Mark Baird believes lifelong financial health is possible for everyone — regardless of their income level. If you’re like most Americans, you probably don’t feel financially secure. In fact, money might even feel like a daunting problem for you. Mark hopes to change that in his new book, Rules to Riches.
In this episode, you will learn a few simple steps that you can take this week to improve your financial future and start building wealth.
How did Mark Baird’s financial journey begin?
My wife and I had great jobs in Houston, and this is back in the 80’s. I would say we were living a mediocre financial existence like I said, we did have – we both had great jobs and more money than we had ever made before. We both grew up on a farm so it was a big culture shock when we moved to a large metropolitan city like Houston.
You know, the mortgage payments and the car payments and the thinking about kid’s college expenses, started to do a lot of interplay in our thinking. We kind of got bogged down with the debt load and with the obligations that just come with normal everyday life.
But in my heart, and to my wife’s heart, we knew that there was a better way. We were ordinary but we wanted to become extraordinary and I knew we could do that because I’ve seen people around us do that very thing.
We became very interested in being better when it came to money. While money is not everything certainly, it allows you to get to the next step or the next level of life that you want to be. I remember it very clearly.
I got invited to one of these “free” seminars and everybody knows what free means, it means that there’s probably a course or a video seminar workbook that you’re going to be buying, or that they’re going to be at least selling. I don’t even remember who gave the talk but I remember a few other points very distinctly and I walked away from that seminar and I started to implement those.
One of them was a systematic savings program and at the time, IRA’s had been around for a while, but I had not set up one and my wife had not setup one.
When did you officially start building your wealth?
We were just married, so we were probably 25. We started an automatic savings plan in an IRA. We started very small and I remember exactly the amount: it was $25 per month for both of us, but we watched that continue to grow.
It was revolutionary to me when I heard the guy say, “You know, you could make extra principle payments on your mortgage,” and I’m like, “Wait a minute… I signed up for a 30 year mortgage, how could I make extra principle payments?” He said “Yeah, you can make extra principle payments.” He said, “Go to your bank,” – at the time, you know, you had to go to your bank – “and get an amortization schedule. which lays out a 30 year stream of payments for every month.”
It was a document that had 360 lines on it and it showed the balance, the payment, the amount of interest in that payment and the amount of principle. And sure enough, you’d look down that list and we started to make extra principle payments.
Each and every month, we would send in an extra $100 or whatever we could afford, and I would start to take off extra month’s payments. We whittled that down and paid that off in under 10 years. But that was the first time I’d heard somebody give me that kind of direction and it was one of some of the best advice that I got.
The other thing that he talked about was starting a part time business and how taking advantage of tax rules and tax laws, by starting a business, can really come out to your advantage in the end.
If you pick out something that you really enjoy, something that – maybe a hobby that you could convert into a business, then there’s all sorts of advantages to that. I remember having a lot of fun with my wife and sitting down and thinking about the various kinds of businesses that we could start and get some advantage to. To this very day, we’ve got a family business that we started and run. As a sideline right now, sort of a side gig, we would call it now. But it’s a lot of fun and makes us a little money.
I remember those three things coming out of that. Out of that, I became really obsessed with personal finance to be quite honest. And I wanted to be educated and informed about all aspects of personal finance, whether it be investing, whether it be risk management – which is really insurance.
I took the step of going back to school and actually signing up for the course work that leads to a CFP designation or certified financial planner designation. Now, mind you, I wasn’t in the financial field and did not have a financial background.
What’s the most important idea in Rules to Riches?
Mindfulness about money. Many of us spend money with largely no thought to it, we spend it willy-nilly. Whether it be credit, whether it be Starbucks or whatever the case may be and we don’t – really unaware.
“My big call to action for people is to start a system.”
I don’t prescribe a system, what I tell people is do what is right for you. It could be a spreadsheet on Excel, or it could be an app like Mint or Quicken, but just do something. It doesn’t have to be perfect to start with.
One of my favorite sayings is “Don’t let the perfect be the enemy of the good.”
A lot of people, especially the type-A folks, will want everything to be just right and perfect starting out, and you can’t do that.
It’s an evolving process. Don’t beat yourself up but sit down with your spouse or your partner. One of my favorite things to tell people to do because my wife and I have done it many times is to go out to eat and sit down with a sheet of paper or your budget sheet and go through it once a month.
What’s the next thing we need to do to grow our wealth?
The one thing that I think is probably the most important thing in the book aside from starting to track where you’re at financially, is what we do with our homes and with our transportation or cars.
I call this chapter, “Curb Your Enthusiasm” because we have become so enthused about where we live and what we drive, that it sometimes clouds our future, either figuratively and especially financially.
“The two biggest things that have an impact on our future wealth are where we live and what we drive.”
That sounds very simple but it is so true because probably the two largest things that 90% of the people out there will buy in their life, largely from a financial standpoint where they live and what they drive.
I tell people, be careful what you can qualify for is different than what you should actually spend for those two items.
Why do people think of homes as investments?
People are conditioned to think, “Well, you know, I’ve got to buy a house because that will save me money on taxes.”
“I tell people, wait. You also need to evaluate renting.
“In some markets, renting will come out ahead of purchasing.”
Because when you purchase a home, look at really what you’re doing. You’re not only paying a mortgage but you’re paying for insurance and you’re paying for upkeep, you’re paying for maintenance, you’re paying for a new roof probably in 10 years, if it doesn’t have a new one on it.
That’s a part of planning, that’s a part of what a financial plan does is put everything in perspective. It doesn’t just pick out one or two things to focus on, it looks at the entire portfolio so to speak of the different aspects of finance. Insurance, college financing, things like that, that maybe we don’t think about when we’re dreaming about that next bigger home, that’s going to be so fantastic to live in.
What if we’re in a terrible financial situation?
You can get out. I’ve never seen a situation where someone couldn’t get out of it and it doesn’t always take bankruptcy to get out of it. But it takes a concerted effort, working hard and paying down debt, maybe increasing income to get things balanced out. Because the expenses minus income should be zero at the end of the month, with any extra leftover to pay down debt, or put into savings, or put aside into whatever goal or objective you have as a family.
So sit down, take some time, and then grab somebody that can help you too. There is no harm in looking on the internet for financial coaches or financial planners. Or you may say, “I need somebody to help me get out of debt.” Well there are plenty of financial coaches out there. In fact, there is a lot of what I do, which is to coach people through reducing debt and to getting out of debt.
What is Mark Baird’s favorite financial tool?
If you go to my website, rulestoriches.com, you can download it – it’s a debt to management spreadsheet. All you have to do is to put in your name and an email address and you’ll be allowed to get immediate access to the spreadsheets that I have on there. Talked about them during in the book and also available for you to download, no charge for those.
What’s been your favorite Rules to Riches success story?
It was a single mom with two kids in high school. She was scared to death that she would not be able to pay for the kid’s college. One of them was coming up on 16 and she felt obligated to help them out with a car because they had a job. She felt obligated that she needed to provide them money to go to a college.
We sat down and went over her finances- what she owns, what she owes, her expenses and what her income and looking through it, I told her, “Well here’s something you want to think about.” And where a lot of people think about college education they think that it’s sort of the responsibility of the parents.
To put the kids through four years of college, four years maybe not a private school, but four years of estate school and I said, “You may want to take a look at that again.” Because what happens if mom, by yourself or even a mom and dad take on that responsibility and that obligation. It may strap them such that they have to delay retirement or maybe they can’t even retire with the lifestyle that they’re used to and what that does ends up as a burden onto the kids.
So get rid of the guilt and don’t feel obligated to put your kids through college. Step back and say, “You know two years of community college is not the worst thing in the world and that last two years of college, if college is in the plan, at a state school that degree looks the same going there two years as it does four years.” There’s no difference, there’s no ribbons on that degree. No one will know the difference.
What financial challenge can you give our listeners this week?
Give sitting down with your spouse or your partner a shot and talk about money. It doesn’t have to be a lengthy conversation, go out to your local coffee shop or your local restaurant and sit down – probably without the kids around – and just challenge each other. “What do we want to look like as a family financially in five years, 10 years, 20 years? When do we want to retire? What kind of goals and objectives do we have as a family?” And this first discussion didn’t have to be every jot and twiddle about every detail about your finances.
But think big and think broad and come up with goals and objectives that you want to do with the family. I would venture to say that the majority of families out there haven’t done that. They are too busy in their mind with just life. Life happens. But take some time and go off and take a couple of hours to do that and then use that as a spring board to get more mindful about your money. Use that as springboard to maybe sit down with an app like Mint, or a spreadsheet like we have on our website or like I said earlier, just a big tablet of paper and start writing those things down.
What do you owe, what’s our income, what’s our expenses? That, for some people, that will be the first time that they see it all in one sheet and that’s a very powerful vision. It could either be a good vision or a bad vision depending on where you’re at.
How can our listeners get in touch with Mark Baird?
Go out to rulestoriches.com and on that website, there’s a tag down there that you could email me directly. I’d appreciate any kind of communication that you show my way.
You can also look me up on Facebook, it’s “Mark Baird Financial Adviser” and feel free to like my page and you can get some tidbits along the week. I usually try to post a couple of times a week with some financial tidbits that hopefully people can get some value out of and take away a bit of wisdom.
Missing Pieces, Broken Heart: B.J. Shonk