Home values have dropped, there’s a lot of inventory on the market, and rates are low.

What that means is this:

1. The prices of homes are lower than they were 4-5 years ago
2. A lot of people are trying to move, can’t afford the payment, or tried to build a spec home before the “bubble burst”
3. Interest rates are at a 40 year low!

What this means for you

The best time to buy a home is now, but is this a good time for you to take advantage of this housing trifecta? You must consider the following before even looking at properties for sale:

Do you want to buy a home?

Owning a home is a wonderful thing. You have a place you can call your own, your wife gets to customize it (furniture, drapes, wall color, flowers and outdoor plants, etc…) and you get to put all your tools in the garage. Awesome, right?

How much can you afford?

Most people believe they can afford a home that has the same monthly payment as renting, but as you can probably guess from the things mentioned above this is absolutely not true. Curtains, couches, new liners for the cabinets, there are numerous things to buy when moving into your new place. Also, you pay all the repairs and maintenance yourself, not to mention the increase in real estate taxes and house insurance over time.

How much time can you dedicate?

Mowing the lawn, raking the leaves, painting the soffits, power-washing the siding, there are a number of things that will monopolize your time in the name of “home ownership”.

So, are you ready?

Financially, there are a number of things you need in order to buy a home or qualify for a reasonable mortgage. Note: If you are paying cash for the house (no mortgage) then this is a no-brainer. Find something you like and buy it! Otherwise:

Save for a down-payment

The more you put down on a house the lower you balance, the less interest you pay over the life of the loan, and any down payment of 20% or more of the value of the house will keep you from having to pay PMI (insurance for the bank that protects them from loss in case you lose the house).

Be patient and get yourself a deal!

Since there is so much inventory on the market, prices are down, and interest rates are low you can take your time and find yourself a deal! Experts suggest you look at a house at least 3 times before deciding to sign the papers, that way you are certain this is the house for you.

Don’t buy the most expensive property in the neighborhood

One of the greatest financial benefits of home ownership is growth. If you buy the best place on the block then your house will not appreciate as much as a “normal” house down the street. The same goes for building: Don’t overbuild the neighborhood.

Pre-qualify for a mortgage

Run some numbers to see how much you can afford. Dinkytown.com has some awesome mortgage calculators. Just remember to add insurance and taxes to the normal mortgage figure (principal an interest). You do NOT want to become house poor.

Qualify for the best rates

There are three ways I know of that will allow you to qualify for the best rates out there. The most common one is the FICO score (credit score) which is a number based upon your debt payment history, amount of debt outstanding, credit (debt) history, new credit, and types of credit. This is my least favorite because it does not take into account non-debt items like rent, the electric bill, or even your cell phone payment. A better way would to be to include ALL your payments to prove you are an excellent candidate for a home mortgage.

If your credit is bad

How do you prove your credit worthiness if your FICO score isn’t stellar? Maybe you had a problem keeping up with your payments a couple of years ago but have been on-time for the past 2 years. That should count for something, right? It does. There is a new option on the table, and a company called eCredable. This is a company that WILL include all your payments (rent, electricity, cell phone, etc) in your AMP Credit Rating. Getting your credit rating verified doesn’t happen overnight, so this would be something to start when beginning to look for a house.

You can learn more by visiting eCredable.com/MoneyPlanSOS or listen to an interview with eCredable CEO Steve Ely.

The time is now

You don’t need to panic and rush out today but things will not stay this way forever. If you have a decent down-payment and are ready for homeownership then the time is now. Give yourself 3 months of looking and pre-qualifying and I expect you will enjoy having a place you can call home.

When I first heard the Dave Ramsey show

I was driving through Southern Illinois about a decade ago (before iPods, podcasts, and I can’t remember having a CD player in that car). I stumbled upon a radio station about to go to a commercial break. The DJ was playing the Rippingtons, a jazz group I liked, so I decided to stick around after the break. When the commercials were over the DJ started playing a song by Heart. The Rippingtons and Heart on the same station? Now THAT’S variety! But the DJ kept talking and I suddenly realized he wasn’t a DJ, he was a talk radio show host. I almost changed the station but this redneck on the radio reminded me of a guy I used to listen to in the late 1990′s, Bruce Williams, so I stuck around.

Dave Ramsey is no Bruce Williams

At first I thought he was just some southern shock-jock saying crazy things to get the listeners upset and riled up, kind of like a clean Howard Stern. Cut up your credit cards? Pay off the car early? That stuff doesn’t work Mr. Ramsey, or so I thought at the time. I kept listening, checked out resources on his website, and found out that he was right – ABOUT EVERYTHING. Now I’m a sold out Dave Ramsey fan.

So what’s up with the title of this episode?

PLEASE don’t ever start a sentence with “Dave Ramsey says…”. Who cares what Dave Ramsey says? You’d be a fool to buy every get-rich-quick idea on midnight cable or to believe that what you hear on the news is a true representation of what life looks like in every city. You need to learn about these things for yourself.

Don’t ever say “Steve Stewart Says” either

I hope this podcast doesn’t TELL you how to live but that it shows you how money really works, kind of like taking a shop class consisting of Excel spreadsheets. You could get by without listening to my show or ever taking a  financial literacy course, but if you want to speak into someone’s life with authority and a true knowledge about personal finance then you need to learn.

What you can do to learn without 4-years of college

Take a financial literacy course. April if Financial Literacy month, maybe you can find a free class being offered in your state such as Money Smart Week offered by the Federal Reserve Bank of Chicago.

Read some books. I recommend the Millionaire Next Door, the Total Money Makeover (no surprise there), or a fun one called The Wealthy Barber. There are a bunch of great ones I recommend in the “SOS Library” page of my website.

Of course you could always take Dave Ramsey’s Counselor Training. You can read about some of my experiences in a series of blogposts or go to DaveRamsey.com.

Top 50 Money Topic Checklist

Download the Future Financial Minister Top 50 Money Topic Checklist to see how much you already know about personal finance issues. This is not a test, there is no score. This is just for you!

Also, Holla From The Impala: Do you balance your checkbook?

I balance my checkbook the old-fashioned way. How do you balance your checkbook? I would love to hear what you and how it has helped you catch fraudulent charges or mistakes like the ones I have.

How to use the Recommended Percentage Spreadsheet

Enter your expected take-home pay in the first yellow box at the top. This will formulate all the recommended amounts and percentages for you in the suggested ranges for each category.

Enter the amount you spent for each category last month or what you anticipate to spend this month. Feel free to use round numbers.

The spreadsheet automatically calculates

Your percentage of income spent (or will spend) on each category (in blue cells)
Your amount (over or under) spent versus the high recommend (in orange cells)
Your percentage spent over the highest recommended percentage (in orange cells)

What if I’m debt free (except the mortgage)

I give my recommendation percentages for households that are debt free in the blue cells. You can also see in the green cells.

Imagine the increased percentages when the allocated percentage for debt is $0. You could put more into Giving, Saving, or even Fun & Recreation. Now THAT’S something I would highly recommend!

Holla From The Impala: Happy Vadertines Day

Reminder: I’m goin’ back to Cali on February 29th, 2012. I would love to meet you at Lucille’s BBQ at 11338 South St in Cerritos, CA around 7pm. Let me know if you are coming!

We need to invest like Spock

Deciding how, where, and why to invest should not be taken lightly. We need to think logically and look at the data, the facts. Spock from Star Trek is a great example of how to approach investing wisely. He didn’t let emotions get into the way of making the right decision and he didn’t care how others felt about the choices he made. They were based on facts.

There are three things to think about when starting to invest

I am not a Financial Planner and don’t know much about specific investments. But I do consider these three easy to understand things before investing a dollar into anything.

• Purpose

What is the purpose of the money? Don’t just put in the market for the sake of being in the market. You must give the money a purpose. Examples: Retirement, a second home, kid’s college

• Timeline

How long before you need to take out the money? Investing is a great way to get a good rate of return when saving money for more than 5 years.

• Risk Tolerance

Listen to me explain how my risk tolerance increases (meaning I was willing to take more risk) when first riding roller coasters. You must know how much you are willing to risk before boarding because once you are on, you are on. You also don’t want to jump off too soon. If your risk tolerance is low then you probably want to start with the kiddie Dragon coaster.

Don’t let the media scare you from the market

The media is trying to get your eyeballs. If it bleeds it leads. The weather isn’t mostly sunny, it’s partly cloudy with a chance of storms on Thursday. You gotta watch that, right? The same is when the stock market drops. You hear more headlines about the bad economy than success stories of the good stuff.

Spock would evaluate the data, and here it is

Download this spreadsheet and follow along: S&P500 trends Excel

The S&P500 lost 8% or more twenty times in the past 100 years. But it GAINED more than 12% fifty times! Did you hear that? It gained more years than it lost!

When we take into account multiple year, evening out the waves, we can plainly see that the S&P NEVER LOST MONEY when looking at an average of 5+ years. In fact, the trends average more than 8% or more 91 times out of 100. Granted, these are not inflation-adjusted numbers but you are more likely to win than loose over the long haul.

Not so scary anymore, huh?

Investing is part of anybody’s moneyplan after getting out of debt. Once you fully realize this and see how compound interest and re-invested dividends work you should feel more comfortable in creating a portfolio of investments. When you have a purpose for your extra money, a timeline before you need it, and understand your risk tolerance level you will be able to look at the data and make smart decisions, just like Spock.

Also in the show: Holla from the Impala

Top 5 ways you know you are a sold-out Dave Ramsey fan

Join me on leap-year day!

I’m going back to Cali! Come join me at Lucille’s in Cerritos, CA on the evening of February 29, 2012. We’ll get some BBQ and hang out in the bar area for a while. Right now I am planning on 7pm but this could change (depending on traffic – yikes!)

Lucilles in Cerritos is located at 11338 South St and their phone number is 562-916-7427

Items should be reported on your income tax returns:

• Interest
• Capital Gains
• Real Estate
• Debt forgiveness
• Lottery winnings
• Gifts (over $13,000)
• and now Frequent Flyer Miles?

Are you serious?

Citibank sent customers 1099 forms for their customers who received American Airline miles when opening a checking account in 2011. Somebody up there thought they were complying with IRS regulations. Maybe they know something we don’t know.

Relax

The good news is reward points and frequent flyer miles awarded in the use of a membership account (or stupid credit card) are considered a rebate. However, a “reward” given for opening a checking or savings account is considered a gift and could be taxable. So you could get a big kickback from using your Speedy Rewards card at Speedway gas stations and not owe a dime in taxes.

Besides, how valuable are they anyway?

The IRS does require a 1099 be issued for the above mentioned items when valued at more than $600. Have you tried to cash in your points for a vacation or flight that you wanted? Could it be that this difficulty in using reward points make them more valuable, thus the need for a 1099? I think not, and I certainly don’t want Panara Bread sending me a 1099 for the free sandwiches I “earned” by frequenting their fine establishment!

What if we got taxed on our Starbucks Stars?

If reward points did have to be reported on your 1040 then the value of Priority Club, United, and even the free soy milk we get for using our Starbucks cards could become less valuable because of taxes. There would be rioting in the streets and a new President elected into office.

We spend a lot of time and effort going to “our places” and using “our cards” to earn points. Sometime we even spend more money just for the points. C’mon, you know you do it too. It feels so good to get that Amazon gift card in the mail when you reached the “award limit” that all the extra stuff you bought almost made sense.

Funny how rewards can motivate people even more than paying attention, not interest.

We live like Kings

First of all, if that were true then most Americans would not be following God’s principles. We are the richest nation on this planet and have access to luxuries that most would call necessities: Electricity, plumbing, grocery stores and automobiles. For example: I was eating some really juicy blueberries the other day. It’s January. Where do I get fresh blueberries in the middle of winter? The grocery store. We have access to food fit for kings in 46,000 square feet facilities with freezers, bakeries, produce sections, and isles of wine and sodas. So we are all rich when compared to most of the world’s population.

Second, having nothing is not Godly

If giving everything away and having nothing was Godly then those who have absolutely no possessions would be more Godly than we are. Their receiving of our gifts would make them less poor, and less Godly? So the statement about giving everything away and living in poverty is ridiculous.

Third, it’s not just about money

Giving is not just about money. Along with a tithe God asks us to help our fellow Brothers and Sisters in Christ which could simply be raking the leaves of an old lady’s house or changing the oil in a single mom’s car. It could be babysitting for another couple or having them over for a Bible study. Giving of your time has value as well.

It’s not ours anyway

Psalm 50:10 – “For every animal of the forest is mine, and the cattle on a thousand hills”. (By the way, he owns the hills too). None of this stuff was ours to start with. He gave us our bodies to do things with, the brains to control our bodies and ideas, and the talents to put those things together to do things for others will reward us for (usually with money). It’s not our money, so we probably should manage it well.

Take care of Family first

Even the Bible tells us that we have to take care of our family first. 1 Timothy 5:8 says “Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever”. Wow. The Bible says we are not believers if we don’t provide for our family. That doesn’t mean new iPods each year, but it does put a priority on how we use His money.

We are taught to use our talents to make money

My favorite story Jesus told is the Parable of the Talents (or Parable of the Three Servants). It is a story of a man who was going on a long trip and left talents (money) to three servants. Two servants took the money and used it to invest, build, and grow businesses which resulted in them returning twice the original amount to their master. The third servant did nothing with the money and returned the original amount to his master. The first two servants were rewarded and the third was called lazy and fired him (that’s my polite translation which is much less severe than the original Biblical text).

To summarize

Neither giving it all away or keeping it all to ourselves is Godly. We are called to work, save, and give which is both scriptural and spiritual. Margaret Thatcher has a great quote about having money to give: “No-one would remember the Good Samaritan if he’d only had good intentions; he had money as well”. What are the intentions of your money?

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.

Join the http://Facebook.com/MoneyPlanSOS group

Follow me on Twitter.com/MoneyPlanSOS

Watch how I create The Absolute Simplest Budget That Works in less than 2 minutes from the front seat of my car. Also, Bonus material at the end shows how this spreadsheet works great for those with a variable or irregular income.

Download the template for this at MoneyPlanSOS.com/SimplestBudgetInExcel

For more details on how to complete this budget, including steps you can take to prepare to complete a budget with your spouse, listen to Episode #5 of the MoneyPlanSOS Podcast.

The Money Class show

At the request of a friend I recorded “The Money Class”, a new show by Suze Orman. While watching it, I tried to put my personal opinions aside to see the true message she is sending. Notice I used the word “sending” because I really felt more like she was TELLING us what to do instead of TEACHING us what to do. OK, give her a chance Steve.

The first 30 minutes

Suze talked to some people, seemed genuinely interested in their lives, and gave some good advice (noticed I used the word “some”). As I said in my podcast episode “Defending Suze Orman”, she is leading people in the right direction down the field. I can support that. Some of her advice was spot on, some of the show was exaggerated for TV, and the stories from guests were interesting.

Using the 4-letter word

Leading into a break she said it, she said the 4-letter word. Quote: “Up next, the 4-letter word that could save you thousands of dollars. It’s spelled F-I-C-O”.

That was it. I had to shut it off. I get too upset hearing someone mislead you about your finances, so much so that I feel like Darren McGavin playing Ralphie’s old man in “A Christmas Story”, ready to rip out a torrent of nonsensical words to replace things I would never really say out loud. Suze was just making a silly statement to get our attention to keep from changing channels.

FICO does not save you money

If FICO score lending didn’t exist then everyone would be offered the same rate. The only reason interest rate comes into play is when companies want to measure their level of risk in lending you money (which I agree with). Companies are more likely to lend you money if you have a history of paying bills on-time (notice I said BILLS and not just DEBTS) than if they knew you had a problem paying bills. So a FICO score does not qualify you for a good rate but will DISQUALIFY you if there is any hint of a bad payment history.

Making FICO irrelevant

Saving money for future purchases would make FICO irrelevant. I guess it could come into play when applying for a mortgage or refinance, but there are other options like eCredable or good old-fashion underwriting that will qualify you for a good rate.

The Money Class Drinking Game

If you must watch The Money Class, take a drink each time you hear Suze Orman say the “F” word. Your only alternative is to stay sober and follow her advice about taking out loans, maintaining credit lines, and making interest payments. Either way, you would wake up asking yourself “what happened to my money and how did I get here?”

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

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.

Financial Adviser and TV host Suze Orman has created a pre-paid card that is supposed to be the smart choice for you. What are the true benefits of the Approved Card that isn’t a credit card?

9 Benefits Of The Card (with my thoughts)

Weighing out the pros and cons

You can live on less than you make, have an emergency fund, monitor your credit report (not score), and teach your kids about money without having to tie yourself to a brand-name card. And you can do it all for free.

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!

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

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 accustomed to, and it’s the easiest
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?

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

I don’t really have a story. There was no life-altering event or pre-destined career choice I followed in order to help people with their personal finances. Sorry, no car chases or bungee-jumping in my history caused me decide to do what I do. But we like to know about people’s stories, find out who they are, and how they were changed by the experiences they had. This is my attempt to share my story.

Who I am

Who am I? Your humble servant and Personal Finance Architect! How did I come to be a coach? That is a question I get often from people who want to become a financial coach and/or take Dave Ramsey’s Counselor Training. But before I tell you all about that experience, I feel it is important that you know more about me. What caused this goofy guy to become a financial coach and Mr. “Pay Attention Not Interest”?

What forms you

Even some of the most inconsequential events in our lives can be lessons that form us into who we are today. I share some of the things I did before helping everyday Americans with their personal finances. For example: Playing with electric trains forces you to learn to plan ahead or the train falls off the ping-pong table it was set up on.

Try this (the Who I Am sheet)

Download a blank copy of this “Who I Am sheet ” sheet.  On the left side write down all the things you remember doing, “What I Did”. On the right-hand side describe how those things affected you, essentially “What I Learned”. This was the exercise I completed in order to prepare for this episode and it made me realize how much of my past changed me into who I am today.

Mentioned in this episode (click on pictures): 

First and foremost…

I am a husband and value my marriage. This comes second only to my relationship with my maker. This is evidenced by the (paid-for) ring on my finger.

Second, I am a teacher

This is visible in the red wristband. The Great Recovery is a movement that challenges good people to get out there and teach biblically-bases financial principles that everyone can live by.  I LOVE to teach people about money, how it REALLY works, and I explain it in a way that people who are smarter than me can understand (that would include almost everyone).

Third, I’m free from debt

Except for a reasonable mortgage, I am FREE as is shown by the orange band with the word “FREEDOM”. No car payments, no student loan, just budgeting and saving and paying attention, not interest.

So what?

If I were to hire a fitness coach I would pick the one that was thin and muscular. If I were to be in the hospital I would want the nurse who didn’t smoke and was attentive to the patients under her care. If you were to want help with your personal finances I would hope you asked for help from someone like me, not someone who wears expensive badges of success and “manages” their debt.

Did you hear the story about the Financial Planner who lost his house? He admitted that he knew better but decided to borrow 100% on a $575,000 house, re-financed it with a “pick-your-payment” type plan one year later, and made the smallest payment required – the one that adds to the balance each month instead of subtracting from it. I wonder what he’s wearing today. I wonder what his CLIENTS are wearing today?

What this should tell you about Steve Stewart:

I live Debt Freedom, I teach Debt Freedom, I AM Debt Freedom! What do you wear?

The book, Living Beyond Awesome, is a testimony that even when things seem impossible and you just want to quit, you can push yourself a little bit further (especially with God’s help).

Jen McDonough tells her story of learning what she needed to do in order to prepare for the Ironman and the struggles as she began to train. She shares her successes, and embarrassing failures, in this real-life story about doing something extraordinary.

Whether it comes to personal goals, physical accomplishments, even personal finances, there is a finish line. It is up to you to do the hard work to cross it.

EBOOK AVAILABLE NOW: http://moneyplansos.com/lbabook

Physical copies will be available in December 2011. Order your copy now or get the first two chapters free: http://www.livingbeyondawesome.com/living-beyond-awesome-book/?ap_id=mpsos

Like planting a seed:

Opening an account is like planting a seed and continuously funding the account is like watering the seed. Time will cause the seed to grow and sprout branches (diversifying your investments). Over a long period of time you will have a fully-grown tree and be able to live off of the fruit (dividends and interest) that the tree produces, all without having to cut off any branches and cutting back the investment/tree.

I produced a short slide-show video that illustrates how saving for retirement works: http:MoneyPlanSOS.com/Tree-tirement (It is also at the bottom of this post).

Pre-tax retirement contributions:

401k plans and Traditional IRAs offer you the benefit of saving money pre-tax. The dollars you contribute to the account are not taxed.

For example: Joe earns $120,000 and will pay $24,000 in taxes if he is in a 20% tax bracket and take home $96,000.

However: Joe decides to save 10% into a pre-tax account ($12,000). He will only pay $21,600 in taxes and bring home $86,400.

Pre-tax savings net result:

By saving 10% of his earnings in a pre-tax retirement account Joe will bring home $86,400 and have saved $12,000 – a $2,400 advantage over not saving and bringing home $96,000 after taxes!

Other retirement saving options:

What if your company offers a match? What if they don’t? What if the 401k investment options aren’t all that great? Are there other options besides a company 401k?

The advantages and disadvantages of 401k when compared with other retirement saving options:

Advantages of saving money in a ROTH IRA using after-tax dollars:

If you save $100 a month for 40 years and earned 12% you will have put $48,000 into an account but have an investment portfolio in excess of $1.176 MILLION dollars! Question: Would you rather pay taxes on your 401k/Traditional IRA growth or pay taxes on the original investment and be able to bring home the $1.176M tax free?

I love the idea of tax free money. When there is no match I choose to pay taxes on the seed, not the tree.

Also, Holla From The Impala: Top 5 things a FICO score can do for you

• Only for employees of companies who offer such plans
• Pre-tax benefit: BOTH employer and employee save on Federal Income taxes and Social Security/Medicare contributions with pre-tax deductions from your paycheck
• Most common uses: Health Care expenses and Dependent Care expenses in a Flexible Spending Account (FSA)

Health Care expenses:

Many service providers that employers hire to host these accounts offer these of a Debit Card. It’s taken right out of your contributions/savings to the plan.

You must submit a detailed statement to the service provider to prove the eligibility of the expense within a certain amount of time (often within 30 days).

You also have the option to mail in claim forms with receipts as well, and many companies allow you to do all of this online and have the funds deposited into your bank account.

The Benefit: Let’s use this example: During Open Enrollment you fill out the form and tell your employer you want $1,000 to go into FSA. You get paid every other week so $38.46 comes out of your paycheck BEFORE TAXES ARE TAKEN OUT. In one year you contributed $1,000 to the account, had use of those funds during the year to help pay for doctor prescribed medical expenses, co-pays, hospital expenses, etc.

Regardless of your income, $1,000 of your income was not subject to Fed Income Tax and Social Security or Medicare contributions. If you file your taxes and are in a 20% tax bracket (depending on income, dependents, deductions $40K – $140K) you will LEGALLY save $275 in taxes.

The money you used from your Flex Spend account contributions you would have paid anyway so this is an excellent way to manage your money wisely.

One caveat: It is a use-it-or-lose it plan. You have a couple of months into the next year to send in any receipts proving expenses you use the Debit card for or send in receipts to get manual reimbursement.

Dependent Care Expenses:

Very similar to the Health Care plan, but used to reimburse you for the following qualified expenses:

• Child daycare
• After-school latchkey or Day camp programs
• Nursery School
• Nanny meals & lodging expenses

You won’t be provided with a Debit card for this purpose. However, some service providers allow you to fill out an authorization form that sets you up for automatic reimbursements. All you need to do is upload (or send by mail) the receipts to prove you paid the expenses.

What we do: Pay for the expenses out of our personal accounts. Then we simply fill out an on-line claim form, upload the receipts from the day-care, and in a few days the money is deposited into our checking account.

The Benefit: Same as with the Health Care expenses: Example: $4,000 into plan ($153.84 per bi-weekly paycheck) will save you $1,106 in taxes!

Same caveat: It is a use-it-or-lose it plan. You have a couple of months into the next year to send in any receipts proving the expenses to get reimbursed.

To learn more:

For detailed information go to http://www.irs.gov/pub/irs-pdf/p969.pdf and read all about IRS Publication 969, rules governing Health Savings Accounts and other Tax-Favored plans.

Or, let me Google that for you: http://lmgtfy.com/?q=irs+cafeteria+plan+dependent+care

Other options that may be available to you:  

Some companies also provide Parking and Transit plans, and there is even an option for Adoption Assistance: All pre-tax contributions in a similar plan.

For more information go to http://www.irs.gov/publications/p15b/index.html  (IRS Publication 15B)

Health Insurance:

Everyone need health insurance. One uninsured hospital stay can set a family back thousands of dollars. Is an employer-sponsored package the best option for you? Have you considered pricing a policy in the open market?

Figures used in the show:

The two companies I was able to researched offered Family coverage with medical, dental, and vision from $145 to $355 a month. An online quote from Blue Cross for a $7,000 deductible would cost about $240 a year.

Disability Insurance:

What would you do if you couldn’t work for 2 months? What would happen to your Money Plan if you became permanently disabled. You are more likely to become disabled before age 65 than you are to pass away. How much would it be to get some from your work’s benefit program (I would bet it is very inexpensive at your place of employment).

Figures used in the show:

Coverage for company employees could cost $5 – $15 a month for Long Term Disability Insurance. Private Disability Insurance for someone like me could cost between $40 – $60 a month.

Life Insurance:

Term life insurance is a must for everyone who earns and income and is not yet debt free with over a couple million dollars. It is inexpensive through work and even less expensive in the open market. Better yet, when you get it yourself you don’t have worry about losing coverage between jobs. It is just another way to show your family that you truly care.

Examples used in the show: 

Company plan – $50K base salary provided free. Can purchase additional coverage of $100K for $120 a year, $200K for $240 a year, and $500K for $600 a year.

Open-market 15 Year Level Term: $495 a year

Open-market 20 Year Level Term: $660 a year

Of course, these quotes are for someone like me and do not reflect the market as a whole, but it does make sense to take a look for yourself:

Watch a video that shows how easy it is to check insurance products in the open-market without having to talk to a salesman or give out your name, phone number, or email address: http://www.moneyplansos.com/vid-torial-easy-term-life-quotes/

Feel free to leave comments under the show notes or Tweet the secret MPSOS hash-tag.

Twitter.com/MoneyPlanSOS

Facebook.com/MoneyPlanSOS

It wasn’t until this month that refinancing our home’s loan made any sense. I found a local bank willing to refi our mortgage with a fixed 3.25% loan. Incredible, isn’t it?  But does it truly make sense for us?

I’ve done my homework and investigated all the variables, asked all the questions, and crunched all the numbers. In this episode I will describe how to do a quick estimate to see if it makes sense for you, and some things you may not have thought about when it comes to getting approved for a mortgage or refinance.

I also take some time to talk about four of the most popular types of mortgages out there, for first-time home buyers or those who are considering a refi:

Adjustable Interest Rate (ARM)

A loan with an interest rate that adjusts with an index (such as the CMT or LIBOR). It adjusts at certain intervals and will change your payment. The introductory interest rate is usually better than current market rates for at least the first year and typically will adjust yearly.

Balloon Mortgage

Picture a balloon with a string. You start at the end of the string and move closer to the balloon with each payment. Example: A 7-year balloon on a 30 year mortgage at 5% for a $200,000 loan. You pay $1,073.64 each month and that gets you a little further up the string towards the balloon. After 7 years you have arrived at the balloon and still owe about $177,000 on the balance. At this point you  must make a decision: You either refinance, allow the bank to adjust the rate to the current market, or sell the house.

Interest Only

A loan that allows you to pay the interest portion of the loan payment only. After a certain amount of years you begin to pay down on the principle. You don’t build any equity, other than your home growing in value at the same time, and I would guess you could do better by renting a home than doing this deal. Sorry, that’s just how I feel about it.

Fixed Rate

An interest rate that is fixed for the life of the loan, usually for a 30, 20, or 15 year term.

Simple.

Things to take into consideration:

• Closing costs
• Money saved by losing rate (reducing the interest rate)
• Reduced Mortgage Interest Deduction
• Current value of the home
• Credit history
• Type of loan (FHA, VA, or conventional Fannie Mae-type program)

Only after you have measured all the risks, done the math, and are in agreement with your spouse (when applicable) can you make an informed decision about refinancing.

Holla From The Impala: Top 5 things that shouldn’t work, but do!

Mentioned in this episode:

Best on-line mortgage calculators: DinkyTown.net

Difference between owning and renting: MoneyPlanSOS.com/031 (House Poor Are You)

Way to prove your stellar payment history instead of using the FICO credit score: MoneyPlanSOS.com/033

Being broke has everything to do with the amount of assets you own versus the amount of money you owe (debt). You can do something about that: Spend less than you make and eliminate your debts, and when you start to have more money than debt you are no longer classified as “broke”.

Being poor is more about your perception of life as it pertains to money, or the lack thereof. When I used to think like a poor person I didn’t see the balance statement of my own finances, I saw what others had and thought of how it effected my life. The funny thing is that someone else’s job, car, or even their tax bracket didn’t have anything to do with me being broke.  I thought like a poor person.

Top 10 Things Poor People Say

Photo courtesy of RedState.com

1. Easy payments
2. Holds its value
3. Good debt
4. Someday…
5. I wish they would…
6. Fair Share
7. Give Back
8. TGIF
9. When I hit the lottery…
10. Where’s my bailout?

Teaching kids about money is hard.

The good news is that it isn’t complicated. It can be broken down to four things: The three things you can do with money and how you get some (work).

There are only 3 things you can do with money.

This applies for both children and adults:

Spend:

It is a fact of life that we are going to spend money. Allow your children to make those purchases that you know aren’t durable or practical. They will eventually learn what you know, that cheap items are cheap

Save:

We need to save money. My daughter saves very little but gets excited when she does save because Daddy matches her savings with the same amount.

The blogpost mentioned in the show: The First 10 Things To Do When You Become A Millionaire

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy (Millionaire Set)

What are the first 10 things you must do once reaching Millionaire status?

1. Save an additional $2,000 (see next step)
2. Throw a $2,000 party (only after Step #1 is completed)
3. Hire an Estate Planner (to set up boundaries between your guests from Step #2)
4. Revise your will (with person you hired in Step #3)
5. Make sure ALL personal debt has been paid off (probably already done)
6. NEVER go into debt again (there’s no point to borrowing)
7. Hire a CPA/Tax Consultant (you can’t afford not to)
8. Hire a Financial Planner (you probably already have, you Millionaire!)
9. Revisit your investment portfolios
10. Pay attention, not interest

Do you know what the typical Millionaire in America looks like? Check out the surprising secrets of the wealthy in Thomas J. Stanley’s book “The Millionaire Next Door”

Or “Millionaire Women Next Door” (I haven’t read this one yet, but believe it to be just as good as the previous release)

5 components of FICO score:

• 10% Type of credit (debt)
• 10% New credit (debt)
• 15% Credit (debt) history
• 30% How much you owe
• 35% Debt payment history

Each of these components are based on debt. The more you borrow and pay back the better your score, and the more you are likely to pay in interest charges. A bad score typically is one that is below 650. A good score is above 650. I believe the BEST credit score is 0.

However, the FICO Score is a one-sided system that only evaluates your debt, history and availability to borrow more and does not take into account how much money you make or how much money you have.

Arguments for the continued use of the FICO score that don’t hold water:

Car Insurance rates: There is statistical evidence that shows that those with low FICO scores are more likely to file a claim, less likely than those with good FICO scores. Unfortunately, it isn’t a fair evaluation for those who are living a debt free lifestyle and have a 0 FICO score.

Renting an apartment: If you had an apartment to rent, would you rather hire the guy with a 0 FICO score but can show he makes all his payments or the guy with a good FICO score because he is making all his payments on the thousands of dollars of debt he has?

The arguments for continuing to use credit to “build your credit score” no longer hold water thanks to eCredable’s AMP Credit Report which reports ALL your payments, not just those based on debt. For more information go to http://eCredable.com/MoneyPlanSOS

I don’t want to improve my Credit score. I’m going to say No to FICO and work on my Debit score.

Holla From The Impala:

Top 5 signs you are addicted to Credit Cards

• 5) You use your card everywhere for reward points, even to put air in your tires
• 4) You show off the design of your cards to everyone you see at your Mom’s birthday party
• 3) Your stack of cards is thicker than your cell phone
• 2) You have to give each of them a descriptive name just to keep track of them
• 1) You are convinced that as long as you can use the card and it is not declined that you still have money to spend.

Links mentioned in this episode:

I’ve been beaten by a Squirrel: Twitter.com/BuschSquirrel

Glen Steinsen interviewed me on Stewardship Weekly: http://StewardshipWeekly.com/17

Original written post this episode is based upon: http://www.moneyplansos.com/working-on-my-debit-score/

Interview with Steve Ely, CEO of eCredable: http://MoneyPlanSOS.com/033

For more eCredable information: eCredable.com/MoneyPlanSOS

Interesting, unique campfire gear: http://www.grateoutdoorsolutions.com/products-page/

Steve Ely, CEO of eCredable

Steve Ely, CEO of eCredable, used to work for Equifax running the Direct Consumer Business. One of the challenges he experienced was they had a very limited scope in terms of how they could help consumers. Consumers really wanted help with financial advice or with their credit file but that was not what they were there for. Their primary business was to serve companies, not consumers. He left that company to become CEO of a company that does serve consumers and individuals.

Introducing eCredable.com!

A service that helps individuals build a true picture of their payment history that every creditor must take into consideration when they use other credit related information to determine your credit worthiness. What is the difference between traditional credit score lending and eCredable?

FICO score:

A numerical score based upon Amounts Owed (debt), Credit History (from debt products), New Credit (new debt), Type of Credit (debt), and Payment History (on the debt). In summary, borrow a lot of money and pay interest regularly over a long period of time and you will have a great credit score, allowing you to borrow more money, get lots of credit offers in the mail, and be a target for identity theft.

eCredable AMP (All My Payments) Credit Rating:

An A – F grade of your true payment history, NOT JUST PAYMENTS MADE ON DEBT PRODUCTS. Your electric bill, rent payment, daycare tuition, the month-to-month type bills most of us have that are never factored into a FICO score. If you have debt, your current payments are taken into consideration when you include that in your eCredable profile.

Who can eCredable help that FICO doesn’t?

• Graduates: Starting out their adult life as an individual with bad credit or no credit. Ever try to get a cell phone without a credit history? Ever been turned down for an apartment because of your credit score? Get past dummy lending (getting approval from a FICO score) by showing your AMP Credit Report.
• Immigrants: Why would you come to this country only to learn you have to incur debt in order to “build their credit”? Individuals that are here legally and don’t have a traditional credit history can show that they have a good payment history with eCredable’s AMP Report. They can apply for bank accounts, get better rates on car payments (which I don’t recommend), even use it when applying for a job with a company who looks at your credit score.
• People who had bad credit and just can’t wait for their FICO score to improve: Why wait for your credit score to “heal”? Use the eCredable Report to get better terms or interest rates when lenders
• Debt-free lifestyles: Continue to pay the light bill, phone bill, even child care and you will likely qualify for the best rates on car insurance and mortgage rates – even when you have a zero credit score.

• When you pay for college without taking out student loans, who gets hurt? The Government doesn’t get your interest? They also don’t have to worry about defaults on your loans.
• Who gets hurt when you pay cash for a car? The finance company, because the dealership you actually buy the car from gets the money for the car.
• Who gets hurt when you pay cash for your: Clothes, groceries, gadgets, and vacations with a debit card instead of credit? Credit card companies, but they still make money on the actual debit transactions so they will still be around.
• Who gets hurt when you don’t use the 90-days same-as-cash furniture? The 90-days same-as-cash company, the furniture is still paid for.
• Who gets hurt when you pay cash for a house? The bank because they aren’t getting your interest, not the person you are buying the home from. In fact, they are getting their money right away without having to wait for a contingency sale of your old house or approval for your financing. Who are you trying to buy the house from anyway?

The people who get hurt when you pay cash for things are banks and finance companies. It seems like there are better things that we could be doing than paying people who are selling us money.

..think about those last six words

Ashley Barnett, Personal Finance Blogger from MoneyTalksCoaching.com, shares her thoughts on Social Security. We know the system is broken but what can be done to fix it? She has an idea and she wrote about it in her blogpost “An Argument For Privatizing Social Security“.

She talks about who Social Security is for, it’s not just for retirees anymore, and how employees only pay 4.2% of the 10.4% paid into FICA (Federal Insurance Contribution Act).

To repair the system and maintain it in the current state we can do any one of the three following options:

• Lower Benefits
• Increased Taxes
• Borrow (more debt)

I don’t like any of those options, so Ashley explains to us the benefits of Privatizing Social Security:

• Your money stays with you
• Unused funds can be inherited
• The government can’t reduce or withdraw your benefits

Privatizing Social Security sounds scary, doesn’t it? Our MoneyTalksCoach guest uses practical math to explain how Funding Private Accounts, even in a conservative investment option, will net someone more money than Social Security ever could.  Sounds like a reasonable solution to me!

Do you have suggestions on how we can fix our Social Security problem? Please leave comments below and let’s continue the discussion. I would love to get another conversation going for a future podcast episode.

Read more of Ashley Barnett’s articles on MoneyTalksCoaching.com

Follow Ashley on Twitter: @MoneyTalksCoach

Email: Ashley@MoneyTalksCoaching.com

In the past 10 years:

• We have seen iPods, YouTube, streaming HD movies, on-line meeting conferences, cars that can accept unleaded and/or E85 fuel, and super-huge LED TVs for less than $1,000.

• Television programs go from 7th Heaven, Friends, and The Drew Carey Show to a slew of “reality shows” and 24-hour cooking channels. Suddenly cable channels like HBO and Showtime were creating their own content as if they were a risqué NBC. There was also a re-envisioned Battlestar Galactica, a computer-generated Star Wars (Clone Wars), an American version of The Office, and my all-time favorite intro for a game-show: Cupcake Wars (go Jilly’s!)

• America has seen two bubbles burst, the Tech bubble and the Housing bubble. The DOW has crossed over and under the 11,000 mark more than two dozen times and online companies like Google and Amazon.com thrive.

• We have also seen the birth of social networks like Twitter and Facebook appear as if overnight and wonder how we got along without them. An industry was birthed from website development and thousands are making a living by developing “apps” and selling them for a dollar.

I received a letter from my Financial Advisor two weeks ago. With the “debt ceiling crisis” coming to a head, he felt it important to send this to all his clients. The message was familiar, but not in the way you would expect. Make sure you read the entire letter and pay particular attention the the final sentence:

Where Are the Markets Headed Next?

Whether your pessimism about the future is based solely on your feelings or what people and/or the media are saying, I believe it really is all about timing. When might the next major move happen and to what degree? I would like to address what I believe are the various scenarios that could play out. Based on your view of these possibilities will determine what steps you should consider in the days ahead regarding the positioning of your financial assets.

I’m a degreed engineer out of Miami University. That was way back before they invented color. We engineers were trained to “Worse Case” things. Stated simply, what is the worst possible thing that could happen? In the financial arena, the worst case is the financial system shutting down. That means, in my mind, the banks are closed, stock, bons & mutual funds don’t exist and the currency has no value. You can’t swap a $10 bill at Exxon for some gas because it no longer has value. So if you believe this scenario will happen, what should you do?

Here’s my hypothetical model: 

First, get everything out of investments that are denominated in currency. Sell all your investments including IRA’s & 401(k)’s, pay the taxes and penalties if you incur any and buy things that can be stored and bartered with. Maybe some gold & silver, chocolate, food, coffee, bicycle parts (since there will be no gas probably as transportation will shut down as well), etc. You get the picture. Now you have all of your assets in hand and can trade as need be to get what you want.

If the worst case does not happen, you made a major mistake. But if you believe in your heart of hearts this will happen, this seems the only logical thing to do. There are several rabbit trails off of this. How long will it be this way? Will a new currency come into existence? Will the financial markets really stop functioning? But the real question is when? I remember back in 1973 when we had the first major round of inflation, oil embargoes, gas lines, extreme situations int he middle east, many people were saying and thinking the same things back then. But here we are 38 years later still functioning.

What if the system shuts down, the currency is devalued or replaced?

The new dollar bill is called the “zognoid”. It will be red with lightning bolts on the top and bottom. Okay, I’ll stop: you get the point. To get the new zognoid, you will have to turn in your greenbacks. Conventional wisdom would be to have some gold & silver along with diamonds. Anything that traditionally has held value during turbulent times would be the choice. So adding some of these kinds of items to your investment mix might be appropriate. People did that back in 1979 when gold got up to around $900 an ounce. It promptly fell back to less than $300 an ounce and stayed in that range for over 20 years. Only recently has gold gotten back to, and exceeded, the earlier heights. In either case this step, if the events unfold as described, would have preserved wealth.

Last but not least, the system continues on in its current state with markets functioning as they have for the past 100+ years. Between this time and when things might shut down, it is business as usual. So what is one to do? Well, 

The basics are still the basics:

• Don’t react and pull funds out due to fear
• Only pull out funds if it is absolutely necessary
• If you are done with the market, have a plan in place to exit in an intelligent manner
• And of course, if your financial plan supports doing so: Buy, buy, buy while things are on sale

My advice and personal feelings on these matters:

Talk to us (ie: Financial Planners). Before you allow yourself to get whipped into an emotional frenzy, let’s talk. We can construct a plan to navigate these troubled waters. This is especially important for folks who are using their assets to live on. Exit strategies must be in place. In my mind, if you are more than 10 years away from using your funds, it is steady as she goes unless you are scared to death. If so, let’s design an intelligent exit strategy.

NOTE: The above letter was written in December 2008. As you can see, my feelings have not changed!!

There are some stark differences that I just wanted point out between buying and renting because knowing these differences might just help that first home buyer or someone who is strapped to their house. You see, When someone has too much of their take-home pay going towards household expenses, we call that being “House Poor”, and it can be devastating to your financial future. But Owning a home has so many benefits, I don’t want to make owning a home sound like a bad thing even though it’s a pain in the butt sometimes.

Definition of a Renter: 

You are considered a “Renter” if you are paying for a place that you do not have a legal position of ownership. This would include signing a lease for an apartment or even a house (which has become more common in the past few years), paying a friend while you crash on his couch for an extended basis. You could be living in a dorm room that your parents are paying for or maybe sharing the expenses with one or two roommates.

A typical rental agreement is to pay someone else for the right to stay in their property for a pre-determined amount of time. A security deposit is usually required, often the first month’s rent has to be paid in advance, and you need to keep the place neat and clean.

Failure to make the monthly rental payment can result in eviction.

Typical housing expenses for a Renter:

• *Monthly rent or lease payment
• Water
• Trash pickup
• Electricity
• Natural Gas
• Cable
• Phone
• Internet

*In many cases property owners include one or more of these utility expenses in the rental payment.

Definition of a Home Owner: 

In our culture, you can be considered a “Home Owner” even if you have a mortgage. In almost any conversation you have with a friend, co-worker, even on job applications or legal documents, you can be classified as a Home Owner even though the bank holds the title and you repay them for buying the home.

A typical mortgage agreement states that the lien-holder, the mortgage company, holds the tile for the property and you must make monthly payments until it is paid off, then you own the home and no longer have to make those monthly payments.

You lose that right if you stop paying the payment and the bank forecloses on the property.

Typical housing expenses for a Home Owner:

• Monthly mortgage payment: A portion or this payment goes towards the Principle (loan balance), Mortgage Interest, and Escrow (savings account for property taxes and insurance)
• PMI: If your original loan amount when purchasing a home is greater than 80% of the value of the house, that is to say if you haven’t put down 20% as a downpayment on a house, then you will likely be charged PMI (Private Mortgage Insurance) which, on average, is about $70-$80 per month for every $100,000 borrowed.
• All utilities (water, trash pickup, natural gas, electricity, cable, internet, phone)
• Repairs: Water heaters, air conditioners, dripping faucets, leaky roof, holes in walls, aluminum siding, broken windows, etc…
• Maintenance: Lawnmowers, weed-wakers, weed killer, lawn fertilizer, snow shovels, furnace filters,  the plastic window insulation stuff for winter, paint for the the nursery, paint for the same room when they are 5, and more paint when they become Tweens before they put pin-holes in all the walls when hanging posters and pictures. And finally: Anything else you usually find on a Honey-Do List.
• The unmeasurable costs: The time spent Mowing the lawn, weeding the flower garden, raking the leaves, shoveling the snow, missing work while waiting for the repair man to arrive, mowing the lawn (Yes, I said it twice because it has to be done every weekend in the spring, summer, & fall!)

The net difference between Renting and Buying:

The time spent on the maintenance and unexpected repairs when owning a home is almost immeasurable. Imagine the amount of free time to read, play sports, work on a small business, further your education, volunteering at a rescue ranch, or simply spending more time with your wife and kids instead of mowing the lawn or spending all day Saturday catching up on the Honey-Do list.  If you were to put a price on the expenses of owning a home you will quickly find it is incredibly cheaper to rent than to own.

There are huge benefits of owning a home, but almost none of them are financial. The financial benefits of a home over a rental come down to two things: Tax deductions and home equity. That might not be enough to qualify getting into a mortgage as a “smart financial decision”. The biggest benefits are comfort, stability, security, and personalization (remodel a room into a den or home theater and paint it any combination of colors you would like). Those are immeasurable benefits of being a home owner.

 How do you know if buying is better than renting?

Weigh out the true costs of owning a home versus renting. If you can get a great deal on a place with a small mortgage then there are huge benefits to being a home owner. But you have to consider all the costs to see House Poor you will be.

I hope you have weighed out the differences and are not House Poor. And I certainly hope you are doing so well with your money that you can afford to pay someone else to mow your lawn.

Holla From The Impala: You Have A Debt Free Date!

Future Financial Ministers and changes to the podcast

A study by Associate Professor of Economics, Keith Chen, showed that monkeys understand the basics on how money works and can act in irrational ways, just like humans do. I will summarize what I have learned about this unusual, but insightful, experiment:

Capuchin monkeys were presented with two games consisting of grapes and a coin toss:

• 1st game: A researcher showed the monkey one grape and flipped a coin. If the coin landed on the correct side, the researcher would give the monkey the first grape as well as a bonus grape. If the coin landed on the incorrect side, the monkey would get the original, single grape.

• 2nd game: A researcher showed the monkey two grapes. If the coin landed on the correct side, the monkey got both grapes. If the flipped coin landed on the wrong side, one of the two grapes would be taken away.

Here is the kicker: Once the monkey learned the game, they strongly preferred the 1st game – the researcher that started with one grape! That isn’t rational. It doesn’t matter which game they played, the chances of walking away with one or two grapes were identical, a 50/50 chance. So why the strong preference to play the 1st game?

The difference is called “Loss Aversion”, making an irrational determination between two equal outcomes in order to avoid the feeling that you are losing something. And it didn’t take a lab full of monkeys to prove that, studies on human beings have identical results. If you were to play the same game but with $100 bills instead of grapes, you think you would go to the guy that started by showing you $200, but in real life you probably would go *the guy with only $100 with the opportunity to win. BTW: Did you notice I wrote “the guy with ONLY $100″? Even as I typed this article, I exposed my feelings on winning versus losing. Ugh!

As my digital friend Dave “Sparky” Saganaki says: “We are all just a bunch of shaved monkeys with car keys”. Ouch.

They also allowed me to use their struggles for a Real Life Case Study episode. They wanted to be able to provide for their family, give generously, and build a house for themselves but did not know how they were going to do it. They had $1,000 in medical debt, $5,700 owed on a car, and the wife had $20,000 in student loans but decided to become a stay-at-home Mom while making $35,000 a year. (You can go back and listen to guest Financial Coach Don Current and I discuss their story at http://MoneyPlanSOS.com/003 )

Most of the time a spouse who has $20K in student loans isn’t able to stay at home when the other spouse only makes $35K, that is without destroying the future of the entire family. But this couple has locked arms, cut back, and are making it on less than they make! And she helps market his handyman business and does some graphic work on the side:

.

Listen to their story in this episode of the MoneyPlanSOS podcast, hear their gentle hearts talk about caring for their two little girls, the way he took his handyman business seriously, started keeping track of expenses and are now working together on a budget. And they are rocking it!

Courtesy of RetailByRyan95

How do you know you are winning financially?  This is a topic I shared with Matt Wegner, Financial Coach at FinancialExcellence.net. He was intrigued with the question and thought it would be a good discussion for his internet radio show ‘Living In Financial Excellence’. We talked about it for a half an hour, bringing up discussion points like reaching retirement with a specific dollar amount saved, doing a Net Worth statement once a quarter, and how training for a marathon and running a race is much like learning to live on a budget, spending less than you make and doing something smart with the difference. The discussion could have gone on longer as participants in the live chat were bringing up other thoughts and ideas. 

So let me break down the question and then present the question to you:

• HOW do you know you are winning financially?  A net worth statement, a progress report, something to look at or measure. Nerd stuff, ya know?
• How do YOU know you are winning financially?  The biggest variable in the question. Everyone is different, so everyone’s description of winning with money is different.
• How do you KNOW you are winning financially? “Know” is short for knowledge. It is how your brain measures the start, finish, or progress points and then tells your heart whether you are doing good or not.
• How do you know you are WINNING financially?  Winning indicates you are either ahead of others or ahead of a measurable marker while heading towards a goal.
• How do you know you are winning FINANCIALLY? It’s all about money (this is a website about personal finance, after all).

So YOU need to figure out what FINANCIAL goal you want, figure out HOW to get there (with a MoneyPlan), review it periodically to KNOW if you are WINNING.

Much like personal finances, the answer to the question is different for everyone. Is having a net worth of $1,000,000 winning? Does owning a 2nd home get you over that financial finish line? Or being able to give $100,000 at one time to your favorite charity?
What does Winning With Money look like for you? Leave a short comment below. If you are on Twitter then use the hashtag #WinningWithMoney.

Alex from AlexSpeaks.com

Alex Humphrey from AlexSpeaks.com tells us that Everything is Normal. Places, people, things, even the way we think money should be handled is weird to some but becomes normal when you’re around it long enough.

To read the original blogposts visit: http://alexspeaks.com/9-lessons-i-learned-in-jamaica/ and the post we discuss in this episode: http://alexspeaks.com/everyone-is-normal/

Alex’s recent project is a blogpost series called “Money 101″. You can read it at http://alexspeaks.com/money-101/

Also, Holla From The Impala: The Media Is Winning

Do you think you have enough life insurance? Are you afraid to ask because you think some pushy salesman might sell you a bad product? This video shows how quick and easy it is to find prices on term life insurance without having to talk to a salesman!

Eric Lentz paid off $53,000 in debt over 24 months. As he worked two full-time jobs and got intense on eliminating his loans he created an Excel spreadsheet to track the amount of money he had available to increase paying off his debt and stay motivated to stick to his plan. Eric continued to develop his program even after eliminating the last debt and now offers it on his website in a free and a Pro version with video tutorials at DebtSnowballCalculator.net.

Some of the many features included in every Pro version:

• Easy access
• No dependence on internet
• You can take it with you
• Free lifetime upgrades
• No macros used
• Monitor your checkbook balance (avoid overdraft)
• View cash-flow and ease the budgeting process with first and second half functionality
• Enter recurring payments and budgeted cash expenditures
• Include your mortgage, or don’t – it’s your choice!
• Run scenarios on how debt payoff is effected when you earn more/spend less
• Allocate $ for your emergency fund
• Monitor the amount you have paid off and remaining interest
• Stay motivated by watching your progress on the Results page!

Eric has allowed me to be an affiliate to offer the Pro version to listeners of the MoneyPlan SOS Podcast.  I encourage every Coach to have this in their toolbox as an additional way to show clients how fast they can pay off their debt if they just pay attention!

Here is a fun video Eric helped me put together that shows what it would take for us to pay off our national debt in 12 1/2 years:

What if we had balanced the national budget and could actually pay off our debt? I know, it seems unbelievable. But what if? What if we used the debt snowball method to pay off our national debt?

Don’t think it can happen? The way things are going it is hard to believe that it could happen. But there is a way: We can change the economy of 1.

If you would like to support the MoneyPlanSOS podcast and vid-torials by purchasing a copy of the Debt Snowball Calculator then click this and take control of your money: http://debtsnowballcalculator.net/moneyplansos

John tells us where Crown came from, what Crown does, and about The Money Map.

For more details on meeting with a Crown Coach or becoming a Crown Coach yourself: 

http://www.crown.org/Coaching/

Read articles written on a blog written by Crown CEO, Chuck Bentley: 

http://inspiringfaithfulstewards.com/

Give back to the parents who raised you
Giving back to the community
Giving back to God

I’m a giver, I love to give. Why do I have a hard time with the idea of “giving back”?  It was during a sermon that I discovered why I dislike the idea of “giving back”, it was the use of the word “BACK”.

The only people who can give BACK is those who have taken, borrowed, or stolen (and since is a money blog we can also add those who have taken out a loan). Giving BACK indicates that I have something that is not mine and I need to return it, occasionally with a penalty assigned to it. If you take something or steal it then some form of punishment or retribution may occur. If you borrow or take out a loan then you need to return the hedge trimmer to your neighbor with a cold bottle from your own fridge as a thank you or repay a loan with interest.

But when I am asked to “Give BACK” to my parents, community, or to God I have to take offense to the way it is phrased. I am under no contract or obligation to my parents to give them anything, the benefits of living in my community are taken care of with property and sales taxes, and the only thing God wants from me is to believe in, and honor, Him.

Let’s rephrase it this way:

Give LOVINGLY to the parents who raised you
Give WILLINGLY the community
Give HUMBLY to God

No contracts, no agreements, no obligations to abide by. Giving is never a return of something owed, it should come from the heart and go TO something without any strings attached. Only then is it considered true giving.

Example: When I give my dog a treat, there is no requirement that he gives me something back. The joy is in the GIVING and the reward is in GIFT. And to be honest, I don’t want any of the gift back.

Photo by Ashnikov

1. Work
2. Plan
3. Give
4. Pay for necessities
5. Save $1,000
6. Pay for a few wants
7. Pay off all debt (except mortgage).
8. Save 3-6 months of expenses
9. Save for short-term purchases (repairs, vacations, etc..)
10. Invest wisely
11. Pay off the house
12. Build wealth in order to give a bunch of it away

Click here to download a printable copy with the associated verses

Holla From The Impala - Top 5 reasons why being in Debt is like the Matrix:

#5 – It takes a lot of fancy moves to escape it

#4 – The “Machine” needs you in order to stay alive

#3 – No matter how much we are told that the world revolves around it, there is no spoon

#2 – Loan Officers wear the same suits as The Agents

#1 – When we are in it, we don’t want to know the truth

Coming in the next few months: Financial Literacy Classes for the Masses all along Interstate 70 from St. Louis to Indianapolis (possible other locations could be added at a later date).

Check out the short Vacation Savings Tip videos and “Money Is Like…” blogposts on MoneyPlanSOS.com.

If you like this show, please leave a review on iTunes so the podcast will show up higher in the rankings for people looking for shows on Financial Freedom!

Most people have no idea what they would do in this scenario. The good news is that keeping gas in the tank is a fairly easy thing to do.  So when do you plan to fill your tank? Before the “Low Gas” indicator goes off? When the gauge touches the “E”? Or are you gambler and get it as close to vapors as you can possibly go? Maybe you are like the majority of Americans. You don’t really think about it but you do have an idea of when to go to the gas station. It’s a no-brainer, easy to do, and necessary to keep from running out and causing all kinds of havoc in your life.

Guess what? Your checkbook is like a gas tank. It has fuel (money) in it, you use it during the next week or two (pay bills, buy groceries, have fun), the level (balance) gets lower and lower, and you need to refill it before it runs out. What if you run out of money before your next payday? Do you risk asking for assistance from others? Do you call your bank? Do you take a long walk to the nearest payday loan station?

You always keep a small amount of gas in the tank so you should always strive to keep some amount of money in the bank. Tracking our expenses and just looking at the gauge (the account balance) once in a while should give the sense that we are right on track, when we might be able to go out and have a little more fun, or when we have to cut back because we are about to run out of fuel.

So this post is a challenge: Enter your purchases, paychecks, and bill payments into your checkbook every week for a month. Then see how far you can go before running on empty. Is there always something left over when you reach payday? If not, how can you get better mileage from your account?

He read my blog on the air.

It was quite a surprise! I had not sent it to him or to anyone in his company, and it really wasn’t a great post but it did spark some great discussion as people sent in their own additions to my “10 Things We Say That Keep Us Broke” blog post.

So what do you do on a 1 year anniversary of the day your blogpost is read on a syndicated radio show to 4.5 million listeners? Do you just re-post the same article? Do you talk about it on your next podcast?  Yes and Yes.

And I’ll raise you a REMIX! (Click on picture to play)

If you’d like to follow along, here are the 10 things:

1. I’m too ________ (old, young, in-a-middle-age-crisis, broke) to save money.
2. I deserve ________.
3. I did it to improve my credit score.
4. My student loan/mortgage is “Good debt”.
5. He told me I would _______.
6. The “Little Man” can’t get ahead.
7. I can write off the interest on my taxes.
8. How much a month?
9. I have retirement covered, Social Security _________.
10. When I _______, then I’ll be able to ________.

The answer won’t come from the Government, it certainly won’t come from the President, it won’t even come from Dave Ramsey himself – but he can start a movement.

Here are the four action steps:

1) Start talking to your congregation and community and inject a spirit of hope.

2) Teach financial classes in mass

3) Read Proverbs and start doing Pastoral work

4) Join in The Great Recovery.

My co-host for this episode is Mike Young, a Dave Ramsey Certified Coach and host of the Beyond Your Wedding Day podcast (www.BeyondYourWeddingDay.com)

Thanks to our guests:

Jack Orman from Level Path Coaching (www.TheLevelPath.com)

Teresa McGarry from MoneyTalk Financial Coaching (www.MoneyTalk.TMMcGarryLLC.com)

Tony M from the driver’s seat of his car

Kathryn Gerken from Gerken Financial Coaching (www.GerkenFinancialCoaching.com)

If you want to learn more about becoming a coach or leading your own FPU class, visit DaveRamsey.com or TheGreatRecovery.com

If you want help with your Financial Coaching business then give me a call: 636-373-4818 or send me an email: Steve@MoneyPlanSOS.com

The third video in a series to give you ideas on how to save money on vacation.

Photo by Piedmont Fossil

I am constantly amazed at guys that can read box scores and can tell you everything that happened, even if they didn’t watch the game. They speak in figures: Innings, At-Bats, Runs, Errors, all kinds of information that a novice fan would think was as complicated as Trigonometry (PS – I had to spellcheck that word).

So why do guys say that they would suck at doing a budget? There are so many similarities: Numbers, averages, percentages, goals, timeframes, and in personal finance there are only one or two players to be concerned with (themselves and possibly a family). A real sports fan could be excellent at tracking their spending (runs/hits/errors) and then lay out a game plan in the form of a budget (income and expenses).

It all comes down to caring. How can I say this with such certainty? Because I can look at someones Budget or even their Tax Return and find out a TON about who they are and what they do. But I could care less about who won the ball game or the On Base Percentage of fill-in-the-blank. If it were important enough then I would start paying attention to Albert Pujols’ .329 lifetime batting average (yes, I had to Wikipedia it).

The great news is we live in a society where you can get such information easily – whether it be sports stats or it is a budget spreadsheets with instructions (watch my video on how to create the Absolute Simplest Budget In Excel).

Yes, I know doing a budget is boring. But you can always add a category line item for Season Tickets!

He is NOT a Financial Coach, yet he is uniquely qualified to speak into the life of our Real Life Case Study subject.

In this episode we help a young, single, male college student going off to an out-of-state college this fall. His tuition is paid for and he will be getting a stipend that will cover most of his expenses. So why is this a case study? He already has $90K in student loans. Ouch.

Zac Bissonnette shares his extensive knowledge on private and Federal student loan debt to advise our Real Life Case Study on some choices he can make to improve his financial life before, and while away to, college.

Financial Coaches: If you want an incredible tool for your toolbox then you need this book! If you would like to support the podcast and I convinced you that this is something that you need, then please consider purchasing the paperback of Kindle edition through my affiliate link: Debt Free U (through Amazon)

Intro Music by: 

Photo by Samcwill

You see, using a Budget is like a windshield – it allows you to look ahead, make safe course corrections, and enjoy the ride.

Paying for things with Cash or Debit cards is like using the side windows. You can choose to look out them, lower them when things get hot and raise them when you need to protect yourself.

Using Credit (credit cards, student loans, auto financing) forces you to keep looking out the rear-view mirror. The payment ALWAYS comes after you.

If opportunity appears during your journey then you will miss it because you weren’t watching where you were going or paying attention to what you were doing. Your attention was spent worrying about what was coming up behind you.

PS – You will get farther (better mileage) when you stop making debt payments and the ride will become much more enjoyable!

First thing for anyone (whether in debt or not): Have $1,000 in cash put aside for emergencies. When you hit that $1,000 amount, say to yourself out loud “I saved A THOUSAND DOLLARS”. Go ahead and practice now. Pretty powerful, huh?

Then what? You need to set some Savings Goals:

3 things to do to set a savings goal:

1) Estimate how much you need for this savings goal

2) See how much can you save every month

3) Decide how long before you need the money

Holla From The Impala: Top 5 Signs you are addicted to shopping

#5: Your night out with the guys starts AND ENDS at Bass Pro Shop

#4: The Home setting on your GPS is The Mall Of America

#3: You look forward to birthdays, anniversaries, and Christmas. Not because of the gifts but for all the items you can take back to look for “just the right one”

#2: You took pen and paper to the theater with you for the sole purpose of writing down the name of every store the girls walked by or through in Sex & The City 2

#1: You bought the same limited-time offer item on the QVC Network TWICE!

Homework Challenge:

Set a savings goal for Christmas

One of my biggest problems when it comes to spending money is housing costs. Visions of expensive home remodel projects from the past keep going through my mind. Specifically, a kitchen remodel that was going to cost more than I was willing to spend. My wife wanted new cabinets and granite countertops. I didn’t want to blow up our budget, emergency fund, or savings goals to pay for it (and debt is not an option). So we had to come to a compromise on how much would we spend and how long to save up before starting the project. The project was finished and we couldn’t be happier with the results.

For the past 8 years we have been battling a leak in our stand-up shower. We had spent over $500 to have it re-caulked, put in new splash guards and none of it fixed the problem. How much more would we have to spend to manage or fix the problem?

The constant reminder that we needed to get this stupid leak fixed was wearing on me, and the dollar amount I was willing to spend to fix it kept going up with each passing event (remember, I am the cheapskate). My wife was fed up with my hesitation to spend money and called for some estimates. The first handyman who walked into the bathroom suggested we get a company to bid on a new two-sided glass enclosure. I was certain this was going to cost us our daughter’s college savings.

To make this long story shorter, the bids we got for a new enclosure and complete re-grout of the tiles came to $1,000. That was it? $1,000 for a new shower and this annoying leak that kept defeating me would go away? Cool!

I know I’m a horrible cheapskate. It’s hard for me to part with money when we haven’t reached some of our savings goals yet. But this situation reminded me once again that THE  UNKNOWN SCARES US INTO INACTIVITY and KNOWLEDGE IS EMPOWERING. Once we had the information and knew this project wasn’t going to delay our savings goals helped make the decision easier.

The leak is forever gone. I thank my wife for pushing me to spend money. Without her I would be living in a house that had windows but no screens, washing dishes by hand, and opening the garage door by hand. My life truly is RICHER because of her (and I love the double sliding glass doors too).

Step 1 – Take the cards out of your wallet, put cash in your wallet

Step 2 – Delete credit card numbers from all online accounts, use your bank’s BillPay for online payments, Debit for purchases. Start saving the money you haven’t been over-spending.

Step 3 – Freeze your accounts to any further charges. By now you will start to see how much you’ve haven’t been spending and how much more you can be saving.

Step 4 – Realize you haven’t been using the cards and you don’t need them. Use your Debit card just like you used your credit card, there is no difference and they have the same protections when you don’t use your PIN number.

Here is a blogpost I wrote about Visa’s Zero Liability policy and the protection they give to debit cards: http://www.moneyplansos.com/is-your-credit-card-safer/

For more information, go directly to this information on Visa’s website:

http://usa.visa.com/personal/using_visa/personal_finance/debit.html

http://usa.visa.com/personal/security/visa_security_program/zero_liability.html

Holla From The Impala – My daughter on money

Visit Facebook.com/MoneyPlanSOS for new blogposts and video-blogposts in the month of July.

Send me a message on what you think about the frequency of the show and how often you could listen if I did more audio episodes.

Our guest coach in this Real Life Case Study is a Dave Ramsey Certified Counselor (that guy in the picture with her) who has been helping individuals, couples, churches, and businesses with their personal finance challenges for over 3 years. You can find more about her at www.DebtFreeWithKelly.com

Today we talk about a couple who have $57,000 in credit card debt and $23,000 in student loan debt. They bring home $4,500 a month but are behind with 8 of the 13 cards and are beginning to worry about being sued. They are now working a MoneyPlan but they keep getting calls from creditors and knocked off-balance by letters in the mail threatening to “take legal action”.

Resources mentioned in this episode:

For a discount on a State-specific will: http://www.uslegalforms.com/dave/

To learn more about rules on debt collection regulations: http://www.FTC.gov

or http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm

Also, I was recently on Matt and Janelle Wegner’s podcast “Living In Financial Excellence” (can be found at http://financialexcellence.net/065-financial-excellence-4-steps-to-living-without-credit-cards/) and will be featured on Jon White’s “JWFinancial Coaching Podcast” (at www.JWFinancialCoaching.Wordpress.com). How cool is that?

Only one of these two items will be able to help me save money. Which one?

By the way, both talk about things that rapidly accelerate, are incredibly volatile and have explosive returns when they go up. But all you are left with at the end of the day is some bad paper.

Photo by Tim Dorr

There is an old saying that “The rich just keep getting richer”. Is there truth in that statement? Well, let us take a look at the habits of “the Rich” to see what they are doing differently than the middle class and poor to see if there is something going on that is unfair or unobtainable for average Americans.

They spend less than they make

You are probably sitting there thinking to yourself “Well, no DUH Steve. Of course they spend less than they make, they’re rich”. Have you ever thought of it all the way through? They keep household expenses down, pay off (eliminate) debt, don’t overextend themselves for a car or home, and they don’t spend every penny they earn before the weekend is over. Sometimes they do without something they would like in order to get something they love. In other words, they spend less than they can.

They work with professionals, consultants, tax experts, and coaches

I hear this all the time: The Rich “know someone” or “don’t pay their fair share of taxes” because they “got a guy”. There is nothing illegal about taking legal tax deductions and avoiding taxes whenever possible. Do you believe working with an expert could help you improve your game? Stop taking your financial education from the “roaming reporter” on the street or your broke brother-in-law and work with professionals who have an expertise in investing, real estate, saving on taxes, or even your everyday household expenses and debt elimination plans

They buy things wisely

What items do you see the rich buying? Are they of poor quality? They are usually of good to exellent quality and they maintain them well. You can’t expect something from the Dollar Store to last more than a week, so things of importance are researched and/or tested before plopping the money down on the counter. They find good investments to put their savings in (anyone can open a savings account or invest in mutual funds) and don’t waste money on get-rich-quick schemes like the Lottery or Wealth Without Risk programs.

They do what they say

Dr. Thomas Stanley studied America’s weatlhy population and is best known for the award winning book The Millionaire Next Door: Surprising Secrets of America’s Wealthy. His research found that Integrity was the #1 factor that explains a millionaire’s success (from studies discussed in his book The Millionaire Mind).Rich people do what they say they will do and try to do it with excellence. We don’t hear much about typical millionaires but hear A LOT ABOUT Bernie Madoff and those involved in the Enron scandal – but they aren’t rich anymore. They did not have integrity and did not do what they said they would do, so they no longer get to be rich. Integrity is like locamotive: You believe it will stay on the track, but once one of them jumps the rail you lose trust for all of them. Don’t fall prey to the media, very few trains jump the tracks.

They give

When someone has control of their money, lives on less than they make, and lives with integrity, they tend to be givers. They give of their posessions, time, and money through charitites, churches, non-profits, and all sorts of volunteer organizations. Have you ever given to someone with a real need when a gift was not requested or whom you did not have any personal ties to? It’s the greatest feeling in the world! Giving is truly the most fun you will have with money (I double-dog dare you to test me on this).

THE BOTTOM LINE

There are no secrets or tricks here and the typical millionaire worked for their wealth (it wasn’t given to them). WE CAN ALL BE RICH IF WE FOLLOW THESE SAME HABITS, NO MATTER THE INCOME RANGE. Those of us earning $100,000 a year can do these things, and those of us earning $25,000 can do these things although it may be more difficult. But if you live on less than you make, do what you say you will do, learn/work with professionals when needed, and make wise purchasing decisions then you can be rich too! Don’t look for it to happen overnight. You need to stick with it and change some habits, just like “The Rich” do in order to get richer.

Step 1 – Take your cards out of your wallet and put cash in your wallet instead.

Step 2 – Delete credit card numbers from your online accounts and use BillPay for online payments.

Photo by Martin Cathrae

This Episode: Step 3 - Freeze your credit card accounts from any further charges and use the money you have been saving to build up your emergency fund.

Check your credit report if you have accounts that you can’t find or don’t know how to contact. To learn how to check your credit report for free, watch this Vid-torial: Annual Credit Report Vid-torial

Holla From The Impala: Buy Mutual Funds, not commercials

Do you need a Coach? Visit http://www.moneyplansos.com/free-estimate to find out how to pick my brain and see if I can’t help you with your money. The first consultation is free!

This episode covers Step #2:

Delete your credit card numbers from all online accounts. Some cool side effects of this exercise: You may find some accounts you no longer need (magazine subscriptions) or you may re-visit some contracts (revise your cell-phone plan or cable subscriptions).

Substitution or Solution: Use your bank’s free online BillPay to pay for online purchases. Also, attempt to purchase things locally for at least 1 month instead of online, only using Debit when absolutely necessary.

Holla From The Impala: Investing in the market – ya can’t lose!

Become A Coach Book Giveaway Winner: Alex Humphrey from AlexSpeaks.com

Bob and Jen share their story of why they decided to make a drastic change in their life, including working 8 different jobs last year to pay off debt and START GIVING while paying off their ton of debt!  Listen to their inspiring story of who they were, who they are now, and who they hope to become.

If you were inspired to give and don’t know where to start, why not make a donation to the Juvenile Diabetes Research Foundation at www.JDRF.org.

UPDATE November 2011: Bob and Jen were featured on ABC 5 

Holla From The Impala: Leaving money on the table is NOT smart money management.

Finally, what books are you reading this year. Let me know:

Email Steve@MoneyPlanSOS.com, send a note on Facebook: “Ask MoneyPlanSOS“, or send me a note on Twitter.

Simply put, saving for retirement is like planting the seed and watering it in order to grow a big, strong tree.

Photo by GreatBayBud

I can’t speak for the women, I have never been one, but I know our female companions are more open to asking for help than their “men” are. Why is that? Why can we spend so much time and energy supporting our favorite team and coaches but won’t take steps to improve our own lives by seeking expert training and advice from a professional?  Guys will wear sports jerseys to work, paint our faces for Monday Night, and swear allegiance to the coach of our hometown sports team but don’t seek help from a coach to improve areas in our own personal lives. A disproportionate amount of hours are spent being arm-chair quarterbacks and idolizing the very few who do excel in their craft but NO time or effort is spent on improving, or even discovering, our own talents.

We have coaches for EVERYTHING these days, not just sports. Career, business, marriage, nutritional, life, financial, spiritual, even Justin Bieber has a “Hip-Hop Coach” (and it appears to be working well for him). We live in a world where more and more careers are made in some sort of specialty field. Has anyone ever told you about an “Ear, nose, and throat” guy? Well, now there is an Ear guy, a Nose guy, and a Throat guy – specialists with demands on their services for different parts of the body. With all the different advisors, consultants, counselors, and trainers, it’s a wonder why there aren’t more people taking advantage of the expertise that surrounds us all. So why is that? 

Here are ten reasons why we men (and some women) don’t seek the help from a Coach:

1. We think it’s too expensive,
2. We “Know someone” or we’ve “got a guy”
3. Free material is available – it’s called Google
4. No faith in process, it won’t work for me
5. Pride
6. Hopelessness
7. Too busy
8. Unaware we need the help – our results are average and we don’t know better
9. Lack of spousal support
10. Afraid of change, even positive change 

I was the same way until 9 months ago when I hired a coach to help me with my business. Now I can truly see the benefits of working with a coach, a specialist that teaches me how to improve me.

A diamond does shine brighter when you buff out the imperfections, even if it is just one of its facets. And our worth will be reflected by it.

Dos and Don’ts for engaged couples

#1 DO: Have “The Money Talk”

#1 DON’T: Combine finances early

#2 DO: Make a mock budget

#2 DON’T: Blow off big disagreements

Click on the media player above to hear all the important details.

On Holla From The Impala: A Bad Good Investment

And Art Milbert tells a story about Discouragement

For information on Financial Coaching and how a Personal Finance Architect can help you build a solid financial foundation, email Steve@MoneyPlanSOS.com or call 636-373-4818. I want to help YOU.

I will start my “get-out-of-debt-plan” when…

A) I get the “big raise”
B) Gas prices go down
C) When the Sheriff arrives at my door to serve court papers
D) Today

Make the change today.

Turn off the TV and read a book on personal finance.
Listen to a podcast, do a budget,
and don’t be afraid to ASK FOR HELP.

What is the difference between a Money-Market “Account” and a Money-Market “Fund”?

A) There is no difference
B) Only one is FDIC insured
C) One is offered by a bank, the other through a Brokerage House

Jeff Kosola from DeliverAwayDebt.com asks our question for April 27:

What are your reasons for improving your financial self?

A) Reduce stress
B) Provide a better future for your family
C) Be able to work less
D) Because DeliverAwayDebt said so!

Matt and Janelle Wegner, a married couple with their own podcast called Living In Financial Excellence (LIFE), join me this week for our Real Life Case Study as we discuss a couple who have a good income but way too much outgo. Where do they cut back, where can they work extra, should they sell the house?

Mentioned in this episode:

Matt and Janelle’s Website: http://financialexcellence.net/

Noted in the show: http://financialexcellence.net/episode-53-business-lessons-learned-from-a-financial-coach/

If you didn’t listen to the whole show then you don’t know what this is for: http://www.chicagofed.org/webpages/education/msw/index.cfm

Update: Matt and Janelle syndicated this episode on their show: http://financialexcellence.net/057-financial-excellence-real-life-financial-coaching-case-study/

If you were to pass away while in debt would your…

A) Debt be forgiven
B) Heirs be responsible for the debt
C) Estate be responsible for the debt
D) Dreams of being Debt Free finally be “realized”

You should save for your child’s college education…

A) In an Educational Savings Account (ESA)
B) In a 529 Plan
C) After consulting with a professional to see what is best
D) In a checking account where you can get easy access to the money

Think you know the answer? Is there a right answer? Tweet it to us using #FLMonth or comment below this post.

Julia from www.PromisesFC.com has an awesome question to challenge the way we think about money:

What is more important to you?

A) Knowing your mortgage interest rate
B) Knowing the remaining balance owed on your mortgage
C) Knowing the equity position on your mortgage

Once you answer the question, give yourself another minute to think about why you answered that way and what about the other options? Did you answer “interest rate”? Well then, why not the remaining balance? Isn’t the goal to pay off the mortgage instead? Or why did you choose the “equity position”? Are you looking to use the equity for the purchase of a car or cruise? Think about it….

Matt Wegner from FinancialExcellence.net has a great question for today:

How much should you spend on groceries per person in the household each month?

A) $50 per person
B) $100 per person
C) $150 per person
D) $200 per person

Who knows how to manage your money better?

A) The person with an 840 FICO score
B) The person with $1,000,000 Net Worth
C) Your broke Brother-In-Law

Turn your volume down as we go up, up, and away for this question from Linda at LillicoFinancialCoaching.com:

Should I get a Will?

A) No, I might die if I get a will
B) Yes. I love my family enough to have my wishes written down so there is no confusion when I am gone
C) No. I don’t own anything so why bother?

Josh Levitt from LevittCoaching.com wants to know what you think:

What is the best way to start investing for retirement?

A) Invest in a Roth IRA
B) Invest in a 401K up to your employer’s match
C) Buy a house

Leave your thoughts (or even better, your suggestions) below this post.

Jake Stichler brings us a question from one of his follwers at DebtSucksBlog.com. It’s a deep one so we will need you to leave your thoughts in the comment secion below.

Is bankruptcy moral?

A) Yes
B) No
C) Only in certain circumstances

This is a much deeper question than the possible answers so let’s start a conversation by leaving comments in the section below or let us know your thoughts on Twitter using #FLMonth.

Justin also wrote a book called “Become A Coach“. I asked him who should become a coach, how to make it work as a business, and what are the liabilities in being a Financial Coach. We also discuss the changes in Dave Ramsey’s Counselor Training program, which we still consider to be the best around.

If you are considering becoming a Financial Coach, or any kind of a coach that helps people with their problems, then I highly recommend his book in which he answers the most common questions he was asked about how he became a business coach.

Isaac Chaffee and his dad (Enemy Of Debt)

Brad Chaffee from Enemy Of Debt and his son, Isaac, give us our question today with a twist:

If you experience a loss of income you should…

A) Cut spending and budget for essential needs in order of priority
B) Keep the cable and phone plan but cut the food budget
C) Continue to spend at previous levels
D) Hold your hand out and hope for the best

UPDATE

Brad Chaffee’s video was picked up by CBS MoneyWatch contributor Kathy Kristof and she wrote an article called “Is Uncle Sam Smarter Than A 5-year old” based on his question! Congratulations Brad!

Today’s question isn’t about money but most Americans believe this topic does have something to do with their finances:

I earn the most points by…

A) Using my Credit Card

B) Using my Membership Accounts (Airline, Hotel, etc)

C) Buying my wife flowers!

Matt Wegner asks us this challenging question today:

When saving money, what should be your first priority?

A) College funding
B) Emergency fund
C) A new car
D) Retirement

Jon from JWFinancialCoaching.Wordpress.com asks us this question on Tax Day:

By getting a tax refund from the IRS you…

A) Did something good and the Government is rewarding you
B) Got lucky and can now make a downpayment on a new truck
C) Gave the IRS an interest-free loan in the amount of your refund

What percentage of monthly income should you budget for a mortgage payment?

A) 10%
B) 25%
C) 45%

If you had $1,000 to pay down debt, what would you put it towards?

A) Pay off a $1,000 Student Loan (and lose the tax dededuction)

B) Half of a $2,000 Credit Card balance at 9.99%

C) Part of a $5,000 Car Loan at 9.99%

Leverage is a term used in the housing industry, but everday Americans Leverage themselves all the time and don’t realize it.

Then on “Holla from the Impala” I talk about digging in your pocket for quarters to play the lottery.

Music used in the intro is BREAKFAST WITH ZUES by CRESSIDA and it is KICKIN!

The question for the day is by Julia Gray-Lion from www.PromisesFC.com:

If you are single you….

A) Don’t need a budget (you’re the only person responsible for you)
B) Don’t have time to do a budget (time-poverty is real)
C) Love budgets because it holds yourself accountable for reaching your financial goals

If you are in your 20′s, what is the best thing you can do with your income? (If you are 30 or older, you still need to think about this)…

Today’s question is about stress when money gets tight (like when a military family receives only half a paycheck – thank God that didn’t happen).

How would you fill in the blank: “When money gets tight we ________”

Today’s question comes from Linda Lillico at www.Facebook.com/LillicoFinancialCoaching. She wants to know:

Using coupons….

Brad from EnemyOfDebt.com ask us “What is most important to you financially”?

A) Building retirement
B) Become debt free for life
C) Owning a home

This happened to me, what would you do?

You need $250 for a root canal. What do you do?

A) Put it on a credit card

B) Take money out of savings (emergency fund)

C) Get a second opinion

Our question today is being provided by Coach Greg at GregPare.com

Question: What is the biggest difference between a Traditional IRA and a ROTH IRA?

A) The type of investments within the IRA

B) The Governments treatment of taxes

C) Dependent upon where you open the IRA (Bank, Brokerage, etc…)

Help Jeff from DeliverAwayDebt.com answer this question: What is the fastest way out of debt?

Don Current from CurrentFinances.com asks us for our question for April 4th during National Financial Literacy Month.

Question: You should begin saving for your child’s college education…

It’s Sunday, so Jackie Walters from “Personal Finance with Jackie Walters” on Facebook provided this faith-based finance question:

When a man leaves his father and mother to join his wife and become one, they…

Question: A Mutual Fund Is…