Monday, April 24, 2017

Should you hire a family member at your business

Having a small business doesn’t give relatives a free pass to employment. As entrepreneurs, you have the right and responsibility to do what’s best for your company. And you don’t have to hire anyone -- even a relative -- who’s not a good fit.

There are situations where hiring a family member can actually be a plus. If a relative is qualified and the kind of person who understands they’ll have to bust it every single day and perform at a level equal to or above your other team members, that can be a special and productive thing. A relative who is a problem child, however, can be a nightmare in both your professional and personal lives.

Ask yourself a few questions: Would you hire this person if they weren’t part of the family? Would you hire this person because they would make a good team member? If the answers are no, then you don’t hire them -- period.

Be kind about the situation, because there may be some bruised feelings. But the bottom line is you have to do what’s best for your business, your immediate family, and your team.

Wednesday, April 19, 2017

Dont let your basic living expenses get too high

Dear Dave,

I read where you recommend having your house payment or rent at an amount that’s 25 percent or less of your monthly take-home pay. Does this figure include property taxes and insurance too?


Dear Mark,

Yes, it does. I’m trying to keep you from being “house poor.” Did you know you can qualify for a house payment, with taxes and insurance, that’s close to half of your take-home pay? That’s ridiculous. When you don’t have room in your budget to do anything else that matters because your house payment is so large, that’s what we call house poor.

When your income minus your basic living expenses equals almost nothing, it means your basic living expenses are way too high. Being in this kind of situation keeps you from saving for really important stuff like investing, retirement, and college for your kids. I’m trying to position you where you can get the house and everything paid off so you can become wealthy. Remember, your most powerful wealth building tool is your income.

When we talk about driving a crappy car, not going out to eat, or not going on vacation -- those are temporarythings. It’s all about living like no one else, so that later you can live and give like no one else.

-- Dave

Monday, April 17, 2017

You dont have to be a math genius to understand Personal Finance


Personal finance isn’t all about math. Personal finance is only about 20 percent math. The other 80 percent is behavior.

We list debts in the debt snowball in order of the smallest to the largest balance, putting as much as possible toward the smallest while paying the minimum payments on the others. The reason, as I mentioned earlier, is behavior modification. It helps you see yourself making a dent in your debts.

It’s easier to change bad habits when you see quick results from your efforts to eliminate negative behaviors. Paying off the smallest debts first, instead of the debts with the highest interest rates, will give you quick wins that will help keep you motivated. It provides proof that you can succeed and become debt-free.

Wednesday, April 12, 2017

Why putting money in pensions may not be wise

I wouldn’t put money into a pension. For one thing, when you die after putting money into a pension, in most cases it dies with you. 

Number two, when you put money into a pension, you’re going to get about a 6 percent rate of return in the current environment — maybe even as low as 5 percent. You’re not making much on it while you’re alive, so I don’t advise putting money in pensions. We let employers put money in pensions, if they want to. That’s a nice benefit, but I wouldn’t add to it.

Monday, April 10, 2017

Dont skip Baby Step 3 - Emergency Fund

Dear Dave,
My husband and I heard about your plan, but we're not sure what to do next. We have between $400,000 and $500,000 in a 401(k) for retirement, but we don't have any other savings. We're both in our forties, and the only debt we have is our house, so what should we do about Baby Steps 4 and 6? — Mary

Dear Mary,

Overall, you two have done a great job with your money. Let's go over the Baby Steps you mentioned. Baby Step 4 is putting 15 percent of your income into Roth IRAs and pre-tax retirement plans. Baby Step 6 is paying off your home early.

The thing that worries me is you've completely skipped Baby Step 3, which is having three to six months of expenses in an emergency fund. This is money set aside strictly for emergencies. The problem right now is if you have a real emergency, you may have to cash out your 401(k). If you do that, you're going to be penalized 10 percent, plus your tax rate. That's a real kick in the teeth just because you didn't do things in the right order.

My advice is to temporarily stop your 401(k) contributions until you get a fully funded emergency fund in place. By temporarily, I mean six to eight months at most. That way, you'll be covered when life happens without having make a big dent in your retirement savings! 

— Dave