Archive - February, 2006

I know the difference!

Observed today on a sticker – “I know the difference between right and wrong, but I choose to ignore it.”

When it comes to finances, I have learned a lot about what is right and wrong. I hope I do not EVER choose to ignore it!

I have learned that:
– saving money is right and that spending all of my money is wrong
– having an emergency fund for emergencies is right and using a credit card for emergencies is wrong
– giving to worthy causes and individuals is right and not giving at all is dead wrong
– paying cash for purchases is right and paying on payments is wrong
– including your spouse in the budgeting process is right and not including them is wrong
– calling our money “ours” is right and our money “mine” and “yours” is wrong
– working together as husband and wife toward common financial goals is right and working separately is wrong
– having medical and life insurance is right and not having this insurance is wrong
– dealing with your financial situation is right and just throwing up your hands and declaring bankruptcy is wrong
– developing a plan and following it is right and handing your financial mess over to rip-off credit counseling is wrong
– facing your finances is right and choosing to ignore it is plain wrong

I would love to hear some other truths you have learned as you have dealt with your finances!

Are you doing what you love to do?

Are you doing what you love to do? Are you passionate about your work? Do you have a passion for doing a particular type of work? Are you doing what you were put on earth to accomplish?

There are many people who are not doing the very thing they are passionate about. For many, the number one concern is money. Money pays the bills. Even if a job is despised, people will stay just for the money and benefits. Meanwhile, the very thing they were put on this earth to do is rejected and ignored.

In many cases, the very thing that a person is put on earth to do does not generate a large income. It may not generate ANY income. If this describes you, that is EXACTLY why I am blogging on personal finances. This is why it is so critical that you become debt-free RIGHT NOW!!! Not tomorrow, not next year, not in five years … NOW!!! Can you do what you are made to do if you have no payments? How much income would you need to generate to live if you had no debts?

A hero of mine pursued his passion in life – playing the piano. You may have heard of him – Anthony Burger. Anthony burned his hands as a child, and there was doubt about his even being able to have 100% use of his hands. He would not deny the passion of his life and made it his life’s work. Anthony Burger died last Wednesday evening at the age of 44 doing what he loved the most – playing the piano for a huge crowd on a Gaither Homecoming cruise.

Anthony made his life’s passion happen. He made it happen immediately. There was no time for delay. He only had 44 years. There was (and is) no promise of time to get on with it.

What is the world missing out on because you are not relentlessly pursuing your life’s work? If money is the blocker, make it a non-issue by becoming debt-free!

This is what life is about!

Last week’s events are a picture of what life is all about!

Monday – Thursday
I was able to spend three days in Salt Lake City, Utah. Beautiful! I was able to night ski at Brighton Ski Resort. They had 122″ (that is 10′ 2″) of snow! If you have not skied in big mountains – you have not skied! It is awesome! I was also able to go snow-tubing on 1000′ groomed runs at Gorgoza Park in Park City! We went down the runs with up to 14 people at once. Very cool. Two 5-mile runs and a game of basketball were also enjoyed.

While in SLC, I was also able to conduct training on some key business tools, and others were able to teach me some new tools. These tools will make me more effective at what I do.

Thursday
I am happy to report that my twin brother and his wife are the proud parents of their firstborn – a son!

On Thursday, I also received a phone call from a close friend who is challenging me to take another huge step in life. I love being challenged!!! Keep pressing!

Friday
I am also happy to report that my close childhood friends, Jamie and Tina, are the proud parents of their secondborn – a son!

On Friday morning, I was able to travel with my family to Pittsburgh, PA to hold our new little nephew! This is what life is all about!!!

Saturday
We enjoyed Melea’s basketball game (she scored another basket!), time with Jenn’s mother and brother, and ended the day with a Bunco (sp?) party with our friends.

Sunday
To end the weekend, we were able to attend morning worship services and spend time with Jenn’s mother, brother, sister, and brother-in-law. We enjoyed a fine family meal, a Sunday afternoon nap, another family meal, and a nice drive home.

Conclusion
What does this have to do with personal finances? Actually, very little. Do you know why? We implemented a plan over three years ago that makes it possible for our personal finances to not be a huge pressing issue for us. If we need to travel to hold a brand new nephew – we can just go do it. If we want to spend time with family and not work overtime, we can do just that. Finances should not be an overwhelming part of one’s life. Finances are important, but they should not be controlling.

If you need help with your personal finances, I strongly recommend you take Dave Ramsey’s Financial Peace University class. It is the material that Dave teaches that completely changed our family’s approach to personal finances. You can have the same happen for you!

Why pay off your home early?

If your interest rate is 5% and you pay off an extra $1000 on a 30-year note, you have just saved $50/year for the next 30 years. That is $1500!!!!

If you pay off your home early, it frees up what is often a very large portion of your monthly expenditures. You can then use that money to invest, give, and build wealth.

Besides, when you pay off your house, the grass crunches differently underneath your feet.

It’s good to talk about it … but action makes it happen!

Are you still talking about it? Talking about making a change to your financial future? Wanting to get out of debt? Every year, one of the top New Year’s resolutions is “to become better off financially.” Are you one of the many who made that resolution?

Talk without action is mere babble.

You CAN become debt-free! You CAN save money! You CAN become better off financially! You CAN prepare for an excellent retirement. You CAN!!! It will not be easy, but you CAN do it!

It takes action to make the improvement. It requires you to stop signing up for more debt. It means that you need to turn off the TV and work with your spouse to develop a set of actions you can work on together.

After working with many couples’ finances, I do understand how intimidating this can be, but I also know the end results of the couples who have applied these tried, tested, and proven true tools. They have freed up their income because of their focused efforts in becoming debt-free.

If you are one of the persons who is just lost when it comes to your finances and you do not know where to begin, here are some practical steps you can take TODAY to initiate ACTION.
1) Go to this link and print out the budget sheet.
2) Sit down with your spouse and fill out your expected income and expenses for the next month.
3) Obtain the balances and monthly payments for each of your debts and calculate your debt-freedom date. Get instructions on how to do that here.
4) Make a commitment (you and your spouse if married) to STOP obtaining more debt.
5) Take Dave Ramsey’s Financial Peace University class. You can find a class near you by clicking here.
6) Live it. Don’t give up. Keep moving forward. Setbacks will happen, but do not allow them to derail your effort. I recommend writing a debt-freedom proclamation that you can post on your refrigerator. Read it every morning as you are getting your breakfast! Get fired up about it!!!

How about it? Are you taking real action to better your personal finances today, or are you still talking about it?

I have never seen anyone save money by spending money

Have you ever heard someone say one of the following statements?

  • “I saved $50 on this shirt at the mall!”
  • “I saved $2000 on this new car!”
  • “I saved $200 on this new couch!”

I have one question. Did you really save money while spending money? I can believe that you spent less money, but I cannot believe that you actually saved money.

You may think that I am playing a word game. I am not. Marketers are! They are working to make you feel good about a purchase. They know that you may not want to spend money at that particular moment. They also know that they will not earn any money if they do not sell something! To get you to purchase the item, they need to make the purchase appeal to you. One way they do this is to tell you that you can save money by purchasing today.

Game over. You are not saving money when you are spending money.

Freeing up $200/month in expenses is equal to receiving a $285/month raise!

When you free up any money at all in your monthly spending plan, it becomes immediately available for other uses. It can be used to pay down debt, to build your emergency savings balance, or to give to a worthy cause.

The wonderful thing is this – If you free up $200, you really have $200 to do something else with! On the other hand, if you received a $200 raise, you really will not have $200 to do something else with.

Not making sense? Let me put it this way. It appears that everyone has this one uncle. We like this uncle in many ways, but we really do not like to him to come around very often. He routinely borrows money without our approval, spends money carelessly, finances everything, and he looks to us to foot the bills when it is all over. Yes, his name is Uncle Sam.

Uncle Sam immediately shows up when he hears that you have gotten a $200/month raise. He wants his share. He charges you Federal Income Tax, Social Security Tax (FICA), Medicare Tax, State Income Tax, and Local Income Tax. By the time you get home with your $200 raise, it has been remarkably reduced by between 20% and 40%! That means that your $200/month raise will only deliver around $140 and $160 to you.

That is what makes budgeting so great! When you find a way to spend less money, it is like giving yourself a raise! A big raise! A tax-free raise!!! This will speed your ability to achieve freedom from debt and truly build wealth.

NOTE: Jenn and I were able to immediately give ourselves a $200/month raise by spending less money on groceries. How have you been able to give yourself a raise?

Quick Cash joints are HORRIBLE RIP-OFFS!

I am VERY UNHAPPY with quick cash and title loan places. They offer quick cash … for a fee … for a VERY LARGE fee. Don’t believe me? Do what I did. Go to the web sites of these establishments.

One you can try is http://www.paydayok.com/loan_cost.asp Type in $500 for the state of Indiana, SC, or TN and 30 days for the loan. What is the interest charge on this loan? $107.15!!!! That is a 21.43% return on that money – IN ONE MONTH! I do, however, credit the PayDayOK folks for putting a “How to get out of debt” link on their website.

At http://www.mycashnow.com/fees.php?PHPSESSID=b87b5526b56dd3e999497e1003fdcef9 the fees are even higher! For $500 for 21 days, the fee is $139.65!!!! That is a 27.93% return on that money – IN ONLY 21 DAYS!!! By the way, to get to the fee schedule they require you to click a link named “Our low fees”. Outrageous! Here is the statement (word-for-word) under the “disclosures” section of the My Cash Now web site.

“LOAN AMOUNTS AND FEES. Mycashnow.comTM currently provides loans ranging from $100.00 to $1500.00. The finance charge for these loans is based on 485.450 percent APR and the number of days of the loan. See fees for a complete breakdown of amounts and charges for various length loans.”

Recently I was in South Carolina, and I saw a quick cash place with the name “CheckMate”. That is about right. Once you start utilizing this type of place for loans, they have you in checkmate. You will not be able to get out of it.

On that one street in a less than 3 mile section of town, I saw at least 10 quick cash establishments. Terrible. I did not see even ONE establishment dedicated to getting people out of that mess.

I could go on forever about this, but I will finish with this outrageous story from this link http://www.checkintocash.com/in_the_news_fortune.htm

CHECK INTO CASH, INC., with it Corporate Offices in Cleveland, TN, was asked by the Governor to participate in the issue and has a full page ad, plus a feature in the Tennessee Success Story. On April 27, Allan Jones , Founder, Chairman and CEO of Check into Cash, Inc. flew to Nashville for a luncheon hosted by FORTUNE and the State of Tennessee . He and other CEOS across Tennessee joined the Governor for lunch and received special recognition for their support of Tennessee ‘s economic development over the years. He joined other Tennessee CEOs representing such companies as Federal Express, Bridgestone, Toyota, Wilson Publishing, Hospital Corporation of America, Sea Ray Boats, A.O. Smith Water Products, University of Memphis, King Pharmaceutical, UnumProvident, Blue Cross-Blue Shield of Tennessee, to name only a few,

I can’t tell you how much I disagree with the statement that Check Into Cash has helped Tennessee’s economic development. It has helped to enable broke people to become even more poor, it has charged them incredible amounts of unfair interest and fees, and then it is proclaimed that they are “helping” people. Give me a break.

What would you do with all that money?

I give JESUS the praise and glory for the below true story!

I remember when Jenn and I decided it was time to become debt-free. It was so exciting! We were so frustrated at the mess we had made, but we had hope now! We had calculated our debt-freedom date (see post from 2/15/2006 to see how to calculate yours). Our debt freedom date was 14 months away – February 2004.

What was one of our biggest motivations to become debt-free? It was the huge amount of money that was being sent out each month to pay the monthly loan payments! We asked ourselves the question – “What are we going to do with all that money once we have become debt-free?” It was so exciting just to think about the possibilities – cruises, exotic vacations, cool electronics, a new car, helping others, seed-germination heating mats, giving to worthy causes, season tickets to Purdue University football games … The list was endless. We were so amazed! To think that we could pay off everything but the house in 14 months and have access to all of that money was HOPECREATING (new word – “W” is envious)!

That HOPECREATING moment was what kicked us off toward our debt-freedom date. If we would not have had that moment, we would absolutely still be in debt – probably even more debt. Anyway, the great thing about the process of becoming debt-free is that it takes time. This means that you have to think about becoming debt-free a lot. It means that you have to maintain the intensity even when all your friends are going on a cruise together, and you can either go and be in debt for another 24 months or not go and be out of debt in 4 months. It means that the latest electronics can wait their turn for you (Ebay!).

Jenn and I thought about becoming debt-free for the entire 14 months. We made decisions that meant we would not be able to live life like we had before. We could not spend $200 a month on dining out. We could not shop at the mall and buy something every time. Do you know what we discovered? We discovered we could live without stuff. We realized that happiness cannot be bought at the mall and that home-cooked meals taste better than restaurant food anyhow.

Since it took us 14 months, our entire financial behavior changed. Guess what? The magic month arrived in February 2004, and we became debt-free!!!! We paid off a credit card, a truck loan, and a student loan. At the same time, we were also able to absorb a major surgery for Jenn that WE PAID CASH FOR.

Jenn and I now stand on the other side of the fence. We have remained debt-free for over 2 years now. Words cannot express how much better Jenn and I’s communication about our life has become. I have discovered “what I would do if I had all that money that was going out for loan payments” – give more than I ever have, save more than I ever have, and truly understand what financial peace is.

How long until you are debt-free?

It is simple to calculate your debt-freedom date! Here is how you do it.

1) List all of your debts
– include each debt’s name (Home Depot, Victoria’s Secret, etc.), the debt’s balance, and the monthly payment
2) Sum up all of the outstanding debt balances to obtain the Total Debt Owed
3) Sum up all of the monthly payments to obtain the Total Monthly Payments
4) Divide the Total Debt Owed by Total Monthly Payments
– this will provide you the number of months until you are debt-free!!!

Look at the example below. You can see that the Total Debt Owed is equal to $16,650. The Total Monthly Payments have also been totaled and are equal to $505. Dividing the Total Debt Owed by the Total Monthly Payments equals 33 months. In this example, the family’s Debt-Freedom Date is December 2008!!!

A couple of notes:
1) This assumes that you are no longer acquiring debt. Just say NO! :)
2) This does not account for interest. However, it also does not account for pay raises, bonuses, tax refunds, money from selling something, or money freed up by better budgeting. Trust me. If you go crazy on this thing, it will take you 50% to 75% of this time to become debt-free. It really depends a lot on how much you really want to become debt-free and how much you are willing to give up to achieve financial freedom.

How long until you are debt-free? What would you do with the $505 each month if you were not paying debt with it?

Make it happen!

Budgeting requires give and take

When you set up your budget with your spouse, it is important to remember that it is a process of give and take. Jenn and I have learned to really value this aspect of budgeting. There will be times that you do not agree on everything in the budget.

Jenn and I usually agree on the budget, but there are times that we disagree. Disagreement is good! If we have not budgeted for clothing for the past 5 months, I probably will not notice. Jenn will notice and ensure that it is added to the budget. She presents Exhibit A – our child has no winter clothes and it is February. That is probably a budget that is not well-prepared. Time to put money into that category.

For some reason, Jenn also believes that if we are going to go on vacation, we need to budget for it in advance. WAY in advance (she prefers at least 4 years – smile!) I am more of the “go on a starvation budget and save for the vacation in the last couple of months prior to its happening” type of person. It has become apparent that $2.43 in the food budget is not enough. Time to put money into the vacation fund.

Give and take is valuable in all areas of life. It’s value is really clear in the process of planning for the family’s spending for the next month. The benefits are clear.
1) You will be on the same page with your spouse
2) Ownership of the spending plan by both you and your spouse
3) Accountability will be established when you agree on the budget together

A budget makes the financial engine run well and delivers you to your future financial goals. Is your financial engine running well?

What are you known for?

If you have a plan for your finances and you follow that plan, you will have a great chance of becoming wealthy. Wealth generally amplifies who we really are.

I want to be known for my passion for helping people accomplish more than they ever thought possible. I want to help equip them with tools that alter their future for the good. I want them to be able to focus on their life’s passion instead of how to pay the house payment this month. It is time that Americans are taught the long-lost truths of saving, budgeting, having a plan, saying “NO!” for a little while, invoking parental control, spending less than is earned, and giving. If we are not following these truths, will our children? Will our government?

Is this blog helping me develop into who I am made to be? I think so, but it certainly is not enough. My entire life must represent the values I am seeking to teach.

It has been said that you can look at a person’s checkbook and day planner, and you will know who they are and what they value. What a challenge! Try it out. Do you like the results? Remember, wealth will only amplify who you really are.

Will you like the rich version of you?

I am passionate about helping …

My life’s passion statement is to help people accomplish far more than they ever thought was possible. One key way that I am seeking to accomplish this is by teaching people about personal financial management. I have realized that if I can help people with their financial situation, then they will be better able to focus on achieving their life’s passion.

Example 1: I have this friend, Perry Noble, who is passionate about leading people to Jesus Christ. He is passionate about helping people to intensely focus on doing more than just sit on a church pew – to get up and DO SOMETHING! If he were worried about where the money for the next house payment was going to come from, would he be as effective at accomplishing his life’s passion?

Example 2: I have this other friend, Ken Wilson, who is passionate about technology, graphic design, and motion graphics. He is passionate about helping people learn about technology and utlizing it in a creative, mind-stimulating way. If he were constantly worried about the creditors calling, do you think he would be at his creative best?

Example 3: I have myself. I am passionate about helping others accomplish more than they ever thought was possible. If I were worried every single day about how I would pay the doctor bills, I believe that I would not be as effective at accomplishing my life’s passion!

What is your life’s passion? Is your financial situation stopping you from focusing 100% on it? What do you need help with most?

Another reason why you should budget …

PAID FOR VACATIONS! Going on a vacation that is paid for in advance is AWESOME! Imagine going on a trip that is already PAID FOR before you leave. It is an outstanding feeling!!! When you have paid for the trip in advance, you will enjoy the trip so much better.

I am going on vacation. It is paid for. It was paid for over a month ago. Now, all I have to worry about is … NOTHING AT ALL!

Are you going on a pre-paid paid-for vacation anytime soon? It is awesome! Here is the challenge: Try to go on a weekend vacation and pay cash for it in advance.

What will you say in 20 years?

Today, I mark 20 years since I learned about debt and its impact on my ability to achieve financial freedom. It was 20 years ago that I learned that if I had debt, it would enslave me to the lender. I learned that the interest I paid on debt would help the bank build a nice new building downtown. I learned that debt would lead to added stress in my life. Debt would cause tremendous strain on my marriage. It would also cause me to have my reputation stained when I lost my job and could no longer pay my debts. Debt would make me lose the ability to give to worthy causes or help the poor. Debt would limit my ability to assist my children through college. Debt would make me lose sleep at nights. Debt would force me to work extra hours and additional jobs just to keep current on payments. As a result of working the extra hours and additional jobs, debt would wrench the additional income from my family’s hands. I also learned that unexpected expenses would arrive and that if I had not saved money, debt would be available to handle the emergency. Debt would cost me the ability to do exactly what I am made to do since it would not produce a large enough income to service the debt. It was 20 years ago that I learned that debt is dumb. It was at that time that I learned that I needed a plan to become and stay debt-free.

Today, I am broke. I still have debt. Even after knowing the truths about debt FOR TWENTY YEARS!!! Even after seeing its awful consequences on friends and families. Even after knowing that I really should do something about this debt problem. If only I had taken the time to plan. If only I had gotten on the same page with my wife and budgeted. If only we would have told ourselves “NO!” to the gadgets that we paid top dollar for, but sold in a garage sale for $4 total last weekend.

Signed – The Average American

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