Really good advice on money
Our really good advice series continues this Sunday at Reverb. This week's topic? Money.
I'm looking forward to this one.
See, I'm not really a worrier. I sleep pretty good most nights. I don't fret about the future. I don't worry about what people think. I'm pretty laid back.
Until it comes to money. If there's one thing I worry about, it's money.
When I was first out living life on my own, I was terrible with money. I can remember not wanting to go to my mailbox because of all the overdraft statements from the bank and credit card bills. If I went to the ATM, I would never look at my receipt because I didn't want to know how much money I didn't have.
Then it finally all got to me and I made myself get serious about money. I started budgeting. Once I had budgeting down, I started saving. Then I realized saving wasn't going to do me any good unless I was out of debt.
Last January, I stared a get out of debt plan. I had two credit cards (one small, one large) and a truck loan to pay off. Now, eight months later, I've only got the truck payment left - and I should have it paid off in about nine months. Getting rid of those cards was a huge weight off my shoulders. I'd been carrying one of them around for ten years just paying minimum payments. TEN YEARS!!
I'm anxious to see what Fred has to show us about money from Proverbs on Sunday. But now, I'm more anxious to see what you guys have to say about money. How do you handle it? Do you avoid it? Are you anal about it? Did your parents teach you how to handle it? Have you had to teach yourself? What kind of goals do you have in your life in terms of finances? Tell us all about it. Remember - you don't have to give your name. Feel free to post anonymously if you have something to say but would rather remain private for now.
Category: Post
I'm looking forward to this one.
See, I'm not really a worrier. I sleep pretty good most nights. I don't fret about the future. I don't worry about what people think. I'm pretty laid back.
Until it comes to money. If there's one thing I worry about, it's money.
When I was first out living life on my own, I was terrible with money. I can remember not wanting to go to my mailbox because of all the overdraft statements from the bank and credit card bills. If I went to the ATM, I would never look at my receipt because I didn't want to know how much money I didn't have.
Then it finally all got to me and I made myself get serious about money. I started budgeting. Once I had budgeting down, I started saving. Then I realized saving wasn't going to do me any good unless I was out of debt.
Last January, I stared a get out of debt plan. I had two credit cards (one small, one large) and a truck loan to pay off. Now, eight months later, I've only got the truck payment left - and I should have it paid off in about nine months. Getting rid of those cards was a huge weight off my shoulders. I'd been carrying one of them around for ten years just paying minimum payments. TEN YEARS!!
I'm anxious to see what Fred has to show us about money from Proverbs on Sunday. But now, I'm more anxious to see what you guys have to say about money. How do you handle it? Do you avoid it? Are you anal about it? Did your parents teach you how to handle it? Have you had to teach yourself? What kind of goals do you have in your life in terms of finances? Tell us all about it. Remember - you don't have to give your name. Feel free to post anonymously if you have something to say but would rather remain private for now.
Category: Post
posted by Patrick at 3:11 PM
6 Comments:
My wife and I have been very blessed. We got married and had a little credit card debt and a car loan. In the first year or two we took the Financial Peace class and started budgeting and getting rid of debt. It has made things so much easier to know where and how we'll spend our money from the start of the month.
It is so great to get rid of debt and have the freedom that comes with that. We are currently only paying off our house, and it should be paid off in 5-7 more years. That's still a long way off, but it's much better than the 30 years that we started with several years ago.
Well, I'm rambling on...my point is that it is so much easier to live on a budget and debt free.
Can't wait to hear from Fred.
I must thank God for Dave Ramsey and Bryan Carter!!
As a child my family didn't really focus on money. My parents were financially blessed and we definitely lived that way. However, when I went to college, I decided that I was an adult and that I no longer needed their money. Hmmm...lets see...this was a BIG mistake!! Therefore, I was stuck in a pattern of working full time and going to school full time. Anyway, I tried to live the lifestyle that I did as a teenager, but on a lot less money, which led to a lot of credit cards, school loans, car loans, etc.
However, for the last 4 years, Bryan has been helping me change my spending habits. I went on a strict budget and paid down LOTS of debt. I now live by a budgeted cash system and it has made a huge difference. Thankfully, I only have a small school loan & car loan. Both should be paid off within the next year.
I highly recommend the Financial Peace University class. I think there is one starting at the church in the next few weeks! Check out Directions (or the program) for more information.
Oh, this one's a doozy. I was always a saver. I started working at 14, bought my first car with my own money, etc, etc. I lived all my life debt-free until I met my first husband at 28.
Mistake # 1:We never talked about our financial history. Mistake #2:he asked me to put him on my accounts as an authorized user, and I did. Mistake #3:When he began racking up cc debt I didn't take him off those accounts.
By the time we divorced he (we) had $40K in cc debt-I got half to pay off. The atty fees for the divorce were exhorbitant due to our circumstances. Because I spent 9 years of my life having to account to him for every penny I spent, I bought stuff for 6 months. Then I lost my joband was unemployed for 6 months. I wrote convenience checks for the mortgage and COBRA payments.
Good news: I changed my spending habits. I began again to live within my means.
The bad news: Once that was under control for 2 years I ended up filing bankruptcy. Not something I ever intended or am proud of. I was paying $1200/month on minimum payments alone, and I was looking at that payment for life-I was barely paying off interest and couldn't get anyone to play the shuffle-the-interest game with me anymore.
I wouldn't recommend it to anyone. It's devastating to your soul. But it's what I had to do at the time. I've been living responsibly now for 3 years. I have a house, a car, and a credit card I keep for emergencies. I don't spend more than I can afford and I am really happy.
Thanks for sharing guys.
One of the things I like about Dave Ramsey's show is how he's always telling people, if you've made mistakes with money, that just means you're human.
If you're interested in catching his show you can download podcast or stream his show at his website: http://www.daveramsey.com. He's also on the air from 12:30pm to 2:00pm on 1230 AM out of Danville and from 8:00 to 11:00 on 590 AM.
My Story
Long rambling that may be painfully boring to some.
I’ve always considered myself with above average financial intelligence. I count among my financial teachers Warren Buffett, Charlie Munger, John Boggle, Charles Givens (Don’t laugh, he had good thoughts on organization), Bruce Williams and Thomas Stanley. Often I’ve considered myself mis-cast in my role as an engineer and should have been involved in finance. (e.g. stockbroker or financial planner) I spend some considerable time exploring and learning about personal finance.
The big change…Almost four years ago, we were a two income one child family living in another state. Using a “2 for 1 coupon” we became a one income three child family. Deciding to pack it up and head home to Ky, we made some smart choices that dramatically improved our quality of life even with all the major changes. It resulted from smart advice gathered from various sources. In our case we had $20,000 in debt (not including the house).
Concept of Behavioral Finance
Can’t really recall all the sources I used, but one I definitely credit is Charlie Munger, Buffett’s business partner, musings on various subjects. I would consider Charlie a renaissance man with varied interests, similar to Benjamin Franklin. (He is well worth the time to study) Anyways, he recommended a book called “Influence: Science and Practice" by Robert Cialdini. This book explained how we are influenced in our buying decisions, be providing concrete examples and scientific analysis. It was incredible to learn the tools that are used to influence our buying decisions. This gave the name to the different things I’ve experienced and opened my eyes so to speak to my buying habits. This book in turn made me explore the field of behavioral economics. It was incredible!
This lead to reading a book called, “Why Smart People Make Big Money Mistakes” by Gary Belsky and Thomas Gilovich. One of the main concept I took from that book was a $ is a $ no matter how you classify the dollar in your head. (e.g. car fund, Christmas account, retirement account) For example, suppose you are buying a car. The list price is $20k. For an additional $200 the seller will throw in something you didn't want or need. You typically say yes (e.g. In my case it was acid rain protection. I even recalled asking the salesman why the paint was so poor it couldn't stand the rain?) Anyways. You spend $200 more because you figure you already spent $20,000. What's another $200? However, do you often find yourself ordering water at a restaurant to save the $1.50 soft drink? Why is the $1.50 valued more then the $20? A $ is a $. No matter what mental checking account you pull it from.
Concept of Live Below Your Means (LBYM)
Moving home to KY, we made some smart LBYM decisions which helped free up some cash (i.e. downsized the house) ease the budget tightness of one income and more mouths. Then came my experience with Dave Ramsey. Two of the concepts Dave teaches is telling your money how your are going to spend it (e.g. budgeting) and dumping debt. These go hand and hand. By budgeting you know where the money is being spent and you have a way to track progress. By dumping debt you are giving yourself a raise.
In my case, I had a $18,000 home equity line of credit (We affectionately call it HEL) It just so happened that the HEL monthly statement was very similar to a credit card so I was told what my interest monthly finance charge was each statement. This was important because I could see the effect of each payment. I was reducing the interest charge by less then a $ each month. I was looking at a monthly finance charge of $50+ each month.
Now remembering that a $ is a $ regardless of the mental games I play to say otherwise, I was giving the bank $50+ each month. That is a lot of soft drinks at the restaurants I normally don’t buy. Honestly, I would rather have the diet coke.
So if I dumped the debt I could give myself a $600 raise each year after taxes!
I then started treating each $ the same and decided to reduce the amount I sent to the bank. Over time the HEL interest payment reduced. I recall watching it drop from the $50, to $30, to $10…and to zero! IT is amazing the feeling of knowing I’m in control. The satisfaction of getting rid of the interest and knowing IT is my money to do with it is incredible. By the end of the year I will have gotten the $600 raise. I can now start my retirement savings in earnest knowing that I am in control of every $ coming into my household.
As mentioned earlier, the budget is the key. By budgeting you get the satisfaction of knowing that what you are doing is making a difference. You can see where the money is going and see the effects of your decisions. It’s incredible feedback to know that I’m swimming in the right direction. Anyways…Dave Ramsey’s message is very straightforward and sound. No fancy gimmicks or complicated message. Reduce debt and save. Well worth the time to check out.
Concept of Contentment
Finally the idea of contentment is so important. The Millionaire Next Door, presents the statistics and conclusions from Dr. Stanley and Dr. Danko’s research into the people that have money. I enjoyed the fact that the book was written by college professors. This gave it a straightforward approach to their research results. In conversations I’ve often quoted some of their conclusions such as;
1. The wealthy isn’t who you think they are. "Big Hat, No Cattle"
2. Offense (Income) and Defense (Spending)
3. The importance of spouse and marriage
4. Spoiling our kids with economic outpatient care
5. People with real wealth don't spend their money on things in the Robb Report, or Cribs.
After reading the book, you will begin to notice the trends they speak of and have a label to give them. I read the Millionaire material before I became aware of Dave Ramsey, so I immediately gravitated towards Dave’s stuff since it’s a logical extension of these books. To borrow from idea of beginning with the end in mind, the Millionaire material shows where you are going. Dave’s material shows you how to get there. These books will give you a solid foundation for framing your economic decisions by providing some statistics.
Well worth the time spent reading them.
Miscellaneous Thoughts on Contentment
1) “Circle of Influence versus Circle of Concern” – Fret about the things you can influence. Try to widen this circle to address the things that concern you. – 7 Habits by Stephen Covey
2) On the issue of Pride - "There is no fault which makes a man more unpopular, and no fault which we are more unconscious of in ourselves. And the more we have it ourselves, the more we dislike it in others." - CS Lewis (Suppose I should study this more after this essay)
3) There is a 1 in 21 chance of being born in the USA. 94% of the people in the world don't live in the USA. Talk about winning the lottery. Think about the opportunity.
4) Warren Buffet – Well worth the effort to learn about his life and thoughts.
5) “Successful Intelligence…” by Robert J. Sternberg - In summary we are a lot smarter then we think, and God created each of us differently for a reason. Don’t define yourself by your IQ, it’s wrong. Think about all the smart dummies e.g. Einstein, Newton, DaVinci, Franklin, etc. Don’t let this be a limiting thought.
6) “There is only one success – to be able to spend your life in your own way.” - Christopher Morley
7) Feed your mind good things….keep the bad out. E.g. I really learned this after sitting next to a co-worker that was a huge Jim Rome fan. I noticed my thoughts became more jaded, critical and mean spirited. The real application...Don't go driving through the estate homes on Sunday afternoons, or reading the latest Porsche performance characteristics.
Wow! Obviously you can see I get pretty fired up about this stuff. Sorry if I rambled too much. I suppose I should put a warning at the top. I will probably save this for my kids as well. Anyways...do I get a prize for longest post? 1406 words.
Awesome. You do win the longest post award, but there was so much good stuff in there. Thanks for taking the time to type it up and share it with us.
Post a Comment
<< Home