Posted in Debt Free Me

Month End: April Snapshot

At the end of April, I’m truly amazed at what can happen in just a month. While having dinner at a Mexican restaurant one night, my sweet wife and I came into agreement about taking a bold and risky move. I made a withdrawal from savings to pay to zero the SVF line of credit. Although this line is my debt, it was on my wife’s credit, and I didn’t want it to impact her credit anymore. The plan is to not just replenish the line of credit to what it was, but to charge myself a high enough interest that will not only put the self lending principle to practical use, but recover the interest that would be in the savings account even if it hadn’t been removed from the account. The way you can achieve this goal is by charging yourself an interest at least 5 times or more high than the current interest rate of your savings account. For example, the current interest rate in one of my savings accounts is 2.25% annual percentage yield, so I’m charging myself 15% (6.67 times) and calculated payments based off a 12 month term so I have a minimum payment that is manageable, and if necessary I can stretch the term by 24 months for more cash flow. Your maximum term when using the self-lending principle is 24 months. Anything longer than two years lowers your commitment to finishing what you start.

Paying off this line of credit was also necessary, because we needed to get a new car. Our cars were over ten years old, and we had maximized the usage out of each car. We know how to take care of our cars, and I noticed that more and more money was being poured into her car. It’s in a situation like this one, that I think it’s a good time to look for a new car. We decided to get an SUV, because this type of car would be good for the day we begin to have a family for the sake of transporting children, groceries, and other necessities. Thankfully my, father-in-law was able to find a fantastic deal on a 2018 Ford Escape. Personally, I didn’t want that kind of vehicle, but the car had less than 1000 miles on it because it was used by the dealer only. It was a mid-level SUV, but it had extra amenities on it that added to its overall value. I liked that the vehicle had Bluetooth capability for hands free driving, it had the necessary storage space for groceries, and it had overall better gas mileage than my car and her car. However the most important point is that we were able to get the car at half its MSRP (Manufacturer’s Suggested Retail Price), and have purchased on a 5 year loan at an interest rate less than 5% for a monthly payment of less than $300.00 This flexible term and payment will give us the ability to consider home ownership and at the same time not hurt our budget. Our overall net income or disposable income is still high enough that we can still stay on track on paying off our existing debt. Once my debit is paid off, I can easily switch gears to go after this car loan.

When you are considering a major purchase such as a vehicle or home ownership, you need to look at it from as many different levels as possible. Not just the personal intangible features, but just as important, the financial impact it has on your budget. For me a major purchase is anything that I can’t pay cash for and or it’s $5,000+. In my opinion, some don’t have $5,000 in liquidity easily available to make a purchase. When making a major purchase that may involve getting a loan, ask yourself: Can you truly afford it? Keep in mind that having a good credit score will help you get a loan at an interest rate that will be more in line with your budget. If you have poor credit history, then you could end up paying more in interest over time. Knowing your bottom line is critical and having a peace about your decision will prevent buyer’s remorse.

If you want to learn more about how I’m increasing my income while reducing debt, or if you want to have someone to discuss your debt reduction strategy with, or if you need me to check your financial pulse then, contact me.

Also, learn more about how I use the self-lending principle through contacting me

This month’s video is Kevin Hart FIGURING IT ALL OUT (This will change the way you think!) from the Mulligan Brothers YouTube channel.

“The LORD will send rain at the proper time from his rich treasury in the heavens and will bless all the work you do. You will lend to many nations, but you will never need to borrow from them.”


I believe in your journey to….

A Debt Free Me

Posted in Pursuit of Excellence

April 7, 2018

Items in italics are direct quotes from the articles below

More than 5,000 companies are listed on the Nasdaq and NYSE. How should an investor cast a wide enough net to not miss out on great opportunities, but keep the workload to a manageable level? It is better to focus on a much smaller list of companies, but go significantly further in understanding them. An investor may actually only need to know a few hundred companies and stocks to get through their entire investing life. The key, then, is for the investor to find a balance between knowing just enough to let good ideas come in through the door without being so distracted and spread thin that they risk “paralysis by analysis.” If the financial markets sometimes behave like a giant circus, then investors ought to consider a three-ring approach. This approach will help investors sort out their priorities, allocate their time most effectively and balance out the need to keep a broad perspective with the equal need to maintain focus and attain a deep working knowledge. It is important for an investor to make the most of the time available for research, and one of the best ways to do this is to research vertically (suppliers and customers) and horizontally (competitors).

If you’re researching one company, it makes sense to research its competitor. As far as deciding which stock to follow, divide them into three categories: closely followed stocks, casually followed stocks, and barely followed stocks. What is your investment strategy? What is your investment strategy for paper assets? Are you cash flow driven, or capital gains driven? Asking these basic questions of yourself will also help you build these categories. Personally, I invest in my 401k, I have a personal portfolio that I build over time, and I will occasionally day trade stocks. If you’re going to invest in paper assets, then create watch lists, and the last step may actually be the most fundamental to the entire process. A disciplined investor needs a disciplined process. Set aside time every day (or week) to do the requisite work — both researching new ideas and keeping up with developments in those names on the watchlist.
When you invest in the paper asset, you must understand that you are competing against hedge fund managers, seasoned investors, and credited investors. Stay calm and follow your strategy. If your strategy isn’t working, then find others to lean on. My lens is eternity and legacy. What is yours?

Let’s say you put together a business plan. You did the math to figure out exactly what you needed. You researched your small business loan options, diligently completed the paperwork and even did your little “good luck” dance as you clicked the “submit” button on your application. But then, your worst fears came true: You were denied that small business loan. Let’s face it: There’s almost nothing quite as discouraging for an entrepreneur as seeing your business dreams halted by the decision of a single lender. You might feel rejected, have no idea what to do next and even start to question whether your grand business plans were ever meant to come true in the first place. But here’s the good news: You may abandon your own body, but you must preserve your honour. Of the many entrepreneurs who are denied a small business loan after their first application, most do go on successfully obtain financing with later applications. The key is to figure out why your application was denied, take steps to improve your credit and financial standing and choose the right loan product for your business — before trying again. Don’t let a single denial hold you back from pursuing your small business goals! Here are the five steps you can take right now to ensure that your next business loan application results in a resounding yes. The five steps are: request an explanation from the lender, check your business and personal credit reports, take steps to improve your business standing, consider alternative loan products, and apply carefully the second time. It’s important when you get denied getting an explanation from the lender and understanding what specific concerns a lender has. It’s not only important to manage your personal credit scores with the three major credit bureaus. There are three major credit bureaus for business that you may not know. It’s important to have your vendors, creditors, even your landlords report the payment history to these three bureaus: Experian, Dun & Bradstreet and Equifax.

While your business and personal credit scores will typically be the most influential factors in a lender’s decision process, the internal financials of your business — particularly the strength of your annual revenue, cash flow and business savings — will also be considered. Taking an objective look at these factors from your lender’s point of view may help you to determine what steps you can take to either improve your financial standing or choose a loan product that will be a better fit. The best way to do this? Take a look at what’s called your debt service coverage ratio, or DSCR, for short. This simple formula is the tool that lenders use to determine whether your business has the necessary cash flow to make your loan payments consistently and on time.

Don’t know what a DSCR is? Here’s the basic formula you’ll need to calculate your debt-service coverage ratio, including your anticipated loan as part of your calculations:

Annual net operating income + depreciation and other non-cash charges

Divided by interest + current maturities of long-term debt

A debt service of less than 1 indicates that your business’s debt will exceed available cash flow, meaning your loan will surely be denied. Most lenders look for a higher DSCR — at least 1.25 — with a ratio of 1.5 or even higher being ideal. Even if you’ve been denied a small business loan because of a low DSCR, you may not be able to quickly increase revenue or reduce expenses in order to re-apply.

Working in banking, I know that DSC is the most important driver for loan origination. It answers the question does the Borrower have the ability to repay? Lending is investing in a business. If your business can hit that ideal mark in DSC, then you should seek alternative loan methods, and when you apply for your loan the next time be prepared.

If you need a financial check-up or prayer be sure to contact me.

This week, I’ve included Motivation To Get Up Early- BE UNCOMMON – Motivational Video from the Mulligan Brothers YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.”

Proverbs 28:26 MSG