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Financial Peace University – My FPU Todo List

March 11, 2010 · Filed Under Financial Peace University · 5 Comments 

Over the past few months, my wife and I have attended Dave Ramsey’s Financial Peace University study at our church (of course you’ve breathlessly awaited each post I’ve done on our experiences!). During the process, I’ve been compiling a TODO list of all the things we need to tweak in our financial plan. Now that we are finished with the course, it’s time to put more effort into the actual implementation of the items on my list (I probably should have been working on them all along, but that’s water under the bridge now).

Thus, I will share my original list here and probably do some status updates as we work through it. If you have any comments, suggestions, questions, or just anything to share about any of the items on the list, please drop a comment (after you see the length of the list, you’ll realize that I need all the help I can get!).

Without further ado, here’s the list…

  1. Plastic surgery on some of our credit cards – we have a lot of credit cards (major credit cards, bank credit cards, retailer cards, etc) and we need to pare them down for piece of mind and ease of administration. Some we have not used in years, so it’s time for most of them to go!
  2. A cash trial – Ramsey preaches the power of cash throughout his course. We have never tried to use exclusively cash in all our years of marriage, so I suppose it is time to give it a faithful try and see how it works for us. Note: we have actually started this one.
  3. A workable budget spending plan – Especially with my wife not working for at least a few months, it’s time to get serious about creating a realistic and workable budget and then actually living by it and updating it each month. Note: we have actually created a rough budget but need to tweak it while my wife is off work for maternity leave/retirement.
  4. Periodically check our credit reports – Leveraging the free credit reports from the three major reporting bureaus, it is possible to view a free report every four months.
  5. Investigate identity theft protection – We currently have no ID theft protection coverage, so it’s time to investigate and probably purchase some.
  6. Investigate updating our life insurance – My wife and I currently are a few years into our 20-year term policies. Since having our fourth child, however, we need to evaluate whether that is still sufficient.
  7. 401(k) tweaks – I need to evaluate modifying my contribution to my 401k plan, specifically should I shift more of those contributions to the Roth 401k portion of the plan? I’d also like to up my overall contribution percentage but that is probably not feasible right now.
  8. Convert to a Roth IRA? – Is 2010 the year to convert my old rollover IRA to a Roth IRA? I’ll find out.
  9. Investigate increasing my college savings contribution – self-explanatory.
  10. Evaluate my current job – Is 2010 the year to change to a different job or even a different company. I’ll find out.
  11. Decide what to do, if anything, with our current mortgage – If my wife is no longer working, then our mortgage payment is a bit larger than I’d like it to be. But what to do about it? I need to evaluate whether it makes sense to refinance or move or stay put. This gets interesting due to the fact that we owe more money on our mortgage than zillow says our house is currently worth.
  12. Get title insurance – We did not purchase title insurance when we bought our current house, so I need to evaluate what it would take to get some now. Obviously, if any changes are made to our mortgage or housing situation, that will affect our plan of action for this item as well.
  13. Sell everything we don’t need – Getting rid of stuff, either by selling or donating it, is really a win-win! I love to end up with less clutter and putting a little extra money in your pocket is just icing on the cake.

So the easy part is done (creating the list), now it’s time to get to work on the hard part! As I mentioned, if you have any suggestions or comments or advice, please share – I’d appreciate the help.

Financial Peace University – Wrapup

March 9, 2010 · Filed Under Financial Peace University · 3 Comments 

Well, I am embarrassed that I am just now getting around to completing my Financial Peace University posts as the class has been finished for months! (productivity goes way down with a newborn around the house – especially when that newborn is your fourth!)  Anyway, here I am so let’s get into it.

Did I learn anything?

I did, in fact, learn quite a bit over the past few months.  Of course, I gained some new personal finance information.  More importantly than that, though, I took away some new knowledge about myself and my wife.  It was a great experience to participate in the class with her (this was the first time we’ve ever done any financial-type studies together).  Not only did I learn about the way she thinks a bit, but the experience also sparked a number of practical conversations about our finances.

When we first were married, we used to “dream” about our futures and how they would unfold.  As you get busy with jobs and then kids, the fantastic tends to be replaced by the concerns of daily life.  Dreaming about and discussing what we wanted life to look like in 5 years, etc, was very valuable.  Now, we’ve only scratched the surface on that and have a lot more to do, but I’m hoping that this was the match that rekindled it for us.

Weaning ourselves from credit cards

The biggest change that we’ve made as a result of this class was that we are trying to no longer use credit cards.  For the past two months, we have been using a combination of cash and debit cards instead of credit.  Whereas in the past, we put absolutely everything on our credit cards, now we put it on our debit card instead.  Well, we do use actual cash for dining out – now that’s really easy to manage: if we don’t have any cash, then we don’t eat out.  Practically, there isn’t much difference to using a debit card instead of a credit card, but we are still spending our money instead of exposing ourselves to credit limits and late charges.  Dave Ramsey is adamant that using a debit card instead of a credit card makes a difference but the jury is still out on whether this makes a material difference for us specifically.

We have our TODO list

I created a list of items to look into that arose from taking this course and as I look back over that list, I’m struck by how large it is.  I thought that we were doing things pretty well (personal finance-wise at least); either I wasn’t or there is just so much to take care of that it’s hard to completely nail everything.  Either way, the class was quite beneficial in enabling me to create this list and I hope to be in a better place financially and personally as a result of working through the list.  I was going to share the list here to create a record of it and to spark some discussion and suggestions, but I think I’ll have to save that for another post (check back soon).

You, yes you, should take this course

I found this course extremely enjoyable.  Now, if you’re a normal person, maybe that’s not an endorsement you take seriously (you know, since I write a PF blog and read about these topics for fun in my spare time).  So, to allay your concerns, allow me to mention that my wife enjoyed the classes as well (truthfully, she did!).  She found Dave to be a very engaging speaker.  It was fun to go to class and watch him on the DVDs.

The topics that are covered in FPU are myriad and varied.  Whether you are struggling with getting out of debt, worried about creditors, trying to get started on the right track, or trying to get things in order as retirement looms, this class has information that you will find valuable.

That being said, Dave’s basic philosophy is based on simplicity.  In a nutshell, save and invest your money instead of giving it away to banks and credit card companies.  There is nothing too terribly complex about the advice.  If you think that you are too sophisticated for this advice, you might not enjoy the class with its simple approach (of course, if that describes you, I’d argue that maybe you really, really need to hear some of the lessons!)

So, don’t be afraid; even if you’re not the “nerd” in your relationship, I’d venture that you’ll get a kick out of Dave.  Go for the entertainment and you’ll probably learn a tremendous amount of finances and how to really win with money.  Truthfully, if you can find a session going on near you, I highly recommend that you attend.  If you are married or engaged, I’d highly recommend both or you attending the class together.  Of course, you can take an online version of FPU, but you just can’t recreate the valuable discussion alone (I hope not, at least) and undoubtedly some of your classmates will serve as inspiration for you!

There you have it – I enjoyed FPU, was glad that I did it, was thrilled to complete it with my wife, and you should find a class and participate as soon as you can!

Check out my previous FPU posts:

Financial Peace University Lesson 13 – The Great Misunderstanding

January 15, 2010 · Filed Under Financial Peace University · Add a Comment 

Unleashing the Power of Generous Giving

This class marks our final FPU lesson and introduced the final baby step.  I appreciated that this lesson was included as the final class in FPU.  I felt it was, in a way, the culmination of all the earlier lessons but not in a wrapup/summary kind of way.  Instead, this lesson answered the question, “Why?”  Why should you be responsible with your finances?  Why should you get out of debt?  Why should you attempt to build wealth?  Is it not simply to have loads of money to greedily hoard for yourself?  Or is it to gain enough to feel like you are self-sufficient and do not need to rely on God?  Thankfully, no.  So why do we do all of this…

Baby Step 7 – Build wealth and give

Dave started off this final lesson with this quote found in the workbook:

You can do everything we teach and you will prosper, but if you don’t understand this lesson, you will never have financial peace.

The “Great Misunderstanding,” as Ramsey calls it, is the incorrect view that the best way to have more money is to hold tightly onto what you already have.  Dave used the visual aid of tightly grasping some cash – yes, you probably won’t lose any out of your hand, but it also won’t be possible for more to get into your hand.  In contrast, when your hand is open and money is able to flow out of it to others, it is also easy for more to flow into your hand as well.

We are asset managers for God

Remember that we are not owners of anything in this world, we are simply stewards, or asset managers, for the real owner – God.  If you have read the Bible, you will see that we are repeatedly told to give …why are we told that so often?  Ramsey presents a number of reasons for this, some of which are:

  • Giving makes us more spiritually mature,  more Christ-like
  • Giving makes us less selfish – less selfish people are more likely to prosper in relationships and wealth
  • Giving is a reminder that we are not the owners – you’re not even giving away your own money
  • Giving is praise and worship
  • Giving is offensive spiritual warfare

Remember, neither God nor the church need your money.  What they need are “sold-out believers” and giving will just a by-product of living out that sold-out faith.

How to Give

You’ve probably heard of what has become a fairly controversial topic in Christian circles – the “tithe.”  You’ve probably heard arguments such as should Christians tithe?  Must they tithe? How should they tithe?  Where should they tithe?  Ramsey addressed these topics in the following way.  First, the tithe is a tenth (that’s literally what “tithe” means) of your “increase.”  The Bible states that you are to give of your “first fruits” – so not what’s left over at the end of the month.  Furthermore, in the Old Testament, God tells the Israelites to bring the tithe into the storehouse of the temple.  This money in the storehouse was used to take care of widows, orphans, and the Levites serving in the temple.  Our modern day analogue is your local church which is still tasked with taking care of widows (including military spouses, single parents, etc), orphans, and your church staff. The Bible also mentions “offerings” separately from the tithe.  These are given above the tithe and are given from your surplus.

So, if I interpreted Ramsey correctly, he suggests that Christians should give 10% of their gross salary to their local church and any offerings above that to other Godly organizations.

Remember this about giving…

Dave then spent a few minutes reminding us about some truths from the Bible.  He started off by telling us that the tithe was not initiated as part of the Old Testament law; it was introduced prior the law.  For instance, Abraham gave a tithe to God and so did Jacob after his ladder dream.  Finally, never give with the motivation of getting what you gave, or more, returned to you (sorry about that if you’re a prosperity gospel kinda person).  We should give because God tells us to give.  Now, God does say that we will be prospered if we do so, but that doesn’t necessarily mean financially prospered.

Wrap-up

Ramsey wrapped up this final class with these two thoughts:

Financial Peace is more than just God’s system for understanding money, becoming debt free, and building wealth.

Financial Peace is when the Great Misunderstanding is understood

So that was the 13th and final class and it was quite motivational to me.  I would love to get to the point, both in attitude and resources, where I could freely give money to help those around me.  How much fun would that be?  Frankly, I’d love to spend my days going around meeting with church planters or missionaries or school administrators or whatever handing out checks.  I’d get business cards printed up that had as my title, “Major Donor.”  Wouldn’t that be so cool!!

I’ll do at least one more FPU post next week – a wrap-up type post of what I learned, what I liked and didn’t like, what steps I still need to accomplish, etc.  In the meantime, with many new FPU classes starting up around now, if you have the opportunity to take part in Financial Peace, I would highly recommend it!

Check out my previous FPU posts:

Financial Peace University Lesson 12 – Real Estate and Mortgages

January 8, 2010 · Filed Under Financial Peace University · 8 Comments 

Keeping the American Dream from Becoming a Nightmare

In our second-to-last FPU lesson, Ramsey discusses his thoughts on the best ways to buy and sell a home.  As you might imagine, he’s not a big fan of 0% down, interest-only, 40 year mortgages (I know, shocking!).  If the concepts espoused in this lesson were followed by everyone, we might not be having nearly as  problems in our real estate market right now.

Tips for selling a home

Dave started off the class by laying out some tips for selling your home.  I didn’t find anything earth shattering in his list but they are good solid tips such as:

  • Think like a retailer -make your home into a model home with no evidence of cats, dogs, kids, nothing on the kitchen counters, take most of your clothes out of the closets, etc.
  • Pay attention to your home’s curb appeal – “71% of buyers buy from the curb”
  • Make sure your home is listed on the internet (77% search for houses on the internet) and in the Multiple Listing Service (MLS)

Buying a home

Ramsey is a big fan of home ownership for three main reasons:

  • Paying for your house is a forced savings plan
  • Owning a house is typically a hedge against inflation
  • Your house grows virtually tax-free

Obviously the real estate market in some places in the US has not been performing well for the past few years.  But that is a short-term trend resulting from a number of factors.  In the long-term, owning a house is still a good idea (besides, you need a place to live).

Baby Step 6: Pay off your home early

Tips for buying a home

Again, you have most likely heard Ramsey’s list of tips for buying a house.  These are suggestions such as:

  • Buy at the bottom of the neighborhood’s price range
  • Homes prices are based mainly on three things: location, location, and location
  • Buy a home that can be attractive from the street and has a good basic floor plan
  • Do NOT buy trailers or mobile homes – they go down in value faster than a car
  • Do NOT buy timeshares – there is typically no secondary market to resell them (my parents actually own a timeshare…they rented the same week at a timeshare for years and the owners eventually just gave it to them.  They didn’t even attempt to make my parents pay for it; in fact, they even paid the attorney fees to transfer the title!)

Mortgages

Now, we get into the crux of the lesson and I’m sure you can imagine that Ramsey’s suggestions will not mesh with all of the crazy mortgage options we’ve seen over the past decade.  He starts off this portion of the lesson by reminding us to hate debt and that the best mortgage option is the 100% down plan.  Seem crazy?  He states that 11% of second home buyers pay cash – so someone is doing it!

Do not buy a house and take on a mortgage until you are ready to do so – that means you are out of debt and have a fully-funded emergency fund.  There is nothing wrong with renting for a period of time to make sure your financial house is in order.

Ramsey recommends that you get a mortgage with a payment of no more than 25% of your take home pay on a 15-year fixed rate with at least a 10% down payment.  Now, this is a very conservative plan but I’m sure it is very effective.  Imagine for a moment if everyone in the US followed this advice over the past decade  – I would have to think that the foreclosure rate would be drastically lower than it has been over the past few years (home prices would not have inflated so drastically, people would not have over-extended themselves, all in all, it probably would have made for a much more stable market then and now).

Why choose a 15 year mortgage?  The reason is simple finances.  Certainly you will pay more each month but the interest savings over the term of the loan is substantial.  For instance, on a $225,000 mortgage at 6% APR, you will pay an extra $550 per month compared to a 30 year mortgage but after 10 years you will have about a $90,000 lower principal!

Ramsey recommends that you avoid these “horrible” mortgage options:

  • Adjustable rate mortgages – these transfer the interest rate risk from the lender to you
  • Interest-only mortgages – if I have to explain to you why Ramsey hates these, you really haven’t been listening!
  • Reverse mortgages – you are putting a paid for home at risk and the fees are typically large
  • Accelerated or Bi-Weekly plans – these are not bad ideas in themselves, but don’t pay a fee to set this up as you can easily do it yourself.

Yet another myth

Ramsey warns to not fall for the mortgage tax-advantage myth as a reason to not pay off your mortgage.  Think about this, if you are in the 25% tax bracket and pay $10,000 in mortgage interest in a year, you will save about $2,500 in taxes.  Someone might tell you that it’s a bad idea to pay off your mortgage because then you won’t save that money in taxes.  Is it really a good thing to spend $10,000 to save $2,500?  That math just doesn’t make sense.  This math makes a lot more sense and is a “win” for everyone (except maybe your bank): pay off your mortgage, then give $10,000 to your church or another charity and you’ll still get the $2,500 tax reduction (besides, would you rather give $10,000 to a bank or a charity?).

Patience is a virtue, so is self-restraint

Take your time, find a good house and get a good deal on it.  Make sure that you can afford to drop a sizable down payment and get a 15-year mortgage.  This is how Ramsey recommends that you buy a house and protect yourself from being in the unfortunate situation in which so many people currently find themselves.  “Real estate is a wonderful thing to buy, but move slowly.  Don’t buy until you are financially ready.”

Check out my previous FPU posts:

Financial Peace University Lesson 11 – Working in Your Strengths

December 29, 2009 · Filed Under Financial Peace University · Add a Comment 
Just in case you were wondering if I really had FPU class the week of Christmas, we did actually finish a few weeks ago. I started off running each post about a week after the lesson, but I’ll admit that over time I’ve drifted a bit farther behind than that! Anyway, Two more lessons to debrief after this one…

Careers and Extra Jobs

This week’s lesson centered around your career and here it is in a nutshell: You should really enjoy your work (at least for the most part) because you spend so much of your life doing it.  Check out these statistics from Ramsey: the average job lasts on 2.1 years in length.  That means that a worker could have as many as 20 jobs in their lifetime!  He also stated that 98.3% of employees work for small businesses (defined as those having less than 100 employees).  The backbone of our economy is truly the entrepreneur!

Some more myths

Apparently Dave Ramsey really loves debunking myths as this is the third lesson (I think) where he discussed commonly repeated myths.  So, let’s indulge him…

Myth: As you grow you change

Truth: You might grow, but you won’t outgrow your personality

Myth: You will learn and grow most in the areas where you are weakest

Truth: You grow in your strengths.  You grow the most in areas you already know and love.  Think of your passions – those are the areas that you care about the most and find interest in and therefore those are the easiest to drive you to grow even more.

Remember that money is never ultimately enough of a motivator for doing a job indefinitely.  If you hate your job, eventually that salary, no matter how large, will not be enough to get you out of bed and out the door each morning.  Therefore, Ramsey recommends that you seek a career that blends your skills, abilities, personality traits, values, dreams, and passions.  I’m sure you’ve been around people that really enjoy their job – it’s hard to tell if they are working or playing;  that’s when you know you are in the right career.

The DISC Personality Profile

Ramsey then spent a few minutes explaining the DISC profile and touching on the characteristics of each type.  There is too much information to even get into here but I do agree that going through a personality profile, be it DISC or Myers-Briggs or whatever, is a helpful exercise.  I’ll at least tell you what the four profiles DISC are:

  • Dominant
  • Influencing
  • Stable
  • Compliant

Job Hunting

Dave spent the remainder of the session presenting some tips on job hunting.  I won’t recount all of them here but I will hit on some of the ones I found most useful.  First of all, remember that a company is not looking for you, rather they have a problem and they need someone to solve it.  Therefore, approach your job search from that perspective – that you are here to solve their problem.

When you are getting ready to contact a company, approach it the way you would when starting up a new relationship with a person (maybe even like you are trying to get a date with someone).  Dave recommends contacting your potential employers at least three times – first to send an introduction letter, then to send a resume and cover letter, and finally a phone follow-up.  He reminds us that interviews and job offers come from networking and persistence.

When interviewing, treat it like you are the product and you want to present that product as the best one available.  And after an interview, tell them that you will follow-up with them on a certain date (and then make sure you do it!).  He also recommends sending a handwritten thank-you note to your interviewers.

What about extra jobs?

As opposed to raising your income for the long-term through a new job or career change, it is typically much easier to raise it in the short-term by finding an extra job (or two).  It will typically take a significant sacrifice on your part to work an extra job – but if you need to do it and you really want to win with your money, then you must be willing to make that sacrifice.

I found his next tip a very good one – he recommends that you have a detailed plan for your extra job(s).  In other words, create a plan for how much you will work, how much you will earn, and how long you will be doing it.  That way, you can see the finish line and know that though you are sacrificing, it is only for a certain period of time.  And finally, do not give up!

A final word of caution from Ramsey

Although we spent the entire class discussing careers and jobs and the like, he ended class by reminding us to not allow our career to be the all encompassing source of our satisfaction and self-worth.  This is a very important tip but sadly it is one that is often forgotten in our culture.

Wrap-up

I didn’t find a ton of new information in this class as I’ve heard most of the job hunting tips and done numerous personality profiles.  To be fair, I was able to pull out a few tips that I will use the next time I need them.  That being said, this was a very inspirational class.  You know, Dave is right, we spent too much of our short-time here on earth working.  Therefore, you should really strive to enjoy your work.  That might mean changing your attitude about your current job or finding a new job that you fit into better.  Dave mentioned during class that if you work for him and you don’t enjoy your job, then he’ll fire you.  It’s not good for them to have you working there and it’s not good for you to be working there either.

Now, don’t do anything rash, but if you are unsatisfied in your current position, I urge you to take some time and reflect on why that is.  It might be just a matter of you changing your approach to your job or finding another role at your current employer.  Or you may need to change to a different company or to an entirely different career to find that satisfaction and enjoyment.  And I know this is a really bad time to be considering looking for another job (see a few sentences up: “don’t do anything rash”) but you owe it to yourself to at least consider your options if you’re not in the best position for yourself at the present time.

Check out my previous FPU posts:

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