Hold Fast Iron

"As iron sharpens iron, so one person sharpens another." Proverbs 27:17

Hold Fast Iron is dedicated to sharpening the lives of others.  

FINANCIAL PRINCIPLES FOR A HOLD FAST LIFE

What if I told you that the most important factor to achieving financial success wasn't your paycheck, but how you manage your money? What if I also told you that you really don't need to make much money at all in order to achieve financial freedom?  From my experience if I asked that question to 100 people, almost all of them would tell me that I’m wrong and then likely barf-up a high school counselor speech about  college degrees, getting a good job, being a doctor, blah…blah…blah.  Well, I can tell you from my personal and professional experience that anyone who answers that way likely isn't rich, is swamped in debt, and is probably more worried about appearing rich to others, than actually working toward financial freedom. 

Now, let me start off by saying that here at Hold Fast the Iron, we first and foremost believe that people should strive to be content and to minimize their needs. We do not discuss money and wealth building with the aim of helping others achieve materialistic excess,  nor are we going to motivate you with images of BMWs, bottles in the club, or any other hip-hop version of wealth.  Our goal rather, is to help you live different than the other 99%, so that you can live different than the other 99%.  

That said, we put together the following list of financial principles that we believe everyone should live by and practice. Being a good steward of one's resources is a key commandment of living a Hold Fast life, so we encourage you to read each item and then evaluate how you can improve or implement each of these principles. 

·         Don’t Lend the Government YOUR money.  When it comes to income taxes, the best strategy is to try to break even. I know a lot of people prefer to treat their taxes like a savings account, but imagine if you had that money in your monthly budget. Lending your money to the government comes with a hefty opportunity cost, especially if you are a diligent saver.  Imagine you received a $5,000 tax refund.  In an average year the stock market might return 9%, but let’s say conservatively that it only returns 5%.   By not investing that money you are giving up a $250 return on investment by giving your money to the government ($5,000 *.05).  You may have even saved more by paying off a credit card where the interest rate can be north of 17% (5000*.17 = $850).  These numbers might not seem like much in any given year, but if you did this over your whole life time, the numbers become very large.   $250 opportunity cost times 30 years would equal $7500 lost investment income. And this doesn’t even include compound interest.

·         "Expert" financial advice usually is geared toward making the "Expert" money, not you. As someone who has worked in the financial industry; both banking and investing, I can tell you that unfortunately this can be very true. The SEC, Federal Reserve, Consumer Financial Protection Bureau, etc., were all created because greedy sales reps tend to put themselves first. For example, your banker and advisor likely won't tell you to pay-off your house because of the coveted mortgage tax deduction (we'll get to this later), but really it's because no one but you would make money of that strategy. The bank loses interest payments and there would be less money for the advisor to invest. 

·         Keep it simple. Unless you have a degree in finance or significant knowledge of the field, it is usually best to focus on simple strategies. Complex saving and investing strategies are usually designed to make professionals money, not average joes. 

·         Never buy a lottery ticket. Statistically speaking this is the worst purchase you can ever make. Instead of wasting money on the lottery, add the extra dollar to your mortgage payment or credit card. The interest you'll save will provide an immediate return on your investment. Plus, the government makes money on the lottery...enough said.

·         Know yourself. If you drink too much, keep it out of the house. If you shop online, commit to only buying in person. If you need to keep things liquid, don't lock up all of your money in retirement accounts and other illiquid products.

 

·         Have a savings account worth at least 6 months expenses. This is a lot of money for most people, but shoot for at least a $1,000. That amount can usually cover most emergencies and can keep you from having to dip into credit card hell. 

·         Don't rely on the government; take care of yourself. The government has social programs that are designed to help the least among us through hard times. They are not supposed to be used to support laziness. Work hard and bust your ass to take care of yourself. 

·         Pay off your credit cards and just say NO to rewards programs.  I'm sorry if this offends anyone, but rewards programs are for suckers. Credit card companies created those programs to incentivize you to borrow beyond your psychological limit so that they can get a greater percentage of your income through interest. What you don't realize is that the free airline ticket you’re getting likely cost you three to four times what you would have paid for it had you just paid cash. Use credit like the rich do to buy assets and wealth; do not use credit to buy gas, electronics, clothes or other everyday items. Cash is king. 

·         Don't spend money to show off or to make other people think you're successful. Would you rather live a modest lifestyle and be sitting on a pile of cash; or, would you rather be broke, but have nice things so others will think you're better than they are? I'd rather look broke, than be broke. Not only that, but we'd all be a lot happier if we realized that we are really only competing with ourselves. 

·         Drive every car you buy for at least 10 yearsThis one goes along with the previous item, but strive to own every car you buy for at least 10 years. Maintenance on an old car is far cheaper than a car payment and a used car will save you thousands in dealer fees, interest payments and warranty costs. Also, avoid leasing in most situations. Leases are designed to create repeat customers; that is, people who will purchase a new vehicle every three years or be forced to over pay for the leased vehicle when the term is up. In most lease situations, the dealer will extract a greater amount of your money from you by basically getting you to buy the car twice from them. Once on the leasing carousel it is incredibly hard to get off, so avoid it all together. I know; my wife and I have been making payments on a RAV4 we leased over 6 years ago. In the end, the dealer will have extracted 10 years of payments out of us. It would have been paid off two years ago had we just purchased it originally. 

·         Work towards being debt free and stay that way. Pay off your credit cards, auto loans, student loans and mortgage as fast as you can. All of the interest you’re paying is robbing you of your future. And don't get romanced by the mortgage tax deduction. Why would you spend $10k in interest, just to save $2k in taxes? That is an $8k loss.  Further, don't be obsessed with your credit score. Once you're rich you won't need credit because you'll be able to pay cash for everything.

·         Minimize your needs and avoid material excess. Material things can never provide lasting happiness, so try to learn to live with as few possessions as possible. Detaching from material things will give you an amazing sense of contentment and save you thousands of hours that would have otherwise gone towards organizing, cleaning and purchasing. Not only that, but every dollar you spend on junk is one less dollar that could be used to pay down debt or invest for your future. 

·         Don’t always believe that low deductibles are better for you.  Sure, low deductibles mean you have to come up with less money in the event of an emergency, but over your lifetime they are likely to cost you thousands of dollars and fill the pockets of the insurance company.  If you have the cash savings we described above, then don’t be afraid to raise your deductibles. The statistics of you ever filing a claim are exactly the same regardless of your deductible (which is extremely low), so why give the insurance company more money then you have to protect your car or home. Raising your deductibles will also help with your monthly cash flow allowing you to save, pay down debt or invest. Notice I did not say anything about eating out or buying anything material with the money you save.

If you think you could save money by changing policies, give our friend Chadd a call. Click here for his information.

·         Manage your money for FREEDOM, not pleasure. No one can have two masters.  If you’re in love with the idea of a comfortable lifestyle, then you’ll likely always spend more then you should and fall short of your financial goals. However, if your goal is to achieve an experience real freedom, nothing will be able to stop you from getting rid of your credit cards, trading in an expensive car for a used one, or making any other sacrifice necessary to experience something very few men have ever enjoyed: Total financial freedom.

·         Give and Share with others:  As comfortable Americans we often forget that most of the world lives on less than a $1 a day, while we bitch and moan about not having the latest iphone. Take time to think about the least among us and donate money, food or your time whenever possible.  Be wary of large charities though; most of them have high overhead and eat up the majority of the money they take in.  We suggest giving to religious organizations or military focused groups like Operation Home Bound, where a very high percentage of the funds will be used to directly benefit those in need and have an immediate impact.

Focus…Work Hard…Hold Fast!

Note: We are not financial advisors or insurance agents. The following principles are our opinion and may not be suitable for your situation. We encourage you to carefully consider the information presented and then consult with a professional to determine what is best for you.