Saving Money for Non-Budgeters

SavedPlus

Everyone wants to save money, but some people don’t have the discipline to “pay themselves first”. If you don’t balance your checkbook or put away a set amount of money with each paycheck, then SavedPlus might be a simple solution to help you save money without having to change your habits.

The way it works is simple. You choose a savings percentage between 5-20% that you want to save with every purchase you make. Then as you spend, that extra percentage gets moved from your checking to savings account. So, if you set your percentage to 10% and go to the grocery store and spend $75, an extra $7.50 will be moved to your savings account. You can change the percentage from the mobile app or web site whenever you’d like as well as check your account balances and set up goals.

To keep you from pulling too much from your checking, you can also set up a maximum transaction amount so that it doesn’t save an extra 5% of that new flat screen purchase as an example. In addition, you can choose to exclude single transactions if you want. To keep you from overdrawing your account, you can also set up a minimum balance for your checking account so that it stops transferring money if your balance gets too low.

In order to use this service, you give your checking and savings account information along with your debit and credit card info so it can catch all of your transactions and move the money from your checking to savings. How much does it cost to use this service? Nothing. It’s free. You don’t have to open any accounts with them since they use the accounts you already have.

For those of you who balance your checking account and keep close tabs on what you spend, this may not be for you. It would drive me crazy to try to keep track of the extra transactions. But for those who keep track of what is in their checking account by just looking at the balance occasionally, then this may be a perfect way to starting putting away some extra money for a rainy day or retirement.

For more information, you can check out their site, the FAQs, and the How It Works page.

Potential Savings: I haven’t personally used this service, but it seems to be getting some attention. According to their website, average users save $350 a month or $4200 a year. That’s quite a bit of coin for not having to change your habits.

PSA: Letter from Target’s CEO Gregg Steinhafel and Important Notice

Below is an email that I received from Target regarding the unauthorized access of credit and debit card information that has been in the news. For those of you who may not be on their mailing list, I wanted to repost it.

Dear Target Guest,
As you have likely heard by now, Target experienced unauthorized access to payment card data from U.S. Target stores. We take this crime seriously. It was a crime against Target, our team members and most importantly you – our valued guest.
We understand that a situation like this creates stress and anxiety about the safety of your payment card data at Target. Our brand has been built on a 50-year foundation of trust with our guests, and we want to assure you that the cause of this issue has been addressed and you can shop with confidence at Target.
We want you to know a few important things:

  • The unauthorized access took place in U.S. Target stores between Nov. 27 and Dec. 15, 2013. Canadian stores and target.com were not affected.
  • Even if you shopped at Target during this time frame, it doesn’t mean you are a victim of fraud. In fact, in other similar situations, there are typically low levels of actual fraud.
  • There is no indication that PIN numbers have been compromised on affected bank issued PIN debit cards or Target debit cards. Someone cannot visit an ATM with a fraudulent debit card and withdraw cash.
  • You will not be responsible for fraudulent charges – either your bank or Target have that responsibility.
  • We’re working as fast as we can to get you the information you need. Our guests are always the first priority.
  • For extra assurance, we will offer free credit monitoring services for everyone impacted. We’ll be in touch with you soon on how and where to access the service.
Please read the full notice below. And over the coming days and weeks we will be relying on corporate.target.com and our various social channels to answer questions and keep you up to date.
Thank you for your patience, understanding and loyalty to Target!
FAQ
Important Notice
We wanted to make you aware of unauthorized access to Target payment card data. The unauthorized access may impact guests who made credit or debit card purchases in our U.S. stores from Nov. 27 to Dec. 15, 2013. Your trust is a top priority for Target, and we deeply regret the inconvenience this may cause. The privacy and protection of our guests’ information is a matter we take very seriously and we have worked swiftly to resolve the incident.
We began investigating the incident as soon as we learned of it. We have determined that the information involved in this incident included customer name, credit or debit card number, and the card’s expiration date and CVV.
We are partnering with a leading third-party forensics firm to conduct a thorough investigation of the incident and to examine additional measures we can take that would be designed to help prevent incidents of this kind in the future. Additionally, Target alerted authorities and financial institutions immediately after we discovered and confirmed the unauthorized access, and we are putting our full resources behind these efforts.
We recommend that you closely review the information provided in this letter for some steps that you may take to protect yourself against potential misuse of your credit and debit information. You should remain vigilant for incidents of fraud and identity theft by regularly reviewing your account statements and monitoring free credit reports. If you discover any suspicious or unusual activity on your accounts or suspect fraud, be sure to report it immediately to your financial institutions. In addition, you may contact the Federal Trade Commission (“FTC”) or law enforcement to report incidents of identity theft or to learn about steps you can take to protect yourself from identity theft. To learn more, you can go to the FTC’s Web site, at www.consumer.gov/idtheft, or call the FTC, at (877) IDTHEFT (438-4338) or write to Federal Trade Commission, Consumer Response Center, 600 Pennsylvania Avenue, NW, Washington, DC 20580.
You may also periodically obtain credit reports from each nationwide credit reporting agency. If you discover information on your credit report arising from a fraudulent transaction, you should request that the credit reporting agency delete that information from your credit report file. In addition, under federal law, you are entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting agencies. You may obtain a free copy of your credit report by going to www.AnnualCreditReport.com or by calling (877) 322-8228. You may contact the nationwide credit reporting agencies at:
Equifax
(800) 525-6285
P.O. Box 740241
Atlanta, GA 30374-0241 Allen, TX 75013
www.equifax.com
Experian
(888) 397-3742
P.O. Box 9532
www.experian.com
TransUnion
(800) 680-7289
Fraud Victim Assistance Division
P.O. Box 6790
Fullerton, CA 92834-6790
www.transunion.com
In addition, you may obtain information from the FTC and the credit reporting agencies about fraud alerts and security freezes. You can add a fraud alert to your credit report file to help protect your credit information. A fraud alert can make it more difficult for someone to get credit in your name because it tells creditors to follow certain procedures to protect you, but it also may delay your ability to obtain credit. You may place a fraud alert in your file by calling just one of the three nationwide credit reporting agencies listed above. As soon as that agency processes your fraud alert, it will notify the other two agencies, which then must also place fraud alerts in your file. In addition, you can contact the nationwide credit reporting agencies regarding if and how you may place a security freeze on your credit report to prohibit a credit reporting agency from releasing information from your credit report without your prior written authorization.
Again, we want to stress that we regret any inconvenience or concern this incident may cause you. Be assured that we place a top priority on protecting the security of our guests’ personal information. Please do not hesitate to contact us at 866-852-8680 or visit Target’s website if you have any questions or concerns. If you used a non-Target credit or debit card at Target between Nov. 27 and Dec. 15 and have questions or concerns about activity on your card, please contact the issuing bank by calling the number on the back of your card.
IF YOU ARE AN IOWA RESIDENT: You may contact local law enforcement or the Iowa Attorney General’s Office to report suspected incidents of identity theft. You can contact the Iowa Attorney General at:
Office of the Attorney General
1305 E. Walnut Street
Des Moines, IA 50319
(515) 281-5164
www.iowaattorneygeneral.gov
IF YOU ARE A MARYLAND RESIDENT: You may obtain information about avoiding identity theft from the FTC or the Maryland Attorney General’s Office. These offices can be reached at:
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
(877) IDTHEFT (438-4338)
http://www.ftc.gov/idtheft/
North Carolina Department of Justice
Attorney General Roy Cooper
9001 Mail Service Center
Raleigh, NC 27699-9001
(877) 566-7226
http://www.ncdoj.com
IF YOU ARE A MASSACHUSETTS RESIDENT: Under Massachusetts law, you have the right to obtain a police report in regard to this incident. If you are the victim of identity theft, you also have the right to file a police report and obtain a copy of it.
Massachusetts law also allows consumers to place a security freeze on their credit reports. A security freeze prohibits a credit reporting agency from releasing any information from a consumer’s credit report without written authorization. However, please be aware that placing a security freeze on your credit report may delay, interfere with, or prevent the timely approval of any requests you make for new loans, mortgages, employment, housing or other services.
In order to request a security freeze, you will need to provide the following information:

  1. Your full name (including middle initial as well as Jr., Sr., II, III, etc.);
  2. Social Security number;
  3. Date of birth;
  4. If you have moved in the past five (5) years, the addresses where you have lived over the prior five years;
  5. Proof of current address (e.g., a current utility bill or telephone bill);
  6. A legible photocopy of a government issued identification card (e.g., state driver’s license or ID card or military identification);
  7. If you are a victim of identity theft, a copy of either the police report, investigative report, or complaint to a law enforcement agency concerning identity theft;
  8. If you are not a victim of identity theft, payment by check, money order, or credit card (Visa, MasterCard, American Express or Discover only). Do not send cash through the mail.
The credit reporting agencies have three (3) business days after receiving your request to place a security freeze on your credit report. The credit reporting agencies must also send written confirmation to you within five (5) business days and provide you with a unique personal identification number (PIN) or password, or both that can be used by you to authorize the removal or lifting of the security freeze.
To lift the security freeze in order to allow a specific entity or individual access to your credit report, you must call or send a written request to the credit reporting agencies by mail and include proper identification (name, address, and Social Security number) and the PIN number or password provided to you when you placed the security freeze, as well as the identities of those entities or individuals you would like to receive your credit report or the specific period of time you want the credit report available. The credit reporting agencies have three (3) business days after receiving your request to lift the security freeze for those identified entities or for the specified period of time.
To remove the security freeze, you must send a written request to each of the three credit reporting agencies by mail and include proper identification (name, address, and Social Security number) and the PIN number or password provided to you when you placed the security freeze. The credit reporting agencies have three (3) business days after receiving your request to remove the security freeze.
FAQs
Is the CVV code the same as the three digit code on the back of my card?
No, the CVV code is not the same as the security code on the back of your card. As of now we have no indication that the three digit code on the back of the card has been impacted.
How do I know if this impacts me?
If you shopped at Target between Nov. 27 and Dec. 15, you should check your account for any suspicious or unusual activity. If you see something that appears fraudulent, REDcard holders should contact Target, others should contact their bank.
If I shopped at Target.com or in Canada should I be concerned?
No, this was an issue that impacted US stores.
Can I still use my card at Target?
Yes you can, if you used your card during the impacted periods, you should continue to monitor your accounts.
Has the issue been resolved?
Yes, Target moved swiftly to address this issue so guests can shop with confidence. We have identified and resolved the issue of unauthorized access to payment card data. The issue occurred between Nov. 27 and Dec. 15 and guests should continue to monitor their accounts.
How can I be assured you are taking the steps to protect my information in the future?
We continue to invest in our security practices to protect our guests’ information including the retention of a leading third party forensics firm to conduct a thorough investigation of this incident. We apologize for any inconvenience this has caused our guests.
If I call you what are your hours of operation?
Agents are available to take calls from 7am to 11pm daily.

Buying a Used Car

used car

I’ve heard a lot of excuses about why people won’t buy a used car. They range anywhere from “I need something reliable” or “I got 0% financing so it’s not costing me anything extra.” There are a lot of good reasons to get a used car over a new car though.

  • Borrowing money at 0% is not free. When you buy a new car, it begins losing value as soon as you drive it off the lot. So, if you factor in the value you’re losing, 0% doesn’t look much like zero anymore. When you buy a used car, someone else has already lost a bunch of the value for you.
  • Used cars can be just as reliable as a new car. If you buy a car that is a few years old, you have the advantage of being able to check how reliable that model of car has been across the entire fleet. Consumer Reports does an annual automobile issue that goes back about 6 or 7 years for just about every model to tell you what areas have been good and what areas there have been issues. They also tell you what the best used car is in each segment and whether or not a particular year or a specific model would be a good used car to buy.
  • Getting a used car inspection can keep you from buying someone else’s headache. It shouldn’t normally cost very much to get one (probably less than $100). They can check to see if there are any recalls and look it over to tell if there are issues or if things haven’t been maintained. When we purchased our used Prius, we took it from the dealer we were buying it from to another Toyota dealer to have it inspected. Since Prius cars are kind of unique, we wanted to make sure a certified professional gave us a clean bill of health.
  • Buying a used car could save you a TON of money. Our last two cars we purchased were used. I felt like we didn’t get a great deal on the first one, but we did get it used with only 2300 miles on it. I feel like we almost stole the second one, so that more than makes up for it. (See the story below.)
  • Buying from an individual and paying cash can save you even more. If someone is selling a car for $8000 and you walk up with $7000 cash, you could find yourself driving home in a “new” used car. Cash tells the seller that you’re serious and all they have to do is say yes and the money is theirs.

I want to close with a little story about our last car purchase. We were kind of in a bind when purchasing our last car because we were in an accident that totaled our Corolla. We shopped around and my wife really wanted a Prius. We looked around a bit and decided we didn’t want to spend much over what we were getting from the insurance company since we weren’t planning on buying a car at that time. We found a Prius at a dealer that was originally listed for $16,900, but had been marked down to $13,900 since it had sat on the lot for a while. We drove it and liked it but wanted to try to negotiate a better deal. We weren’t willing to pay $13,900. Anyhow, we left and told the guy we would think about it. We decided that we weren’t willing to pay that much and it had to be cheaper to buy it. The salesman called us a few days later and asked if we were interested and “what it would take to get us to buy it.” I called up my wife and she said she wasn’t willing to pay more than $13,000 and it had to include tax, title, and fees. I called him back and after a little while he returned my call and said that we had a deal. That means that our actual purchase price was around $11,800 before taxes and fees. So the last tip:

  • Have patience when looking for a used car. Our great deal happened because my wife had patience and wasn’t willing to make a decision quickly or sacrifice more money just to close the deal. Our waiting told the dealer that we weren’t desperate, and desperate buyers or buyers with car fever are the ones they love.

How to Make Christmas Last All Year Long

Loan Featured

Loan 1Loan FeaturedLoan 3Loan 4If your holiday season is anything like ours, it usually involves putting up holiday decorations, trying to figure out what to get people, and running all over to our different Christmas obligations. It seems crazy at the time, but then the day after Christmas life kind of goes back to normal and it’s a little sad that it’s all over. Well, if you want to be reminded of Christmas all year long, I’ve got the perfect solution!

You can now walk on down to your friendly neighborhood banking institution and get a holiday loan. For the low, low interest rate of 12%, you can be reminded of the times you had and the things you bought during the Christmas season every month when you write your check to the bank or credit union.

Maybe you thought you just stepped into the twilight zone. This blog is still about saving money and getting a loan of any kind is NOT the best way to save for anything. Just about the time you would get this wonderful holiday loan paid off, it will be time for Christmas once again. Since you won’t have any money next year since you used it to pay back the loan, you’ll be stuck in the same situation next year. Never fear, holiday loan to the rescue!

I’ve got a better plan and it will work even if you haven’t been saving all year. Although it may require some…wait for it…SACRIFICE! If money is tight this year, try out the tips below.

  • Determine who you need to buy gifts for. Sorry, but this year, the postman, hairdresser, and the neighbor’s kids won’t be getting anything from you. You might even want to cut out nephews, nieces, cousins, brothers and sisters. If you have kids of your own, you’re siblings might welcome not having to purchase anything for them if you don’t purchase anything for their kids in exchange. Just tell them “instead of buying stuff for each other’s kids, why don’t you take the money and spend it on your kids since you probably know what they like better anyhow.”
  • Are you crafty? Ever heard of Pinterest? This could save you quite a bit and the gift will probably mean a lot more since you put your time into it.
  • Create a Christmas budget. It doesn’t have to be complicated. Just determine how much you can safely spend on Christmas this year without throwing your financial world into chaos or causing you to accrue debt. Then write down how you’ll divide that money between everyone on your list. This might be a good opportunity to find additional people you won’t be shopping for.
  • Don’t buy things for yourself when you see a deal! Pretty easy to say, not always as easy to do.
  • If things are really tight, just be honest with family and friends. They will most likely be understanding and may even be grateful that they don’t have to shop for you. You might even find that others are in the same situation, but were just afraid to say it. If nothing else, just going to Christmas events with family and friends is oftentimes all they’re really hoping for.
  • Start saving for next year! If you thought you could afford paying back that Christmas loan (which has a payment of a little over $106 a month), then you should be able to stash that money in a savings account so you’re ready for next year. You won’t just have $1200, but more like $1280. It might take some discipline, but if you can schedule it to come out of each paycheck, then you can make your discipline automatic.

The holiday season can be stressful enough as it is, don’t add to it by doing something you’ll regret the rest of the year.

Dave Ramsey’s Financial Peace University – Week 9

Helping Hand

The final week of Dave Ramsey’s Financial Peace University  is all about baby step 7 – build wealth and give a lot of it away.

If you go through Financial Peace University and miss this lesson, you may set yourself up to win financially, but you won’t feel complete until you give. We have a tendency to want to hold onto our money as we accumulate it, but we have to remember that none of it is ours. Without the abilities and gifts we’ve been given by God, we wouldn’t have any of it. It is our responsibility to manage the resources that we’ve been given since they’re not ours to begin with.

By giving, it makes us more like Christ-like since he gave his life for us. Besides that, giving to others teaches us to be less selfish and people who are less selfish are generally more successful in different areas of their life. We also feel our best when we serve and give to others. I can attest to this personally in my life. Some of the best times of my life were when I’ve been on a mission trip or serving others.

After covering the reasons why we should give, Dave covers the difference between tithes and offerings in the church. According to the Bible, a tithe is a tenth of our income and it is supposed to be given to the local church. It’s the job of the local church to take care of those in need. Offerings are different because they are supposed to be given out of what we have extra.

I think a lot of people get confused when it comes to giving at their church. When the church starts asking for money to do a major project or something like that, they feel an obligation to be a part of it and give. However, if they are giving at the expense of being able to take care of their household then they really should reconsider.

There aren’t a lot of details to go over this week. The main lesson is that part of your financial plan should include giving, despite what your religious beliefs might be. Give it a try this holiday season and see what kind of a difference it makes in your life.

If you’re interested in attending Financial Peace University, you can find a class near you by going here. There are new classes starting all the time. If you don’t think you can make it to a class, you can always take the course online. I think it’s best when you can attend it in person and hear other people’s stories, but the online option is great for families who are geographically separated for one reason or another (truck drivers, military, that kind of thing).

If you have any questions about Financial Peace University, please post them in the comments section. If you have a giving story that you’d like to share, you can post that in the comments as well.

Featured Image courtesy of Naypong / FreeDigitalPhotos.net

Republic Wireless – The future of mobile phones?

Republic Wireless Logo

I had stumbled across Republic Wireless a couple years ago. I have to admit that their service was tempting. I mean, how can anyone resist $19/month for unlimited cell phone service with a smartphone. However, at the time, I just couldn’t make the jump to something that was still “beta”. Besides, things that I had grown used to weren’t yet available, like picture messaging.

Their original smartphone was not great. In fact it was almost the same as what I had and I was ready to ditch it (the LG Optimus). They later upgraded to another smartphone, the Motorola Defy XT. It was kind of cool with it’s water, dust, and scratch proof nature, but it still ran an old version of Android, the screen size was small, and it had been surpassed long ago by other smartphones when they announced it.

You might be wondering why a cellular company would only offer one phone. Well, Republic Wireless’s service is unique. In order to offer you such a low price, they offload many of the functions of a cell phone to available wireless networks around them when it’s available. They only rely on cell networks when they can’t connect to wireless. When you think about it, you’re likely surrounded by wireless at home and at work. In fact, I would venture to say that most of the time that you are stationary, there is a wireless access point that you could connect to. In order to offer this unique setup, Republic has to run custom software on the phone and get it approved by the cell phone manufacturer. In other words, it’s not a quick and easy process.

So, why even present you with a cell phone company that only offers one phone and seems to be so limited? Because this week, they finally opened up their service to make it worth another look again. A good long look. A look where you might be busting out the calculator to determine how much money you could save over time. Then you’ll start dreaming about how you could take that savings and take that trip through Europe you’ve always been dreaming of. Okay, maybe I’m getting ahead of myself.

On Wednesday of this last week, Republic Wireless made their new phone available to buy, the Moto X. I guess the best way to put it is that they jumped from a Dodge Neon to a Lexus (any Lexus, you decide). This phone is a flagship phone, a phone that any smartphone user would be happy to have (unless you’re addicted to your iPhone). The best part, it’s only $299. That may sound like a lot of money, but consider the fact that a new unlocked one on Amazon is currently $529.99.

In addition to a new fancy phone, they’ve also released brand new plans. You can now pick between 4 different plans and are no longer locked into one unlimited plan.

  • $5/month – Unlimited everything over wireless only. This is for those who want to do some extreme savings or maybe want to replace their home phone and plan on keeping it at home all the time.
  • $10/month – Unlimited calls and texts over cellular and wireless, but data is over wireless only.
  • $25/month – Unlimited calls, texts, and 3G data over cellular.
  • $40/month – Unlimited calls, texts, and 4G data over cellular.

You can also change your plan up to twice a month. So if you don’t need the data, but plan on going on a trip somewhere for the weekend, you can change your plan to one that includes data for a couple days and change back when you get home. It’s also important to note that if you use a lot of data over cellular, they will throttle it. It appears that the throttle limit is currently 5GB, which is a TON of data if you don’t stream videos and music all the time. My wife and I together use less than 500MB every month.

They’ve also made some additional improvements to the service. Supposedly, calls can now be handed off from wireless to cellular. That means when you’re at home and you make a call over wireless, and then hop in the car and drive away, it should continue to work even though you are no longer connected to wireless. I’m not sure how they did this, but one review I read said they couldn’t get it to work, while another one said they did. The other improvement is MMS (picture/video message) support.

I have not yet used their service, but with the new plans, it is definitely tempting. I do want to warn everyone that choosing Republic Wireless is not for the faint of heart. They don’t have a number you can call if you run into issues. You’ll have to resort to emailing them or searching through the forums for other people who have had the same issue. Also, if you don’t like the service, you can’t use the phone with Sprint, Verizon or any other carriers. It’s locked into Republic Wireless. Finally, the cell network they fall back to is the Sprint network, which doesn’t have great coverage for everyone. From what I had read though, the phone should be able to roam onto other networks and it even looks like they include 100MB of roaming data.

Should you switch? I guess that depends on how extreme you want to get with your mobile phone savings. We’re planning on trying it when we replace one of our phones. If you’re not ready to go to such extremes. You may want to check out Ting. (You can read my post about them here.)

Potential Savings: If you’ve got one line on Verizon, it looks like you would be paying $80/month for the lowest amount of data possible (500MB). You could get 3G unlimited data through Republic for $25/month or $40/month for 4G data. That’s a potential savings of $55 or $40/month respectively. That comes to a total yearly savings of $660 for 3G or $480 for 4G. Even with the cost of a new phone, you would still be saving quite a bit.

Dave Ramsey’s Financial Peace University – Week 8

House

This week’s lesson covered real estate and mortgages. There is only one more lesson and then I’ll be back to “regular scheduled blogging”. I think the first topic I’ll cover might be about car buying, or deal web sites, or another mobile phone carrier. Who knows?!?!? The possibilities are endless! Anyhow, let’s dig in.

Renting is not a dirty word. Despite what your friends, family, and the guy behind you at the grocery store tells you, it is perfectly okay to rent. This is especially true while you’re paying off debt, building your emergency fund, and saving up a down payment. It may appear that renting is more expensive, but it removes a lot of the risk that home ownership has. When there is a roof leak, the water heater breaks, or the stove stops working, you don’t have to worry about coming up with the cash to fix it.

Owning a home has some advantages that Dave covers. First, you are building equity as you make payments which technically forces you to save money. It also helps protect you against inflation (assuming your home value goes up over time). Finally, any money you make when you sell your house is usually tax free.

What kind of homes should you be looking at when you’re ready to buy? Buy a house that is in the middle to bottom price range of the neighborhood. It’s easier for it to go up in value that way than to try to sell the most expensive house in the neighborhood. Always consider the location that you’re buying in. You can’t move your house to a better location. If you want to find a deal, you need to be able to look over some of the ugly things you might find in the houses you’re looking at. It’s relatively easy and cheap to paint walls and replace carpet and other flooring. It’s not quite so easy to rearrange the floor plan or make it look better on the outside if it’s just plain ugly.

Some of the more important tips that I think many people may overlook when buying a home: You need to get an inspection, even if you’re buying from someone you know really well. The same is true when getting an appraisal, even though it is only an opinion. Finally, get title insurance. We always did, but I never realized how much it can potentially save you if you run into a situation where the title isn’t clean.

Dave had Chris Hogan, one of the people on his speaker team, come out to talk about mortgages. It’s important when considering your mortgage to remember that the goal is to be debt free, so you don’t want to buy the most expensive house you can afford. If possible, save up 100% and pay cash for the house. If you’re going to get a mortgage, Dave’s rule has always been to not get a payment that is more than 25% of your take home pay, on a 15 year mortgage, and put at least 10% down. Twenty percent will make sure that you don’t have to pay PMI, or private mortgage insurance.

I can sum up the next section by saying “only get conventional mortgages”. Stay away from adjustable rate, interest only, reverse mortgages, and other gimmicks out there. If you don’t have a credit score when shopping for a mortgage, you will need to look for someone who does manual underwriting and doesn’t rely on FICO. A local credit union or small bank might be your best bet.

The final thing that Dave covers is selling your home. You need to think about what other people will be looking at when they come through your house. You know how when you are in an environment for so long that you don’t notice certain things like smells? It might be a good idea to invite some friends over who can be honest with you so you can get a clear picture as to how other people will see (or smell) your house when they come through it for a viewing. You need to get your house listed on the internet, with good pictures, and in the multiple listing service or MLS. That will get you the most exposure. Dave highly recommends using a realtor because they can usually take care of these things and reach more people. We had a great experience with the realtor we had when buying our home, but when we had tried to sell it once, I really wish we didn’t use one. I guess everyone has a different experience.

That’s a rough summary of the real estate and mortgage lesson. Next week will be the final lesson!

Featured Image courtesy of luigi diamanti / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 7

Investing

Week 7, only two more weeks left in class! Everything that has been taught in the classes so far leads up to this one. Some students may not be ready for it, while others may have been waiting for it a while. This lesson is the Retirement and College Planning lesson.

There can be a lot of fear around investing, but Dave makes it incredibly simple and breaks it all down. He starts off with a simple example of a 30 year old couple who invests $600 a month for 40 years. At 12% interest, they would have over $7 million! If they could manage to invest $833/month they would have $9.8 million.

If that doesn’t motivate you to start saving, I’m not sure what will. Even if you don’t get 12% on your investments, you’d still have a huge pile of money!

After the $1000 emergency fund, paying off all your debts but your mortgage, and building up a 3-6 month emergency fund, baby step 4 is to invest 15% of your income for retirement. Dave recommends the use of mutual funds since it helps take some of the risk out of investing by spreading your money across several different companies. He recommends splitting up your investments equally among growth and income funds (sometimes called large cap), growth funds (sometimes called mid cap), international funds, and aggressive growth (sometimes called small cap).

When you purchase mutual funds, you can purchase them through several tax favored accounts such as 401k’s and Roth IRAs. A 401k or Roth IRA holds mutual funds and other investments, it is not the investment itself. The type of account tells the government how to treat it when it comes to taxes. For example, with a 401k, you put all of the money in pretax, but when you withdrawal from it in retirement, you will pay taxes on everything you withdrawal. With a Roth IRA, money is put in after taxes have been paid, so all of the money grows tax free and you don’t pay any taxes on it when you withdrawal from it in retirement. You can read more about it here.

To maximize your investments, Dave recommends funding your company’s 401k (or Roth 401k if they offer it) to get all of the match that they offer. You don’t want to leave free money on the table. After that, you should put money into your Roth IRAs until you reach 15% of your income. If you still haven’t reached 15% but have maxed out the Roth IRA, then go back and fund your 401k until you reach 15% of your income.

After covering investing for a while, Dave’s daughter Rachel Cruze comes out to talk about saving for college (Baby Step 5). They recommend saving in an Education Savings Account first, and then using a 529 after the ESA is maxed out. Personally, I’m not sure why Dave hasn’t completely adopted the 529 as the primary choice. The only thing I can think of is that there are so many 529s out there and they are different in each state. For example, in Ohio where I live, any money we put in up to $2000 per child is tax deductible from our state income taxes. I wouldn’t get that benefit from an ESA. Look at your 529 options closely. You don’t have to invest in the 529 for your state if you like another state’s options better.

Rachel warns against using insurance, savings bonds, or prepaid tuition to save for college. They don’t get the same returns as using mutual funds. Always look for something that allows you to control what you’re invested in and doesn’t change with age. Finally, they stress the importance of graduating from college debt-free. Some of their money saving tips are to go to an in-state school or community college, look at all your living options (including living at home), get tutoring for the ACT/SAT to improve your scores and get more scholarships, and finally WORK while you’re in school!

I agree with graduating without student loan debt. Personally, my wife and I were able to do it because of the work we put in while in high school and the scholarships we got. When a student graduates with debt, they don’t have the freedom to find the job they really want and instead are sometimes forced into a less than ideal position so they can pay their student loan payments. This makes no sense to me really. Parents and students spend all of this money on college so that they can have the “experience”. If they do it right, a person will be spending a lot more time in the working world than in college and the last thing they need to do is start off in a position that they despise and have student loans hanging off their back.

Next week’s lesson will be covering real estate and mortgages.

Featured Image courtesy of ddpavumba / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 6

Car Accident

Insurance. One of those things that you don’t want to think about, but when you need it, you’re glad you have it. Do you have the right kinds of insurance? Are you spending money on insurance that isn’t necessary? That’s what Dave Ramsey covers in lesson 6 of Financial Peace University, called “The Role of Insurance”.

The purpose of insurance is to transfer the risk from you to the insurance company. It helps to protect what you have, and any money you’ve accumulated. Without going into too much detail, I’ll quickly cover the types of insurance you need and the types of insurance you don’t, as taught in this lesson.

Insurance you need:

  • Car Insurance – In most states I think it’s illegal if you don’t have it, but you want to make sure that you’ve got an adequate amount. There are companies that sell the minimum legal amount, but if you’re in a bad accident, they will only pay out until the maximum is reached. If it ends up costing more than that, you’re on the hook and it could force you into bankruptcy.
  • Homeowner’s Insurance – Make sure you have enough to cover the rebuilding of your house. Personally, I know that the amount they cover you for seems crazy since it’s a lot more than you could sell your house for. But they aren’t giving you money to buy the house all over again, but to rebuild what you had, and that can be expensive.
  • Renter’s Insurance – Renter’s insurance is cheap and if something happens to your stuff while you live in an apartment or rental, you’re responsible for insuring it.
  • Umbrella Insurance – This is helpful if you start to build wealth and look like a target for crazy people.
  • Health Insurance – This one is kind of a no brainer. With the laws changing, you’ll have to get it. A Health Savings Account might be a good option for saving money, but it may not be for everyone. I’ll try to write another post about HSAs at a later time.
  • Long Term Disability Insurance – If something were to happen to you and you became permanently disabled, you’ll want some income to pay the bills. This one takes care of should that horrible thing ever happen.
  • Long Term Care Insurance – Dave says if you’re over 60, you need to purchase one of these plans. If you or your spouse needs long-term care, it could wipe out your nest egg.
  • Identity Theft Protection – This is probably the newest recommendation from Dave. He suggests you get a policy where they will assign someone to clean up the mess should your identity be stolen.
  • Term Life Insurance – You need to get a term that will cover you getting out of debt and paying off the house. It should be 8-10 times your income.

Insurance you don’t need:

  • Whole Life Insurance – It’s incredibly overpriced and you would be better buying term and investing the difference or using it pay down your debt snowball.
  • Credit Life and Disability
  • Cancer and Hospital Indemnity – Your health insurance should take care of this.
  • Accidental Death – Remember term life insurance?
  • Pre-paid Burial Policies – You would be better off setting aside the money and investing it.
  • Mortgage Life Insurance – So, they will pay off your mortgage if you die, but as you pay down your mortgage, the amount of coverage your paying for is decreasing. You’d be better off buying extra term insurance until the house is paid for.

That pretty much covers them all, but not in nearly as much detail as when you attend the class. Dave goes into much more detail about the levels of coverage you should get and other things to look for and avoid. Next week’s lesson is about retirement and college planning!!!

Featured Image courtesy of Bill Longshaw / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 5

Marketing

Unfortunately, this week I wasn’t able to help out at FPU due to family illness. However, I’ve heard the lesson before and I grabbed some notes, so you’re in luck!

This week’s lesson is called Buyer Beware and Dave talks about all of the ways we are marketed to. He’s taught the class to save money, pay off debt, and control where their money goes. This lesson is all about protecting yourself from the marketing gimmicks that can mess up your plan.

We’re  being bombarded on a daily basis with ads and marketing. It starts when your alarm clock wakes you up with your favorite radio station. Then you turn on your TV while eating breakfast and get hit with commercials. When you get to work and check your email, you’ve got a bunch of marketing emails waiting in your inbox. You might as well forget about browsing the internet without seeing an advertisement.

It’s important for us to recognize that this is happening to us so that we don’t get tricked into making a purchase and mess up our budget.

Dave then covers different ways that we can keep ourselves from making a bad purchase decision, such as waiting overnight since you may feel different in the morning. A couple other good ones are to consider why you want to buy the item, whether or not you understand what you’re buying, and to think about what else you could be using the money for (like saving or investing it).

There used to be an entire lesson on getting a deal when purchasing big items, but that is now condensed into a shorter part at the end. If I remember correctly, Jon Acuff is brought out to do this part. (For what it’s worth, Jon has decided to go out on his own and no longer works for Dave Ramsey’s organization.) I love these tips a lot. I remember after seeing the full lesson in the old version of FPU, I wanted to go out and negotiate on something, but I couldn’t think of what that something might be.

Anyhow, the tips (in my own language) are below:

  • Be completely honest.
  • Flash the cash (it’s hard for the other party to say no when they see the Benjamins in front of them).
  • Walk away when the time is right and you may be surprised by what can happen.
  • When negotiating, keep quiet. Silence is very powerful when negotiating.
  • Tell the other party “That’s not good enough.” (Ironically, that’s the name of the old lesson.)
  • Learn to recognize when there is a good guy, bad guy tactic being used against you. Car dealerships are notorious for this.
  • The final piece is the “If I Take Away” tool. This one is hard to explain, but I’ll do my best. Let’s say you’re going over to someone’s house to look at a used truck they’ve got. When you get there, you see that they’ve got a trailer that was obviously used with the truck but they’re not likely to want to part with. At this point, you would ask them to throw the trailer in as part of the deal. When they tell you they can’t, you then ask “if we take the trailer out, what kind of deal can you make me on the truck.” Sounds kind of tricky, but if it works it could save you some serious cash.

Featured Image courtesy of Stuart Miles / FreeDigitalPhotos.net