Long Trips: Money Tips

Next week my family and I will head to Henderson, Tennessee, for the annual Freed-Hardeman University Bible Lectures. We are planning on leaving early Monday morning and staying until Friday morning.

Being gone that long, and with the type of schedule the lectures have, we will have to eat out quite a bit. Here are some things we do to help this not destroy our budget.

1. We already have the cash set aside. We go to this lectureship each year, so we know about how much we spend on food. So, back in December, we set aside enough money to pay for our meals and our hotel room. That way the only thing coming out of our budget is gasoline.

2. We stay at a hotel with breakfast, but we also buy some items. The "breakfast" at this hotel consists of a few Little Debbie snack cakes and Sunny D. I can't drink anything with that much sugas in it early in the morning. Also, we are very busy until lunch (at around 11:30), so we need something with substance. So, we take our own juice and usually take a few homemade muffins or other items. While this doesn't really save us money at breakfast, it can help save money at lunch; since we are not as hungry.

3. We don't buy snacks throughout the day. During the brief breaks, it can be tempting to go grab a soda or candy bar for a little "pick me up." To be honest, we might do this one time during the week, but we simply avoid doing it daily. We only buy a little snack if we are going to have time to enjoy it.

4. My wife orders water (and I do, too, ... sometimes). We usually eat fast food for lunch, but then we try to have a "sit down" meal for supper. As you know sodas, tea and other drinks greatly add to the total bill. Drinking water can really help keep costs down, especially if you are eating out a lot.

5. We ask about our daughter eating free. She is just 2 and doesn't eat all that much right now. However, we do not want to just assume that she can eat from our plates. We like to ask so that, if another worker sees her doing so, we can say that we asked about it. So far, we have never had a problem with this, and that alone saves a lot of money. Many restaurants charge anywhere from $2-$6 for a child's meal!

6. In connection to that, our daughter drinks water nearly every meal. She likes it, so that helps!

7. We take advantage of discounts or gifts. I am one of the song leaders at the lectureship next week, and, as such, I am entitled to a free meal on campus. That means that one of our meals will be eaten at half-price. The line for this meal is always long, but you can't beat half-price food! (And the food is quite good.)

Whether it is a vacation or a business trip, nearly everyone will face a trip like this one at some point. Using some planning and a little common sense will help you avoid running through your food budget, and will help you have a little extra money at the end of the trip. Maybe you can use that money to buy a souveneir for the kids!

2008: The Year That...

When Leah and I got really serious about getting out of debt, we looked at "the numbers" very closely. We added up our debts from Turner's birth and the debts we already had, and looked at our income and any other variables we could think of.

While things change and some numbers change, we are still focused on getting out of debt on our target date. That date?

December 31, 2008.

We are happy to say that, since April of this year, our debts have continued to go down. We have not added a penny to them. While we do not know if we will "hit" that target date, we are going to do our very best.

Hopefully we can keep you up-to-date on this blog as to how we are doing.

In other news...

Where Your Treasure Is has been added to pfblogs.org. This site is a reader--much like an RSS feed--of scores of personal finance blogs. However, to be added, a site has to be reviewed and approved. I am proud to announce that we were approved yesterday and added late yesterday. Check out the site for literally hundreds of great articles from dozens of blogs and watch for articles from Where Your Treasure Is!

A GREAT Month!

Usually, December is a hard month in which to really "pay down" debt. With Christmas shopping (which, for us, includes driving = $ for gas) and the electric bill starting to rise, this just usually isn't a very fun month.

But December 2007 will go down as a great one in the Faughn house!

We budgeted for Christmas throughout the year and are going to be right at the budget. We still have a couple more gifts to purchase, but we still have money left, too. So that came in right on schedule. Our family helped very much. We all set a limit (that was equal for everyone) on what we would spend on Christmas presents. We set a limit where we could get each person something he/she wanted, without feeling the pressure to buy anything huge. It took some savvy shopping, and some online work, but we met that goal.

Also, our electric bill (for November; paid in early December) was low for this time of year. We have been staying around 50 degrees and have actually been up in the 70s for a few days in late November, so our heater didn't have to run all that much. Also, when we went out of town for Thanksgiving, we turned the unit way down, so it would hardly run. While our water bill was a bit high, it was more than covered by the lower electric bill.

We have had two negatives this month, though. First, we have had to travel a bit more than expected, so we are going to barely make our gasoline budget (if we make it). Gas prices have come down just a bit, which is helping, but we are still paying quite a bit (about $2.85 on average). Also, our DirecTV bill had a mistake on it and the mistake was ours. We had been paying it, but we had been unintentionally late a couple of times. We just did not realize that our payment was due on the 1st of the month, and we had been waiting until the 2nd week of the month, because we pay all our bills out of that one paycheck. We had to pay the extra money, but we also had DirecTV move our "due" date back so we can continue paying without the late charge. We also went ahead and paid January's bill early.

Now, for the big "upside" factor. For the past 3 months, I have been teaching a class for Faulkner University, one night each week, on the Book of Acts. I finished last week and quickly graded all papers and sent in the necessary paperwork on the night of the final. I was hoping to get my paycheck before Christmas (kind of a "special" holiday treat). They were good to me, and we got the paycheck yesterday.

Add all these up, and December became a banner month for us:

1. First, we got cash to pay for our entire trip to the Freed-Hardeman University lectures in February. The trip is already taken care of, which will be a big help in January's budget.

2. Second, we are up to date on all bills (since we got our mistake taken care of with DirecTV). We have never been behind before--and still haven't intentionally--so this is a great relief.

3. Finally, and most exciting for us, is the fact that we paid off...are you ready for this?...over $1100 in debt this month! We did that while going Christmas shopping and taking another 2 trips out of town! By sticking to out budget and using the extra money from my class, we were able to attack our debt.

When you have good news, you just have to share it. And this was great news to us. We're not debt free, yet. But we are working on it, and this month really pumped us up to work even harder in 2008 to finish our journey out of debt!

It's THAT Time Again

Last week we had the greatest holiday of the year: Thanksgiving. For many, the day after Thanksgiving begins a frenzy that won't end until December 25, as shopping lists are filled to buy gifts for loved ones and friends.

However, when people are in debt (or saving for another financial goal) how does that family not get side-tracked during the buying frenzy of Christmas? Here are some suggestions.

1. Have a limit and stick with it. The best way to do this, in my mind, is to discuss ahead-of-time with your family how much you can spend on each member of the family. We have done this in my family and it is already helping us stick to our Christmas budget.

2. Look for sales, but don't get duped by every "sale." Just because Store A has a shirt for 25% off does not mean that the shirt is quality. Make sure that the price is good for the item you are purchasing. Some retailers truly believe in volume instead of quality this time of year. I would rather pay a couple of dollars more for a quality item. Also, make sure the "sale" is really a SALE. Sometimes prices are marked up, then marked a certain percentage "off," and you are right back at the original price!

3. Shop online before shopping in person. You can find great deals online, but you can also find out what things are really selling for. Many times, when you shop online, you end up paying more for the item because you have to pay for shipping. Factor that in! If the item is going to be more with shipping, go to the store, but make sure you know what you could have paid online. Sometimes, for bigger-ticket items, stores will bargain a bit.

4. If you find a deal, don't spend more just to reach your limit. For example, if you have $50 set aside for your sibling and you find "THE BLOUSE" that she has been wanting for $30, don't feel obligated to spend the other $20 on another gift. Take that money and pay down a debt, or use it for gasoline on your Christmas gift-giving. The people you are buying for already know you love them, and they will never know that you got a good deal.

5. Remember your goals. I can't overstate this. If getting out of debt is a high priority--truly a high priority--you will not overspend on Christmas. This is a time of year that will really test your dedication to your financial goals.

Enjoy Christmas shopping. Be kind to those in the stores. Don't ruin their experience. But make sure you don't lose focus of your goals when it comes to your finances.

"The Automatic Millionaire" (Chapter Four)

"Now make it automatic."

That's the overriding theme of this chapter, and the idea from which the book gets its name. David Bach is a firm believer in putting as many things on "autopilot" as possible. In fact, for the rest of the book, nearly every step includes the idea of making it automatic.

If you work for a company that will move money from your paycheck before you ever see it, get in touch with them and enroll in a 401(k) plan, but make it automatic! As we mentioned in the last chapter review, Bach also says that, whatever percentage you think you can put away, add one or two percent to it. After just a couple of weeks, you won't miss the money, anyway!

The chapter also contains a very easy-to-understand comparison of the traditional IRA (Individual Retirement Account) and the Roth IRA. As with most financial gurus, Bach teaches that, if at all possible, one should work in a Roth, but only after taking a company match in a 401(k) plan.

This quite lengthy chapter (it's 54 pages in length) also takes the time to show you the names and contact information for some companies that can help you get started with an IRA.

There is one major "plus" to this chapter. Bach takes quite a bit of time to share with the reader the importance of compound interest and of getting started as soon as possible. As you, no doubt, know, compound interest, over time can make thousands of dollars worth of difference if the same amount is invested. A chart on page 97 shows what investing just $100 per month will grow into. If you invested $100 at 10% for 20 years, you would have 76,570. However, if you invested that same $100 and only got 9%, but started 10 years earlier, you would have $184,447! That's almost twice as much, despite making less in interest!

I feel there is one major "minus" to the chapter, too. Bach is a firm believer in the "pyramid" way of investing. He says that, over time, one should move money from investment to investment, getting a little more "safe" (or conservative) as time goes by. For my money, I agree more with Dave Ramsey on this one. If you will take you time and do your research, you can keep your money in good stock mutual funds for your entire life and still be quite safe.

This chapter is long, but it is informative. While I feel that Bach gets off the subject just a bit (or, maybe, he just tries to explain too much about investing in one chapter) the overarching theme is still to pay for your retirement automatically. If you decide that you can write out checks every month, if you are like me, you will fail. "Something" (whatever that is) will "come up," and keep you from putting money away regularly. Save yourself from yourself and make it automatic.

"The Automatic Millionaire" (Chapter Three)

If you think the "Latte Factor" is used several times in David Bach's book, the principle introduced in chapter three is used even more. In many ways, this step in his "automatic" plan is the basis for everything else.

Now that you have found something (or several somethings) in your budget on which you "nickel and dime" yourself into the world of being broke, you can change that. Stop (or greatly curb) your spending on that item. Now you have freed up some money to pay down debt, and build wealth.

The key, according to Bach, though is not just to cut out those small expenditures, it's to make sure you "Pay Yourself First."

By "first," he means "first!" Even before the government. If you work for a company that will help you by putting money out of your paycheck where ever you tell them to, you can easily do this. Simply call or email those in charge of this and ask them to put a certain percentage of your check into a retirement account.

Notice that Bach recommends a percentage, not a specific amount. The reason is really quite simple. If you get a raise, the amount you are putting away for retirement goes up proportionately with that raise.

You may say, "I'm already in debt and living paycheck-to-paycheck! How can I possibly put even 1% into retirement." The answer is this: you have cut your spending by finding your latte factor. Now you can live on less. Also, after just a couple of weeks of doing this, you will be amazed at how you don't even miss the money.

Finally, Bach recommends putting away more than you think you can. Challenge yourself. If you think you can only put away 2%, make it 3 or 4. If you think you can do 5%, make it 7 or 8. Again, after a few weeks, you won't miss the money anyway. And you will be taking advantage of compound interest over time. Also, if your company matches your retirement, make sure you are putting at least the amount they match away. If you fail to do so, you will be missing out on "free" money!

MY TAKE: Obviously, this "order" of doing things is not the same that Dave Ramsey would recommend. We have not even starting getting out of debt (officially) yet. Bach believes in doing both at the same time so that you will see little victories in both categories. While I agree with Ramsey on this one, Bach does make an interesting argument.

"The Automatic Millionarie" (Introduction)

For our third book review on this blog, we turn to another best-seller. David Bach's The Automatic Millionaire is an intriguing book that I have read more than once.

At the outset, I will tell you my biases, both for and against this book. You will probably notice that they will come up several times in this brief series.

First, the negative. I don't fully agree with Bach's strategy. While some of what he has to say is wonderful, and I will praise a couple of his principles several times, I don't like his lack of focus. I follow Dave Ramsey on this one: do one thing with total focus until it's done. Bach likes to divide our focus into more than one thing at times, and I don't like that.

The positive--besides the principles I like--is that the book is extremely readable and brief. I have read it three times, and actually read over half of the book in one day (without even reading all day) last year. It is one of the few financial books I enjoy reading.

Introduction

The book begins by promising to help in a practical way, and promises to do so in a short amount of time. Like many books, this volume does not give you "hot stock tips" or other such financial information. It, rather, changes our attitude about money.

After laying out some practical points ("You don't have to make a lot of money to be rich," for example--page 7), Bach gives is overriding theme, and the one for which the book is named:

If your financial plan is not automatic, you will fail! (7)

If you can remember that point, you will do well with this book. It comes up in every single chapter, and makes the book simple to understand.

The introduction is short, but it does grab the reader's attention. If you don't have a copy of The Automatic Millionaire, you may purchase it from the link below. While you may or may not agree with everything Bach says, the book is definitely worth the price of a used copy.

What I'm Thinking

As I continue to think about the car situation (scroll down to the last article if you don't know what's going on), I keep thinking about the decision my wife and I made quite a while ago.

We are paying for a car right now, and we really don't ever want to do that again. We know that there is a chance we might have to, but we really hate doing it.

I'm a guy. I get car fever every so often. Yeah, I'm one of those who likes to go to the lots after they close and look around; you know, when the sales persons aren't flocking to you like sharks to blood. I know I've bought my last new car (the car we are paying on is used, in fact), but I still enjoy looking.

So, what are we going to do about our car situation? We're still deciding, but I found a short presentation that makes it harder to even consider a payment. Here it is. Enjoy.

Let's see...live with one car for a while and have over a million dollars, or go more deeply into debt...

We may decide to buy a car, but we are doing our best to avoid a payment.

Just as an update, my wife and I--yes, together--sat down last night with our budget, our bills, etc., and talked about this situation. We feel like Step One is complete: just getting "the numbers" in front of us will help us decide.

WYTI Links: 10.25.07

Thursday links this week:

• How I Live Without Using Credit Cards - My Simple System for Living on a Budget (via No Credit Needed) Thanks to Adam for recommending this worthwhile write-up.
  

• Budgeting is Like Baking Cookies (via ChristianPF) I'm a big fan of analogy/comparison articles. These are some excellent points about budgeting.

• An Annoying Email I Got (via I Will Teach You to Be Rich) The end of this conversation is where this really gets interesting. Finances are no different from faith in this perspective: advice (even Biblical) is of no use unless we are willing to change.

• Where To Stash Your Emergency Cash (via Michelle Singletary, Washington Post)
  

• Inexpensive Ways to Woo Your Wife (via Clever Dude) This is a guest post by Clever Dudette (Clever Dude's wife) about cheap ways to keep the spark lit with your wife. You've still got time this afternoon to implement some of these suggestions :).
  

Paying for Gas: Reader Reaction

No, this isn't an article dealing with the high price of gasoline (although we might get more interaction with such an article). We understand that gas prices are "up there," and that they are not coming down any time soon...despite all the emails of ways to "stick it to" the major companies.

This post is a way for you to share you ideas. When my wife and I plan our budget for each month, the hardest expense to figure out is gasoline. We always try to list any places we are going during the month (visiting family, speaking engagements, etc.). We also try to leave some "extra" room for just filling up the car normally (visiting around town, going to work, etc.).

However, at the end of the month, we are nearly always way off. Sometimes (although not often) we have planned too much money for gas. More often than not, though, we have not planned enough. It doesn't usually destroy our budget, it just means that we have less money to attack our debts with.

The two major factors are usually "hidden" trips and unknown gas prices. We always seem to make an extra trip shopping to Florence (round trip, about 120 miles) or we go visit family and gas where they are is 15 cents per gallon more expensive.

One of our first "series" on this blog was ways to save money on gasoline. Those tips still help me, but I need help in this area. How do you budget for gas? It is such an ever-changing amount of money, what are some of your better tips? Please leave comments and help all our readers--and this writer--with this area of their budget.

An Interesting Look

Before reading this brief article, please take a moment to read "A Guideline Budget: How Do You Compare?" on Gathering Little by Little.

If you do much reading on financial planning, or any reading on budgeting, you will probably find a similar breakdown of how to allocate your funds. I find the comparison in the article to be quite interesting.

I also find it eye-opening. Did you notice that nowhere in the "guideline" was there a line item for "Church" or even "charitable giving"? Even if you looked at the miscellaneous category as that kind of spending, it would only be 8% of the budget (at most).

Recently, Wes wrote an article on this blog that I hope you will go back and read. Sometimes faithful Christians really have a struggle with their attitude towards money. The reason is quite simple: we either give like we should and stay deeply in debt (or just waaaay behind the "Joneses"), or we live like everyone else without giving anything but a token to the Lord.

Christians need to remember that, in our "budget meetings," the Lord doesn't just come first. What? Isn't that what we always say? Write down what you make and put "Church" or "Giving" as the first item on the list? Yes, we should do that. God shouldn't get the leftovers, He should get our first "fruits."

However, that's not the only place God should be in our budget meetings. The Lord shouldn't just come first on the piece of paper or on the spreadsheet. He should be in charge of the meeting! Every decision, from the debt reduction to eating out, should have our spiritual lives in focus.

When we do that, we will adjust our "percentages" accordingly.

More Music Savings

I have been waiting for today for a LONG time.

Several months ago (in fact, about 15 months ago), I heard of a site that was going to offer free music downloads, based upon advertising. While the site is brand new, www.spiralfrog.com is up and running with free music downloads.

I don't have an mp3 player (iPod or otherwise), but these songs can be downloaded to your computer for use in many ways (burned to CDs, mp3 players or just listening on your computer).

I hope you enjoy this new service, and I hope it saves you some money on music. Downloading, even at about $1 per song, can add up really quickly into a way to burn through a lot of cash.

"Giving Our Way to Prosperity" (Lesson Eleven)

A survey of the New Testament letters is a valuable study in nearly any Bible subject. That is true in thinking of giving, as well. Just a simple survey of the epistles teaches us so much about money and stewardship. In the 11th lesson of his book, V.P. Black gives us a few lessons to think about that come from these books.

First, from the example of the Macedonians, brother Black lists 9 paradoxes from their example in giving:

1. They gave under affliction and persecution.
2. They gave with abounding joy.
3. They gave with abundant liberality.
4. They gave as much as they were able to give.
5. They gave more than they were able to give.
6. They gave willingly.
7. They begged Paul to accept it.
8. They gave more than Paul expected, they surprised him.
9. The reason for their liberality: they gave themselves. (page 64)

As you can see, each of these 9 could easily be a great class discussion starter. Such is the nature of a survey.

Next, brother Black takes the time to speak of the concept of the "promise" to give (Second Corinthians 9:5). This leads to a discussion of setting a budget. He lists 8 things that a budget "is."

1. It is a goal looking to the future, believing certain things can be done.
2. It is a plan which may be called the blue print of the church's program of work.
3. It is a way which points out the best road to follow in the use of your liberalities.
4. It is a picture which points up the financial program of the church, and is drawn so all may see.
5. It is a ladder which challenges Christians to climb still higher, and thereby walk the mountain tops in righteous stewardship.
6. It is satisfaction in which every member can have a part in carrying on congregational activities. It is not really just the "church budget," it is "our budget"--the personal obligation of every member of the congregation.
7. It is an operation which "cuts out" all unscriptural means for financing God's work.
8. It is an opportunity for all--from the youngest to the oldest; from the richest to the poorest; from the largest to the smallest. It is a thrill, it is a joy. Here everybody knows where his money is going and what it is accomplishing. (pages 65-66)

This list would make a great series when thinking about budgeting. We often think of a budget as a stagnant "thing," but these points remind us it is far more.

Other sections in this chapter make further points ("Completion of plans," "The Lord's money can be embezzled," and "God's promises to the liberal giver"). There is so much in this chapter and it is one that can be covered for many weeks. Students will enjoy a teacher who gives ample time to the points in this survey.

WYTI Links: 09.05.2007

Three links for you today...

• The One Hour Project: Clean Out Your Media Collection (via The Simple Dollar)

• Creating a Basic Budget and Organizing Your Financial Documents (via No Credit Needed)

• Can I Use My Emergency Fund For That? (via We're In Debt)
  

An August Journey

While we don't plan to be too personal on this site, our blog is about personal finance. As such, I thought it would be interesting to share our financial goals for August and then let you know how we did at the end of this month.

As a youth minister, August is an interesting month. There are still youth activities going on (which require money), but, then, the young people go back to school. In other words, life gets back to "normal" (whatever that is!).

Here are some of our goals:

1. Only spend money in our envelopes for those expenses. Nothing extra!!!
2. Buy materials (or begin saving for them) for a minor bathroom remodel, and get prices for a couple of other upgrades to our house (do-it-yourself stuff--not professionally done).
3. Pay at least $500 extra on our debt (above the required amounts).
4. Compare our electric bills before CFLs and finish installing them in all lights.

These may not be huge goals, but they are what we are trying to accomplish this month. Money will be tight. We will be going to Tennessee in August for the birth of our niece (yeah!!), and we have a youth trip planned later in the month. Also, beginning today, we'll eat out at lunch with the youth group for 3 days in a row. These things add up and make it harder to stay on budget, but we're going to do it!

Or, at least, we'll do our best!

"The Total Money Makeover" (chapter 13 and recommendation)

It has been fun to re-read Dave Ramsey's The Total Money Makeover. This makes four times through the book for me, and I get excited every time I read it. Each time I read the baby steps, and see them build, I want even more to be debt free. It is going to be a great day! We have a goal in place, and we are doing all we can to reach it!

The final chapter is very brief, only covering 5 pages. It is meant to put the teachings found in the book into their proper place. Ramsey mentions Proverbs 10:15, which teach that a rich man's wealth can become his walled city. He goes on to simply remind us that, even if we become debt-free and have millions of dollars to our name, that's not the most important thing. I couldn't agree more!

If you haven't been able to tell, I highly recommend reading and applying this book. I have tried to mention a few things in the book with which I do not agree, but there simply are not many! Ramsey makes the process logical, focused, and--when done as a family--fun.

If you wish to order a copy of this great book, click on the link below.

To read any of the chapter reviews in this series, click on the appropriate link:

An Overview

Chapters on "Attitude"

Chapter 1 (The Total Money Makeover Challenge)

Chapter 2 (Denial: I'm Not That Out of Shape)

Chapter 3 (Debt Myths: Debt is [Not] a Tool)

Chapter 4 (Money Myths: The [Non]Secrets of the Rich)

Chapter 5 (Two More Hurdles: Ignorance and Keeping Up with the Joneses)

Chapters on "Action" (the Baby Steps)

Chapter 6 (Save $1,000 Fast: Walk Before You Run)

Chapter 7 (The Debt Snowball: Lose Weight Fast, Really)

Chapter 8 (Finish the Emergency Fund: Kick Murphy Out)

Chapter 9 (Maximize Retirement Investing: Be Financially Healthy for Life)

Chapter 10 (College Funding: Make Sure the Kids are Fit Too)

Chapter 11 (Pay Off the Home Mortgage: Be Ultrafit)

Chapter 12 (Build Wealth Like Crazy: Arnold Schwarzedollar, Mr. Universe of Money)

I hope this series has been helpful and has helped you think about your financial situation. The next book I will review will deal specifically with giving.

"The Total Money Makeover" (chapter 8)

Much of what is said in chapter 8 is similar to chapter 6, and for good reason. The eighth chapter of The Total Money Makeover discusses the third baby step.

Remember, if you are going to follow Dave Ramsey's baby step system exactly, you must have steps one ($1000 emergency fund) and two (out of debt except the mortgage) completely finished. Ramsey is a firm believer in total focus, so you must have these two steps completely finished before moving on to step 3.

Step 3 is "Finish the Emergency Fund."

Now, what is meant by "finish"? For most people, especially with families, Ramsey recommends having 3 to 6 months of essential expenses in that emergency fund. If you are single, or if you don't own your home, you might only need 2-3 months, but, personally, I like the idea of having at least 3 months no matter what your life situation.

A couple of points about this baby step:

1. As we said in baby step 1, put your money in a place where you can get to it in an emergency, but only in an emergency. Obviously, if you are pleased with where your $1000 starter fund is, you can just build that account.

2. To get an idea of how much money you will need, you need to go through your budget and figure out what you have to pay each month in essential payments. Obviously, the house payment or rent is essential. You will also need to eat in an emergency, but you won't need to eat out! You'll need enough for the electric bill, but not the cable bill--you'll turn off your cable in an emergency (won't you?).

3. Finally, why is this such a big part of a financial plan? It is simply because emergencies are what, many times, wreck the financial plans of those who are really trying to "get ahead." They pay off their debt, but then they start spending the extra money they have. Then a child has to go to the hospital. Or dad is laid off. Or mom finds out she has to have some serious medical tests run. Or the car absolutely falls apart. And what do we pay those expenses with? If there is no emergency fund, we go back into debt. With a fully-funded emergency fund, we can handle even large emergencies without going back into debt.

For many people, this baby step is as important as any other. With several thousand dollars lying around for emergencies, we can sleep at night. Even if Murphy's Law comes into effect in our house, we can pay her to leave!

The Total Money Makeover (Chapter 4)

Continuing the "myth versus truth" theme from chapter 3, Dave Ramsey spends more time in this chapter dealing with ideas people have about riches, retirement and bankruptcy, among other things. This chapter is called Money Myths: The (Non)Secrets of the Rich. Ramsey uses the phrase "(non)secrets" because, if you really stop and think about some of the "myths" in this chapter, they simply don't add up to real wealth.

Here are the myths, and truths, in chapter 4:

1. Myth: "Everything will be fine with I retire. I know I'm not saving yet, but it will be okay." Truth: "Ed McMahon isn't coming." (Love it!!)


2. Myth: "Gold is a good investment and will cover me if the economy collapses." Truth: "Gold has a poor track record and isn't used when an economy collapses." In fact, gold is one of the last things "used." In a true collapse, services and bartering become the norm.


3. Myth: "I can get rich quickly and easily if I join these groups, buy this tape set, and work three hours a week." Truth: "No one develops and makes a six-figure income on three hours a week." Sadly, I fallen for this one before. Not again! Oh, yeah, and this section also briefly describes the "real estate at no money down" commercials.


4. Myth: "Cash value life insurance, like Whole Life, will help me retire wealthy." Truth: "Cash Value life insurance is one of the worst financial products available." If you listen to Dave's radio show, he talks about this nearly every day. He is so right about this, too.


5. Myth: "Playing the Lotto and other forms of gambling will make you rich." Truth: "Lotto and Power Ball are a tax on the poor and people who can't do math." Not to mention, they are immoral!!!


6. Myth: "Mobile homes, or trailers, will allow me to own something instead of renting, and that will help me become wealthy." Truth: "Trailers go down in value rapidly, making your chances for wealth building less than if you had rented." This short section (just three paragraphs) is worth the price of the book if this thought has ever crossed your mind.


7. Myth: "Prepaying my funeral or my kids' college expenses is a good way to invest and protect myself against inflation." Truth: "Plans for prepaid funerals and college expenses give low rates of return and put money in the other guy's pocket." To be honest, this is one area where I disagree with Ramsey. I know the math, but there is also something to be said for peace of mind.


8. One of my favorites in the entire book--Myth: "I don't have time to work on a budget, retirement plan, or estate plan." Truth: "You don't have time not to." Well said!


9. Myth: "The debt-management companies on TV, like AmeriDebt, will save me." Truth: "You may get out of debt, but only with your credit trashed." If you are deeply in debt and have ever considered using one of these companies, buy this book and read (and re-read) this section.


10. I'm skipping a few myths in this chapter, and will only mention a couple more. Myth: "I'll just file bankruptcy and start over; it seems so easy." Truth: "Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage."


11. Myth: "I can't afford insurance." Truth: "Some insurance you can't afford to be without." Shameless plug for other articles on this blog: make sure you scroll through the archives and read James's articles on insurance. They are well-done and thorough in looking at different types of insurance.


12. Finally, myth: "If I do a will, I might die." Okay, men, how many of us have thought that? (My hand is in the air.) Here's the truth: "You are going to die--so do it with a will."

This chapter may be the most practical in the "attitudes" section of the book, and it is worth reading several times. Again, in this first section, Ramsey is trying to get you to see money in a different way. If you've ever thought any of these myths, you need to read Ramsey's ideas.

The Total Money Makover (Chapter 3)

Debt Myths: Debt Is (Not) a Tool

We are often told that OPM (other people's money) is the way to wealth. While there may be some truth to that statement, most of us do not understand how to use OPM. In this chapter of The Total Money Makeover, Dave begins to list some very common myths about money and then give his answer to them.

Here are a couple of my favorite "myths vs. truths":

1. Myth: "If I loan money to friends or relatives, I am helping them." Truth: "If I loan money to a friend or relative, the relationship will be strained or destroyed. The only relationship that would be enhanced is the kind resulting from one party's being the master and the other party a servant." I have had this happen. We borrowed some money from relatives. They never held it over our heads in any way, but I knew. I couldn't wait to get it paid off. When we wrote the check it was one of the best feelings!


2. I like this one just because of the way Dave writes the "truth" part. Myth: "Cash Advance, Payday Loans, Rent-to-Own, Title Pawning, and Tote-the Note Car Lots are needed to help lower-income people get ahead." Truth: "These rip-off examples of predatory lending are designed to take advantage of lower-income people and benefit only the owners of the companies making the loans." How do you really feel, Dave? Seriously, if you ever get a chance to see how much the annual percentage of the interest is at Payday loan stores, you would be shocked. Some are as high as 900%!


3. Myth: "'Ninety days same as cash' equals using other people's money for free." Truth: "Ninety days is not the same as cash." When we agree to pay for something in this way, we add a great amount of risk. Also, if we don't pay off the item in those 90 days (or one year, or whatever), the interest is staggering (usually around 30%), and is added to the original price of the item, even if you've paid off almost all the price! Finally, if you walk in with cash, you might be able to get that same item cheaper anyway.


4. Myth: "Car payments are a way of life; you'll always have one." Okay, how many of you think this way? Most of us. But notice the Truth part: "Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire." To be perfectly honest, this one section is worth the price of the book if it will change your mind about car payments. I know I have one right now, but my goal is to make this my last one!

Most of the remaining part of the chapter deals with credit cards. We will have a ton to say on this site about those, so I won't list anymore "myths." This chapter continues to deal with our attitudes about money and debt, and it really gets the reader to think. When we are honest, most of us have said similar things to some of the myths listed in this chapter. When we face the truth, though, we see money working in a different way.

Sometimes It Hurts

Getting out of debt isn't easy. It takes focus. It takes sacrifice, at least to some degree.

But sometimes, like today, it hurts a bit.

I know we aren't supposed to be attached to "stuff," but some "stuff" has sentimental value, and today we got rid of two pieces that were a little hard to get rid of.

First, we put some things in a yard sale with a neighbor. We didn't have enough items to have our own, so we asked if we could just combine with them. They were kind enough to allow us to do that. One of the items was a futon that we bought just before moving to Haleyville. It was our "big piece" in a den in our first house in Haleyville. Not a major loss, but it still was a part of us that moved from Somerville to Haleyville.

But, the other WAS a big deal. About 5 minutes ago, a guy drove off with a car. My 1991 Ford T-bird sold on eBay yesterday, and the man came to pick it up today...and actually hauled it off! This was the car that Leah and I dated in. We took it on our honeymoon. It's been to Kentucky many times. Faughnmobile II is no more.

But, while getting rid of stuff like this hurts a bit, the cash in my pocket is really helping things. And, then, when I think of going to the bank tomorrow to put that cash on our loan...things really start to brighten up!

...and it's just "stuff" anyway!