Financial Peace
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Wednesday, June 11th, 2008
Is your puzzle missing a few pieces?
Your budget is just like putting together a puzzle. Every piece is important because without all the pieces it will never be complete. If your budget is not a completed plan for how to spend your money, it is not a plan at all. There are many things that have to be considered for a budget to work. The death of a budget is when we feel the budget has failed and we give up. It’s true the budget did fail, but we need to understand that it only failed because we failed to do what was important for it to work.
I’d be willing to bet that most of us have tried a budget before and given up in the first month. It’s probably more like the first week!! I know because I am guilty!! We went all out when we went on our budgetfest shopping spree at Staples or Office Depot prior to our TMMO. We would buy the “special” budgeting book, filing cabinet, and maybe even a book about budgeting to help us. Don’t forget about the brand new calculator that you have to have. Not because your other “new” calculator stopped working from ALL the budgeting, but because you have no idea where it is. 
Since we started our Total Money Makeover we have realized that the important parts to a successful budget were never at Staples or Office Depot. I know, what a shocker right? The truth is that WE ARE the budget, WE CONTROL the budget, and WE ARE responsible for it’s failure or success. This is not to say that if we are doing it right that we will never hit any obstacles because LIFE always happens! Remember this: Successful people fail far more often than unsuccessful people do!! In addition, we fail because of what we do not know, and succeed because of what we do know! Learn from your failures. The bottom line is that you will fail, but be sure to get back up and find all the pieces again. Your budget CAN be put back together!!
Pieces to a successful budget.
PREPARATION - Whenever I put together a puzzle I start with the outer edges first. To me putting together a puzzle by starting from the middle felt chaotic, unorganized, and even overwhelming. With structure comes confidence. In budgeting confidence begins with an EMERGENCY FUND. If you are prepared for what life throws at you by having an EMERGENCY FUND, you will be less likely to give up. Prepare yours NOW!
DISCIPLINE - Discipline is never an easy thing. We are constantly bombarded by impulses to buy this or buy that. “We deserve a prize for all our hard work”. we might say. (I have used this one on many occasions. It is the easiest way to justify bad behavior.) We actually deserve financial freedom and the relief that comes with it. Discipline will keep you from making those impulse decisions to buy when it isn’t the wisest decision to make. Smack yourself on the hand and say NO, and if that doesn’t work stay home! 
CONSISTENCY - It has been said that if you are consistent over time, you will be successful everytime. If you are consistent in seeing to it that your plan is followed every single day of every single month, you will reach your budgeting goals. If you are consistently breaking your budget, then one thing is for sure, you will consistently fail at it. Control your behavior and tell your money where to go and make sure it does it!
PERSEVERANCE - As I mentioned earlier, failure is likely which is why perseverance is an important piece. There are many reasons why we fail, but no matter what those reasons are, perseverance is the key to any success. You must never give up if you want to win. Instead what you must do is figure out what is causing you to fail. Doing the same thing over and over and expecting a different result is the definition of insanity.
Have you lost some pieces?
I know I sure have. We found ourselves dealing with a busted budget at the end of May. We are still recovering from it. We even had to dip into our $2,000 EF, and now need to replenish $500. It could have been worse. We thought things were fine at the end of May so we decided we could go out to eat a few too many times while on vacation. It wasn’t the meals that did us in so much as it was the “life happening” part. We lost a piece of the puzzle when we decided to bust the budget to eat out. We aborted the plan. We weren’t disciplined, we weren’t consistent, but we will persevere. First we have to find all the pieces and regroup so we can try again.
Other helpful components to a healthy and successful budget.
- Try using an envelope system to control your spending in certain categories. These categories might include groceries, fuel, BLOW money, and entertainment. Stop using your debit card when you shop. It is more likely that you will overspend if you use plastic. Spending cash hurts more so you tend to watch your purchases a little closer. Try it and see for yourself. It can be as simple as using envelopes from home or the bank, but if you are looking for the extra accountability there are programs you can use as well. Here is one:
- Something else that is not only helpful but can be very important is starting a sinking fund. A sinking fund is a fund that you use to prepare for lump sum payments, such as car repair, and even Christmas shopping. If you aren’t prepared for your auto insurance renewal then your budget is going to be strained for that month. Plan for repairs, insurance, Christmas, vacations, membership renewals etc. ANYTHING that is not a part of your monthly expenses. This method will also enable you to possibly eliminate monthly payments. For example, we have always paid our car insurance monthly, but by starting a sinking fund we were able to pay for six months of insurance which lowered our costs, and freed up more money to pay off debt.
Thanks for reading and good luck budgeting!! Having a plan is the best way to succeed. Do you have a budget in place? Find the pieces and finish your financial puzzle today! You’ll be glad you did!
What If You Were Recession Proof?
Saturday, May 17th, 2008
Are we experiencing a recession?
That seems to be the question of the year. If you watch the news, you are probably convinced that you should just give up. Don’t start digging that bunker just yet. The truth is that the U.S. is merely growing at a slower rate. From January to March the economy grew at the same rate of 0.6 percent, as the last quarter of 2007. Slow, but still growing.
A recession is defined as a period of economic decline; specifically, a decline in GDP, for two or more consecutive quarters. Maybe we should wait until we have one quarter of shrinkage before we start saving canned goods. So to answer the question if we are indeed in a recession the answer is NO, but that doesn’t mean we aren’t on the brink of one.
How should we prepare?
The answer to this question is actually a very easy one, and that is you should manage your own economy at home first. Everyday we hear people complain about Government spending, yet 70% of us are living paycheck to paycheck. If we expect the Government to spend OUR money wisely, shouldn’t we do the same? If you had a financial plan that didn’t consist of putting that 60″ HDTV on credit, you could better position yourself in order to handle an economic down slide. Instead people are spending their own money UNWISELY while expecting the Government not to, so that it can subsidize poor decision making at home. Did you get all that?
By spending less than we make and saving for the future we can make a recession feel like a thunderstorm instead of a hurricane. If you didn’t have any debt payments, lived on a written budget, and had a savings of 3-6 months of expenses, would you worry about a “looming” recession? The only worrying you would be doing, is for the people who weren’t prepared. Not to worry though, just throw this book at them!!
What do we do if we have not prepared?
Number one would be to get started NOW! You are still going to have to hunker down for Hurricane Murphy but at least you will be more prepared for the next storm. Too bad you “needed” that 60″ toy! The good news is you can still sell that expensive T.V.! “SAY WHAT?” Well does the “looming” recession scare you or not? If you sold the T.V. you would be able to start your Total Money Makeover by saving $1,000 for your baby Emergency Fund and even have enough left over to pay on your smallest debt! How scared are you?
What if business has slowed, or we are unemployed?
If business is slow then you are probably going to have to get a second job, if you do not want to leave the first. Regardless, you are going to have to make more money! It might be a good time to ask yourself if you knew what you know now, would you still accept your current job? I’m not saying to quit your job but what if you set some goals and eventually worked your way out of your current low paying position? How nice would it be to be doing the job you loved? You would probably make more money doing something you loved and had a passion for.
If changing career paths is too much of a change then you must then consider your remaining options. A) You could look for a higher paying position in the same field, and/or B) get a second job delivering pizzas or waiting tables. When looking for a new job do not rely solely on the classifieds. In fact, you are far more likely to get a job if you thumb through the phone book for any businesses you are interested in, and placing a call. Of course you have to be prepared and ready to approach them in this way. For more about job search methods and choosing careers read 48 Days to the Work You Love.
For those that are unemployed, you need to be filling out applications every day. The Government is not going to find a job for you. Unless you are disabled you should have a job. The unemployment rate is around five percent but how much of that five percent choose not to work? Unemployment in Michigan is the highest in the country at around 7.2 percent, yet I know a very hard working woman in Michigan, that has two jobs despite this. She (Mikki) is doing a Total Money Makeover, and just like other Dave Ramsey fans, she is beginning to see the light at the end of the tunnel! I can guarantee you she is not complaining about unemployment rates?
YOU are responsible for YOU!
In closing I want to end with a line from the movie Pursuit of Happyness, where Will Smith is sharing a teachable moment with his son. “You gotta dream, you gotta protect it. People can’t do something themselves, they wanna tell you, you can’t do it. You want something? GO GET IT…Period!” You hear the man, GO GET IT! If you are unwilling to do all that is necessary to succeed, then you can’t complain about the inevitable outcome.
In (F.I.C.O.) We Trust?
Tuesday, May 13th, 2008
“Everyone” says you should get a credit card so you can establish credit.
Well, the truth is “Everyone” is Broke!! You want to establish credit so you can one day buy a house, right? That’s what most people believe they are doing or at least that is the reason they give for getting a credit card. I believe that it is the beginning of a cycle that ends up becoming a nightmare!
Why would you need to have good credit?
You would need to have good credit if you are planning to borrow money. If you do not plan on borrowing money then your credit score is pretty much useless. Can you buy a house if you have never borrowed money to establish credit? Absolutely! All you need to do is be on time or early with your rent for more than two years, maintain the same job for more than two years, have the ability to pay the mortgage you are trying to get approved for, and have a substantial down payment. Manual underwriting is when the loan company actually looks at your situation as opposed to checking your FICO score.
Can you survive without a FICO score?
If you went your entire life and NEVER borrowed any money, then your credit score would probably be a big fat zero! SO WHAT! All that means is that you have gone your whole life using cash and ONLY buying things that you could afford. It also means that you have spent WAY LESS for your stuff because you avoided interest payments! The problem with this in today’s world is that people want things now without having to wait or plan their purchase. They “need” it so they go borrow to get it. If you are a human being living in the United States you have probably used credit to purchase some pretty absurd things. I wonder how many pets have been repossessed due to non-payment?
To Borrow Never Again!!
My wife and I have vowed to NEVER, EVER, EVER borrow money EVER again EVER! We now understand that while it isn’t “normal”, it is more than possible. We currently have a mortgage and when it is paid off that is it!! My co-workers and even some family members swear that this is not plausible. The only thing they have to make their case is NOTHING! Their case is made for them by the simple fact that they just can’t comprehend owning anything big without having to borrow to get it. Then they say things like, “It’s going to take you forever to pay your house off!” If I lived like them and continued to borrow, and most of my paychecks went to paying off my monthly debt payments then they would be right! It WOULD take FOREVER!
No payments?
If you have no payments of ANY kind, your income becomes a very powerful tool! You can then afford to pay your house off in less than 10 years. You can then afford to pay cash for that car. You can then afford to do just about anything without it following you around for the rest of your life. Stop acquiring debt NOW, before you end up finding out why!! Forget about your credit score, because it only encourages you to BORROW MONEY you don’t have! Use cash and make sure you have a financial plan! Anything you can borrow to get, you can use cash to get without becoming a slave, and without making everyone but yourself wealthy!
In (Family is Important use Cash Only!) WE Trust!
We believe in our own F.I.C.O. score to manage our financial matters. We believe that because FAMILY is so IMPORTANT we shouldn’t use debt to set future generations up for failure, so we use CASH ONLY! Debt destroys families, DON’T let it destroy YOURS!
- What is the most obnoxious item or thing, you have ever financed?
How to Balance Your Checkbook
Tuesday, May 6th, 2008I found these videos on YouTube and wanted to share them. Until recently, balancing my checkbook was non-existent. The truth was I didn’t know how. A little embarrassing yes, but the truth is there are lots of people that do not bother with this financial detail. For those of you who already know how to balance your checkbook, share this post with someone you know that has difficulties in this area.
Ideas on How to Give Yourself a Raise
Friday, May 2nd, 2008
Have you done a budget only to find out there isn’t much disposable income left?
Even worse, are you in the negative? Here are some ideas that we have tried, have heard others recommend, or that we intend on trying in the future. If you are willing to try some new ways to trim the budget, and earn extra money, you have come to the right place. I hope you can try one, some, or even all of these ideas to help GIVE YOURSELF A RAISE! Good Luck!
Read, read, read!
The more you read the more you know. The more you know the more you become. The truth is that when you read it stimulates your brain causing you to be more creative in your thinking. It opens doors that you were unaware existed, and it strengthens your decision making capability. Improve your ability to earn more simply by reading!
Have a plan!
This may seem obvious to some but the truth is most of us do not have a plan. There are so many ways to save money by simply having a plan. For instance, by planning the route and order of your errands each day you will save gas, time, and energy. This will give you more money in your fuel envelope, & increase your productivity. Perhaps the biggest money makers of them all is the budget. Telling your money where to go will help you find that raise you were looking for, but only if you actually account for every dollar.
Adjust your withholding so that you do not get a huge refund at the end of the year.
Every year people complain about not having enough money each month. They say things like, “If only I made a little more money.” How about this. Instead of giving the Government an interest free loan every year, give yourself more of your money each month. The money would be better spent on your new financial plan!! The sad thing is people that complain about not having any money end up spending their tax return on toys or acquiring new debt! Couldn’t you use an extra $100-$400 each month?
Dumping debt can also add money to your disposable income.
Sell that car and free up the amount of your car payment each month. This will also likely cause your insurance premium to drop. Here’s something to think about. Take 1/3 of the money that you were spending on your car payment, or other debt, and use it to purchase bargain items to sell on Ebay. You can probably earn the amount of your car payment and then some, just on the resale from those items. Add that to the 2/3’s saved from not having a car payment and you have significantly increased your take home.
Completely avoid credit cards and loans of any kind. (Mortgage being the exception)
In order to understand this you must understand compound interest. Compound interest is a mathematical explosion and if you are on the receiving end you are extremely pleased about your return. Most people however are on the opposite side of the spectrum and happen to be the ones PAYING the compound interest to someone else. That is no fun at all. So by avoiding credit cards and loans you are opting out of the “making someone else VERY RICH” fan club. Make yourself VERY RICH, and change your family tree forever!! For a better understanding of compound interest see how Ben and Arthur did.
Change the deductibles on your Insurance plans.
By raising your deductibles to a higher amount, you will lower your premiums each month. This is only recommended if you have your Emergency Fund in place. It will not do you any good unless you have the money to cover the deductible if needed.
Give yourself a raise by trying all or some of the ideas presented. The more money that you create, whether by income or savings, the more of an impact it will have on your life. Get out of debt, save money, and work diligently towards recession proof status, and you will be happier in the end.
Other ways to give yourself a raise: Use envelopes, shop for bargains, walk or ride a bike when you can, take the bus, downgrade from cell phones and land lines to one or the other, quit smoking, and pack a lunch. Please feel free to add to this list as I am positive that there are many more ways to give yourself a raise that I have left out.
For even more ideas on saving money and getting bargains check out these blogs:
- Frugal Dad
- Frugal Hacks (Frugal Blogging Network)
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