but it
was only partially filled out, so his coach challenged him on it. “I
just think this is really boring and time consuming, and frankly, I
don’t want to do it,” said Stan. The coach then reminded him of his
need to come up with an additional $110 for his daughter’s college
expenses and Stan reaffirmed that he desperately wanted to keep her in
college. His coach promised him again that if he would keep track of
his spending faithfully, that he would find the money he needed. At
this point, he replied, “well, what if I don’t find the money?” The
coach promised the Harbrechts that if, by tracking their expenses, they
couldn’t find an additional $110 in wasted money, that Money Mastery
would make up the difference. Surprised, Stan said “you’ve got a deal!”
Once
Stan had given the coach his full attention, she explained to him again
that he would have to keep track of his spending very carefully every
day. He agreed. It was only two days later when Stan called the Money
Mastery offices. He was excited about a discovery he had made. He had
pulled into a 7-11 store for his daily visit to buy a Big Gulp and some
snacks while he talked with other truckers. He paid $0.84 for his
32-ounce drink, and as he had promised, recorded the expense. He had
been keeping track all day of his spending and when he totaled his
expenditures, they came to $11. Stan quickly realized that it was $11
of miscellaneous money that he didn’t need to spend. He was clearly
shocked at the amount, and realized that he had been spending that kind
of needless money for years. He said “I can tell you right now, I know
I am going to find that extra money I need for my daughter.” As he
meticulously kept track of his spending the Harbrechts found that Stan
had spent $78 that month just on Big Gulps alone. As he proceeded over
the next two months to carefully track his money, he found well over
$180 a month that was being wasted on Big Gulps, Twinkies, and other
junk food. Containing this unnecessary spending kept the Harbrecht’s
daughter in school.
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Value of Mistakes
“The better a man is, the more mistakes he will make, for the more new
things he will try. I would never promote to a top-level job a man who
was not making mistakes….. otherwise, he is sure to be mediocre.” -
Peter Drucker.
This
Peter Drucker quote gives me solace, for I have made more mistakes than
anyone reading this blog. It is also the reason I am at peace when I
make decisions, because I try to remain humble and teachable regardless
of what happens. Now go out there and make allot of mistakes! (Don’t
try to make them, just be aware that we do make them and to do our best
and not cry over spilt milk.)
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Thinking
Every person is what they are because of the dominating thoughts which
they permit to occupy their mind. If debts, living
pay-check-to-pay-check, arguing with spouse and an occasional bounced
check always keeps you nervously sitting on the edge of your financial
seat, you will not have any fun. And you may just die early.
The
solution? Get a money management system and live it. Any system is
better than no system. And, of course, the Money Mastery System is an
excellent one. Life is short enough, you don’t have to live on the
ragged edge.
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IRS Updates Plan Contribution Limits
National Underwriter, October 23, 2006
The Internal Revenue Services has announced a $500 cost-of-living increase for the 401(k) plan deferral contribution limit.
The
maximum Elective deferral for 401(k) plans, the federal Thrift Savings
plan, 457 Plans and Similar plans will increase to $15,500 in 2007,
from $15,000 this year, the IRS says.
The limits on annual
defined benefit plan benefits will increase to $180,000, from $175,000,
and the defined contribution plan benefit limit will increase to
$45,000, from $44,000.
The dollar limitation under Section
416(i)(1)(A)(i) concerning the definition of “key employee” in a
top-heavy plan will increase to $145,000, from $140,000, but the limit
used in the definition of “highly compensated employee” will hold
steady at $1000,000.
Retirement plan administrators can update
their plans to incorporate the new maximum limits without getting new
determination letters, the IRS says.
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Withdraw IRA On Time Or Pay Stiff Penalties
When reaching the age of 70, the law requires a certain amount of money
to be withdrawn from an IRA each year. Those who fail to take the money
out of the account are subject to some stiff penalties, including a 50%
penalty tax PLUS the income tax on the amount that should have been
withdrawn. So let’s say someone has $100,000 in their IRA account; they
should be withdrawing $5,000-$7,000 a year. Let’s say they’re in the
25% tax bracket and they fail to withdraw the money. They could lose
75% of the $5,000-$7,000 in taxes (25% income tax plus 50% late
withdrawal penalty)! This is an important rule that people should be
aware of, especially those retiring.
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