The “B” Word!
by Brad Chaffee

Yeah I said it, the “B” word….Budget. My FPU class just finished Lesson Three called Cash Flow Planning, and when most of us think about a budget, all kinds of negative thoughts surface. First we think it will keep us from having fun. If you are like me then you may have thought it was more trouble than it was worth. Seriously, why should we do a budget when it always seems to collapse midway through the month? Most of us have avoided doing a budget our entire life all because of these misconceptions.

The truth is that the budget is not something that should make us squirm. It should make us feel safe and secure. When you have a plan it eliminates that uneasy feeling you have when you spend money that you aren’t sure you have. It keeps your money from walking away without a trace. Our money disappears and we just accept it like it is no big deal. No big deal?? I am here to assure you that it is a very big deal. Your budget is a blueprint for your life. A blueprint that will tell everything precisely where to go.

Dave Ramsey often uses the analogy of building a house. You surely would not want to have your house built without first having a plan for the builders to go by. If you did, then your house would probably be very unique to say the least. A blueprint leaves no question about where everything goes, and your budget does the same thing. It makes your money behave.

When most people think of a budget, they think of it as something restrictive. This is not the case at all. Your budget is a plan for your money, and it is called personal finance for a reason. What you choose to spend your money on is up to you, but it is extremely important that you know where it is going at all times. When your goals are clear and concise you will make less mistakes and more smart decisions with your money. You will be so amazed at just how much different you start thinking and handling your money once you have a budget. It makes you think about what is important to you and the desire to achieve what’s important grows with each new budget.

Dave also says, if you do rich people stuff with money you will become rich, if you do poor people stuff then you will be poor. This is why he says that if we want to become rich we need to study the habits of rich people. They are rich for a reason and it has everything to do with the plan they have in place.

It is also very important to understand that a budget is not going to be fun at first. It’s going to be tough and it is going to frustrate you if you are not careful. The reason why a budget fails most of the time is because we don’t follow it. Another thing is that we do not know everything to include so when something pops up because we forgot about it the budget is dead. The truth is that it takes about 3 or 4 months to really start to get the hang of it. Don’t worry you can do it!!

If you find yourselves asking or saying any of the statements below, maybe it is time for you to take control once and for all. Maybe it’s time for you to try something different for a change. Maybe, just maybe, you could build a strong foundation and change your family tree FOREVER.

1. Where in the world did all that money go?
2. What do I have to show for it?
3. I need a credit card in case of an emergency.
4. My stupid bank charged me an arm and a leg worth of overdraft fees.
5. I hope I win the lottery!
6. What do you mean reconcile my checkbook?
7. I need a co-signer, can you co-sign for me?
8. I’ll always have a car payment!
9. I’ll pay my electric bill next month.
10. I need a payday loan!

If you have never asked yourself any of those questions then you are either in complete denial, or you have or are on your way to serious wealth. How much do you have saved up? A budget will help you have a clue about your life and your future, so go make your budget now! If you keep doing the same things, you’ll keep getting the same results, so do something different.

** I have created a budget for Enemy of Debt that I think will make your budgeting experience easier. I still have some other forms to add to it before it is complete (debt snowball & savings allocation worksheets), but if you are interested in the budget worksheet now, email me at brad.chaffee@enemyofdebt.com. I will be happy to send you the budget form.

HAPPY BUDGETING!

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I think a majority of people would say it is better to buy simply because of the “I own it”, way of thinking. I used to believe the same thing. I think people do not take into consideration all of the things that should change that “normal” way of thinking.

Dave Ramsey believes that if you are in debt, have no savings and no plan you SHOULD NOT buy, and I am right there beside him in agreement. You need to consider insurance costs, property taxes, as well as being responsible for ALL repairs. All of which does not enter into the equation when you are renting. You absolutely have to factor in the risk that comes with buying when you aren’t ready. Also, I believe that anyone wanting to buy a house and doesn’t feel they should wait for the 100% down plan to kick in, MUST be able to qualify for a traditional 15 year mortgage. Otherwise creative financing may CREATE more of a problem than a solution. Adjustable rate mortgages, balloon mortgages and interest only loans are given to people that ARE NOT ready for home ownership. Just for the record we have an “Interest Only” loan and WE HATE IT! We had a case of house fever because we “had” to have this house. Hindsight is 20/20 by the way.

We “own” a home because of that same way of thinking, but I wish we would have waited until we were a little more prepared for the responsibilities that come with home ownership. There was one time when we had TWO houses at once. One we were renting out and of course the one we are currently living in. Murphy hung out on our back porch for sure and I am so glad we got rid of the rental. I am 100% convinced that we dodged a bullet as we signed the papers to sell the rental. Not only was it before the real estate bubble burst, but we were really eating some cost due to our tenants. We found out that people do not take good care of something they do not own. Sometimes finding another tenant was like finding an employee to cover shifts the day before the biggest day of the year. Our turnover rate was probably higher than McDonalds. My point is that we were not ready and because of it, we paid some stupid tax. We were told that it was “smart” to get another house and to rent the first one out. Luckily, we still made some money in the end after the dust cleared. Notice I said luckily!

When is the Right Time to Buy?

If you are doing a Total Money Makeover then you probably know this answer. If not grab a pad and pencil so you can write this down.

Before you go into debt to buy a house you should first pay off ALL, yes I said ALL, your outstanding debt. This includes cars, boats, furniture, medical bills, student loans, and anything else that you are making payments on. Get rid of it! Use what is called the debt snowball to pay off your debt from smallest to largest. Every time you pay off something roll the money you were paying on that debt over on to the next debt. Once ALL your debt is paid off, you should then save 3/6 months of monthly expenses. If you are single, then you should definitely choose the 6 month number. Your one income, if lost, could put you in a world of hurt so you need to be prepared. Also if you have an irregular income, or work on straight commission you will want to be prepared for those slow months. Otherwise it is up to you and your spouse to decide which to choose. Dave Ramsey says that the spouse that wants the Fully Funded Emergency Fund (FFEF) the highest wins. If you want 3 but he/she wants 6, he/she wins.

Once you have no debt and have saved 3/6 months of expenses you are ready to start saving for that down payment. No, 0% down mortgages, and forget about the 30 year mortgages all together. A 15 year mortgage will not be much more per month than a 30 year and you will save a ton of money from avoiding the extra interest. Dave likes to point out that a 15 year mortgage ALWAYS pays off in 15 years. Before you head off to the Mortgage Company though, I would like to offer another solution. This solution will make you learn a lot about patience but it will also give you the most Financial Peace. I would like for you to consider the 100% down plan.

100% Down? Are You Crazy?

Nope hear me out. If you are on a Total Money Makeover and you have saved your FFEF, which is Baby Step 3, then you are ready to knock out two more baby steps before you start saving for that home. Baby Step 4 is to save 15% of your pre-tax yearly income for your retirement. Then if you have kids, or plan to, you can start investing $2,000 a year into an Educational savings Account (ESA), which is Baby step 5. With no payments to speak of, a solid Emergency Fund, 15% towards retirement and approximately $166 a month being put away for college expenses, you are in a fantastic position to become gazelle intense and save for that house you’ve been wanting. If you are intense enough, in two to three years you could be in a position to buy a very nice, paid for home, with no payments EVER. EEEEEEVERR!!!

You have NO PAYMENTS and 3/6 months of savings. Your income is FINALLY yours to build wealth so that you can experience true Financial Peace. The average person doing a Total Money Makeover reaches Baby Step 7 (Build Wealth) in an average of 7 years. That is not bad when you consider that most people have a mortgage, car payments and any other thing they can finance for their entire lives. So seven years of sacrifice and hard work doesn’t seem so bad, does it? Giving up the bondage of slavery for Financial Peace and freedom is very appealing to me. I sure wish we weren’t slaves to our lender!! Now we have a plan and we will remove the bondage as fast as we can.

Extra note: The argument I hear the most about why you should have a mortgage is because of the tax benefits. A tax deduction is NOT a good reason to buy a house. To avoid paying Washington in order to claim the interest as a deduction and give the bank significantly more of your money is not good math.

Plan, Save, THEN spend!

I’m getting so excited, I can feel my level of weirdness rising. I only felt apprehension when I crossed the first level of weirdness, swearing off debt. I mean, who in this day and age does that? Oh com’on not use credit cards, what planet are you from, everybody uses credit cards. So it was nothing but a fear I slowly crossed into the first level.

I then took a bold step and used my tax rebate to fund my online FPU class and with the remaining rebate half funded my Baby Step One Emergency Fund. Right away I learned how to make a written budget I could live with and more importantly stick with. I learned that even a perfect budget on paper is just a waste of time unless you actually follow it. Duh. Sounds simple right? But I learned by putting down in black and white all the things I’ve been spending my money on. Wake up call time here! I had to have that “ut-oh” moment with myself when I looked down at that spending plan I just finished. That moment said to me if I had all this money I worked hard for going to these things ( okay to insert your past mistakes here ), then look at all those things I could not fund in my wish list. Level two of my weirdness kicked in here. I realized there is a way to reach those places I wanted myself to be. It was a mixture of shame, irritation, anger, relief and hope. The negative feelings were from looking at how stupid I had been with money in the past. The last two emotions were from knowing all the tools I learned in FPU would get me to where I want to be. Level two on the weirdness scale, using a budget for your money month in and month out. Think of it, who knows what their money is for before they even get payed? Man, that’s weird!

I’m getting excited because I have to tell ya, I got to whisper it ,come here ,closer….. anybody looking this way, no? Okay here’s the deal I’m going to be without a car loan!! No really. I have only two more payments and I will not have a car loan. I know what your saying. Everybody has car loans or a car lease. I will have neither one in a mere 60 days. I’m excited about it! I know I will never have another car loan or lease in my lifetime. Ever again, period. Whoops, I think I just got kicked up to level three on the scale! Happy about not having a car loan ever again. That’s just weird. I can hear you out there now. But dude, you gotta have a car to get around man, how are you going to get by? Oh, I will have a decent car guys, I will just have it free and clear unlike you who have another four or five years of payments. I also realize that I will not just be spending away that amount I’ve been paying on the car loan. You see I can now use that money to get a big push on my debt snowball. You see I’m weird. Watch out I have a plan and I am not afraid to use it.

Weird isn’t it? How weird are you?

You Do It!

If there is one thing that comes through clearly in the “Relating With Money” lesson it is that we all need support and encouragement.  We need each other.  If you are married, you need your spouse in order for this money thing to work.  If you are single you need someone to hold you accountable.  So many people that I know use the “you do it” philosophy when it comes to money.  I have too.

When Alana and I first got married, she was the one who controlled the finances.  That was until we had a few too many of those “money fights”. This is when the sparks flew!  She finally said, “Okay…YOU do it then!”  Macho me, said “Fine, I will!”  Needless to say we still had money fights after that.  Yep, the one who was accusing messed up, and Alana chimed in with an, “I told you so”, and she was right.  I deserved it!

The person that handles the money is ALWAYS responsible for what goes wrong. The burden of such an important part of our lives should not be carried by one person!  Dave Ramsey says that we should work together so that we agree on everything beforehand.  Agreeing on everything from the start eliminates the possibility of placing blame.  Agreeing on the budget and intensely following the plan reduces money fights dramatically.

Same Page?  We’re Not Even In The Same Book.

How do I fix our financial problems if my spouse is not on board?  That is not an easy question to answer.  If this is the case for you then as Dave would say, “You don’t have a money problem as much as you have a marriage problem.”  In which case, marriage counseling would be the likely solution.  All of us can be selfish little whiners when we want something, so I am not leaving anyone out.  I have done it and so have you.  The truth is that it is immature and irresponsible to think that you should be able to do your own thing with the money, regardless of who earned it.  When you got married you agreed to be a team for life.  Your spouses input should not only be respected, it should be mandatory.

It is important that you do not nag your spouse though, and whatever you do, DO NOT continuously say, “Dave Says…”.  (Believe me, I know about this one.)  Instead try approaching them in a loving way and simply express your concern over the finances.  Explain to your spouse how important it is to you that you both gain control of the situation.  Do a budget and show them why they need to be concerned too.  Gently ask them to check out this book you read so that you can talk about it.  I am of course talking about the book The Total Money Makeover by Dave Ramsey.  You can still disagree on things but at least you can start listening to each other and communicating about what is important to each of you.

Single and Scared.

What a feeling it is to be single and struggling financially.  I have been there before and I remember the feeling that overcomes you as soon as Murphy stops in for a visit.  If you don’t know, then do this.  Set the timer to take a picture on your camera.  Get ready, and scream at the top of your lungs making sure that you use every single muscle in your body.  Now look at the picture and you will know what a financial disaster can mentally do to someone who is single.  It is a painstakingly agonizing feeling that takes your hope and flushes it right down the toilet.  So what do you do?

Put yourself on a budget, telling every single dollar where to go before the month begins.  Now get yourself an accountability buddy that will help you stick to this new budget.  The most important thing to remember is to not justify improper spending because you deserve a break.  You deserve a break, but not the kind that is going to make you sink even further in the financial abyss.  Instead do things that will encourage you.  Create a budget for yourself as if you had NO DEBT and NO PAYMENTS.  What does your budget look like?  How nice would it be to be in that position?  You owe it to yourself to get there.

But Mommy!

We have all done it.  We have all bought our kids something when we knew we didn’t have the money.  Yes, we are ALL suckers!  I know I sure am.  To look in your child’s eyes and resist the pitiful puppy dog look is tough.  The bottom line is that we MUST resist.  Not only should we resist, but we should take the time to teach our kids about money.  The schools are not going to!  We need to teach them how to give, save, and spend.  We need to keep them from struggling like we have.  It is never too late to teach your kids how to manage money and that starts with your example.  If you buy anything you want, they will buy anything they want.  If you are slave to the lender, then so will they.  Don’t pass that down to them.  Prepare them to win with money.  Show them this chart.  You should check out Junior’s Clubhouse, and even buy them Financial Peace Jr.  Change your family tree now.  Don’t put that burden on your children’s children.

Good Luck!

I am sure everyone has seen the movie Willy Wonka and the Chocolate Factory.  At least twice, right? It actually happens to be one of my favorite movies (the original of course), though Johnny Depp played the role of Mr. Wonka brilliantly. But do you remember the part where the rich girl is in the chocolate factory and she tells Mr. Wonka that she wanted the golden goose and she wanted it now? She even drummed up a high school musical type theatrical, singing and prancing around about everything she wanted. Now I don’t need to remind you of what happened to the little girl, and the many other children that failed to listen to Mr. Wonka.  For those of you who have never seen the movie, the ending was not pleasant to say the least.

Why do I mention a movie that is ever so innocently geared towards children you ask? Its simple, because most of us in our adult lives can relate to the little girl and her golden goose tantrums, as well as seeing it in our children on occasion. As I have begun to walk down the yellow brick road to debt freedom, I talk to more and more people who believe just as the little girl did, just as I did only a few months ago. Those who have been though Financial Peace University have watched Dave’s video that speaks about this issue.

So the saying goes, “I work hard, I should get what I want.” Of course you should, but under the right circumstances.  We as a people fail to realize the true consequences of acting impulsively and purchasing things on credit because of the “I earned it” type of mentality. You can probably attest to this if you live paycheck to paycheck. So what can we do to insure and maintain financial bliss while Veruca Salt lives within us? Well here are a few tips in case you feel the urge to have a tantrum like Ms. Salt did in the movie.

1. Save up and pay cash.

2. Sleep on it before you buy it.

3. Wait for a sale, or look on Ebay.

4. Buy it used.

5. Ask yourself if it is a need or a want.

6. Just say no!

I hope these few tips help you, and feel free to add if you have more ideas on the subject. After all, you don’t want to end up being sent down the “bad egg” hatch for mismanagement of your money, so lets get on the plan and be about the business of creating wealth and happiness!

Do you have a Veruca Salt moment that you would like to share?  Leave a comment and tell us about it!

]]> http://www.enemyofdebt.com/2008/08/i-want-my-golden-goose/feed/ http://www.enemyofdebt.com/2008/08/the-active-hobbyist/ http://www.enemyofdebt.com/2008/08/the-active-hobbyist/#comments Mon, 11 Aug 2008 22:30:47 +0000 cbryer10 http://www.enemyofdebt.com/?p=183 Expensive Hobbies
by Chuck

How Much Does Your Hobby Cost You?

We all have’em! I’m talking about those hobbies you have that take your money. I was joking around with a person on the Enemy of Debt forum about paying for cable or dish TV. It got me thinking about the hobbies we all have and how much money we devote to them. How do we justify the money we allocate to hobbies when we are in the process of getting out of debt? I mean some hobbies can take a big chunk of change on a continual basis. No matter if it’s a recreation sports team your on with all the equipment you need, or a passion to do something like photography or scrap booking, it will take money to continue doing them. How do you pay for it, and do you feel guilty after spending the money on your hobby?

I am not immune from this type of affliction mind you. One of my favorite hobbies is computing. Keeping up to date with that, I have seen me turning over a good amount of money over the years. I own several types of computers from desktops to laptops. I have spent money on buying a very experimental computer from One Laptop Per Child foundation. That is also something I’m very interested in but not a topic for Enemy of Debt. Do I feel guilty about the money spent? Yes, sometimes. I know that the money could have gone to my snowball. Some of the money was spent before I learned of Dave Ramsey and is the cause of my snowball! Why do I feel guilty? I realize we all have to have a life while doing the debt thing. In a way though I wonder if it shades my gazelle intensity. How about you out there, are you going through the same thoughts when you spend on your hobbies?

What’s Too Much?

I can’t speak for you with your hobbies or how you spend your money. I can only speak for myself and how I reach my conclusions and ultimate decisions. I have, after a lot of soul searching, decided I will continue with computing as one of my hobbies. I would like to eventually go back to take some schooling for it maybe. That being said, how I remove the guilt of spending, is finding alternative ways to fund my hobby. I have taken unused items laying around the house and sold them on Ebay. This offsets the cost of my hobby. I cut back on other areas of spending in my life. Like I said in the beginning of this post all this thinking of hobbies started over a conversation on paying for cable TV. I do not have cable or dish TV. I only have the standard few stations my tv will receive and I am fine with that. I find I do not miss all those channels I used to get either. I have prioritized my hobby into a life style I feel comfortable with.

Another way I have come to justify my computing hobby is to make it into a hobby that gives back to my community. I am now in the early stages of starting a 4-H computer club in my area. I can turn something that has brought me a lot of fun, and turn it into a way to give back to others. If and when the new 4-H club takes off, I will feel totally content with any money I have spent so far. It will have raised what was just a fun past time for me, to something that has the capabilities to reach out and help young kids. In a nut shell I can have my cake and eat it too! That’s my way of taking a hobby and molding it fit with Dave’s teachings.

Later………
Chuck

Mikki wrote an awesome blog about what her debt free call to The Dave Ramsey Show would be like. She did a very good job of expressing the excitement of such a tremendous achievement. I am very blessed to have such a motivated and hardworking accountability buddy, and it is what made me decide to ask Mikki to be a contributor on Enemy of Debt. (EOD)

Now there are three of us. Me, Chuck, and Mikki. There will be no more additions to the EOD Team. As three gazelle intense individuals come together we hope to spice up EOD in just the right way. I hope you enjoy, and as always please tell a friend about this debt free blog!

Better Than I Deserve
by Mikki

Last night I was laying in bed, thinking about the day I could call the Dave Ramsey show and scream “I’m Debt Freeeeee!!”. I started to wonder what I might say to Dave when he goes through his normal questionnaire and it went something like this…..

Dave: We have Mikki from Detroit on the line, what’s up Mikki?

Me: Hi Dave, how are you?

Dave: Better Than I Deserve. How can I help?

Me: Well Dave I am calling to let you know I’m debt free!

Dave: Alrightttttttt!!! How much have you paid off?

Me: $35,000 In 18 months

Dave: Wow making what kind of money??

Me: I started out at $35k a year. I picked up a part-time job and also started working my real estate business and now I am half way through the year at $55k!

Dave: Wow, thats amazing! So what made you decide to get out of debt a year and a half ago?

Me: Umm well, I had just turned 25 and had just purchased a house. I was driving a $20,000 car making about $28,000 at the time. In December I got into a car accident and smashed the front end of my car, thankfully no one was hurt but, the car had no insurance on it. At the time I was driving an hour each way to work and one thing after another started to happen. I almost lost my job, and the car ended up being taken from me because I couldn’t afford the payments. I was so overwhelmed with the new house and bills that I thought about taking my life. So I was sitting at work one morning and my mom called me, she told me they were offering FPU at a local church in Detroit, maybe I should check into classes in Lansing (Which is where I work). I was like ok here she goes with this Dave talk stuff again! But at that point I pretty much had nothing more to lose. I really did feel like Job in the bible and that I couldn’t lose any more than I had already. So I searched for my zip code and found a class at a church that actually started the very next day Dave.

Dave: Wow thats amazing!

Me: Yeah so I called the coordinator and shared my story and he said the class would be perfect for me, and since then I have never looked back.

Me: And Dave you know how you say Murphy moves in right when you start the program, well he did because about 3 months later I was forced to move out of an apartment that I was living in with a friend of mine, I had been saving for BS1 and I had to use that money to find a place. Had I not started the program I would have been a total wreck when all that happened.

Dave: Wow what an amazing story Mikki, so what would you say the hardest part of it was??

Me: I would say being made fun of but after a while It didn’t bother me anymore.

Dave: So what was the last thing you paid off?

Me: Sallie Mae.

Dave: Ahhh, good ole Sallie getting kicked out of the spare bedroom.

Me: Yup!

Dave: So now that you have been through the process, what do you say the key to success is?

Me: The key is have an accountability partner, and being Gazelle intense. I became friends with someone on MyTMMO, his name is Brad. “Hi Brad!!” We have become really good friends and I think having someone to share that experience with you is the greatest thing, but it doesn’t work if they aren’t as Gazelle intense, and Brad is the poster child for the Gazelle. Also Dave I want to thank my FPU coordinator and everybody on the Total Money Makeover forums, Those are the coolest people around!!!

Dave: Hahahaha, thats awesome Mikki, so your 27 now with out a payment in the world except for the house. You are so weird now!

Me: Yep I know I feel weird!

Dave: Hahaha, so what do you say to those 25-30 year olds struggling to make it?

Me: I would say they should know they are not alone and to pray as much as you can. God doesn’t put more on us than we can bear, and you have to put your trust in God 100%. The program gave me hope for my future because before I didn’t see my life being anything, but now I see a bright future and I can show others that they can do it to. Its important to have friends and family around you that love you because if it would not have been for my mom, and my best friend I would not be here today.

Dave: Mikki thats great advice, so are you ready to count it down?

Me: Yeah! 3…2…1… I’M DEBT FREEEEEEEEEEEEEEEEEEEEEEEEEEE!!!!!

Dave: Yeaaaaaaaaaaaaaaaa! That is how it’s done folks!!!

(insert tears)

Have you thought about how your debt free call would sound?

Meet Chuck

Hello everyone! I just wanted to officially introduce you to Chuck. He is someone I met in the FPU Online Forums as he too was going through the course. He also has a passion for debt freedom and agreed to write some guest posts as a contributor. I have hit a wall with time since I started coordinating my own FPU classes at my church. I will be posting one or two posts per week and Chuck will pop in from time to time to express himself. I have given him the freedom to post whenever he wants so I hope you enjoy his work. Please comment and share your thoughts with him.

Please check out Chucks articles by clicking on the links below:

1. Does Anyone Blame Themselves Anymore?
2. Keeping The Cheetah At Bay

I hope you enjoy! Share your thoughts.

America has no use for Piggy Banks anymore!

America is in the RED!

With a negative savings rate, America is in DESPERATE need of a Total Money Makeover. What will it take? When will people finally understand why saving money is too important to ignore? America needs new priorities, like yesterday! As one of the very many bloggers who blog about money and personal finance, it is my duty to help spread the word. How much do YOU have saved up?

What in the world is keeping us from doing what we know we should?

Is your savings account overflowing with riches? I didn’t think so? Lucky for you, there are answers. Based on our own experience and that of those around us, payments are the biggest hindrance to why Americans don’t save. After all, our payments are often times our entire paycheck. We (society) have payments for credit cards, student loans, furniture, electronics, cars, Christmas, cable television, internet, and some have taken loans out on their pets. All of these payments are the reason we can not save money.

Who is to blame? The company you work for? The school you went to? The Government? Rich people? Prepare yourself for what I am about to say. The answer is none of the above, it is YOU. You have subscribed to normal and you may have not even known it. Society is not a very good example of how we should be saving our money. Society has forgotten what the word priority means. A priority is defined as something highest or higher in importance. Society says that it is more important to impress others. I say that impressing others by going into debt, is a bad priority. Impress them by not living paycheck to paycheck. Impress them with contentment and Financial Peace! Rearrange your priorities if you want to win with money.

A credit card is NOT an Emergency Fund!

Anything that hurts you more than it helps you should not be used as an Emergency Fund. An Emergency Fund is supposed to cushion emergencies not create them. If you continue to use credit cards for emergencies, you will continue to live paycheck to paycheck. Credit cards are not our friends! They only encourage us to spend money that isn’t ours, and they trick us into believing that the interest we pay for the privilege to do so is worth it in the end. Is it? How well are the credit card companies doing? How well are you doing? I think the answer is obvious, don’t you?

Blame the evil rich people!

Dave Ramsey has a very good example of why hating a rich person because they are rich is completely wrong. As if just the fact that someone has lots of money makes them evil. Money is not good or bad, it is AMORAL. It’s the person who handles the money that is either good or bad. Money can be used for good and evil, by rich people as well as poor people. How about using it for good to combat evil? If we all were doing better off financially, wouldn’t we be in a better position to really help those in need? Instead we are conned into believing that the Government can do it for us. We continue to do poorly with our money and then expect an inept Government to bail us out. By the way, doesn’t the Government need a Total Money Makeover? Not to mention a new rule that says to be a Government representative one must complete Financial Peace University training? Dave Ramsey for President?

I’m sure you know who Murphy is!

Murphy is that law that says if it can happen it will. When you are unprepared Murphy will stop by and completely sabotage your life. Just when things seem to be going smoothly, he will come in and destroy your hope. Without an Emergency Fund you are more susceptible to emergencies! When anything happens that you are not prepared for it is an emergency every time. When you are prepared, Murphy stops by because that’s just life, but he doesn’t have the same impact as he once did. Prepare yourself today and tell Murphy to get lost. Having an Emergency Fund is a pretty good way to eliminate some stress too!

What would it be like to have an Emergency Fund?

Day Dream with me for a moment. You have been introduced to a Total Money Makeover and you are prepared. For the first time in your life you have NO DEBT, and you have saved up 3/6 months of expenses. (See diligence does pay off) All of a sudden you hear a crackling sound coming from somewhere in your house. You soon realize that the crackling was not popcorn and has quickly turned into a swooshing sound. Is it raining? Well, in a sense. Your pipes have busted and you just know it is going to cost thousands of dollars to fix it. Your basement is flooded and this is an emergency. What do you do? You calmly walk over to the phone, call a plumber and a clean up crew, and then you grab your checkbook and write a check for the total. No scratching and clawing your way to the next dollar! No borrowing money from family! You didn’t have to pay someone 18% to solve your problem! Instead, you were prepared. Doesn’t it feel GREAT? Congratulations!  (A rainy day fund really does work, especially when it rains!)

Now wake up and go make it happen! Prepare yourself for “unexpected” events by having an EMERGENCY FUND!! Financial Peace feels way better than your current method. Give it a try!

Hitting A Home Run And Becoming Debt Free Are The Same!

7 out of 10 people live paycheck to paycheck without even blinking an eye!!! After all it is what everyone else is doing right? Have you ever tried to do a budget? This blog is about telling your money what to do. It is about getting rid of the debt that keeps you from enjoying life. It’s about having a PLAN!

Do you feel it’s just too late and you have no traction? I am going to show you exactly what it looks like to become debt free. I am quickly becoming a part of the winning team, and that is the 30% who have decided that treading water is just not good enough. With all the effort that it takes to swim in place, you may have decided that you are sick and tired of following your plan. You are ready to swim in rough waters. Just like swimming in rough waters, getting out of debt is much of the same. It’s tough at first but eventually you get stronger and the rough water starts to feel like a gentle stream.

Once you make it to the gentle stream it is so rewarding and refreshing, In order to get there you have to change your financial plan, because what you have been doing has got you right where you are today! As Dave Ramsey says, “You have to face the person in the mirror”. You have to decide what is more important, the car which is pulling a monthly payment, or getting out of debt? I tend to want to experience true freedom. Have you tried to budget only to find out that your money runs out before you want it too? There is a reason for that. It’s called “YOU”! What if you got rid of your car so you could free up some money? Could you use an extra $300 a month? I found it helpful!

Look at getting out of debt the same as hitting a Home Run. A Home Run is always more fun than just getting a double. We all know that the farther you hit the ball, the closer you are to making it to home plate. Having a car payment is like getting thrown out at first, because you didn’t hit the ball far enough to get anywhere!. Getting rid of your car payment is like practicing and getting stronger so that you can hit it further and further!!

Don’t you want to make it all the way around the bases so you can see how it feels to hit a Home Run? What base have you made it to?

1. FIRST BASE- You have decided to never borrow again! You are now on a budget and are telling your money where to go instead of wondering where it went. You are becoming gazelle intense and are realizing that you may have to downgrade to the cheaper, more affordable living arrangements. Sell the car(s)! Sell the big screen T.V.! What do you have to sell to get as much traction as you can? Make it to second base!

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2. SECOND BASE- You are now doing everything you can to build up an Emergency Fund to make you ready for when life happens! You have dropped the weight of your car payment, and built some protection . Not only are you running faster but you are starting to build some confidence, and you see hope! There is a light at the end of the tunnel, NOW RUN TO IT!

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3. THIRD BASE- Now you are starting to taste the possibility of approaching home. It feels good! You are now paying off your debt from smallest to largest. Your confidence builds even more and your taste for Financial Peace is making you run faster and harder!

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4. HOME PLATE- CONGRATULATIONS! You have hit a Home Run!! How does it feel? Now you are DEBT FREE except for your house and you are ready to add to your collection of Home Run balls! This collection is your payoff from so much hard work and diligence! This collection represents your Fully Funded Emergency Fund .(3-6 months of expenses) Did you think this was ever possible? Now you know and are probably feeling pretty good about your decisions to change your broken plan! Way to go!
   

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5. ALL-STAR TEAM- You have hit a GRAND SLAM with the bases loaded in the Ninth Inning! You are the WINNING RUN! You now have money going towards retirement (15%), as well as funding your kids college fund! You are now a Baseball sensation which has made you make the All-Star Team. Your mortgage is paid, and now you are ready to BUILD WEALTH AND GIVE LIKE NEVER BEFORE! More importantly after all your hard work and effort you will FINALLY be able to live the rest of your life with dignity! Free from the worries and stress of paying off all of the debt from everything you “needed”!

If you aren’t ready to hit a Home Run then prepare for the consequences of just making it to the batter’s box. Soon you will have to explain to your family why the phone is ringing every twenty seconds because you have borrowed everything you gained. Do you want to tell them about eating Alpo at retirement or shall I?

Keeping the cheetah at bay is how we win financially!

Keeping The Cheetah At Bay
by Chuck

Question: How do you keep your Gazelle intensity for the long haul ? Furthermore, how do you stay ahead of that Cheetah nipping at your butt ?

Its easy to be like the Gazelle those first few months when your knocking off the small debts that place your debt snowball into motion. But, to get out of debt to the place where you can live like no one else is a very long process. According to Dave the average time to go from baby step one to baby step three is 18 to 24 months. So after the first few small debts are paid off the time frame shifts to a slower pace as the remaining debts are bigger in amounts. You must be prepared with lots of tools to keep you gazelle focused.

Complacency is what the cheetah is hoping for!

Fortunately for us there are many tools out there to utilize. Dave himself describes how he and his wife used their net worth balance sheet to track their progress. Then there is the example of the woman who took her debt snowball list, enlarged it, laminated it and plastered it on her fridge. Every time she would walk by it she would say “Your going down, baby!”. There is also many ways to use charts to show progress along your get out of debt journey. You can either chart your savings going up, or your debt going down, and maybe you choose to do both. Using small increments of what ever your tracking will show bigger results in your charts. That way, even small progress will show up in your charts, which is what you want to see, right? Lists and charts are tools that respond to our visual sense. Its not just numbers on a page but something we can see happening. The more senses we can involve with our fight to stay gazelle intense the better.

Another tool we can use is emotional triggers. What do I mean by that you ask ? Well, I’m sure you have imagined lots of great things you could be doing with your money if only you didn’t have debt. You can use those images to spur you on in your journey. For example, do you have as a goal to be able to give like no one else once you are debt free ? Of course you do, as do I. I can’t wait till the day my income is freed up to the point where I can give to some of these worthy causes I see day in and day out. Yes it can be frustrating in the near term knowing I can’t give right now. Yet rather than beat myself up for past mistakes that put me in this spot, I use that feeling to motivate myself to continue Dave’s way. Knowing someday I will reach my goal and be able to give when and to whom I want without sacrifice. I’m sure you all have worthy causes that you wish you just had the money to give to. Instead of regret think positively of those images of how its going to feel to give to your cause someday. I think positive emotions like this will help in the long run.

Although we all may be fighting the same battle of removing debt from our lives, we all have different needs and differences in what stirs us. We must all find tools that will work for each of us in our fight to stay like the gazelle. The tools are plentiful out there. Mix and match them. Combine the different types. Do what ever you have to do to keep gazelle focused. Failure is not an option.

Remember the Cheetah is out there!

What was that? Over there in the grass….

CHEEEEETTAAAAHH!!!!!!

Good Luck,

Chuck

I was on the Financial Peace University Forums today and happened to notice the word bankruptcy being thrown around as an option. This isn’t a rant as much as it is an argument as to why you should avoid bankruptcy completely. I realize that this is a very touchy subject for people so my intention is not to make a judgment, but instead to express an alternate view. I would like to remind everyone that I was very close to filing bankruptcy myself at one or more times in my life and am very glad that I didn’t. I assure you it wasn’t because I struck it rich.

The truth is that after listening to Dave Ramsey talk about bankruptcy,as well as every other person that calls his show, I have come to the conclusion that bankruptcy is no fun!! It seems to be a very, very painful process that can cause an emotional breakdown. Declaring that you have no money is a tough pill to swallow to say the least! Still, people file bankruptcy in record numbers. Some argue that filing bankruptcy is a service that keeps families from becoming homeless, and some say that it is a way for people to avoid the repercussions of irresponsible spending and poor money management to give them a fresh start. We will talk about them both.

Bankruptcy Keeps People From Becoming Homeless?

Really?  I am so surprised every time I hear this argument, because the first thing I want to ask is, “Did that person decide to file bankruptcy AND quit their job?”  In my mind this argument is bogus!!  Getting foreclosed on is not easy, and having your car repossessed is no picnic either if that is the only car you have but to say that one couldn’t go find a cheap apartment, buy a beater and reorganize their financial life in a way that would enable them to gain control is senseless.

Irresponsible Spending and Poor Money Management?

You betcha!! This is the reason people file bankruptcy! Couldn’t you say that if they did the opposite then bankruptcy would never become in issue? Do something different, get something different!! It is as simple as that. People are filing bankruptcy to avoid the problems that they created and instead of owning up to the outcome they decide to make someone else take the hit! That is absurd to me. Usually I hear, “Well Dave Ramsey filed bankruptcy.” These are the people that are simply avoiding the truth of the matter. YES, Dave filed bankruptcy but he also REPAID all of the debts he filed bankruptcy on. That’s integrity!! He was also in MORE debt than MOST people.

How To Take Responsibility For Your Actions To Avoid The “B” Word, using some of Dave Ramsey’s Baby Steps

1. STOP BORROWING MONEY! NOW! (You are making the fire BIGGER with every dollar you borrow- PUT OUT THE FIRE)
2. Get yourself on a REAL budget.  Pay your four walls FIRST and your credit cards LAST. (Here is something new you can try- SPEND LESS THAN YOU MAKE!! Who knew common sense and personal finance were related?)
3. Consider getting a second job. (Not fun, but not to worry- just  think about all the fun you had while running up ALL that debt.  Now it’s time to get SERIOUS!)
4. SAVE $1,000 FAST! (I don’t want to hear that you can’t, because I know there are several ways you can- Cut the budget, cut grass, deliver pizza, deliver papers, sell on Ebay and consider selling your BORROWED CAR, and buy a beater. If you say you can’t then you will never try.)
5. Pay off your debts (except the house) from smallest to largest using the debt snowball method. Dump anything you can to knock down your debt pile. (Keeping the things that caused the problem is insane!  Let’s see - Keep the house because you like it OR declare yourself BROKE?  I hope you like the house!!)
6. SAVE 3/6 Months of expenses. (The Rainy Day Fund - It’s gonna RAIN.)
7. Save for College and Retirement (Help your children avoid student loans and ensure you are not eating Alpo at retirement because Social Insecurity WILL disappoint you.)
8. Pay off your Mortgage with Gazelle Intensity.
9. Build Wealth and GIVE! (If you have no payments you will be able to build wealth “SCARY FAST”, and GIVE like never before.

You will be glad that you did not file bankruptcy. I sure am!! Now go take control of your life and your problems.

Bankruptcy - The NOT SO GREAT Escape!

It is really quite simple.  You borrowed the money and you need to pay it back.  Why should someone that loaned you money have to take the hit because you finally decided that you have borrowed too much and the only way out is to NOT PAY ANYONE?  Harsh maybe but let me point out that as I considered bankruptcy many times, I was just as harsh on myself.  Not to mention I had some great advice from some great people.

Take responsibility for your errors in judgment and decide to clean up your mess!  You will be so happy that you did!  The lessons you will learn a long the way will be life changing!  This is not a consensus, it’s just one man’s opinion.

How can a scream be gentle?

Gentle in nature, but not in force.  Gentle with love, the scream is not threatening but IS urgent.  It is imperative that I be heard because a family member that I love dearly is considering debt CONsolidation.  Maybe you’re wondering why it’s a big deal?  Thanks for asking!  It’s not that the debt CONsolidation will hurt them, it’s that it’s not going to help them.  Debt CONsolidation is a CON.  It’s what normal people do and normal people are broke.  normal people do it because they are conned into believing that it will solve all their problems.  If saving interest on a few STUPID debts and giving it to the broke guy conning you, is your idea of fixing your problems, then consider being weird for a moment.

Why pay someone to cut you?

Paying someone to “work out your life” is not what you need.  All you are doing is moving your debt, that’s it.  There’s not a solution on the table when dealing with these people.  Their loving embrace is laced with deception as they claim to understand.  What they truly understand is that they are making money off of you - LOTS OF IT!  They are certainly not doing it for free.  The problem is closer than you think.  The problem is your behavior, NOT what your behavior created.  You have to change your behavior. If you continue to do the same stuff, you will continue to get the same results.  First you have to believe you can consolidate your debt by changing your ways.  Do you want to know how?  Hello? Is this (BULL HORN) thing on?

I’ll give you the HARDCORE, TIME IS RUNNING OUT version

Problem number one is that your payments per month are disastrous.  Sell the near $1,000 vehicle payments, and you’ve already loosened the shackles enough to give your neck a breather.  That number is not even taking into consideration the amount you would save if you replaced them with cheaper paid for vehicles. (Car insurance would go down as well as your property taxes, and possibly fuel costs too.)

Common Arguments:

1. We’re already upside down on them, we would lose money. You’ve been losing money on them since you drove them off of the lot, that is why you are upside down.  Sometimes you have to cut your losses, especially if it continues to cost you.  This loss is referred to as stupid tax.  All of us have done stupid, and the price of getting vehicles you can’t afford is sometimes costly.  It’s not safe to assume that because you can make the payment that you can afford it.  Take into consideration all of the added costs, and then throw in life happening right on top of it!!  What? No savings either?  
2. We NEED reliable, roomy transportation for our family. That you are doing right, what you are doing wrong is thinking that signing up for a bunch of debt is your ONLY method of achieving the same goal.  A paid for car drives a whole lot better than one dragging payments behind it!!  NORMAL people have car payments, BE WEIRD because remember, normal people are broke!
3. We do not have the money to pay the difference and buy two paid for vehicles. You don’t have the money to keep doing what you’ve been doing either- so what’s the difference?  Here’s the difference.  My way saves you over $1,000 a month and you are 4 or 5 years closer to releasing the stranglehold of bondage!  Worst case scenario is that you have to get a loan to cover the difference plus no more than an extra $2,000 per car to buy reliable paid for cars.  You’re trading HUGE loans for much smaller ones.  That’s real consolidation.

Those are just a few excuses there are probably more, but I hope my point was loud and clear!  What you have done with money so far, has got you right where you are right now - consider trying something different!  You have now found out that you can’t rely on anything being steady because life happens.  You never know when that will be but if you are prepared for it then it doesn’t steal your hopes and dreams every time it drops in to say hi.  The only thing that you can rely on is that life will happen!!  The only question is, are you going to be ready when it happens again?

Love is spending less than you make

Give your family the gift of security by changing your family tree now.  The hope is there you just have to be sick and tired of being sick and tired!!  You have to get mad, and most of all you have to hate debt!  Debt IS your enemy!! Annihilate it now before it beats you and robs you of your soul.  You have the ability to stand up and win, you just have to do it God’s way.  God’s way is not about having every thing you can, it’s about giving every thing you can.  Even though that does not always mean financially, it’s a great place to start!  Love your family by preparing them for when Life happens.

LIVE like no one else, and later you can LIVE & GIVE like no one else.

(My passive whisper was not working.)

**To any new readers of this blog.  This post is filled with sayings from Dave Ramsey, more commonly known as Dave-isms.  Live like no one else..,normal is broke…, sick and tired….., stupid tax.**

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Does Anyone Blame Themselves Anymore?
by Chuck

Hello all in the land of EOD. My name is Chuck, and I am a guest blogger for busy Brad. I know everyone wishes him great success with his FPU class. Being a FPU coordinator has Brad time strapped , so I thought I could help him out by stepping in once in a while with a guest blog post or two here on EOD. I am a recent graduate of FPU Online myself. I strongly believe in Dave’s way of money handling.

NY Times has a series running called “The Debt Trap”. The July 20th installment titled “Given a Shovel, Americans Dig Deeper Into Debt”. You can read this article here.

Its quite a good read, but if your a Dave Ramsey fan its also very frustrating to read. The basics of the installment chronicle the problems of a Ms McLeod and her debt. She is on the verge of bankruptcy with over $280,000 in debt. It’s the usual culprits, first and second mortgage, credit card debt, car loan and finally medical bills to push her over the edge. The article does not place all the blame on poor Ms McLoed though, intertwined with listing Ms McLeod’s problems the article tries to lay blame on the banks and credit card companies for their excessive fees and charges.

As I read the article it seems I have no sympathy for Ms Mcleod. She did all the wrong financial things with her money -live for the day, spend, spend, spend. Yet I would have to agree with the articles other points on the loan and credit companies practices. They too have gotten out of hand and are excessively greedy. Does that forgive Ms Mcleod though ? I think not. In paragraph four just before the article starts in on laying blame to the lenders it says ” But as surely as it takes two to tango”. Yes it does! That is why I refuse to dance at this party. Call me a wallflower. Yes you will find me up against the wall with the rest of the geeks. I refuse to dance on a floor not built upon equal footing. The lending companies, mortgage, loan and credit card all have gotten more aggressive with their marketing and ways to bleed us dry. The article points out how many make more off fees than the interest on money loaned. These companies are like a very smooth operator on the dance floor. Before you know it they have you swept off your feet, dizzy and wondering where the money went. Its not that I can’t dance mind you. I just can’t dance to the music these lenders are shuffling their smooth moves to. So, yes it does take two to tango. If you want to throw your hard earned money to these slick dance hall demons go right ahead. I plan on saving for items I need, and paying cash for them the Dave way. I guess you can say I dance to the beat of a different drummer…………….

Later,
Chuck