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Fresh Start Law Firm
Money Guide

Your guide to getting out of debt

Staying out of debt

Building money for your future

Accountant

01

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 not 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

02

Switch from a Spending to a Saving Mentality

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

  • Live 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

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Image by Tingey Injury Law Firm

03

Clear Debt

  • A bankruptcy filing can jump start your successful financial 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 one of the hardest money hurdles, debt.

  • Once free of debt's chains, start building for yourself and your future.

04

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 five months. If you make $5000 a month this will take you one month etc. 

Piggy Bank
Dollars

05

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 5 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

06

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

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Working Outside

07

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

08

Build Wealth & Be Generous

  • Keep following all the steps

  • Build your wealth 

  • Share your wealth with people you care about

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Do's & Don'ts

Your guide to getting out of debt

Staying out of debt

Building money for your future

Credit Card

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.

Car
ATM keypad

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 from 30% - 300% annual interest

  • If you thought credit cards interest was bad. This is the final f***ing boss

  • Do not get a loan for anything that is not a necessity

  • If you were to get a loan it should be from a normal bank around the prime rate www.jpmorganchase.com/legal/historical-prime-rate

  • Otherwise you are paying to much

  • Any place called: Tower Loan, ACE Cash Express. Speedy Cash, CashNetUSA, World Finance, etc. run run far away from. 

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

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Image by Amol Tyagi

Make sure your paycheck

Pays your taxes

  • If you are a W2 employee make sure your taxes are being paid every paycheck.

  • If not talk to your employer and get them to start

  • 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

pay your taxes quarterly 

  • 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

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Image by Markus Winkler

Never Cosign for a Car

Never have someone cosign for you

If you cosign for someone else. You are EQUALLY liable for the payment. Meaning if they don't pay YOU DO. If repossessed the car company can sue you, garnish you and put a lien on your property.

​

Do not have some cosign for you. Just like you wouldn't want to be in that position. Don't put someone els in that position. Also by doing so it can make a bankruptcy filing far less effective.

Bonus Car Tip

Electric Car

If worried about mechanical issues on a used car. Consider buying an electric car.

Electric cars depreciate extremely fast. So many nice vehicles can be had at a great price a few years old

On top of that electricity is about 1/4 the price to fill up compared to gas

The maintenance on the car will be significantly cheaper than combustion engines.

The car should run for longer with less issues

The cars are quieter and faster

Lastly if you want a car to drive you places Teslas will basically do that today for a monthly fee.

​

Long story short: the used car is cheaper, the fuel is cheaper, the maintenance is cheaper, the performance is better, the life span is longer, it can drive you around and the more you use a car the better deal it is.

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Financial Account Setup

Your guide to getting out of debt

Staying out of debt

Building money for your future

Image by Amol Tyagi

Account #1

Checking Account

  • This is where your income comes in

  • This is where your money goes out

    • If you have the ability to send 80% of your check to one account (checking account) and 20% of your check to a second account (investment account) do that​

    • If not every payday send 20% to the investment account

  • For everyday purchases use a debit card from this account.

  • Track your spending with your budget

Account #2

High Yield Savings Account

  • This is your emergency fund account

  • ​Build up to 3 months of your income to sit here

  • High yield accounts can typically earn 3-4% back annually 

  • After this account is full send the extra money to your investment account

Coin Donation Scene
Image by Yorgos Ntrahas

Account #3

Investment Account

In this account you will send 20% of your income monthly

Have it purchase safe diverse funds and ETFS

Set your account to automatically reinvest the dividends

Typically the stock market doubles your money every 7 years.

Research historical numbers and funds to invest in what you think is best for your goals.

At some point this account will make more in a year than you do. That is when you know you have achieved a great retirement position.

Account #4

401K / Work Retirement Plan

If your work offers a retirement plan and they offer a match. You should invest at least what is needed to get the match. Other wise you are leaving free money on the table

So if the match is 3% invest at least 3% each paycheck. That way you are earning more money.

Invest the money in what you see fit

When / If you change jobs you can roll that into an IRA account where you have more freedom of investment options

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Fresh Start Law Firm

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