Taking "Pay Yourself First" One Step Further

The age-old adage in the art of saving away a few bucks for a rainy day and beyond, pay yourself first, is still one of the best ideas to not only plan for, spend around, but to also live by with absolute determination and commitment. For years I have advocated what I like to call the 80/20 rule which basically states that you only live on 80% of your means, and save and invest the 20% you don't need. These days the amount I save is actually higher since the 20% affords, eventually, an increase in your means through dividends, capital gains, and other things that the money "in the bank" tends to generate.

Money makes money is another thing everybody says, but that is also absolutely true.

Something that I find often gets overlooked in all of these concepts surrounding saving money is actually a very important factor that can, if not considered, eat away and terribly counter a great deal of the effort you put into your savings commitments.

The COST of money.

Where this factor is most encountered, it is when we are dealing with how we manage and use credit. Most people who understand credit also understand that there is a difference between good debt and bad debt. Naturally there are some people who will tell you that there is no such thing as any good debt. I am not in that camp. By my definition good debt is debt which leverages an  appreciating asset such as your home. In this instance the cost of the debt is typically negated by the appreciating value of what has been financed. Bad debt is debt that is used to leverage depreciating assets, such as a vehicle. But even I am guilty of making use of this kind of debt—although I do everything I can to minimize the impact. For example when my wife and I purchased our Ford Edge a few years back we put down $10,000 to keep the monthly payments down and reduce the overall interest we would pay. I did the same thing recently when I replaced my old Ford Sport Trac with a newer Ford F-150 and laid out $14,000 cash at the bargaining table.

But the worst debt is the credit card.

Credit cards can be used in ways that actually help you toward your savings goals. For example, I use a Discover card which pays me cash back on every purchase. The trick here is to pay the card as you use it otherwise the cash back rewards are really worthless.

But rather than use credit cards, and finally we're getting to the meat of what I meant when I said let'syour own line of credit? I call this little concept the Credit Savings Account, or CSA. Key here is that if you are following strict savings plans, there should be plenty of money sitting around somewhere that you can allocate to a "credit card" where you are your own bank. My CSA sits in my checking account and when I use it, it is as simple as swiping my debit card.

take the concept of paying yourself first one step further, why not simply establish

And by the way, this is a great way to also avoid overdraft fees, and WORSE, paying for overdraft protection which is absolutely a total waste of money.

Here is how I set up my CSA:

• Establish an amount to fund the account with and determine this to be the credit limit.
• Establish a day each month when you will make payments. Mine is on the 20th of each month.
• Establish an interest rate you will charge yourself. This can be whatever you want it to be. I typically charge myself anywhere from 15%-29.9% depending on the balance, but I never pay myself less than 15% interest.
• ALL INTEREST PAYMENTS MUST BE EITHER PUT INTO SAVINGS, OR USED TO INCREASE THE CREDIT LIMIT. THIS SHOULD NOT BE SPENDING MONEY.
• Establish a minimum payment based on at least 3%-5% of the balance. But of course you can repay yourself any way you want.

When I calculate the interest I don't bother with how credit card companies actually do it, using daily periodic rates and average daily balances etcetera. But of course if you want to you can do it this way—but it is naturally much more time consuming. Here is an example of how I will determine my payment and interest:

• Balance ($300) x 15% interest =  $45 / 12 months = $3.75 (this is my interest charge). Balance ($300) x 5% minimum payment = $15. In this example I will pay $15 on the 20th (my due date). Of the $15 I will apply $11.25 to the principle (balance) and direct $3.75 to interest (which will be deposited to my savings).

There is a caveat here. When you set up this account for yourself you must avoid playing games with yourself, such as forgoing making a payment, or playing around with the interest you charge yourself. This will foil any benefit a CSA will afford you. You are the banker. Act like one and fiercely demand payment and interest, and penalties when you don't pay.

Establishing a CSA takes paying yourself first one step further because it will accomplish two very important things. 1) it will force you to save more money away and 2) it will reduce your cost of money since you are using the CSA in lieu of traditional credit cards.

Perhaps even when I bought my vehicles I should have simply paid cash and set up a loan for myself.

Hmm. Something for me to consider on the next set of wheels I think. Let's keep our fingers crossed that Ford doesn't actually come out with a new Bronco or I may have to revisit this idea sooner than I would like.

Brokered Convention A Win For Hillary

So, we are of course still having to have the discussion, when it comes to the GOP convention in July, that there is a strong possibility of a brokered convention if Donald Trump, the clear front-runner in this presidential race, does not garner the 1,237 delegates he needs to seal the deal on the republican nomination. But why we are having this discussion at all is really the begging question, is it not?

In other circles someone commented to me that, "So you are okay if we break the rules for Trump if he doesn't get the required delegates?" I responded, and I think quite rightly, "Would we even be having this discussion if, say, Ted Cruz fell short of the 1,237 delegates before the convention?"

Of course that ended the discussion. Because the person who made that comment knows all too well that he would be okay if Ted Cruz, or anyone else for that matter, got the nomination without the required delegate count—but because we are talking about Trump here, that changes everything.

Because no matter how many times the GOP tries to give the impression it will support the front-runner, those of us who pay attention to what's between the lines know all too well if the GOP can find any way possible to deny Trump the nomination, that is exactly what they will do.

The thing that I find a little bit surprising here is that for years the republican party has been wanting desperately to find a candidate who can reach reach out and grasp hold of voters who might never even remotely consider voting for any republican candidate.

Donald Trump is doing that.

He is getting support from evangelicals and non-evangelicals alike. He is getting broad support (believe it or not) from women. He is getting broad support from (again, believe it or not) Hispanics. And while he may be falling a little bit short garnering support from blacks, there are still wide swaths of other demographics he is pulling toward the republican party that the party itself has not been able to do for a very long time.

He's even pulling in democrats.

There is another very big factor to keep in mind here and that is that Trump has also provided the republican party a huge (or should I say yuge?) increase in voter enthusiasm and voter turnout—when you look at voter turnout as a whole, enthusiasm and turnout is up 65% for republicans and down 45% for democrats.

How did Barack Obama win, partly? Voter turnout. Voter enthusiasm. Voters all but fell over themselves to get to the polls, and of course there were great efforts by PACs and other groups to load up buses and get voters to the polls to check the box for Obama.

Without a doubt Mitt Romney screwed the pooch on the campaign trail and I lay that down easily as a large contributing factor to his defeat, albeit a nominal defeat, by what was clearly a failed incumbent president. But you can also attribute low voter turnout as a large reason why Romney could not fill the gap. Many republicans were so unenthusiastic, and so not smitten with Romney as the candidate, that they just stayed home. If even a fraction of those people would have gone to the polls, it may have sent Obama packing.

I think even the GOP has to know that, in part, this is precisely why they did not win the last election.

So along comes Trump and gets the juices flowing. It may not be the guy that the republican party had hoped for to bring this along. But nobody else has been able to do it. And instead of embrace the victory this is, they only want to trounce Trump, stay the course, and disenfranchise large swathes of the very voters they have been trying to attract that Trump has attracted. Hell, he has practically laid these voters at the very doorstep of the republican convention.

Of course part of the problem the GOP and other republican and conservative voters have is that he's too brash, he's offensive, he's inexperienced, he's unrealistic, and whatever other word one can derive to relate to, "He will destroy America and bombs will fly."

Horse pockey.

The fact is that Trump is doing exactly what every single other politician has done before him—and I think we can now safely call Trump a politician. Donald Trump is telling the American people what they want to hear. It's that simple. And it is resonating and that is why the voting public is responding the way they are.

Read my lips, no new taxes. You can keep your doctor. We will attack pork barrel spending...

All of a sudden we are actually believing that everything a politician says he will do will actually be done? I mean, really. Are we really trying to say that here? We're trying to say this with a straight face?

When Donald Trump gets into the White House, if that is what happens, he will face the same realities and the same challenges as every single president always does. Not only that, but what defines an administration's accomplishments or failures is also largely dictated by what the focus of the day happens to be. Things happen, things occur in the world that cause presidents to have to shift focus, and of course there are multitudes of people that will surround any president and provide him or her with whatever current intelligence on a variety of issues happens to be...

And with reality front and center courses change.

Why would Trump be any different? I mean, don't get me wrong, he has my support in large part because he will do some things differently to my mind. But there are myriad things he won't do just because he can't, or because there will be enough smart minds surrounding him to give him some very important statistics and data and examinations into what the real and true impact may be of anything he has proposed. And like all president's do, he will change course.

Look, the bottom line for me is that if Trump gets the nomination we may lose the general election. Okay fine. Or we may not. Who really knows, right? Polls have been wrong, pundits have been wrong. It's always so easy to try and make an idea a truth when we all know it's not. But a few things are certain to lose the general and ensure Hillary winds up in the White House. To my mind, and without any doubt, one of those things is to broker the republican convention. If the GOP actually denies Trump the nomination no matter if he has the 1,237 delegates or not, there will be far more anger from the voting public than ever before that their voice is not being heard, that the establishment is rigging outcomes, and that the American people are sheep while the government and all of the power-mongers within the system don't give a flying rats ass about what the people want.

Precisely, by the way, one of the reasons that right now a guy like Trump is blowing it out of the park.

At the end of the day I think we should simply be looking at who out of the remaining three candidates have the most delegates (or two if Kasich finally comes to his senses that he has no chance of winning) and say okay. That's the nominee. Because otherwise what is all this other process about? Why did we waste our time with campaigns at all? Why did we bother to go before the American people and see what they think about who is running? Why waste time with all that if at the end of the day it doesn't matter, and no matter who the PEOPLE want it comes down who the PARTY wants?