The Truth About Debt

If you have been subscribing to Copia's Journal, you will remember that I started you off on steps to taking a closer look at your cash flow and creating a budget. One of the things you have to know is how much money is flowing in and how much money is flowing out. That seems simple enough. Yet, so many Americans are so far into debt that more is flowing out than there is coming in.

One of the things an investor learns is the true difference between good debt and bad debt. Very few people understand how to correctly use debt. I read so many published articles that incorrectly explain good debt (probably because the author has to justify their own debt).

It is very simple, good debt is debt that makes money for you, period. Any other debt is bad. As long as you are honest with yourself when accessing your debt you can decide what kind of debt to have, if any. Take the steps to learn to swing the pendulum and use debt to create cash flow and then buy the things you want to support the lifestyle you desire.
Believe me, it is sweet sensation when this paradigm shifts. Learn how to make money work for you instead of the other way around. Debt is really a good thing when it pays for itself and puts cash in your pocket.

Love, Jules

Book Review: Suze Orman's 2009 Action Plan

Last month the ladies of the investment club that I belong to chose to read Suze Orman's new book. I also suggested that the readers of my monthly journal (free newsletter) read it along with us. Well, I did indeed read it and here is what I think about out it.

Her usual message comes through loud and clear, "you must commit to taking action". There is just no room for taking the back seat when it comes to understanding your financial situation and knowing what you need to do with your money.

Suze first spells out very briefly the current global credit crisis. I love her parable, "Our economy is like a patient who was rushed to the hospital in critical condition. After months of aggressive intervention ... the patient is still in the Intensive Care Unit, but the prognosis is that eventually there will be a full recovery. In the meantime, the patient will move into a rehabilitation facility and start to get back on his or her feet. Before too long, the patient will be stable enough to go home, though it might be years before he of she is back to full health".

So what do you do with your money while you ride this "rehabilitation" time out?

The chapters in Suze's book are organized in nine (9) areas of money: Credit, Retirement, Savings, Spending, Real Estate, Paying for College and Family which includes insurance and job loss. Suze lists multiple scenarios for each of these area. So you must read through (a very easy read) to see which scenario might best fit your situation. Then she tells you what to do with an "action plan" for each scenario.

Please be diligent and research any advice no matter how "expert" someone maybe. For example, if you do not understand or know what a treasury money market fund is or an EFT is, then educate yourself and learn. It is important to understand why her action plans are good at this time during a general economic downturn. The economy changes and goes through its cycles; money grows well in one investment during a down turn but then may performs poorly when the economy is booming. Thus, through learning you will also see that money can grow through investments no matter how the economy is doing. I always say, "create your own economy"!

So Suze's book is a great place to start, but there is more work to be done. So get your 2009 action plan started if you have not done so already already.

When fear and doubt are in control you may make decisions that feel "right", but the biggest risk is giving in to your emotions. Do nothing rash". ~Suze Orman
Suze's Ormans 2009 Action Plan

Organizing My Household Budget

I pulled out all of my bank statements and receipts all the way back to January 1, 2008 and over the course of three days entered everything into Quicken. I have version 2004. It was installed on my laptop when my laptop was purchased. I knew I needed to take an overview look at my out-going expenses. Remember, I am not employed at this time and I need to know how much money to earn to cover my living expenses: Cash flowing in and cash flowing out; it is like the breath of the household.

Okay, I have calculated that currently a comfortable life style for me and my kids requires earning at least $4,000.00 a month. I will get some child support, but at this point I do not know how much that will be. I do need to find another place to live. The house I am in now is a rental and the owners are putting it on the market. I'll be looking for a new place and decreasing my rent. I need to move by June 30, 2008.

Although my mother taught me all I know about budgeting and I feel I do it very well, I picked up a few books to read up on the latest and greatest in budgeting and financial planning. So over the course of the last six months or so I have been reading. I'll write reviews and tell you more about those books later. And I will also tell you now that I started a women's investment club four years ago ... and I will tell you more about that later too. The books I read were very helpful in planning my monthly household budget. I came up with seven (7) basic groups: 1) Income, 2)Must Have Essentials, 3) Important Essentials, 4) Amusements/Luxuries, 5) Savings, 6) Investments, and 7) Giving Back.

In summary, what this means is that after I entered all of my deposits and receipts, I took a look at my spending habits and determined which expenses are Must Have Essential; the absolute musts like rent, groceries, electricity, auto insurance and so forth. Then I determined what was an Important Essential; important enough to keep, but if I absolutely had to I could eliminate like the cell phone, education costs, gifts during the holidays and birthdays, recreational fees for my kids to play sports and things like that. Next, I determined the Amusements/Luxuries. These things are all about having fun which is very important, but in a crunch I can go without for several months like, dining out, going to plays, weekend outing, vacations, pedicures and so on ... Now you might really feel a pedicure is an Important Essential rather than an Amusement/Luxury or an automobile is an Important Essential rather than a Must Have Essential. Then you would determine what works best for you; what suits your personality and life style. The group called Savings is for saving for those big ticket items that I dream of having like a newer car or taking the kids to Hawaii. The group called Investments will be used for future investing. This is my path to financial freedom and I'll talk about that later. And last but not least is the group for giving back. I want to donate to causes and programs I believe in on a regular basis.

Please note that I am all for and have the mind set to generating more income rather than cutting back. But it is crucial to know where the money is coming from and where the money is going to in order to set goals and plans in place to generate more income.

In an upcoming article, I'll talk about how I divide up the income to feed each group I defined today and share a little about financial goals.