MoneyPlanSOS

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Pretend you work for $20 an hour and wanted to buy a new iPod Touch for $200. You would need to work for 10 hours to make $200, right?

What we forgot in the calculation – income taxes

Don’t forget that income taxes come out of your paycheck. Pretend your effective tax rate (how much taxes you pay) is 20% of your earnings. In this scenario you would bring home $16 after taxes. How much would you need to work in order to buy that iPod? 12.5 hours.

Wait, there’s more – Sales Tax

But you forgot about sales tax. If sales tax is 8% then you would pay $216 for a $200 item, which would mean you would have to work for 13.5 hours.

Credit Card debt makes it worse

What if you don’t pay cash (or debit/check) for the iPod and charged it to a credit card instead? If interest on your card is 12% annually (about 1% a month) then the debt of this gadget will now cost you 13.64 hours of work, AN ADDITIONAL 8 MINUTES JUST FOR THE INTEREST.

A “good” interest rate

The normal American finances their car. If they finance a $20,000 car with an 8% sales tax at 2.99%, what many would say is a good interest rate, they would have a balance of $21,600. This is the equivalent of 3.36 hours of work for the interest charges of the loan. It will take more than 5 work weeks to cover the interest on a $20,000 car loan.

Work for yourself, not for Visa

Paying interest costs you future income and valuable, precious time! Making purchases with debt products is a promise to your family that you will be leaving them in order to pay taxes to the government and interest to the banks.

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I’m defending Suze Orman, not for her behavior in calling some personal finance bloggers idiots but for something she did with her “Approved Card” that I would love to see other card issuers do.

Why am I even talking about this?

Last week Suze Orman released a new financial product, a prepaid card. Because she is a celebrity and is promoting her new product as “The Smart Choice For You” it is the responsibility of financial bloggers, personal finance coaches, and others in the finance industry to know about its features and inform their readers/subscribers. Some PF Bloggers gave their opinions, including my own, and gave our honest opinions. After some exchanges on the internet that were less than favorable, Suze Orman called some of them Idiots.

Why defend Suze Orman

Suze was blasted for all the fees. Yes, this is a product with lots of fees if you don’t use it the way she says to. And many of the “benefits” of the card are things you can (and should) be doing without her card. With that said, she does disclose the fees in a fairly easy-to-find manner on her website. As far as I can tell there are no hidden fees, which allows me to make a fully-informed decision on our own. If other credit cards were as up-front with their fee structure and helped us understand exactly how to use them without getting into trouble then it would be more difficult to hate the credit card industry.

Take out the ruckus

Take out the emotion, the celebrity endorsement, and the social media ruckus around her using the word “Idiot” and we will see who this card is for: This is a card for a select segment of America who are fans of Suze Orman and will handle this card in exactly the way she says or for the “un-banked”, those who are living in our electronic culture but do not have a bank account or credit card.

Evaluate things with a critical eye

Don’t take my word for it, don’t take your friends (or enemy’s) word for it, take a look for yourself. Evaluate things with a critical eye. Utilize the information presented by others to aid in your research and ask yourself “Is this a product for me?”  You will be better served by your gut feelings than a celebrity endorsement any day of the week. Then you can decide if you “Approve” of this card.

How I can support her

Regardless of my feelings towards Suze, I can support her in teaching others about managing their debt. She could go farther in helping people eliminate debt from their lives for good and stop being a Hypocrite (blogpost I wrote in 2010), but she is helping people get headed in the right direction. I can support someone who is leading folks downfield towards the endzone, maybe that will allow me to intersect them, change their direction, and get them to the goal posts.

Bonus material not in the podcast:

The additional coverage of Suze calling bloggers “Idiots” has created more media than if it never had happened. This has gotten us (me included) to talk about it even more, given it free advertising, and segmented a majority of the population. There are now 3 camps:

• Those who aren’t paying attention to any of this (I somewhat envy them)
• Suze fans who will defend her and do anything she says (Ormanites?)
• And those who disagreed with (or disliked) Suze from the start and now have new “she called me an Idiot” ammo

You probably know which camp I am in, although I will try to act more “Approvingly”.

More bonus material (mentioned in the podcast):

Stewart household budget and checkbook register template

I’ve been using, developing, and improving a spreadsheet for our household that works great for Budgeting AND for tracking spending (checkbook register). I’ve simplified it and added a couple categories to fit the majority of American households (like car payments) but you need to change it to match YOUR financial life.

Download a copy for free go to http://www.moneyplansos.com/Budget2012

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Jon White continues this week in Part 2 of Setting Financial Goals in 2012.

In Part 1 of Setting Goals for 2012

In Episode 44 we discussed taking a look at where you are before you get started: How much do you have in debt, how much in savings, and how much income do you have coming in monthly to apply towards your household budget? After getting your debt paid off and having an emergency fund, now you get to enjoy your money!

What to do when you have no debt

What are some things you have wanted to do but could not because of monthly payments? Things such as vacations, home remodels, and buying newer cars fall into this category.

In addition, now is the time to start saving for Tree-tirement. But where do we save for retirement? The two most common ways are through 401(K)’s and IRA’s.

Finally, it is one thing to talk about your dreams and goals, but it is another to actually go out and do them. So how do we accomplish our dreams? You must do these things:

1. Write them down so you can be reminded of them everyday
2. Make them specific and measurable
3. Figure out your “Why”. Why do you want to reach this goal?
4. Create your MONEYPLAN and set some savings goals. How much do you need to cut from your budget to make this happen? How much do you need to save? How will you save the money?
5. Look at the long-term reward, not the short-term pain. In other words, set your eyes on the goalposts and not the 350 lbs linebacker heading your way

Don’t let a tackle take you out of the game

When you get knocked down on the field, or even get pushed back behind the line of scrimmage, get back up and make another play. If you don’t set your eyes on the goal you could get spun around and start heading the wrong way. You could end up like Jim Marshall who took the football and ran it into his own end zone!

Don’t set resolutions, set goals that are SMART: Specific, Measurable, Attainable, Relevant, and Time-framed. You will reach the endzone for as long as you don’t quit.

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The first of a 2-part series from Jon White from JWFinancialCoaching.com

Resolutions are like the End Zone

Most people make resolutions like “I want to lose weight” or “I want to save more money this year”. Resolutions are like the end zone on a football field, a wide area that we want to reach someday. It may look like it will be easy to get to but we suddenly find obstacles are in the way and we get discouraged when we don’t advance very far down the field.

We should aim for the Goal Posts

In order to be successful we need Goals. Aiming for the goal posts make our efforts more focused, more specific, and it is more difficult to get us off track. The football is always snapped from the center of the field in line with the goal posts, this gives you room to make your moves and avoid getting sidelined!

Once you have set your sights on the Goal

You know what I’m going to say here: You need to PLAN your way to the goal. Most touchdowns are not made by throwing the football 50 yards into the end zone. They are made by small, strategic movements in the right direction. You can easily see the progress you have made and stay motivated, ultimately reaching the goal!

Setting financial goals for 2012

What are your financial goal posts for 2012? Did you promise yourself to pay off some debt, save for emergencies, put more money into your retirement account? How much or how long? What are some smart money-moves we can make to increase our net worth?

Jon White, host of JW’s Financial Coaching Podcast and the Debt Free Living Podcast, lays out our easy-to-follow strategy to help get you started, no matter what your current financial situation is. Need to pay down debt? This plan is for you. Need to save for emergencies? This plan is for you. Want to save for kid’s college? You’ll have to wait until next week’s release of Part 2 but we’ve got you covered. This step-by-step plan allows everyone to jump in wherever they are and head for the goal posts!

But you have to first get on the field and play, so let’s get started!

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If you are new or want to revisit MoneyPlanSOS podcast episodes

More than a year has passed since the introduction of the MoneyPlanSOS podcast. Here is a list of the Top 11 episodes from 2011:

1. Episode #5: The Absolute Simplest Budget That Works and the Absolute Simplest Budget In Excel vid-torial
2. Episode #10: Should I Tithe While In Debt and the importance of giving, even while paying off debt
3. Episode #14: Become A Coach with Justin Lukasavige, Dave Ramsey Certified Counselor who wrote a book about becoming a coach
4. Episode #18: Jen and Bob McDonough’s Real Life Case Story
5. Episode #22: Living Without Credit Cards Part 4 (also Part 1, Part 2, and Part 3)
6. Episode #24: Zac Bissonnette as guest for this Real Life Case Study
7. Episode #25: Dave Ramsey’s Great Recovery Action Steps
8. Episode #30: Glenn and Fredonna’s Real Life Case Story, the same couple we featured in Episode #3′s Real Life Case Study with Don Current
9. Episode #33: eCredable is Incredible, interview with CEO Steve Ely
10. Episode #36: Should I Refi and all that is involved when considering refinancing your house
11. Episode #39: Open Enrollment series Part 3: 401k or Roth IRA? (also Insurance Options and Cafeteria Plans)

Other 2011 highlights for the MoneyPlanSOS website

• Most Tweeted: Blogpost “10 Things Poor People Say“
• Blogpost series: Money Is Like…Your Checkbook, Driving a Car, Cereal boxes, Reading Box Scores
• Financial Literacy Month: Daily 1-minute videos featuring Jeff Kosala from DeliverAwayDebt.com, Jake Stichler from DebtSucksBlog.com, and Brad Chaffee from EnemyOfDebt.com who’s video was featured in an article by Kathy Kristof from CBS MoneyWatch.com called “Is Uncle Sam Smarter Than A 5-year old?“
• Most Commented: Dave Ramsey Says 10 Broke Things
• Most Downloaded: Podcast #18: Jen and Bob McDonough’s Real Life Case Story
• Jen McDonough wrote a book about how she faced an insurmountable goal of completing the IronMan! The book, called ‘Living Beyond Awesome’, is available in eBook form from her site or in paperback at Amazon.
• Vacation Savings videos: A collection of short videos with tips on how to save on, or save for, vacation

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We all have things we value

One of the things we have to do when building our house of financial freedom open up some windows (share and experience things with others). I call this giving. There are plenty of ways to be a giver.

5 ways to turn things we value into something valuable for others

1. Give monetary gifts or buy gifts for others with money. This is what most Americans have become accustom to, and it’s the easiest too.
2. Turn Talents into Acts of Service
3. Volunteer Time
4. Turn your Passion into something Productive
5. Exchange points from rewards programs into gifts for others (kind of like #1)
   

   Another example of turning your Time and Volunteering to raise Money for worthy causes

Also: Holla From The Impala

Second-guessing myself wishing you a Merry Christmas?

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In Episode 40 I shared with you Who I Am and that you can’t believe everything you read (or see on TV). The media does’t make money unless they sell advertising. What do they need for advertisers to pay them money? They need eyeballs.

The more readers, the more money collected in advertising

Why do you think a SuperBowl commercial can cost billions to air when it’s only 15-30 seconds long? The eyeballs. The largest watched TV event each year is the SuperBowl so advertisers know they can get their product in front of millions and millions of eyeballs.

How a paper or news source gets our attention

So how does a newspaper or news source get our eyeballs? Headlines! Fantastic, extreme, bold headline titles. “If it bleeds, it leads”, the more miserable the scarier, and the more our eyeballs keep reading so we don’t miss something “important”. I don’t read the paper very often and I certainly don’t tune into the nightly news. The majority of it is bad news. Even the weather reports have an air of urgency whenever there is a rain cloud forming over Iowa that “could produce some heavy rains on Wednesday”.  You wouldn’t hire a stock broker whose predictions were as “iffy” as Meteorologist Jim Blow.

When I do read

When I do read something I have to approach it with critical thinking, with an eye for the “creative writing” in the sentences. Today was one such day. Here’s what I read: Recession Attitudes but Christmas Cheer Spending by Steve Liesman, CNBC.com

My thoughts: 53% believe it’s a bad time to invest in the market

This statement sounds scary, doesn’t it? If this is true and the “Buy Low, Sell High” theory of investing still applies then 53% believe stocks are up, overvalued, or that things are going to get really bad, even worse than they have been, in the next 5+ years. So these folks should be saving cash for when they are ready to get into the market.

That may mean the other 47% believe it is a good time to invest, that stocks are undervalued or are convinced their investments will be more valuable when they actually pull the money out (in the next 5-45 years). I’d keep investing, and that’s what we are doing.

This statement sounded rather scary when I first read it. Don’t let it deter you from your money plan. Whether the market is good or bad, saving and investing is always a good idea.

…a more reasonable level of inflation next year?

Jay Campbell stated “Americans are weary from years of bad economic news and are skeptical that things will improve any time soon. Perhaps because they are looking to create a bright spot, and coupled with expectations for a more reasonable level of inflation next year, consumers across the spectrum have decided to make this a merrier holiday.”

Seriously? Most Americans do not take into consideration next year’s lowered increase of inflation when doing their Christmas budget this year. But most Americans don’t do a Christmas budget, so inflation or no inflation, people will spend more money if they want to. A cheery outlook indeed.

Those expecting wages to rise plan to boost their spending 56%

WOW! This one got my eyeballs. I had to go back and read it again. Did my printer make an error? Nope, that’s what it says. Is this seriously what respondents to the survey said? If so, here is a comparison between this year’s expected spending and what next year would look like if we did spend 56% more on Christmas in 2012:

Americans who believe their home prices will increase plan the highest holiday spending

In a sign of how critical home prices are to the outlook, Americans who believe their home prices will increase in the next 12 months plan the highest holiday spending of any group. 

He’s got my attention again. Is this saying that those who think home values will go up will allow them to spend more? What does the value of ones home have to do with spending? But it’s right there in black and white.

Regardless of what you read

Our behaviors are effected by what we learn. What we learn we get from people we talk to, things that we read, and experiences we have. If we are looking at, reading, or watching those things that the people who want our attention are producing then we have to look at it with a critical eye. It’s not a conspiracy theory, you just have to know that the goal of the media is to get our eyeballs.

Also in this episode: Holla From The Impala: Top 5 Questions I have about Christmas