The Key to Avoiding Financial Unsuccess

I've been meaning to write this post for quite sometime. You may be aware that I am a bankruptcy (and immigration) attorney in the state state with the highest bankruptcy filings in the nation. What can I say, we are good at our job. As a result, I have met with hundreds and hundreds of people regarding their financial status. I have learned a few things and decided to compile a list of things that may be of help in avoiding financial unsuccess.

(1) Open your mail.

Personally, I think this should be done right after you get your mail, but that is just me. (Who has meet with HUNDREDS of financially unsuccessful people...HUNDREDS...and this is advice number one....just saying...)

(2) Read your mail.

Pay attention to what it says too. I know, I'm so demanding.

(3) Organize your mail.

I recommend buying $10.00 file bins from Office Depot, getting file folders, and labeling the folders. Trust me, it works better than bags of unopened mail.

(4) Have some system of paying attention to where your money is spent.

I.e. - if you have $1,000 left over after paying for your necessecities, do actually know where this money goes. I recommend www.mint.com, but really, what ever helps you pay attention to where the funds go will be great.

(5) Live below your means.

People lose jobs. People get injured, have cancer, etc. It happens. When they get new jobs, they don't always make what they used to. So, if you are going to choose to incur debt, incur debt that could be paid back given the worst case scenario (i.e. unemployment check, $7.25 an hour job).

(6) Pay yourself.

By this I mean, get into the habit of setting aside at least 10% of your income for savings and/or investments. By doing this (A) you are learning to live below your means (i.e. on 90% of your income) (B) It gives you a cushion for later.

(7) Pay attention to interest rates.

A few basics: If you buy something on a credit card and pay it back a few months later, you generally accrue interest. Therefore, paying for it with cash is often a better idea. No interest.

Secondly: It is a wise idea to know how much you will be paying in interest. It just is. So sit down, and do the math. It is worth your time.

(8) Don't marry a loser.

I know this sounds really mean. What I mean to say is, don't marry someone who does not have your best interest in mind. It can come back to bite you big time. When you financially intertwine, their choices affect you too. Not everyone is honest. Also, be considerate of how your spending habits affect your spouse. That is both mature and kind.

(9) Get out of the mind set that a house is a good "investment".

It isn't always a good "investment". Especially not in today's market. People are losing thousands at the drop in house prices. I feel like the "buying a home is an investment" idea came, in part, to convince people that incurring huge debt was a good thing. However, after meeting with hundreds of people about to lose their homes, I don't think it is always a wise finanical choice at all.

Keep in mind that with buying a house, your monthly expenses generally go up. Furnices are expensive to replace. Lawn mowers, snow blowers, and additional furniture often need to be bought. Utilies are higher. Property taxes, home insurance, these are all things that a person doesn't worry about when renting. And, walking away from a home is not as easy as it seems.

PAY ATTENTION TO THE MORTGAGE RATES. When you buy your home, actually sit down and calculate how much you are spending in interest. You may be shocked, and hence motivated to pay it off early.

GET A MORTGAGE THAT YOU CAN PAY OFF EARLY. Some mortgages don't allow you to do this.

(10) Buy a house that costs signifiancly less than what you can actually afford.

This way, when times get tough, you have enough reserves to make it through and you can afford it if your budget unexpectedly shrinks significantly.

(11) Don't get sick.

You know, it is expensive to get sick, then you can't work, insurance rates go up. Not so great for financial success. Just don't do it.

(12) Avoid student loans.

I say this as someone with student loans. But, if you are contemplating taking out student loans consider this. You can't discharge them in bankruptcy. You can't defer forever. They can take your tax returns, garnish your wages, freeze your bank accounts to get their money. And they do. And, P.S., it is about a million times harder to pay them back then it is to incur them. I can say this from experience.

(13) If you are going to modify your home loans consider this:

(a) Banks should all be shot for how shoddy their organizations are run. Trust me on this one.

(1) Not a single person in the entire organization has a clue what is going on.

(2) Even if they do, the next person you will speak to doesn't, and will totally contradict everything the person who knew what they were talking about said. But you will never know who actually knew what they were talking about.

(3) Hence, none of their representations hold much value.

If you are working on a loan modification and they tell you you don't have to pay the full mortgage price for a while, take the difference, and put it in the bank. That way when they deny your loan modification and put your house in foreclosure, you can pay it off....because they never tell you what happens if the loan modification is denied. They just put you in foreclosure.

(14) Buying an expensive car is a dumb financial idea for the most part.

If you can buy it cash, the more power to you. If you can't, don't get a lemon, get something fairly inexpensive but totally functional. Pay it off, and start saving for a new car. When it dies, buy the new car cash.

(15) Don't be overly generous.

That is great that you support your kids till they are 45. You probably feel like an angel. But you aren't. Cut the apron strings. They can literally drive you to bankruptcy if you are not careful. You may have a big heart, but in the end, if you give beyond what you have, you are giving away someone elses money. And that is stealing. Last I read, this isn't a good thing.

(16) Have awesome and supportive family and friends.

This may seem to contradict #15. But it doesn't. Being "overly" generous is not the same as being supportive. Just don't give what you do not have to give. But otherwise, be a supportive network to your family and have a supportive network of friends and family. People lose jobs. If you can lend out your basement to your brother and his wife until they get a new job, do it.

(17) Lastly, have a contingency plan. EXPECT a rainy day. It will come. So, what is the plan?