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More Americans are Living Paycheck to Paycheck

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58% of Americans are living paycheck to paycheck after inflation spike — including 30% of those earning $250,000 or more. CNBC

With inflation at 40-year highs, workers across all income levels are having a harder time making ends meet. As one CNBC financial guru once commented, “Too many Americans are left with more month than money.”

As of May 2022, with inflation driving up costs everywhere for consumers in all income brackets, 58% of Americans — roughly 150 million adults — live paycheck to paycheck, according to a new LendingClub report. That’s down slightly from 61% who reported living paycheck to paycheck in April but up from 54% in May 2021.

Consumers are struggling to afford their day-to-day lifestyle and tend to rely more on credit cards and carry higher monthly balances making them financially vulnerable.

This increase means approximately three in five U.S. consumers devote nearly all their salaries to expenses with little to nothing left over at the end of the month.

Those struggling to afford their day-to-day lifestyle tend to rely more on credit cards and carry a higher monthly balance, making them financially vulnerable, the survey said.

Overall, credit card balances rose year over year, reaching $841 billion in the first three months of 2022, according to a separate report from the Federal Reserve Bank of New York.

References:

  1. Jessica Dickler, “58% of Americans are living paycheck to paycheck after inflation spike — including 30% of those earning $250,000 or more”, CNBC Personal Finance, June 27, 2022, https://www.cnbc.com/2022/06/27/more-than-half-of-americans-live-paycheck-to-paycheck-amid-inflation.html
  2. https://www.pymnts.com/consumer-finance/2022/report-36-of-consumers-earning-250k-now-live-paycheck-to-paycheck/

Debt is Bad

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If you make the monthly minimum payment on your 14% interest rate credit card balance, it will take 25 years to payoff this debt and you will pay in interest charges more than the original amount.

You should always pay more than the minimum payment due on your credit cards, student loans and other consumer debt. As your credit card debt balance decreases, your minimum payment due will decrease and your payments will stretch out. If you make the monthly minimum payment on your 14% interest rate credit card balance, it will take 25 years to payoff this debt and you will pay in interest charges more than the original amount.

There are amazing benefits to climbing out of credit card and student loan debt. Paying off debt takes a plan and patience to execute it.

  1. Figure out how much debt you owe. You cannot make a plan to pay off your debt until you know exactly how much you owe.
  2. Decide what to payoff first. Best option is to pay all the minimums, but pay more money on the card with the highest APR. The “snowball” method is the most efficient approach. It’s essential for you to get started.
  3. Negotiate down the APR. call the credit card company and ask for a lower APR. if successful, you can save a significant amount of money.
  4. Decide where the money to pay off your credit card will come from, like balance transfer (a band aid for a larger problem, your spending habits), 401(k) or home equity one of credit (HELOC), or reducing spending to prioritize debt reduction.
  5. Get started. The goal is action, not paralysis by analysis. Get started executing your plan and you can always find tune it later.

Being in debt means giving up choices and having reduced options; it means staying at a job you hate because it pays good money; it means not being able to build a decent savings account. It means delaying or foregoing implementing your plan to achieve financial freedom.

“Good debt is a powerful tool. But bad debt can kill you.” ~ Robert Kiyosaki

Debt can be a tool, as long as it is used to buy assets. And, statistically speaking, debt in America is normal. Only 50 percent of households reported any credit card debt, while credit card companies reported that 76 percent of households owed them money,” wrote Binyamin Appelbaum of the NYT

Seventy-five percent of Americans claim that they don’t make major purchases on their credit cards unless they can pay it off when the balance is due. Yet when looking at data of actual spending behavior, over seventy percent (70%) of Americans carry a balance.

It appears most people have no idea how much they actually owe or have any idea what their debt payoff date is.

Most people don’t get into serious credit card debt overnight. Instead, they accumulate debt little by little overtime until they realize they’ve got a serious debt problem.

Getting rid of credit card and student loan debts is hard, but very necessary to build wealth and achieve financial freedom.

Without a debt management plan, that requires knowing both the amount of debt you owe and the projected payoff date, you will more than likely be controlled by your debts.

The good news is that credit card and student loan debts are almost always manageable if you have a plan and take discipline steps to control and reduce it. You have to plan and take action paying off you credit card and student loan debts.

The number one mistake people make with their credit cards is carry a balance, or not paying it off every month. Since the key to utilizing credit cards effectively is to pay off the balance in full every month.

It is difficult for someone to achieve financial freedom if they always owe and have excessive debt.

Use credit only to purchase things of lasting value: a home, an education, maybe a car. Pay cash for everything else. To quote Knight Kiplinger, “Do you know anyone who got into big financial trouble because they didn’t borrow enough money?”

Once you’re out of the debt hole, you can avoid that predicament again, explains bankrate.com. Here are some rules to live by:

  • Set a budget and stick to it. Live within your means.
  • Avoid impulse purchases.
  • Shop around for the lowest price before making a big purchase.
  • If you use a credit card, pay off the balance each month to avoid interest charges.
  • Keep your finances organized and keep a close eye on your bank balances.
  • Stay away from “buy now, pay later” and “interest-free financing” offers, which just defer your debt.
  • Save money. Try to set aside a certain percentage of your income to be swept into savings.

References:

  1. https://www.bankrate.com/personal-finance/debt/debt-consolidation-options/

Thoughts of the Day

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Gratitude is a Super Power!

Gratitude is a choice, not just a feeling. You must choose to live a life in gratitude and therefore gratitude is an attitude and virtue. Gratitude is a virtue you choose to live your life by.

“Gratitude is not only the greatest of all virtues but the parent of all the others.” Cicero (106-43bc), Roman Philosopher

Angeles Arrien wrote: “The practice of offering gratitude bestows many benefits. Anger, arrogance, and jealousy melt in its embrace. Fear and defensiveness dissolve. Gratitude diminishes barriers to love and evokes happiness, keeping alive what has meaning for us.”

Gratitude is recognizing the fact that everything good that happens in your life is a gift. Not something we’re entitled to, or should expect, but actually a very sweet gift.

“The more you praise and celebrate your life, the more there is in life to celebrate.” – Oprah Winfrey

“Acknowledging the good that you already have in your life is the foundation for all abundance.” ~Eckart Toll

“Success is the sum of small efforts repeated day in and day out.”– Robert Collier

“Destiny is not a matter of chance, it is a matter of choice. It is not a thing to be waited for, it is a thing to be achieved.” -William Jennings Bryan

“Minimalism isn’t about removing the things you love. It’s about removing the things that distract you from the things you love.” ~Joshua Becker Over

“In every season of our life, we’re tempted to focus on our present burdens and miss the opportunities and blessings.

We love it when we receive the blessing, the promotion, the new house, the baby, but with the blessing comes new burdens, responsibilities, payments, cares.

Rather than enjoy where we are on the way to where we’re going, we get so caught up in the challenges that we miss the beauty of this moment.

You could be in one of the best seasons of your life, but you don’t realize it because you’re focused on the struggles, on what you don’t like, on what’s taking so long.

At some point you have to put your foot down and say, “This is the day the Lord has made”, and I will not allow my burdens to steal my joy, my peace and my enjoyment of my blessings.

Change your perspective and attitude. Shift your focus from life’s burdens to the blessings and opportunities, from what’s wrong to what’s right, from what you don’t have to what you have.

Make the most of abundant joy and peace every day.

“Being grateful all the time isn’t easy. But it’s when you least feel thankful that you are most in need of what gratitude can give you: perspective. Gratitude can transform any situation. It alters your vibration, moving you from negative energy to positive. It’s the quickest, easiest most powerful way to effect change in your life — this I know for sure.” ~ Oprah Winfrey

References:

  1. https://www.joelosteen.com/en-US/inspiration/todays-word/2021/03/21/20/06/Todays%20Blessings

Warren Buffett’s Three Investing Principles

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If you want to invest on your own, billionaire investor Warren Buffett recommends three investing principles that have guided him over the decades.

The principles are derived from a book first published in 1949: “The Intelligent Investor”, written by Buffett’s mentor, Benjamin Graham:

Principle 1: Don’t look at a stock like it is a ticker symbol with a price that goes up and down on a chart. It’s a slice of a company’s profits far into the future, and that’s how they need to be evaluated.

Buffett has four things he wants to see, whether he’s buying the entire company for Berkshire, or just a slice of it as a stock:

  1. “One that we can understand …” When Buffett talks about “understanding” a company, he means he understands how that company will be able to make money far into the future. He’s often said he didn’t buy shares of what turned out to be very successful tech companies like Google and Microsoft because he didn’t understand them.
  2. “With favorable long-term prospects …” Buffett often refers to a company’s sustainable competitive advantage, something he calls a “moat.” A “moat” consists of things a company does to keep and gain loyal customers, such as low prices, quality products, proprietary technology, and, often, a well- known brand built through years of advertising, such as Coca-Cola. An established company in an industry that has large start-up costs that deter would be competitors can also have a moat.
  3. “Operated by honest and competent people …”. “Generally, we like people who are candid. We can usually tell when somebody’s dancing around something, or where their — when the reports are essentially a little dishonest, or biased, or something. And it’s just a lot easier to operate with people that are candid. “And we like people who are smart, you know. I don’t mean geniuses… And we like people who are focused on the business.” — 1995 BERKSHIRE ANNUAL MEETING. The quality of the business itself, however, takes precedence.
  4. “Available at a very attractive price.”Buffett’s goal is to buy when the price is below a company’s “intrinsic value.”“The intrinsic value of any business, if you could foresee the future perfectly, is the present value of all cash that will be ever distributed for that business between now and judgment day.“And we’re not perfect at estimating that, obviously”, Buffett stated. “But that’s what an investment or a business is all about. You put money in, and you take money out.”

Principle 2: The stock market is there to serve you, not instruct you.

Many non-professional investors become concerned when stock prices fall. They think the market is telling them they made a mistake. Some may even be so shaken that they sell stocks at the lower prices.

Buffett takes the opposite view. If he buys a stock because he thinks the company will be a long-term winner, he doesn’t let the market convince him otherwise.

Principle 3: Maintain a margin of safety

“We try not to do anything difficult …

“This is not like Olympic diving. In Olympic diving, they have a degree of difficulty factor. And if you can do some very difficult dive, the payoff is greater if you do it well than if you do some very simple dive.

“That’s not true in investments. You get paid just as well for the most simple dive, as long as you execute it all right. And there’s no reason to try those three-and-a-halfs when you get paid just as well for just diving off the side of the pool and going in cleanly.

“So, we look for one-foot bars to step over rather than seven-foot or eight-foot bars to try and set some Olympic record by jumping over. And it’s very nice, because you get paid just as well for the one-foot bars.” — 1998 BERKSHIRE ANNUAL MEETING

Low cost index funds

Buffett has long recommended that investors put their money in low-cost index funds, which hold every stock in an index, making them automatically diversified. The S&P 500, for example, includes big-name companies like Apple, Coca-Cola and Amazon.

Buffett said that for people looking to build wealth and their retirement savings, diversified index funds make “the most sense practically all of the time.”

“Consistently buy an S&P 500 low-cost index fund,” Buffett said in 2017. “Keep buying it through thick and thin, and especially through thin.”

References:

  1. https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2022/03/22/bwp22links.pdf
  2. https://www.cnbc.com/2022/05/02/warren-buffett-says-investing-is-a-simple-game.html

Growing Your Gratitude

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“The single greatest thing you can do to change your life today would be to start being grateful for what you have right now. And the more grateful you are, the more you get.” — Oprah Winfrey

By cultivating a life of gratitude, you will be able to feel joy no matter what your circumstances are. As dark as things might seem, if you can dig deep and find something to be grateful for, your whole attitude can change.

According to an article in Psychology Today, “Scientists say that these techniques (focusing on gratitude) shift our thinking from negative outcomes to positive ones, elicit a surge of feel good hormones like dopamine, serotonin and oxytocin, and build enduring personal connections.”

Being grateful shouldn’t be reserved for those times when it’s easy to be grateful, either. Gratitude promotes life. It’s optimistic. Practical. It takes courage and brains to be grateful.

Gratitude clears the way for positive choice and change. It motivates and moves you into a higher place so you feel better. Hopeful. Strong.

When you appreciate things you’re kinder. Gratitude boosts you physically, mentally and emotionally.

Gratitude helps you build wealth

Nourishing yourself with gratitude makes you feel stronger, more alert and alive. It builds up and strengthens your entire body, mind and spirit.

Six strategic steps to fill up your gratitude account:

  1. Call it “intentional gratitude” or “conscious appreciation” but build a new habit of expressing gratitude frequently. It will make you feel fortunate, powerful and kind.
  2. Create a specific daily mantra for yourself — a prayer, wish, vow or commitment —
    ‘I am grateful for_______________’. Have it in your mind. Say it to people. Write it in notes and emails.
  3. “Thank you” takes one second to say. Consciously look to express it and do good things often. Don’t miss an opportunity to be grateful.
  4. Start a Daily Gratitude Journal – Write 3 things you’re grateful for every night before bed.
  5. How does gratitude live in the world? Look for examples in music, art, literature, daily life, history, people you see and know.
  6. Acknowledge negativity and counter it with genuine appreciation and thanks.

“Gratitude is strongly and consistently associated with greater happiness. Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships…regardless of the inherent or current level of someone’s gratitude, it’s a quality that individuals can successfully cultivate further.”

References:

  1. https://www.huffpost.com/entry/grow-your-gratitude-six-easy-steps-for-smart-people_b_5760096
  2. https://www.aplanforjoyinthehome.com/grow-in-gratitude/
  3. https://www.seventeen.com/life/a37198250/gratitude-quotes/

Student Loan Debt Forgiveness…Shifting the Burden to American Taxpayers

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Americans collectively owe more than $1.7 trillion in student loan debt, more than three times what it was just 15 years ago.

Many progressive Congressional lawmakers have called for President Biden to forgive all federally owned student loans.

Others lawmakers have argued for up to $50,000 in forgiveness per borrower.

Recent reports suggest the White House is more likely to forgive $10,000 and include an income cap that limits relief to high level borrowers. This more limited approach of forgiving $10,000 would provide relief to people who need it most while ensuring that high-earning borrowers like doctors and lawyers don’t get a bailout.

The White House has also repeatedly extended a pause on loan payments that was put in place by the Trump administration in the early days of the pandemic. That pause has included a freeze on interest, which on its own has saved the average borrower about $5,500, according to one estimate.

Why there’s debate

Supporters of student loan debt forgiveness say the enormous financial burden of loans, many with onerous interest rates, make it impossible for college graduates to get ahead.

Debt relief would directly affect around 43 million Americans. It is believed that forgiving student loan debt would free those people to spend their money on goods and services and would create significant economic benefits for everyone.

Many also argue that debt relief would help reduce racial inequality, since people of color tend to borrow significantly more than their white peers.

Opponents of student debt forgiveness say it would be unfair to the vast majority of Americans who don’t have student debt — particularly those who paid off student loans on their own. Additionally, federal student Liam debt forgiveness doesn’t erase the debt, it only shifts the burden from the borrowers to the American taxpayers, who are already burdened with the tad of inflation.

Some make the case that there are much more effective ways to reduce inequality. Others argue that it would be wasteful to forgive student debt without also taking on the much more difficult task of fixing problems in the higher education system that created the student debt crisis in the first place.

What’s next

If Biden does choose to forgive some student debt, it’s not clear whether the courts will uphold the executive branch’s authority to do so.

References:

  1. https://finance.yahoo.com/student-loan-debt-how-much-should-biden-forgive-213848402.html

Canceling Debt Just Shifts the Burden

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Debt is never completely canceled or forgiven, someone (in the case of student loan debt, it would be taxpayers) always pays the debt or incurs the burden.

About 43 million people, according to CNN.com, are waiting to find out if President Joe Biden will wipe away all or part of their federal student loan debt.

President Biden is “taking a hard look” at canceling or forgiving hundreds of billions of dollars in federal student loan debt — a decision his advisers believe would be “a complete disaster” for the Democratic Party in the midterms.

The White House floated loan forgiveness of $10,000 per student borrower. The debt forgiveness would add $245 billion to federal government debt, according to the Committee for a Responsible Federal Budget.

Digging deeper, it appears that the top 40 percent of wage earners hold the majority of student debt and would be the major benefactors of this Presidential Executive Order. Of student-debt holders between the ages of 25 and 40, the top 40 percent bears half of the total debt.

According to the IRS, if you borrow money and are legally obligated to repay a fixed or determinable amount at a future date, you have a debt. You may be personally liable for a debt.

If your debt is forgiven or discharged for less than the full amount you owe, the debt is considered canceled in the amount that you don’t have to pay.

In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.

A majority Americans are opposed to blanket federal student loan debt forgiveness or cancellation. Because, it doesn’t seem fair to them if millions of student loans are forgiven, yet the money to pay the debt is going to have to come from somewhere, and it most likely will be on the backs of the middle class tax payers.

Many Americans made sacrifices so that they and their children could attend college and would not need student loans, largely because they sacrificed and saved enough money to help pay for college costs.

Additionally, many economists opine that you or the government simply cannot cancel debt, you can only move the obligation around. This simple economic principle seems completely loss on many Congressional politicians.

Debt cancellation — it’s a noble yet dangerous concept. Basically, the financial burden may not fall solely on the students with debt. Who would pay for it? Every U.S. taxpayer would pay for this relief. 

So the Executive Order wouldn’t really forgive or cancel debt. It would simply make every American obligated to pay this federal student loan debt they didn’t sign-up for or reap the benefits from.

In short, student loan debts that are forgiven do not go to “debt heaven”. The obligations will fall onto the backs of American taxpayers.

References:

  1. https://www.americanthinker.com/blog/2022/06/well_lend_them_more_money_to_pay_the_higher_tuitions.html
  2. https://www.irs.gov/taxtopics/tc431
  3. https://www.msn.com/en-us/news/us/heres-what-it-would-mean-to-these-americans-if-biden-canceled-student-loan-debt/ar-AAYBK7N?ocid=uxbndlbing
  4. https://www.forbes.com/sites/forbesfinancecouncil/2020/08/06/you-cant-cancel-debt—you-can-only-move-it-around/?sh=7fdfa9c64616

Major Definite Purpose

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“A man without a definite major purpose is as helpless as a ship without a compass.” – Napoleon Hill

Napoleon Hill emphasized in his book “Think and Grow Rich” that the first step of learning how to “Think and Grow Rich” is figuring out what you desire more than anything else – and then coming up with a plan to act on it.

Hill puts a great importance on individuals deciding on a definite major purpose. Yet, it’s not unheard of for people to get stuck on this first step.

In fact, the #1 question that most ask is: “How do I determine what my definite major purpose is? I just don’t know what it is I want to do!”

It is said widely that ninety-five percent of the people of the world drift through life aimlessly without definite purposes for their lives.

Psychological reason for having a definite purpose in life implies that one’s actions are determined by the thoughts of one’s mind. Therefore, if you deliberately hold your definite purpose in your mind with the expectation of it realization, this will permeate your subconscious mind to the point where it will automatically influence the actions needed to achieve your definite purpose.

Once you determine your definite purpose, make sure that it is well-defined. You must write it down and place it where you can see it as soon as you open your eyes in the morning and the last thing that you see before you close your eyes at night.

What is your Life’s Mission? What is the number one purpose in your life? Why are you here? What are the most important accomplishments you desire? And what are you willing to give in return for them? 

What one great thing would you dare to dream if you knew you could not fail, asks Brian Tracy?

“If you could be absolutely guaranteed of successfully achieving any goal, large or small, short term or long term, what one goal would it be?  Whatever you answer to this question, if you can write it down, you can probably achieve it.  From then on, the only question you should ask is, ‘How?’  The only real limit is how badly you want it and how long you are willing to work toward it.” Brian Tracy

Once you know your bigger purpose, it’s easier to figure out your next actions.  And, when you know your bigger purpose, it can help you funnel your time, talent, energy, and effort into something that really matters to you.

Definite Purpose:

If you cannot see the end of the journey, you cannot plot the course to that destination.

Thus, it’s essential to determine “The one goal that is most important to you at the moment. It is usually the one goal that will help you to achieve more of your other goals than anything else you can accomplish,” Tracy writes. In his, “6 Attributes of Your Major Definite Purpose,” Tracy writes:

  1. Your major definite purpose must be something that you personally really want, excites you and makes you happy.
  2. Your major definite purpose must be clear and specific.  You must be able to define it in words and must be able to write it down.
  3. Your major definite purpose must be measurable and quantifiable.
  4. Your major definite purpose must be both believable and achievable.
  5. Your major definite purpose should have a reasonable probability of success.
  6. Your major definite purpose must be in harmony with your other goals and aligned with your values.

“Decide now what you desire from life and what you have to give in return.”

To achieve success, you have know exactly what you want and what you are willing to give-up in return….success and achievement are a two-way street.

References:

  1. https://sourcesofinsight.com/major-definite-purpose/
  2. https://www.mavericonsulting.com/news/2018/12/14/what-is-definiteness-of-purpose-and-why-is-it-so-importantnbsp
  3. https://thinkandgrowrichinstitute.com/definite-major-purpose/

Since 1937, over 120 million copies of Think & Grow Rich have been sold, and it’s the #1 book most people who have successfully built wealth credit with their success.

First Day of Summer 2022

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The first day of summer in 2022 is Tuesday, June 21, in the Northern Hemisphere, at 5:14 a.m. EDT, on Tuesday, marks the 2022 summer solstice.

This is the precise moment when the North Pole tilts closest to the sun, making the sun appear at its highest point in the sky of the year.

At that moment on Tuesday, the sun will be directly above the Tropic of Cancer. That’s the farthest north the sun moves in the sky, which is why the days close to the solstice have the most daylight of the year for n the Northern Hemisphere.

The reason the Earth has solstices, equinoxes and seasons is because the Earth is tilted on its axis. According to Earthsky, Earth’s Northern and Southern Hemispheres trade places in receiving the sun’s light and warmth every six months as the Earth revolves around the sun.

Reference:

  1. https://www.yahoo.com/gma/summer-2022-begins-longest-day-213034087.html

The Greater Fool Theory

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“The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. As long as there is a greater fool around the corner willing to pay a higher price, the value will continue to rise,” — Ashwin Sanghi

The “greater fool theory” refers to the principle that one can make money by investing into overvalued assets and selling them for a profit later, because there will always be someone else, “the greater fool”, who will come along and pay a higher price for the assets.

Billionaire Microsoft co-founder and investor Bill Gates has dismissed investments in cryptocurrencies, such as Bitcoin, and non-fungible tokens (NTFS). He opined that the digital assets market is largely driven by rampant speculation, greed and the greater fool theory.

Gates stated that the phenomenon of cryptocurrencies and non-fungible tokens as something that’s “100% based on greater fool theory,” since there will always be other speculators willing to pay more for assets.

Gates said he doesn’t own any crypto because he prefers investing in assets with determinable intrinsic value (value that is justified by facts) or “things that have valuable output.”

Thus without having a determinable intrinsic value, — a value that is justified by “facts”; such as assets, liabilities, earnings, dividends and other definite values — investing in cryptocurrency and NTFs is purely speculative by investors.

In the past, intrinsic value was equated to a company’s “book value”. Subsequently, a new concept was developed; the intrinsic value was determined by the earning power or the present value of the discounted future cash flow of a company.

Regarding intrinsic value: “To use a homely simile, it is quite possible to decide by inspection that a woman is old enough to vote without knowing her age or that a man is heavier than he should be without knowing his exact weight..” — Security Analysis by Benjamin Graham, David Dodd, Warren Buffet.

According to Corporate Finance Institute, the best way to avoid being a “Greater Fool” is to:

  • Do not blindly follow the herd, paying higher and higher prices for something without any good reason.
  • Do your research and follow a plan.
  • Adopt a long-term strategy for investments to avoid bubbles.
  • Diversify your portfolio.
  • Control your emotion of greed and resist the temptation to try to make big money within a short period of time.
  • Understand that there is no sure thing in the market, not even continual price inflation.

References:

  1. https://decrypt.co/102973/bill-gates-crypto-and-nfts-100-based-on-greater-fool-theory
  2. https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/greater-fool-theory/
  3. https://medium.com/the-peanut/the-concept-of-intrinsic-value-in-security-analysis-baa26ed1d42a