Investing Made Simple by Will The Geek

Proven Solutions

Investment methods used by some of the most successful investors in the history of the stock market, Made Easy.

Get Out of Jail Free / Your Plan for Freedom

Debt is Your Prison

In order to become a successful investor, you obviously need money. If you are like most Americans, you are in prison. It may not have bars on the doors and windows, but it is a prison all the same. You are in a financial prison, and debt is your prison. As long as you are in this prison, others will dictate your life. They will tell you how long to work, they will tell you what you can and cannot buy, where you can go and what you can do - or not do.

The only way out of this prison is to buy your way out. So you need money. And just where do you get the money? You already have it. You just don't know it yet. In this tutorial, I am going to show you how and where to find the money you need to get started investing. So let's get started. First of all...

You Need a Plan

If you are to succeed in life, you need a plan. Without it, you are just wishing and dreaming. A plan gives you goals and direction. It makes the impossible possible. You can’t get where you are going unless you know where you are, so let’s find out where you are.

Most of us have no idea what we are worth, what we owe or even where we spend our money. Most everyone has some idea of how much they earn, but not much else. Today, we are going to find the answers to all of these questions. And when we are finished, you will know just how and where you can find extra money for investing and get out of your financial prison. In order to implement your plan, ...

You Need the Right Tools

So let me introduce you to the best financial planning tool you will find anywhere. This is a simple-to-use tool that does all the hard stuff for you. You just fill in the blanks and it does the calculations. You can download it here: Financial Planner download. The planner will help you understand exactly what you owe, where you are wasting money and how to find the money you need to grow your money. Knowing where you are financially is the first step on the road to freedom.

(You will need MS Excel, but if you don't have Excel, don't worry. You can download Open Office , which is free and does the job well.)

Once you see exactly where you are, you will see that it is no longer a huge, hopeless situation. All you have to do is identify the steps you need to take and then take that first step. Looking at only one small problem at a time helps reduce the fear and hopelessness. Everything becomes easier.

Do You Pay Off Your Debt First?

Of course NOT! I don't know how many so-called gurus I have heard say you have to pay off all your debts before you can start investing. No way! If you try that, you will never make it. You will just give up. It is just too hard and takes too long. You will never get out of debt and you will never get rich. The reason is easy to see. You need to see real progress. Just watching your debts go down without seeing an increase in your bank balance or life style will leave you feeling like it is all useless.

So what you are going to do here is pay off debt and put money to work for you at the same time. You pay off part of your debt and as the debt goes down, you start setting aside money to invest. As you watch the debt disappear and your net worth increase, your mood will rise, happiness will return to your life and you can begin to live again.

I will discuss this further in another tutorial. For now, let's just concentrate on your plan.

Let's Get Started

First, you will need these documents:

  • A copy of your latest pay check
  • The latest copy of each credit card bill
  • Rent/House payment
  • Automobile payments
  • Utility bills
  • Any other bills
  • Any other sources of income

If you don't have copies of everything, in most cases estimates will do to start with. And of course, you will need to download the planner. If you haven't done it already, you can download it here: [Link - The Get Out of Jail Planner] OK, got all that together? Then let’s go.

When you first open the spreadsheet, you will see the following screen:


This is a simple spreadsheet. It might look a bit complicated, but it is not. Just take it one item at a time and keep going until it is finished. Don't worry if you don't have all the information at the start. You can always come back and fill in things later. And you don't have to do it all at once. What is important is that you finish it.

Hopefully, you know how to use a spreadsheet. If not, there are many free tutorials online. Just search “Excel Tutorials” and find one that suits your needs.

Notice that there are 6 tabs along the bottom of the page labeled Income, Expenses, Credit Cards, Investments, Net Worth and Where Did It Go. Each of these pages is designed to help you understand exactly what you have, how you spend your money and what you owe. Once you understand this, you can form a plan to reduce debt, increase income, save and invest.

Income Sources

Let’s start by finding where you get your money. First is your job or primary business. Use your pay stub here to enter each of the items on the Job 1 row (You can change "Job 1" to something else). You will notice that as you enter each number, the column titled Net Income changes. So do the Total Monthly Income and Annual Total. Each of the fields in purple are calculated for you, so don’t enter anything in those cells. You can add extra rows to add items that are special to you and your condition.

You may have several sources of income such as Social Security or a part time business. Fill these fields in also. Be as accurate as you can. It is OK to enter a guess for now, but when you get more accurate information, come back and adjust each sheet. Don’t enter anything in the column for After Expenses. When you do your expenses on the next sheet, these numbers will be updated.

The point here is that after you list all your income and expenses, the number in After Expenses column will tell you how much money you have left over each month and each year. If either of them turn ugly red, you are spending more than you make. You are going deeper into debt each month. We will see later how to correct this. It is not as hard as you think.

Expenses




Once you have completed the Income page, move on to the Expenses page. Just click on the Expenses tab to open the page. You will see this page: Expenses Use the same process here that you did for Income. But here, we are listing all the expenses you have to pay each month. It is used to show those things that you do on a regular basis. There is more detail on the Where Did It Go? Page, so you can enter an estimate here for now and update it later. Feel free to add extra rows as needed. How much you spend on credit cards will be automatically updated when you enter them on that page, so don’t put anything in that cell.

Credit Cards

This page is very critical to your goal of getting out of Financial prison. By knowing what you owe and how much it costs you, you can begin to understand how to control your spending and reduce debt.



You can download your Financial Planner here: Financial Planner download

Here’s how to do that:

  • Enter the name of the credit card – I use nicknames – and the last four digits that will help you identify each card.
  • The third column, interest, is very important. Arrange the order of the cards so that the one with the highest interest rate is at the top.
  • You will notice that sometimes there are two interest columns. One is for purchases and the other for cash advances. Look at your bill and use the one that is costing the most money. Or, you can enter the same card twice. Once for purchases and once for advances.
  • In column E, enter the current balance from your latest statement.
  • Next, enter the credit limit. This can tell you which cards are the most valuable. Those are the ones with high limits and low interest.
  • Skip column G since it is calculated for you. This is the difference between the Credit Limit and the current Balance.
  • In column H, enter the minimum payment due each month. As you are beginning to see, you will be updating this page each month when you receive your credit card bills.
  • In column I, enter the amount of interest you are paying on the card. This is an important column also. In the Total line you will see how much you are paying out in interest each month.

The Shocker

This might come as a bit of a shock or maybe a big shock. I know it was for me when I first began using the financial planner. I was paying over $800 each month in interest alone! 800 dollars! I didn’t even have a job then. It was a rough time. But it also meant that if I could get rid of it, I could invest $800 each month. That is almost $10,000 per year. Over 20 years, that is $200,000! Add in growth from investing and that is a good retirement all by itself. That is a goal worth having. I did pay it all off, by the way.

  • Column J will be calculated for you. It shows how much available credit you have for all cards.
  • Column K is a Pay Off target. This is when you plan to have that card paid off. It just helps keep you focused on your goal and gives you a great sense of accomplishment when you reach it.

Way over on the right in column N is the amount you are paying each month. The total is carried over to other pages like the Income, Expenses and Net Worth pages. So it is critical to your plan. It also tells you which cards cost you the most each month. We will cover this section in more detail in another section when we implement your “Get Out of Prison” escape plan. But for now, here is the short form breakdown:

The Execution (Not your own)

There are two basic approaches in executing this plan:

One, pay off the card with the lowest balance first. Two, pay off the one that costs you the most in interest each month. The choice is pretty much yours. Paying off the smallest balance first gives you a psychological boost and helps you keep on track and is the one I prefer. It is sort of like the way you eat an elephant – one bite at a time. In this example, we'll use the lowest balance approach. Here's what you do:

  • Call each credit card company and try to negotiate a lower interest payment or reduction in the balance, or both. It never hurts to ask. Explain your situation and your willingness to pay what you owe, but that you need help to get over a rough time. Let them know you are desperate. Explain that some money is better than no money if you have to default.
  • Pay only the minimum payment on all cards except the target card. Pay the maximum you can on that one.
  • If you are already paying the minimum on all cards, you have a couple of choices. One is to increase your income with a second or even a third job. The other is to default on one or more payments. But before you default on anything, try step one again. Defaulting is not something I would recommend, but if it is the only choice, you may have to. I will cover this subject in another article.
  • Stick to your payment schedule. Look at your "Where Did it Go" page and see where you can cut down and then apply that money to your payment schedule.
  • Learn the difference between Need and Want. When you see something that you want to buy, ask yourself if you really need it right now. Remind yourself of your goal to get out of prison now! There is always another sale and always a newer model. A Once-in-a-lifetime deal comes around every two weeks. So if it is not vital to your survival, skip it.
  • Stay out of shops. No one “needs” to go shopping. If you must go, make a list. Buy only what is on the list. Then leave. It takes dicipline, so practice, practice, practice.
  • From now on, Always Pay Cash. Go to the ATM and get only as much as you need. When you see real money leaving your hand, you begin to understand just how fast it can go. You also begin to understand how you got into debt in the first place.
  • After you have paid off one credit card, hide it. Put it in a block of ice in the freezer or at the bottom of the dirty underwear bucket. Any place you can’t get to it. Never, ever use that card again except for life and death emergencies. That’s why I don’t tell you to cut it.
  • Now celebrate. Give yourself a reward, but a small one. Pay cash. No credit. Use only the amount you were paying on that card for one month, less if you can.
  • Repeat for each card until they are all paid off. Then really celebrate!

Investments

Next, we will look at your investments. If you don’t have any, don’t worry, you will soon.




This one is simple. If you have no investments, just skip it. If you do,

  • Enter the name of the Company where you have the account
  • Enter the account name and the last four digits of the account number.
  • from your statement, enter the amounts for each of the securities you own as well as the cash balance in the account. Again, you can add rows if you need them

The Total from this page will also be carried over to your net worth page.

Where Did it Go?




In the song by the late Robert Palmer called Simply Irresistible; there is a line that goes: “She’s so fine you’ll never know where the money went”. That sums up my life in a nutshell. Most of us never know where the money goes, whether you spent it all on wine, women and song or just wasted it all, the result is the same. You’re broke. There is too little cash and too much month.

So here is where we get down to the realities of life. And it takes a little work. Here’s what I want you to do:

For one month, four weeks, I want you to track every penny you spend. Whatever it is, write it down here. Keep it up for each of the four weeks. When you are done, you will know exactly where the money went.

The total will be automatically transferred back to your Expenses page.

Net Worth




It doesn’t matter how much money you earn if you have nothing left for yourself. Broke is Broke. If you make a million dollars a year and spend a million dollars, you are no better off than someone who earns nothing. Maybe worse. What you have after you have paid off all the debts is your Net Worth.

This is what you have for yourself or for your children. This is the bottom line, in other words. This page is a consolidation or summary of all the other pages. Your goal in life is to make this bottom line figure as large as possible. It is your score in the financial game. It shows how close you are to the gates of prison. When the number is big enough, you are out of prison. You are free. Now you can come and go as you please.

Enjoy Your New Life

You can download your Financial Planner here: Financial Planner download

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