Dave Ramsey’s Financial Peace University – Week 4

Debt

Dumping debt. Not only is that the name of the lesson for week 4 of Financial Peace University, but I think it’s something many Americans wish they could do (or convince Congress to do). In order to do it though, many need to be convinced that living in debt doesn’t have to be a way of life. Dave starts with a bit of history about debt in our culture. Living with debt is actually a relatively new frame of mind that wouldn’t have been considered by many in the first half of the century. However, we’ve been so trained and marketed to that we now accept it as a way of life.

In order to change our way of thinking, Dave debunks several debt myths. I’ll cover some of my favorites here.

  • If I pay it off my credit card every month, what’s the harm? The truth is that people spend more when they use a credit card (and even a debit card) than they do with cash. Why do you think almost every fast food restaurant accepts them now.
  • Car payments are a way of life. I can speak from experience that this isn’t the truth. We haven’t had a car payment in probably 5 years. The wise thing to do is to purchase a reliable used car. You can find a reliable used car in just about every budget range. If you need help finding one, post in the comments and I’ll do my best to help you out. If you want to find out one way to have free cars for life, check out this page.
  • Cosigning is a great way to help out a friend of family member. The reason that the bank requires a cosigner is because they don’t think the person can pay the bill on their own. They want to have an extra person to go after when the friend or family member defaults on the loan.
  • You’ve got to build up your credit score. You only need a good credit score if you plan to borrow more money and go into debt.
  • Debt is a financial tool. To make your money work for you, you’ve got to have some, and you won’t have much if you’re paying it all to the bank. Sure, you may have stumbled across a circumstance where it worked out to your benefit to borrow money in the past, but increased debt means increased risk in your life. They can’t take your car if you don’t have a loan on it. They can’t take your house without a mortgage. They can’t garnish your paycheck if you don’t have any credit cards or student loans.

I’ve kind of summarized my own answers to the myths, but you get the point. There are a lot more covered in the lesson.

So how can you get out of debt? It’s a lot easier than you think for most people. First, stop getting into more debt, find ways to get more money, like work more or sell stuff, and of course use the debt snowball. The debt snowball simply means paying off your debts smallest to largest, and taking what you were paying on the ones you pay off and put it against the next debt. Sure, you may think going after the one with the biggest interest rate would be best, but as Dave would say “if you were good at math, you wouldn’t be in debt in the first place.” Check out Dave’s answer to paying off the higher interest rate debt myth here.

Featured Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Recovering From Unemployment Part 3: Cutting Corners

Planning

Skimping and cutting corners doesn’t usually have a positive ring to it…unless it’s on your budget.  These are helpful tips even if your budget is rock solid and your main concern is de-cluttering or breaking material accumulation habits!  But listen: read through these and pick out ONE thing to try first.  Completely re-vamping your lifestyle takes slow change, it’s not an overnight accomplishment and will end up feeling stressful and overwhelming if you try everything all at once!

  1. DIY Cleaners.  There’s plenty of ways to cut back on household needs simply by making them yourself if you have the time.  Laundry soap is one of the easiest things to replace, and once you start making it yourself you’ll never buy the commercial stuff again!  I’ve tried a few different “recipes” and this is the one I like the best.  (The recipe calls for Dawn, but I actually use Gain dish soap though to make it smell like apples.) For those of you who dally in skincare, I highly recommend switching to the oil-cleansing method.  It costs less than your fancy 5-step regime and is so easy to make!  Click here to learn about the method, then click here to fine-tune it.  If you want to experiment with more DIY cleaners, check out this website.
  2. Drink water.  Quit spending money on beverages!  Juice and pop are expensive initially, and expensive in the long run with dental work!  (*Sigh*   It cost me $1300 to learn this lesson.)  Buy a decent water pitcher with a filter instead and learn to enjoy the taste of water.  It takes a withdrawal period, but eventually you’ll prefer water to anything else and begin to treat sugary or carbonated drinks as, well, treats.
  3. Go Without.  When appliances break down, consider if they REALLY need to be replaced.  Obviously some appliances are pretty crucial to modern society, but others are actually dispensable, despite what the Joneses think!  When we moved into our house the dishwasher didn’t work at all.  We assumed we’d replace it as soon as we could afford to, but once I got used to washing dishes by hand I realized I preferred to do so.  I’d always hated emptying the dishwasher, and now I find that I stay on top of the dishes so much better without a dishwasher!  Other appliances that you could probably learn to live without and still feel happy: dryer, stand mixer, garbage disposal, bread machine, toaster oven, food processor, food sealer, and…the microwave.  (Although admittedly, not having that first and last one would add more work to my day!)  The point is, you don’t NEED these things.  They don’t need to come out of your budget, anyway.  Put them on your Christmas list!
  4. Buy Used.  Cars aren’t the only thing that lose a good chunk of value the minute you drive them off the lot!  Checking out craigslist.com for gently used appliances is a great way to replace the ones that you DO need.  (And some would even argue that buying older appliances is smarter anyway, since they seem to be making them pretty sloppily nowadays…)
  5. Re-purpose clothing.  If you are even remotely handy with a sewing machine, an entire world of thriftiness is opened up to you!  Pinterest will teach you how to re-purpose just about anything into anything!  Have a tear in your shirt?  Sew a fabric flower or a skull patch over the top and now you have a custom shirt!
  6. Move past the brand name.  Chances are good that you’re already doing this, but see if there are any items that you’ve been holding onto brand names with and give the store brand a chance.  (Obviously not toilet paper… some things are sacred, right?)
  7. Use coupons.  Extreme couponing is intense, I can tell you!  Read up on it to learn how to match up coupons with store deals to get the best savings.
  8. Start a garden!  You can save a lot of money by growing your own vegetables and preserving the harvest for the winter.  This one is closest to my heart, obviously.  You can follow my blog to learn more about canning, freezing and dehydrating!  (How’s that for a shameless plug?)
  9. Walk, bike, take a bus or carpool.  By reducing your dependence on your car, you also save money on gas, maintenance and insurance!
  10. Create your own art.  Obviously if you are unemployed or just on a tight budget, you aren’t going to be spending money on decorations for the home.  But there’s still ways for you to add to the color and mood of your home without spending much, if any, money.  If you have young children, let their artwork adorn your walls!  It’s cheaper AND morale-boosting.  Win!  Even if you aren’t artsy, there are clever and inexpensive ways to decorate your home.  Here’s some images for DIY fall decorations to get you started!  ****Keep in mind though that the trick with keeping homemade decorations truly inexpensive is ideally to use things you already have, rather than hitting up the craft store and buying ten shopping bags full of stuff.****

What do you think?  Anything else that you can add from experience?  I know I’m still always looking for ways to cut back on the clutter and expenses!

Featured Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 3

Budget

I can’t believe that I’m so late in posting about probably the most important week of Financial Peace University, the cash flow planning lesson, also known as the dreaded budget. Attendance to this lesson really determines if you’re willing and able to make a change in your life.

Without a budget, you won’t pay off debt, save for an emergency, save for retirement or your kid’s college, pay off the house early, or be able to be a generous giver. Honestly, all of these things depend on you stretching every dollar and knowing exactly where your money is going.

Dave covers a few topics before jumping into how to do a budget. He talks about the reasons we don’t do a budget and things that will cause a cash flow plan to not work. For example, if you spend time making a budget and then don’t follow it, you’re not going to see a whole lot of progress. Doing a budget also makes sure that you cover the necessities or “four walls” as he puts it – food, shelter, basic clothing, transportation and utilities. Speaking from experience, doing a budget makes you feel like you somehow have more money each month.

I wish I could go into all the details about how to do a budget, but really, the best way to learn it is through application. Dave covers the zero-based budget, using the envelope system, and how to budget if you have an irregular income. I’ll try to cover how to create a budget in a future post.

At this point, you might be thinking “a budget just doesn’t work for me because of this reason or that reason.” Really?!?!? The truth is you shouldn’t be working without a budget or you’re just wasting your time.

Featured Image courtesy of patpitchaya / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 2

Couples and Money

This last Saturday marked week 2 of the 9 week journey for those going through FPU at our church. I’m at one of the locations that has a pretty small class with about 6 participants each week. Personally, I kind of like this because everyone gets more of a chance to talk and share their story.

Week 2 of Financial Peace University is all about relating to money.  The lesson covers everyone: married, singles, and kids.

For the married folk, it’s obvious that opposites attract. In most relationships there is a saver and spender, and there is a nerd and a free spirit. The nerd is the one who is all excited about doing the budget, and the free spirit is the one who plans on doing their own thing. In our house, I’m definitely the nerd/spender and my wife is more the free spirit/saver. It seems like an odd combination, but it can happen. I like to do all the budgeting stuff, and I think my wife just enjoys the security of knowing that we have a plan and that because of the budget, we’ll be saving money.

For those who are single, doing the stuff in FPU presents a new set of challenges. They don’t have anyone to keep them accountable. So the most important thing for them is to find an accountability partner. They need someone who they will listen to and who isn’t afraid to tell them, “you shouldn’t be buying that” when they need to.

Finally, there are the kids. For the first time in FPU, Dave had his daughter, Rachel Cruze, present this portion of the lesson. There were several takeaways from this section. First, put your kids on commission instead of allowance. You can create a chart with chores they can do and the dollar amount associated with them. Second, when they get a bit older, you can give them a portion of the money that you would otherwise be spending on them. With it, have them open a checking account and then they can buy clothes or pay to go to the movies out of that account. Finally, let them learn some lessons. If they go to the store and don’t have enough money for what they’re looking, tough luck.

If I remember correctly, next week will be all about cash flow planning (which is just a fancy term for budgeting). I hope these updates have been helpful and will hopefully encourage you to investigate taking the course near you.

Featured Image courtesy of Ambro / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 1

Retirement

If you’ve never attended or even heard of Financial Peace University, then listen up. Financial Peace University is a 9 week course that covers pretty much every financial topic the typical American family needs to know about. It was developed by Dave Ramsey (the guy on the radio) and his team. Each session covers a specific topic and is comprised of watching a video and then some nonthreatening group discussion. The course is usually put on by local churches all over the country. I highly recommend it if you feel like you’re in need of help with your personal finances, or if you wonder if you could be doing a little better. (Hint, you probably could be doing better.)

Our church is putting on a session at each of their locations. It just so happens that the Saturday one fit best in my schedule this year, so I volunteered to help. So for the next 9 weeks, I’ll be talking about some of the highlights and hopefully entice you to sign up for it in your local area. I’ll admit that not everyone agrees with Dave Ramsey and his approach to each of the topics, and that’s fine. It’s okay to be wrong sometimes.

The first weeks session is Super Saving. It covers the basics of the saving components of the program. Dave breaks down his program into the 7 baby steps. Step 1 is to put $1000 in a baby emergency fund and step 3 is to save up 3 – 6 months of expenses as a fully funded emergency fund. He also covers the basic importance of saving in general. The truth of the matter is that you can’t rely on others to take care of you when you get older, and you’re only hope is save money for yourself.

Of the entire lesson, I think the part that has the biggest impact is the story of Ben and Arthur. In the story, Ben saves $2000 a year for 8 years (age 19 – 26) for a total of $16,000 and then stops. Arthur starts saving at age 27 and saves $2000 a year until the age of 65. The funny thing is that in the end, Arthur never catches up to Ben and Ben ends up having about $750,000 more than Arthur. This alone stresses the importance of saving money and starting early.

If you get nothing else out of reading this blog, understand that it’s important to SAVE MONEY and START NOW!!!! If you have kids, or know anyone in high school or junior high, show them the Ben and Arthur link here. If that doesn’t get them motivated to save money, then we’re all in some deep trouble.

Featured Image courtesy of cooldesign / FreeDigitalPhotos.net

Foot Family Project

Foot Family

In preschool, our youngest was assigned the project of creating a foot family. For those that don’t know what that is and can’t figure it out from the picture, it is essentially a picture made up of outlines of each family members foot, turned into something fun and supposedly represents our family.

My wife likes to take these types of projects on as a personal challenge. She doesn’t think that she’s very crafty, but I think she really underestimates what she can do. So last Sunday, we headed off to the local craft store to find everything that we would need to make a castle setting with a king, queen, and two princesses…out of feet. Unfortunately, our favorite store for these things, Hobby Lobby, was closed on Sunday, so we headed over to Michael’s.

Needless to say, they didn’t have many of the things we needed and definitely not in the size that would be in scale to our feet. This caused us to have to rethink what we were going to be. I took the kids so mom could reevaluate the situation. Eventually, we decided to head over to the Dollar Tree store to see if they had anything that we could use.

Surprisingly, they had just the right items to turn our feet into the barn animals you see in the picture. For $5, my wife bought construction paper and 4 kits that are normally used to turn paper bags into puppets. Needless to say, it turned out to be a success and I’m sure it’s the best foot family in the class. So while the craft stores may have a lot of options, they may not be the best or cheapest option.

Recovering From Unemployment Part 2: Delayed Gratification

Needs Wants

Delayed gratification is just a fancy word for patience.

I don’t think that anyone is born with the immediate skill of patience; rather it is perseverance developed with experience and a true desire to mature and grow.   I certainly do not come by this skill easily, and tend to want what I want when I want it. (What?)  I am the main spender in the family as I do all grocery, clothing and heavy machinery shopping.  (Just kidding about that last one.)  And while my husband definitely cannot be trusted to walk into a store without “accidentally” buying a can of Pringles or something, the blame for our grocery budget busting definitely falls on me.  I am a marketer’s dream!  $3 tank tops?  Get one in each color!  That gum I tried but didn’t like is packaged in a new container?  Try it again!  10-pack of toilet cleaner?  I won’t have to buy any for a year!

You get the picture.

It took me a long time to realize that people on a tight budget don’t have money for any of those things.  It wasn’t until I sat down and put our finances on actual paper to see that we needed to get frugal, fast.  Being frugal isn’t something that has ever come naturally to me.  I’ve never been a saver and I’ve never been very wise with money…until now.  Unemployment has been very good for me in that aspect, and I can honestly say that I appreciate the years of financial struggle that aren’t quite over because they’re definitely helping me grow wiser in this area.

Here’s a few tips if you have found yourself in the position of not quite recognizing need from want:

  • Have you existed without this object in the past?  Then it’s a want.
  • Can you exist without this object for a week?  Then it’s a want.
  • Will it affect your health to go without this?  Then it’s a need.
  • Will it cause major contention between you and your spouse to go without?  Then it’s a need.
  • Do you feel like it would make you happy to have it?  It’s a want.
  • Does your kid tell you he/she will love you more to get it?  It’s a want.

It’s been a rough learning curve for me, honestly.  It didn’t happen overnight that I was able to go to Sam’s Club and only get what I needed and what made sense to buy in bulk.  (Toilet paper, yes.  Toilet bowl cleaner, no.)  And I still struggle to walk through any grocery store and not pick up something I don’t need…but I can do it.  Some expenses are easier to define.  When a family member needed some major dental work done, it was easy to see the need.  When my beloved 2000 Honda Odyssey died and needed a $1900 transmission rebuild, it was easy to see the want.  Obviously the dental work needed to be done.  And unfortunately, just as obviously the transmission did not need to be rebuilt.  I’m a stay-at-home mom, I don’t need my own car.  We’ve done the one-car family thing twice in the past, we can do it again.  If all goes as planned I will have saved enough to buy a newer model (hoping for 2007 or better) van in two years anyway, and I get really excited thinking about that!

Truly, this has been a good thing.  We’ve downsized not only the size of our house, but also the clutter, the unnecessary spending, and best of all that guilty feeling that accompanies the wanted item.  We’ve maximized our quality time together as a family since we don’t go out much anymore.  I’ve even minimized the time I spend doing laundry since I stopped adding multiple $3 tank tops to my closets!  I’ve also really learned the true meaning of being grateful, and while I still have to work on the skill of saying “No” to wants,  it’s easy to see when I look around me that I am blessed with all that I need.

In my next guest post, I’ll tell you some of the character-building things and ways to cut corners I’ve learned over our years of unemployment.  I think you’ll be able to see why I’m grateful for those years, as well!

In case you missed it, read part 1 here!

Featured Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net

Parenting Moment – Our “Current” Reward System

Kid with Money

I could have called this a parenting tip or parenting advice, but that would mean I know something more about parenting than anyone else reading this. That certainly isn’t the case.

We’ve got two daughters, ages 6 and 4. One day they returned home from shopping with mom and announced that they were each getting a LeapPad. I guess the guy at the store told my wife that they would be extremely discounted in the next few weeks because a new version would be coming out for Christmas. Anyhow, we can’t let something they’re so excited about come without somehow turning it into a learning opportunity.

The reason I called this our “current” reward system is because, like most parents, we’ve probably tried a hundred different ones by now. This one has stuck for more than a few days, so I figured it was worth sharing.

So, we started with a goal in mind: a LeapPad (or Kindle Fire for the 6 years old). We told them that in order for them to be able to get their prize, they had to earn 100 kid dollars. I was able to find some great printable play money at freestuff4kids.net. We started printing out several sheets on 1, 5, and 10 dollar bills. Each kid got an envelope to put their money in as they earned it.

We’ve tried giving the kid’s money for doing different tasks around the house before. It didn’t last long since they didn’t have a specific item in mind to use the money for. Besides, they technically didn’t lose anything if they decided not to do what we asked them to do. They never had the money in the first place, so it was no real loss.

This time, we told them that they have $5 at the beginning of every day. When they choose to fight, take something from their sister, hurt each other, or do something else they know they shouldn’t do, they lose one of those dollars. On top of that, they also lose a dollar if they come downstairs after being put to bed. They’ve went to bed more than once with all $5, only to lose a good portion of them in about 30 minutes.

So far this has worked pretty well. Whenever things start to look like they may be degrading, we simply ask them “do you want to lose a dollar?” In most cases they stop what they were doing since they know that means it will take them that much longer to get that special item they’ve been wanting. Hopefully they’re thinking “is starting this fight worth losing a dollar?”

We have run into one issue with our 6 year old. She had a breakdown one evening on our way home from the babysitter because she didn’t understand how close she was to the $100 goal. She knew how much she had, but she couldn’t visualize what that meant. To solve that problem, I made a simple graph on the outside of their envelopes and we started filling it in whenever they get their dollars from the previous day. (In our setup, they can’t lose dollars that they’ve earned from previous days.) That seems to have helped quite a bit since she can now see how close she is to getting her Kindle.

I’m not going to say that this approach is right for everyone. I’m sure there are a bunch of you out there finding all sorts of flaws with this or have your own systems. If so, feel free to leave something in the comments below.

Featured Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net

Recovering From Unemployment – Part 1: Getting Into Debt

IOU Piggybank

Unemployment: One of the most counter-productive methods of saving money out there.  And yet, it’s not uncommon to have periods of unemployment in our adult lives.  Unless you’re leaving one job for another, chances are good you’ll have at least a week or two of unemployment, right?  It can be a scary experience, especially if you have few safety nets in place!

In 2010, our sole breadwinner lost his job.  We knew it was coming, fortunately.  He was a pharmaceutical rep for a small company that was bought out by a foreign company.  It had been undergoing some major changes for years, and there was always the threat of impending job cuts.  About 6 months before the actual cut, there was a rumor that the end was near, and soon the company confirmed this.  Fortunately, we were not in debt aside from our mortgage and my student loan.  We had already been dabbling with moving out to the country, and this news sealed the deal for us.  Our house was a major drain on our finances, and while it was my starry-eyed-newly-married-House o’ Dreams, we both knew that faced with any season of unemployment we would quickly run out of money with our giant mortgage.  It was time to say goodbye to the home we’d loved for the last six years!

Despite a treacherous selling market, despite trying to sell a very unique home for far more than the neighborhood’s worth, and despite selling by owner, our home sold in 4 months.  We fell in love with a beautiful home in the country with a much smaller square footage, and happily, a much smaller mortgage.

By then, Ty had been unemployed for two months.  At the time, we viewed this as a “vacation”.  With all the flurry of selling and buying homes, it was just nice to focus simply on moving.  Our daughter had just turned two, and Ty was enjoying getting a taste of experiencing MY job – the life of a stay-at-home mom!  Once we settled in though, Ty started getting serious about his job hunt.

Little did we know how brutal this would be!  At first, we thought this was the perfect opportunity for Ty to switch careers, but while he applied to plenty of non-sales opportunities he was more than qualified for, he never even got an interview.  So eventually he decided even a job he didn’t love was better than no job, and in the meantime our severance package was dwindling.  He started applying for pharmaceutical jobs again, and began to feel the true sting of rejection.

Let’s fast-forward one year.  Ty had a few unsuccessful interviews, but mostly he felt frustrated over the interviews he didn’t even get.  This was new territory for him, in the past he would apply for a job, quickly receive an interview, and usually walk out of the interview with a job.  He had never not even gotten an interview before!  It was a humbling year, to say the least.

By January, he scored a 6-month contract with a pharmaceutical company and we were able to breathe a little easier for awhile.  We also welcomed our second daughter into the family at the end of March!  We tried to replenish our savings account, and he kept searching for permanent work.  Unfortunately, once the contract ended, Ty would go on over 20 interviews over the next year and a half – all fruitless, frustrating ventures.  We both took whatever odd cash-paying jobs came our way, but it certainly wasn’t enough to sustain us.  By the end of 2012 this no longer felt like a vacation, but rather a very scary nightmare.  Unemployment benefits were up, our savings account was dry, and there was little hope in sight.

Finally, finally…a miracle!  My parents expanded their catering business and needed a manager… score!  Not only did Ty get the career change he longed for, but also an environment that built up his crumbling self-esteem, and perhaps best of all:  A Paycheck.  It’s really amazing what a paycheck can do to your psyche, isn’t it?

Now that we have a regular paycheck, we have some work to do.  Although we had tried to budget, cut corners and be wise during our period of unemployment, we still ended up falling back on a credit card.  Most of the debt came from legitimate budget-breakers like a major dentist bill, replacing a few leaking windows, and several auto repair bills, but honestly, some of that debt came from unwise purchases as well.   So now it is time to completely revise the budget:  we certainly don’t have enough money to live extravagantly by any means, but we DO have enough to LIVE and get out of debt, albeit slowly.

The first step is to make an oath to retire the credit cards.  Those things are the DEVIL.  They are too easy to use, and they make a new pair of shoes seem so much more affordable in the moment!  We decided to take this very, very seriously.  This is a time for delayed gratification.  This is a time for continuing to cut corners.   This is a time for hope!

Stay tuned for Part 2: Delayed Gratification!

Featured Image courtesy of Stuart Miles / FreeDigitalPhotos.net