Even though the economy has shown some signs of life over the last month and a half, I feel it is safe to say we are still in or around the low-point of the economic cycle, the trough if you will. Many individuals are feeling that because things have gotten so bad, now may be a good time to ‘start over’. This starting over can mean many different things for many different people. For some it may mean making that jump from renting to buying due to historically low mortgage rates coupled with depressed home prices, or maybe it means purchasing that vacation home or rental property you have been thinking about. For others, this catharsis of the financial system may signal that it is time for a career change or maybe time to branch out and start your own business.

This topic really hits home with me personally because it was during the last bear market that I took that leap of faith and stepped out to start my own business. Fortunately, it has proven to have been a good decision. It was not a haphazard and hasty decision, however. It took a lot of patience, planning, and saving by both me and my wife to make sure that we would be able to, and could afford to, take this risk.

As you listen to the show, I try to walk through each stage of adult life that you may be in and provide you with some thoughts and considerations to make before making a significant life change. Listen for some of the following high points:

Age 20-25. You now have a good job with a strong company and a well defined career path. You have a sense of your earning potential over the next 5 to 6 six years and are fairly certain you won’t have to worry about losing your job. Here are some things to think about:

Are you saving 10-20% of your income?
How much debt do you have?
Now may not be the time to try and start your own business from scratch. Even though you feel more than qualified and adequately educated, get out there and get some valuable experience under your belt.
Do you have emergency reserves or a cash cushion (i.e. money for a down payment)?
DO NOT FAKE SUCCESS!!! Success is a process that takes hard work and time. Don’t try to do too much too fast and get yourself in over your head with debt and unnecessary obligations.

Age 25-30. You’ve been in the ‘real world’ for a while now. Maybe you are married with a child or contemplating getting married or having children.

If you do have a spouse and children, please think about them before deciding to make a huge career or life change. Remember, it’s not just yourself you have to think about anymore.
Are you saving 15-20%?
Do you have adequate emergency funds and cash reserves?
If you are going to make a life change (new home, new career, etc.), how much additional debt will this change have and how will that affect your cash flow situation?
Where is your current career going? Is there still potential for vertical movement or has it become stagnant?

Age 30-40. It’s probably safe to say you are getting close to established.

Are you saving 20%? Remember that Social Security is not what it used to be.
How much debt do you have? By this point, even if you have a significant amount of debt, it should be controlled debt (such as a home loan). Credit card debt and student loans should now be a thing of the past.
Have you begun to really start accumulating some assets so that your net worth is growing? Remember that our ultimate goal is financial independence.
If you have children, they are getting older. Have you begun to save and prepare for college or weddings?
If you do decide now is the time to start your own business, how much will it change your current quality of life and family life? Do you already have an established network and market or are you having to start from scratch?
Are you well diversified? Make sure that all of your human capital, investment capital, and earning potential are not tied to the same tree.

Age 40-50. Now things should start getting comfortable. If you’ve made sound financial decisions, saved like you should, and lived below your means, you should begin to start seeing the light at the end of the financial independence tunnel.

Risk capacity begins to play a more significant role in your thought process.
If you start a new business now, how much do you want to work for the rest of your life?
What stage in life are your children at? Have they become independent or are they still heavily relying on you for support?
Retirement is coming up. Have you been saving? You are getting to the point now where you can begin to estimate your desired retirement cash flow. This will allow you to set a dollar figure goal to know if you will be able to retire when you would like to.
If you are thinking about purchasing a second home, how will this affect your current cash flow?
How much debt do you have? Your primary residence should now be close to actually belonging to you.

Age 50-60. This is retirement crunch time. Your children should be grown up or at least close to it. Are you ready for this next step in life?

Can you retire comfortably?
Are you completely debt free?
What is your desired retirement lifestyle and have you made the decisions that will allow you to enjoy that lifestyle?

In the show I also give a big shout out to Erin at Atomic Podcasts as well as the team at ABC’s local affiliate station, WSB.

To wrap up the show, I thought it would be fun to share an article with you done by InsideCRM.com. The title of this article is ‘14 Big Businesses That Started in a Recession‘. For those of you who are contemplating starting your own business, I hope this article provides you with a glimmer of hope for what could be!

I also read a few listener emails, comments, and criticisms concerning last weeks show, How to Build Your Credit Score.

Josh (the one mentioned in the episode) says

May 1, 2009 at 8:38 pm

Just wanted an opportunity to post my response to Brian’s recent episode. Below is an email I recently submitted.

Hello Brian,

I just got around to listening to the new podcast today and I have to say I almost fell out of my chair when I heard you call my name and begin reading my email. I was flattered to say the least that you felt my feedback was worth sharing with your listener audience. I got so excited I called everyone I know to tell them about it before I even finished listening to the show! I have several family and friends that subscribe to your podcast as a direct result of my recommendation and are now regular listeners. I was thrilled and honored to be a part of your show.

Let me begin by reassuring you that I will remain a Money Guy listener/subscriber for as long as you continue to do so. I think very highly of you and your opinion and enjoy the free advice you’re so willing to provide. With that being said, I was grinning ear to ear as you began to read my email on the air. I had several friends gathered around my iPhone and I felt like I’d made the big time! Ha ha. It was so cool hearing someone whose opinion I hold in one of the highest regards reading an email I wrote. I was scared to death though, once the email was complete, you were going to rip me apart. I told my friends, “He’s probably going to use me as an example of some radical anti-debt extremist”. But I was pleasantly surprised you did nothing of the sort. Rather, you offered your honest opinion and counterarguments. Of course I am well aware that a high credit score can save you money in several areas such as insurance (my mother-in-law kindly reminded me of this when I read her my email I’d wrote you last week) but feel the positives of eliminating debt outweigh the negatives. Now I was unaware that you could live a completely debt free life (no credit card usage, that’s still short term debt) and retain a high credit score. I’m confused how this is possible based on how a FICO score is calculated but I’ll give you the benefit of the doubt. Do your “debt free” clients use credit cards? If so, I will argue they are not debt free. They accumulative debt on a monthly basis and then pay it off. Perhaps this is how they maintain a high score because they are still creating a debt history. Dave Ramsey always boasts a credit score of zero because he hasn’t borrowed any money (long term or short tem, no credit cards) in over 20 years. He said he tried to get a credit score one time and they informed him that his debt history did not contain enough information to determine a score and that one could not be calculated. Maybe that’s why he just says “zero”. Nevertheless, I’m going to respectfully disagree that debt is a tool. In my opinion, that statement in itself is an oxymoron. Even though you and I both use credit cards (I’m a fan of the American Express Blue Cash) to maximize that free money they’re willing to give me, I understand that I charge more with plastic than I would with cash (studies have been conducted to prove this and Vegas builds it’s whole business model on the concept). So how much money am I REALLY saving? And I even work a budget every month so that I don’t spend excessively but still, how much more am I spending with plastic? And borrowing money on large purchases that you end up spending thousands of dollars in interest on just to save a few bucks here and there with insurance really isn’t worth it is it?

But alas, I understand I don’t think like your average individual and I have been drinking the Dave Kool-Aid for several years now (I hear this quite often from family and friends). And I love that your show isn’t the Dave Ramsey Second Edition and that you’re trying to teach BEYOND common sense. I don’t need two Dave Ramsey’s. And while I agree that Dave’s audience is primarily for those that can’t spend less than they make, he offers a lot of other good advice for business owners, entrepreneurs, and everyday items such as life insurance, retirement, and investing. There is a reason I have both of you in my iPhone’s Podcasts.

So in conclusion, I want to thank you Brian for giving me my 10 minutes of fame, ha ha, and appreciate the honest assessment. You’ve always encouraged your listeners to provide feedback to your show so I hope my comments weren’t too harsh or offensive. I meant no ill intent and simply wanted to offer up some constructive criticism. I respect your opinion and advice and only wish you could be my financial advisor. However, since that is not an option, I will continue to listen to your show and use the advice in any way that I can.

~Josh

Comments

Josh (the one mentioned in the episode) says
May 1, 2009 at 8:38 pm
Just wanted an opportunity to post my response to Brian’s recent episode. Below is an email I recently submitted.
Hello Brian,
I just got around to listening to the new podcast today and I have to say I almost fell out of my chair when I heard you call my name and begin reading my email. I was flattered to say the least that you felt my feedback was worth sharing with your listener audience. I got so excited I called everyone I know to tell them about it before I even finished listening to the show! I have several family and friends that subscribe to your podcast as a direct result of my recommendation and are now regular listeners. I was thrilled and honored to be a part of your show.
Let me begin by reassuring you that I will remain a Money Guy listener/subscriber for as long as you continue to do so. I think very highly of you and your opinion and enjoy the free advice you’re so willing to provide. With that being said, I was grinning ear to ear as you began to read my email on the air. I had several friends gathered around my iPhone and I felt like I’d made the big time! Ha ha. It was so cool hearing someone whose opinion I hold in one of the highest regards reading an email I wrote. I was scared to death though, once the email was complete, you were going to rip me apart. I told my friends, “He’s probably going to use me as an example of some radical anti-debt extremist”. But I was pleasantly surprised you did nothing of the sort. Rather, you offered your honest opinion and counterarguments. Of course I am well aware that a high credit score can save you money in several areas such as insurance (my mother-in-law kindly reminded me of this when I read her my email I’d wrote you last week) but feel the positives of eliminating debt outweigh the negatives. Now I was unaware that you could live a completely debt free life (no credit card usage, that’s still short term debt) and retain a high credit score. I’m confused how this is possible based on how a FICO score is calculated but I’ll give you the benefit of the doubt. Do your “debt free” clients use credit cards? If so, I will argue they are not debt free. They accumulative debt on a monthly basis and then pay it off. Perhaps this is how they maintain a high score because they are still creating a debt history. Dave Ramsey always boasts a credit score of zero because he hasn’t borrowed any money (long term or short tem, no credit cards) in over 20 years. He said he tried to get a credit score one time and they informed him that his debt history did not contain enough information to determine a score and that one could not be calculated. Maybe that’s why he just says “zero”. Nevertheless, I’m going to respectfully disagree that debt is a tool. In my opinion, that statement in itself is an oxymoron. Even though you and I both use credit cards (I’m a fan of the American Express Blue Cash) to maximize that free money they’re willing to give me, I understand that I charge more with plastic than I would with cash (studies have been conducted to prove this and Vegas builds it’s whole business model on the concept). So how much money am I REALLY saving? And I even work a budget every month so that I don’t spend excessively but still, how much more am I spending with plastic? And borrowing money on large purchases that you end up spending thousands of dollars in interest on just to save a few bucks here and there with insurance really isn’t worth it is it?
But alas, I understand I don’t think like your average individual and I have been drinking the Dave Kool-Aid for several years now (I hear this quite often from family and friends). And I love that your show isn’t the Dave Ramsey Second Edition and that you’re trying to teach BEYOND common sense. I don’t need two Dave Ramsey’s. And while I agree that Dave’s audience is primarily for those that can’t spend less than they make, he offers a lot of other good advice for business owners, entrepreneurs, and everyday items such as life insurance, retirement, and investing. There is a reason I have both of you in my iPhone’s Podcasts.
So in conclusion, I want to thank you Brian for giving me my 10 minutes of fame, ha ha, and appreciate the honest assessment. You’ve always encouraged your listeners to provide feedback to your show so I hope my comments weren’t too harsh or offensive. I meant no ill intent and simply wanted to offer up some constructive criticism. I respect your opinion and advice and only wish you could be my financial advisor. However, since that is not an option, I will continue to listen to your show and use the advice in any way that I can.
~Josh

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