Happy Independence Day 2009!!
By Brad Chaffee | July 3, 2009
I hope everyone has a safe and festive Independence Day weekend! I also hope as you celebrate America’s birthday, you can think of it as more than just another extended holiday weekend. As a country who enjoys great freedoms, it is a very important day!
Independence is defined as the state or quality of being independent; freedom from dependence; exemption from reliance on, or control by, others; self-subsistence or maintenance; direction of one’s own affairs without interference.
For Your Country:
Celebrate your independence and freedom, and honor those that sacrificed in order for you to have them. Freedom doesn’t come easy, and it certainly isn’t free. We must not take it for granted, nor should we assume we will always have it. Both parties in Washington have forgotten that independence begets freedom. The more dependent a country becomes on it’s Government, the less free it is. I like to compare it to moving away from home. You are more free to make your own decisions, and there is absolutely no better feeling, than doing something yourself. Washington is like that parent that just won’t let you grow up. I love my independence! I love my freedom! I love this country!
For Your Family:
Now you didn’t think I would talk about independence, without talking about debt did you? Do you depend on debt? Do you feel that without it, you can’t get ahead? I remember that feeling and it isn’t a pleasant memory! Independence from debt, gives you hope and a brand new outlook on life. It gives you freedom and peace that otherwise you could never experience. Debt steals hope which is the very reason people now believe that they can’t get by without it. On this Independence Day, consider declaring it an extra special day by becoming independent financially. Break the chains and become truly free! Move out of your parents house for good, and find out why financial independence is better than bondage. Stop borrowing, start planning, and run as fast as you can towards the light! The light becomes more visible the further you run away from debt. RUN!
HAPPY FOURTH OF JULY! Enjoy the fireworks finale below from Charlottesville, Virginia from 2008. (This years fireworks celebration here in Charlottesville will not be as robust because some of the sponsors backed out.)
Topics: Debt Elimination, Freedom, Independence | No Comments »
EOD Interviewed By Mr Credit Card On Blog Talk Radio
By Brad Chaffee | July 2, 2009
Mr Credit Card, from askmrcreditcard.com interviewed me yesterday! I was slightly nervous as it was the first time I had ever done that kind of thing live. After listening to it, I feel it went well and I hope that you enjoy it as well.
Just so you know, the first 35 seconds is silent. (I called 3 times before we were actually connected, and each time I thought I was on hold waiting to go live, but each time heard the computerized voice say “thanks for calling blog talk radio….goodbye!” At the end you’ll also hear me talking to my son, telling him to eat his green beans. I thought I was on hold, waiting to talk to Mr CC about the interview and say goodbye.) haha!
Obviously Mr Credit card and I see things completely different as far as the use of credit cards. As you know I feel that using credit cards is not worth the risk, and he feels they can be used responsibly as a tool. We bumped into each other after Jim Cavanaugh wrote Walking Away from Credit Cards, and J Steele, one of his writers, responded with Credit Cards Bad?.
We talked about:
- How we got into debt
- What made us decide enough was enough
- Budgeting
- Having a large savings account
- The Total Money Makeover
- Debt snowball/debt reduction
- Housing and Mortgages
Topics: interview | 3 Comments »
The Benefits Of Saving
By Brad Chaffee | June 29, 2009
I had to give this speech to my class tonight, and thought I would post it. It’s the very first outline I have ever organized! Usually I just write it as I feel it, when I feel it, and then organize it later. I did get an A+ for my presentation so I am excited. I read a little bit more than I wanted to but overall I did great!
My next speech will be a ceremonial speech, and I think I am going to do that speech as if I have just become debt free. That will certainly be something to celebrate! Enjoy!
The Benefits Of Saving
Specific Purpose Statement: I would like to inform you of the negative effects that financial stress can cause and what you can do to prevent it.
Central Idea: Although it is more fun to get what you want now, saving money to achieve your goals as an alternative, provides therapeutic benefits that can give you more time to enjoy life, and less time loathing it.
Introduction
I. Imagine this- We’re newly married, and just moved into our very first house.
A. We had a plumbing nightmare occur that ended up costing us over $2,000, not to mention they dug up our front yard.
II. With absolutely no savings in sight, we ended up borrowing the money to pay the plumber.
A. I can still remember just how stressed we were at the time.
III. One thing that we have learned since then is how valuable having a savings account is, to cushion the blow when life happens.
A. If you are breathing right now then you know that life happens at the most inconvenient time, so you must be prepared.
B. As a college student, I am sure you can relate to how painful it is when it’s time to pay tuition or buy those expensive books, and you have to borrow money or spend the light bill to do it.
Transition: (Can you remember a moment in your life when an unexpected event caused you financial stress? I bet you can, and I bet you remember thinking to yourself- how in the world am I going to deal with this?)
Body
I. 7 out of 10 people say they are “very stressed” about money.
A. Financial stress can negatively affect your health in many ways.
1. It can cause unhealthy coping behaviors in order to deal with anxiety.
a. Smoking, drinking, and overeating are just a few coping mechanisms.
2. It can leave you with less money to properly take care of yourself.
a. People who are under stress tend to cut corners in areas such as health care.
3. Financial stress can lead to problems sleeping.
4. Unhealthy emotions can also be triggered by stress related to money.
B. Financial stress causes marital problems which can lead to divorce.
1. According to divorcereform.org, financial problems are listed as one of the most common causes for divorce.
Transition: (Now that you understand the problems associated with financial stress, let’s look at how the benefits of saving money can allow you to breathe a little easier.)
II. Financial preparation by saving money can not only reduce stress, but it can also ensure a better quality of life.
A. When you have an emergency fund to cover unexpected emergencies, you can easily cover the expenses without the added stress of where the money will come from.
1. Money magazine reports that 78% of us will have a major negative event in a given ten-year period.
2. 49% of Americans could cover less than one month’s expenses if they lost their income.
B. By planning for your retirement and saving early on, instead of relying on the bankrupt promises of Social Security, you can experience a greater quality of life.
1. Nearly two-thirds of retirees count on Social Security for most of their retirement income.
2. 39% of Americans aren’t saving for retirement!
C. By saving for big purchases instead of putting them on credit, you can avoid debt, and use the money saved in interest to add to your savings account.
1. Using debt for purchases ensures that you will pay more than if you used cash.
a. A Dun and Bradstreet study found that when you use plastic instead of cash, you spend 12-18% more because spending cash hurts.
b. You also pay more over time in the form of interest, for the privilege to buy something you do not have the money for.
D. One of my favorite benefits that come from saving money is the opportunity you will have to give in order to help others.
1. If you have 3/6 months of expenses saved up, no debt in sight, and continue to save for retirement, giving someone a gift instead of a loan is actually a possibility.
Transition: (Be sure to keep this in mind the next time you’re out, and on impulse decide you “need” some new stuff.)
Conclusion
I. Saving money is a priority and when you have a security blanket, because you committed to also having a plan, you’ll have no reason to be stressed out about money.
II. Retire with financial peace, and live out your ending years with dignity, and without constraint.
III. Your new plan to save money can change your life!
IV. You may be familiar with the old story about the ant and the grasshopper.
A. The question is do you want to be the ant, or the grasshopper?
1. The ant prepares first, and eventually enjoys his rewards.
2. The grasshopper lives for today and has lots of fun, but when the snow comes he realizes his mistake.
B. Either way, you will have to be both, so why not make the decision to be the ant now, so later you can be the grasshopper?
1. Nobody wants to reach retirement and deal with the stress of having to work like an ant!
Bibliography
- Crouch, John. “What Are The Most Common Causes Of Divorce”. Divorceform.org. 2005. Jun. 26, 2009. <http://www.divorcereform.org/cau.html>
- Ramsey, Dave. Total Money Makeover. Nashville, TN: Thomas Nelson, 2007.
- Ramsey, Dave. Dave Ramsey’s Financial Peace University Workbook. Brentwood, TN: The Lampo Group, Inc., 2007.
- Scott, Elizabeth. “Financial Stress – How It Affects You and What You Can Do”. About.com. Oct. 17, 2008. Jun. 27, 2009. <http://stress.about.com/od/financialstress/a/financialstress.htm>
Topics: Saving Money, School Speech | 7 Comments »
The Debt Snowball – Do It Your Way!
By Brad Chaffee | June 25, 2009
The Debt Snowball
There are so many ways you can pay off your debt. Of all the methods out there, the one I like the most is the one Dave Ramsey teaches. The debt snowball is the second baby step in the Total Money Makeover. You generally start your debt snowball once you have saved AT LEAST $1,000 for your baby emergency fund. The idea is to give yourself a buffer so that as you are paying off your debt, you will be able to handle life’s little problems without having to borrow money in the process.
Dave’s Snowball method is awesome, but I have come up with a few revisions for special circumstances to give you more options. My revision allows you to attack your debt in a different way, giving you the opportunity to choose paying off higher interest bearing accounts first or to just pay off larger amounts before the smaller ones. Please pay attention to the special circumstances for doing it this way. For those of you that are not familiar with the debt snowball, I have provided you with an example with my revisions directly below it.
Dave’s Debt Snowball Method
List ALL of your debts, EXCEPT your mortgage, in order of smallest to largest. You would also list your minimum monthly payments for each of those debts. You want to make sure you pay ONLY the minimums for each debt on your list. You would then take your disposable income, plus any other money that you can round up throughout the month, and apply it to the first debt on your list.
EXAMPLE:
Debt Snowball
- 1. Visa – $589 ($50 min. pymt)
- 2. Discover – $620 ($55 min. pymt)
- 3. Lowe’s – $819 ($75 min. pymt)
- 4. Mastercard – $1,255 ($100 min. pymt)
- 5. Student Loan 1 – $5,000 ($65 min. pymt)
- 6. Student Loan 2 – $8,500 ($90 min. pymt)
- 7. Student Loan 3 - $12,500 ($125 in. pymt)
- 8. HELOC – $20,000 ($225 min. pymt)
TOTAL DEBT: $49,283
TOTAL MIN. PYMTS: $785
DISPOSABLE INCOME: $250 (money left over after paying all the bills)
For the first month you would apply the $250 from your disposable income PLUS your $50 minimum payment to your Visa bill, while paying JUST the minimums on everything else. You would kill $300 off of your Visa debt and be able to knock out the rest in the following month. (*If you have a yard sale, or put some stuff on craigslist or Ebay, you could probably come up with enough to knock out the Visa debt in the first month.)
Some people have a problem with this method because of the fact that you don’t organize your list according to interest rates. You can certainly do it any way you want, but the idea behind this method is that you earn some quick wins by paying off your smallest debts first. Imagine if your highest interest rate was also your largest debt. You probably would save a few bucks by paying it off faster but it would also take you much longer to pay it off, which could cause you to feel like you aren’t accomplishing anything. Doing it the other way keeps you motivated and focused on killing your debt.
DO NOT underestimate the motivation you get by paying off each debt in your snowball faster! It was huge in keeping us focused and happy while killing our debt. A great example of this for us, is the fact that we have had our last and final debt hanging around since September of 2008. (About $8500) It feels like it is taking forever and there have been times where our motivation has been low. It’s not always about math! Dave Ramsey would remind you that if you were doing good math, you wouldn’t be in debt in the first place. I certainly agree! For the record, I was lousy at math in that respect, for much of my adult life!
My Revision To Dave Ramsey’s Debt Snowball
Now my revision doesn’t really change the debt snowball unless you come into a large amount of money. For instance if you receive a large monetary gift from family, an inheritance, or you gave Washington an interest free loan and received a large tax refund, you would apply that money to your snowball in a different way.
Let’s just say that you received a $13,000 inheritance. Instead of paying the first four debts off completely and paying down the fifth one by $4,717, I think that you have a few more options. My revision basically consists of paying off ANY of the debts in your snowball any way you want as long as you can pay the debt(s) off completely. You will still be gaining those quick wins and knocking out some major enemies on your snowball in the process. Knocking out a huge debt, even if it is only one, can make you feel pretty good, especially if it means you will save some money in the process. Also adding some money to your disposable income to attack your snowball by knocking out a debt with a high minimum payment can be very helpful to your mission!
- Option One: Take the $13,000 and pay off debt number seven from the list above. Then you would apply the remaining $500 to debt number one. With your minimum payment saved from paying off #7, you have an extra $125. That would help pay off your Visa debt completely and give you some extra to start putting Discover out of your misery.
- Option Two: Pick the highest interest account, and if you can pay it off COMPLETELY, do it! What if you could pay off two of your highest interest debts with that $13,000?
- Option Three: Dave Ramsey’s method. There is absolutely nothing wrong with doing it this way. We did it this way and it worked GREAT!
Bottom Line
YOU DECIDE, depending on what makes you feel better! My revision allows you to feel good about paying off your debt while still experiencing the extra incentive and boost from gaining some much needed wins along the way! In order to do this you have to be able to pay off any combination that you choose completely! Remember that and good luck paying off that ugly debt!!
When you take the enemy out of your life, life is better! Stop borrowing money and decide right here, right now, to get that debt out of your life! It will change things dramatically! Try it and see for yourself, you can always go back to borrowing money if it doesn’t! Lose some debt and gain some freedom!
Topics: Debt Elimination, Money Management | No Comments »
Insurance You Need And Insurance To Heed
By Brad Chaffee | June 22, 2009
Do You Hate Insurance?
For most of my life I have HATED insurance. It always seemed to me that I was getting ripped off, especially if I never had an event to justify having it. You probably know what I am talking about. You drive your car for 5+ years without an accident, causing you to think more about all the money you have paid in, that seems to have just been flushed down the toilet. As much as I hate thinking about that I have learned that insurance is about transferring risk, and the cost that comes with that is money well spent. We never know when something is going to happen to us that could cause us to go bankrupt if we don’t have the proper insurance. You should think of insurance as protection, not money poorly spent. Not needing to use your insurance is a good thing, but not having it when you do need it, can cause a bad situation to get worse REAL fast!! On the other hand, you might have the wrong kinds of insurance, and you REALLY ARE getting ripped off. In which case, you need to find out now, rather than later when it will be too late.
DISCLAIMER:
I must say upfront that I am NOT an expert in the area of insurance, but from what I have learned there is insurance that you need, and don’t need, in order to protect yourself from expensive life changing events. This information should be used as a starting point to learn about your insurance needs, not to take the place of your own research and investigation on the matter. You should never act on anything until you understand what it is that you are getting yourself into.
- “Term” Life Insurance – 15 or 20 year term is recommended, mainly because after that you will have become self-insured if you have no debt and at least 3/6 months of savings. Avoid extra options, and don’t forget your spouse. You should have about 10 times your income. Term insurance is cheaper, and has no built-in savings plan. (Insurance is not an investment, it is protection.)
- Identity Theft Protection – Look for theft protection that includes restoration services such as an assigned counselor to handle the headache that follows identity theft.
- Health Insurance – Highly recommended! If you do not have health insurance there are multiple avenues to follow in order to get it. I would recommend that you make it a priority over other things that people seem to put first. (like having a brand new car, bigger house than you need, multiple toys, vacations etc.)
- Disability Insurance – This replaces income due to short term or permanent disability. You want to get insurance that pays if you cannot perform the duties you were trained to do. Buy short-term policies that cover less than 5 years. Pay attention to the elimination period which determines when payments begin after the disabling event.
- Auto Insurance – Your only options are pay the uninsured vehicle fee (NOT recommended), get liability or collision. If you have adequate savings, it is wise to raise your deductible to lower your premium. You can consider dropping collision on older cars. (Because my car is an 85, and worth around $500, I carry liability only.)
- Long-Term Care Insurance – Long-term care insurance is needed for nursing home, in-home care, and assisted living facilities and is highly recommended. Dave Ramsey says not to buy it until you reach the age of 65. “69% of people OVER the age of 65 WILL require long-term care at some point in their lives.” Before 65 it is a waste of money.
- Home Owner’s/Renter’s Insurance – You should make sure you have “guaranteed replacement cost”, instead of extended replacement coverage. If you have the latter it is up to YOU to make sure your coverage is updated every year.
- Credit Card Protection – SCAM!
- Cancer and Hospital Indemnity – Sounds good at first until you realize how fast hospitals discharge patients as well as the total cost of one day. The coverage pays up to $150 per day, and some days cost more than $1,000. (Check link above: Insurance to heed)
- Accidental Death – Whether you die by accident or not, the truth is you are still dead. You just need term life insurance either way. What a scam!
- Pre-paid Burial – You should not pre-pay for any of these benefits. Do not confuse this with pre-planning. It is good to plan but do not pay until the service is needed. You can gain more by investing in Mutual Funds over the years and besides, the only thing you save by pre-paying is the cost of inflation.
- Mortgage Life Insurance – More affordable to buy or add to your TERM life policy. This insurance is hugely profitable meaning you are taken advantage of in the process.
- Credit Life and Disability – Better to maximize your disability insurance.
- Cash Value (WHOLE LIFE), Investment, Or Refund Policies – Insurance should never be used for any of these purposes. Returns are historically low. When you die, the insurance company keeps the cash value, and the fees deducted are really high. (You should know that if you have a cash value policy, you should get a term life policy in place before canceling your cash value policy. If for some reason you have become uninsured, you don’t want to be left with nothing.)
- Duplicate Coverage – Why would you pay twice for something?
- Extended Product Warranties – Huge rip-offs! Cars, phones, computers, and many other purchases have these add-ons to “cover” you if the product you are buying is a piece of crap. Have you ever tried to follow though with one? There are all these little details that determine what is covered, what is not, and blah, blah, blah! Don’t waste your money! I have not bought extended warranties in many years and have never been burned because of it. I know many people that swear by these rip-offs, but nothing is as affordable as putting some money into a savings account and replacing your purchase later on. If you buy a piece of crap, why would you want to replace it with another piece of crap, while in most cases still having to pay a fee to do so?
Has this post been helpful to you? Do you have an insurance story to tell? Did I leave anything out, or get something wrong? Leave a comment below…
Topics: Insurance, Money Management | 8 Comments »