Fresh Start Law Firm
Money Guide

Your guide to getting out of debt

Staying out of debt

Building money for your future

Budget, Budget, Budget

In order to succeed with money on any level you must use a budget, without it you are lost
There are many budget phone apps. We recommend the free version of Every Dollar. However use whatever you like
Type out every expense: rent, utilities, car, insurance, groceries etc.
From here you can see what you are spending the right amount of money on, too much money on, and things you should be spending money on at all
Cut the things you should not be spending on, and try to lower the things you are spending too much on
As random expenses pop up in the year like an oil change or doctor appointment. Average them into the monthly budget

Live Below Your Means

This is the hardest and most important step
If you do not accomplish this one you can not accomplish the others
If you do not do this you will never have money in your bank, you will never have money for retirement, you will never truly have money
Life on 80% of your net income, save / invest the other 20%.
That means live in a place 80% as nice as you can afford, go out to dinner 80% as much as you could etc.
It is best practice to auto deduct 20% of your paycheck as soon as you get it.
Age, Income, etc. is not an excuse not to save. If you don't start now you won't have anything later
Starting today will always be worth more than starting tomorrow due to the time value of money

Clear Debt

A bankruptcy filing can jump start your successful money run.
With the right law firm, we can send you from tens of thousands of dollars in debt to completely clear
Use bankruptcy to get over on of the hardest money hurdle, debt.
Once free of debts chains, start building for yourself and your future

Save $1000 for Emergency Fund

Life happens
Be prepared when it does
All of the steps should be done whether you are in an active Ch. 7, Ch. 13 or not
Based on Step 2 saving 20% of your income. Put that 20% into a High Yield Savings Account
If you make $1000 a month this goal will take you four months. If you make $4000 a month this will take you a month etc.

Save 3 Months for True Emergency Fund

Save 3 Months income for a true emergency fund
To do this continue with the 20% contributions to your High Yield Savings Account for 1 year
Every 4 months -> will save 1 month of spend
This sets you up if suffer from job loss, a major home or health problem etc.
High Yield Savings Account is also an introduction to investing. The money in that account grows at a decent rate with no market risk, making it the perfect place to put an emergency fund

Invest your Income

Everyone should invest there income after there emergency budget is full
Assuming a 10% rate of return, this is how long you would need to invest a percentage of your income. To start earning that same income each year as an investment return and stop working if you wanted to.
10% - 26 years
15% - 22 years
20% - 19 years
25% - 17 years
33% - 15 years
50% - 12 years
So the lesson here is any amount of money invested will pave the way for future.
The second lesson is the higher percentage you can invest the quicker you will get to your desired, retired outcome
The third lesson is the sooner you start the sooner you can relax

Look to Increase Income

This is a basic concept that everyone thinks will get them out of debt or help them retire.
Which it can but when used in conjunction with the other steps it is supercharged
If you are able to increase your income, you can decide if you want to, to increase your investment percentage.
The higher the investment percentage the less years it will take you to retire or relax. Good luck

Build Wealth & Be Generous

Keep following all the steps
Build your wealth
Share your wealth with people you care about

Do's & Don'ts

Your guide to getting out of debt

Staying out of debt

Building money for your future

No Credit Cards

Use Debit Card

Credit Cards on average charge 25% interest
48% of Americans carry a balance and pay credit card interest every month
Stay away from 25% interest and use a debit card

No Car Notes

Buy in Cash

This one is more about taking time to gain knowledge on cars then it is anything else
First new cars depreciate like crazy, meaning when you buy a new car it will be worth half its value 4 years
Also car insurance is based on the price of a car so when you buy a new 50K car you are paying a major premium to keep it insured
By contract used cars 5+ years old do not depreciate that much. Meaning you can buy one and then sell it later for a pretty close price to when you bought it
Before buying a car check its value on Kelly Blue Book www.kbb.com so many clients buy cars $10K above the cars value because they are not checking the price
Lastly your favorite car is a good price just 5+ years old. So spend time searching for cars you like until you hit a year you can afford,
Googling car depreciation calculator is a good tool to see these numbers
Price wise we would suggest not spending more than 20% of your income on a car
A meaning a person earning 50K should not spend more than 10K in that year.
However if in year 2 the person wants to take there paid off 10K car trade it in with another 10K and get a paid off 20K car that is fine
In summary you will save money by: not overpaying for car, limiting car depreciation, not paying high insurance premium, and the biggest one not paying a car note interest rate 7-22% a year
As well as the added bonus of freeing up $629 a month (the average US car payment) to go to anywhere you see fit in your budget.

No Signature Loans

Cannot afford it, do not buy it

If you have built an emergency fund you should be able to stay away from signature loans
In all cases stay away from predatory loans that charge north of 20% interest
Do not get a loan for anything that is not a necessity
If you were to get a loan it should be around the prime rate www.jpmorganchase.com/legal/historical-prime-rate
Otherwise you are paying to much

File You Taxes Everyyear

File them on Time

Filing your taxes on time every year is an important step in being financially sound
If you owe taxes and are afraid to file. You should still file on time. You do not have to pay the taxes when you file but you need to file
Also filing taxes does not need to be expensive
We use and reccomend www.freetaxusa.com its easy to use and each year it only costs $15 to file

Do Not Withhold Paying

Taxes at your job

If you are a W2 employee and your company asks if you would like to withhold paying taxes.
DO NOT DO THAT
This is the most common reasons clients end up in 30K+ in tax debt and have no easy way to pay it off and no way to get rid of it with a bankruptcy
So if you don't want to be in that painful loop keep paying taxes each paycheck

If you run a business

hold money for taxes

If you run a business you are responsible for holding on to the tax money and sending it to the federal government
Use a tax calculation to estimate your effective tax rate www.smartasset.com/taxes/income-taxes
The more you make the higher the rate
Then take that rate and for ever dollar put in that percentage into a High Yield Savings Account
Business after their fist year are required to pay quarterly taxes. So you will need to start sending money to the IRS every quarter
Do all these steps and you won't be in tax debt. Ignore these steps and you will be quickly

Never Cosign for a Car

Never have someone cosign for you

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Fresh Start Law Firm Money Guide