Total Money Makeover – The Snowball Starts

Posted by Debt Destroyer on August 8, 2008

In part of the interview process I went through to get this cushy gig, I remember being asked what I thought of Dave Ramsey. I had to admit that I heard of him, but that I didn’t really know much about him. I remembered him being featured on “60 Minutes” some years ago, but that was it.

Luckily for me, that embarrassing answer didn’t instantly disqualify me.

And after this past weekend, I can no longer claim ignorance on the Dave Ramsey front. Thanks to THE HAPPY ROCK sending me a copy of Total Money Makeover, I now can say I know Dave Ramsey’s method.

Actually I was already aware of a similar method.

As newlyweds my wife & I attended a couple of adult education classes put on by the Minneapolis Park & Rec Dept. We went to “Sink & Faucet Repair” and “Invest in Your Debt”.

We never repaired our sink(but it did give me the confidence to tackle a toilet issue that arose), and we never really fully invested in our debt either. But it did motivate us to pay off our smallest debt first then apply those payments to the next smallest and so on and so on.

Sound familiar?

Obviously we didn’t stick with this plan, which is why I’m back to square-one when it comes to our debt, but it gave me a background to digest “The Total Money Makeover”. Devour might be a better word because I read it in a day (skipping the success stories).

I was hooked.

The motto “If you will live like no one else, later you can live like no one else,” spoke to me. I cruised through the myths & hurdles, commenting to my wife, “When does he get to the plan?”

Then the plan came and I didn’t put the book down the rest of the night. Like Dave says, it’s not complicated, but very difficult. Too bad I didn’t look into this information after watching him on 60 minutes because I would be in a very different place right now.

But what truly has me fired up about this book is that my wife is now reading it. That alone is a major accomplishment (the pile of books that I’ve recommended her to read and she says, “I’ll get to it” would reach the ceiling), so it shocked me when after I told her she should read this, that she started right away.

And the best part is that it is also reaching her.

Just today she was telling me that maybe you all weren’t that crazy for bringing up the idea that we sell our van. She now sees the mistake we made when we bought it in such a haphazard manner. She’s still not quite ready to get rid of it just yet, but the possibility is now on the table.

Of course I wish I was working so I could really throw ourselves into this method, but this way we’ll be in the right mindset when I do start working again.

From the comments I’ve been getting I’m sure most of you are already familiar with Dave Ramsey and his system. If you are, how about giving a progress report on how it’s going for you. Does his system work for you? Did you need to alter it at all? Has it inspired your own system?

Let’s hear some success stories…remember I skipped the ones in the book.

Until next time,

-DD

P.S. For those of you who were like me and don’t know who Dave Ramsey is, check out The Total Money Makeover.

» Filed Under Motivation, Psychology of Debt

Tipping The Personal Finance Scales In Your Favor

Posted by The Happy Rock on June 12, 2008

I wrote earlier about the moment/idea that marked that turned around our financial journey. Today, I wanted to talk about the moment when the momentum for positive change became unstoppable.

This is the moment when I felt like our plan finally came together. Where all the hard work finally culminated in an unburdened, energized, free to pursue my dreams fist pumping YESSSSS! type feeling.

What was the moment? It was about 4 and half years from when we decided to get out of debt when we finally had 6 months expenses locked away in an ING direct account. We had gotten to that limit before, but we had to tap into some emergency funds because we needed to cover adoption expenses when our second son came sooner than expected. This time we had made it for good.

The point when we sent in our last payment on the last of our debt(besides a mortgage) was a great feeling and made us feel like we accomplished something monumental, but all we had to show for it was nothing. We had spent 4 years paying back money we had already spent. It wasn’t until we had $12,000 in cash that we could tangibly visualize the effects of all our efforts.

With that tangible reminder of all the hard work in the form of an emergency fund came a host of other benefits.

Hundreds of dollars a year in interest. Our money was working for us rather than against us!
A peace that came from knowing that we could handle almost every situation, even job loss.
A motivating freedom that made all our dreams in life seem possible. I know it sounds a little Hallmark, but it really is true. I don’t feel like there are any barriers to hold us back. We have accomplished so much already by 30 that we really need to sit down and repopulate or life goals list.
Cash Flow. As it stands now, only 50% of our income needs to go towards actual expenses. We have complete freedom over they other 50% of our income. What does that mean? One example is that I think it is quite possible to save close to 20% for a new house down payment in just a year. That sounds like freedom to me.

If that isn’t a motivating list, I don’t know what is. I really am not exaggerating for effects of the culmination of 5 years of hard work either. I would have thought that once we reached a milestone like that we would have ‘slacked off’, but getting over that mountain opened a world of new possibilities that is spurring us to even greater heights. Having no debt expect for a mortgage and six months of expenses stockpiles for emergencies really does feel as good as it sounds.

» Filed Under Chasing Dreams, Debt Elimination, Motivation

Go Big or Go Home – Why Success Requires Bold Decisions

Posted by The Happy Rock on February 29, 2008

“Insanity: doing the same thing over and over again and expecting different results”

– Albert Einstein

The truth in that little statement is profound. If we truly want to succeed in our financial life and with our life goals in general, we must be willing to fully commit to our dreams. Often we don’t do much more than give lip service to the big things in life. Now, if you are happy have average or slightly better than average results, than go right on doing same things as everyone else. If you keep using those credit cards, leasing cars, buying cars and houses that our over our price range, spending frivulously, and not saving we can expect to end up like everyone else. If you don’t want to end up like everyone else then we need to stop acting like everyone else.

Sell the truck that you have a $20,000 loan on.
Move to a place that will help you accomplish your dreams.
Cut up the credit cards and stop using debt.
Take a second job for a little while to get out of debt faster.
Stop worrying about what people think or how much they have.
Hang out with friends that will challenge you, not bring you down.
Drive a reliable beater.

The list could go on and on and on. Personally, I don’t really care what the exact decision is…but that you are paying attention and making intentional bold decisions to advance you towards your dreams.

What bold decisions have been running from?

Post your recent bold decisions in the comments sections as public declaration and an added level of accountability.

Here are my bold decisions.

» Filed Under About Me, Friends, Living with Purpose, Motivation

Top 5 Reasons The New Year’s Resolutions Fail

Posted by The Happy Rock on January 7, 2008

Like clockwork New Year’s comes and everyone fantasizes about some habit they want to kick or a good behavior they want to start. I was on the resolution train for years, only to realize I was lucky to make it to February. I am here to offer some reasons why New Year’s resolutions aren’t lasting recipe for change.

Resolutions are so common place that everyone feels like they need to do them. They get created out of habit rather than conviction, motivation, or passion. Even if the desire is there, the planning and preparation are often half hearted or non existent. Writing them down, planning, preparing, reading, and learning are crucial to creating lasting life changes. Half the time we can barely recall what the previous year’s resolution.
Resolutions are often derive from negative emotions. Changes that are built around positive results and motivation, rather then ‘stopping’ something have a much greater chance to be successful
No accountability. Everyone knows resolutions fail, but we try anyway without changing the formula. We rarely involve family, friends, or support groups and no one cares(even ourselves) when the resolution is abandoned by mid January.
Resolutions are overwhelming. Our unhappiness with the past year or our zeal for the New Year causes us to bite off way more than we can chew. The huge weight we create for ourselves serves only to drag us into hopelessness. Smaller specific goals are more likely to be achieved. Even the divide and conquer method can be a great help.
Resolutions are too broad/general. Vagueness usually leaves room for use to say ‘yeah, sure I did X in 2007’. ‘Spend less money in 2008’ is a admirable goal, but it is unlikely to have a significant impact on your life without quantifying how much you spend now, having a specific target goal, and measuring your progress.

That has been my experience with resolutions, hopefully yours is different. Is it?

What’s the alternative? The real goal is to create a life attitude and structure that constantly embraces and promotes self growth, rather than one that skates along the whole year until some arbitrary day where culture says you should try to change something about yourself. Is New Year’s a great time for reflection? Absolutely, but it should be just one many reflection and change points throughout the year, not a day that you need to make up for all the lost time of the previous year. Another alternative is 30 day experiments with proper preparation and motivation. They can be excellent ways to create positive self growth.

» Filed Under Accountability, Experiments, Habits, Motivation

Do We Earn The Right Not To Budget?

Posted by The Happy Rock on November 7, 2007

I have admitted it before, The Rockette have never lived on a formal budget. The closest we come to real budgeting is what I label retroactive budgeting. This is when you come up with reasonable spending amount for the different categories like groceries, clothing, entertainment, etc. Then at the end the month you compare the actual totals to your suggested limits.

When we were in the midst of shedding our 70k in debt, we did this almost every month. As the debt shrunk, so did frequency of our retroactive budgeting. I have been trying to decide whether this is a negative thing.

Three things happened as our debt decreased and was eliminated.

Our behavior and spending patterns changed. With less debt and new spending habits our monthly totals feel within a reliable range.
As the immediacy of the situation abated, so did our intensity. Our intensity got us through the tough times and turned the tide, but then our attention slowly began to leak elsewhere.
I felt like we earned the right to not check. Not checking as closely became the reward!

The thing is, changing the direction of the net worth train and your financial habits is heavy tiring work. Work that pays off down the road and work that removes stress. For those of you that are in the midst of an intense debt struggle, this can be a light at the end of the tunnel. For those of us who weathered the storm and are in cruise control, you know that freedom that is created from not having to worry and stress over your finances.

Sometimes, I think I am sacrificing financial efficiency, because of laziness. Other times I remember that the reason I got out of debt was to have the freedom to focus on other areas of my life without having my finances dictate decisions. Obviously, I think the latter is more often the reality or else I would be much more diligent about checking.

What are the readers opinion on the matter? Are you earning the right to ‘slack’, or are you going to better off if you stay focused and efficient?

» Filed Under Debt Elimination, Energy, Favorites, Motivation, Productivity(Financial)

Change Your Child’s Genetics By Giving Up The BMW

Posted by The Happy Rock on October 18, 2007

We recently talked about financially changing your family tree as financial motivation, but for those of us needed some more convincing here is evidence that our decisions about money go much deeper than just dollars and cents. Our choices are crucially importance to our children and this offers early stage evidence that our choices can cover over ‘bad’ genetics.

The researchers “studied 109 children who had been removed from their parents’ care due to reports of abuse or neglect and 87 control children with no reports of abuse or maltreatment.” The children also had two gene polymorphisms that put them at a greater risk for depression. The researchers also assessed each child’s support system and assigned each one a score for their support system quality .

I picked up three import things from the recap of the study. First, the effects of the depression amplifiers only held true for the children who were abused and neglected. Second, children with strong support systems almost completely escaped the effects of the ‘bad’ genes. Third, genes alone weren’t likely to make a child depressed, but maltreatment alone can.

Picture the ‘bad’ genes as little seeds. Give the seeds water polluted with mistreatment and lack of support and the ‘bad’ genes flourish. Nurture them with a safe supportive water and the children could likely overcome the ‘bad’ genes. At least in this small study the age old question of nature versus nurture is answered. Nurture wins .

To me, this is truly amazing! Think about the implications. Does it change how important we view sacrificing the BMW and huge backyard, so that we can have a stay at home spouse. Do you have to work 60 hours a week to support your current lifestyle? Is your debt stressing your relationship with your spouse and your children? Maybe we are sacrificing too much? Maybe we should be giving more time and money to support those willing to adopt and provide supportive homes for maltreated children? Hopefully studies like this help to illuminate which decisions are the truly important ones in life. What do you think?

» Filed Under Children and Money, Living with Purpose, Materialism, Motivation, Serving Others

Change Your Family Tree By Making Solid Financial Decisions

Posted by The Happy Rock on October 15, 2007

If you have ever listened to Dave Ramsey, there is a good chance you have heard him say “go and change your family tree”. It is a beautiful saying that paints a wonderful backdrop for our motivation to make healthy and wise financial choices. The idea being that the money choices we are responsible for now can and will affect your children and family. These are huge shoes to fills, and they get even bigger when broaden the perspective to grandchildren and great grandchildren.

Let’s not operate out of fear though. Be encouraged by that fact that if you stop your family’s reliance on debt, or align you decisions with your values, or even make wise investment choices, those choices will positively affect your family tree for generations to come. Think about being the grandparent that your great grandchild points to in photo albums and say he is responsible for changing the family’s relationship with money.

You can see that power of this principle at work when a couple’s perspective changes upon hearing that they are pregnant. The ensuing scramble to undo or right their financial ship is often frenetic. Too often those changes die and shrivel, as life, not us, starts to take control again.

The beauty of the saying is that is takes our focus off of us, and gives us something bigger and more wonderful to live for. When we hang on to those types of higher purposes, we receive long lasting sustainable energy. When we are motivated by short sighted and selfish goals, the changes are often short lived.

For those without immediate family, don’t be discouraged either. The trick is to find motivation from goals that are bigger than ourselves, and not on things that lose their appeal when the next new invention or model comes along.

» Filed Under Living with Purpose, Motivation, Serving Others

5 Key Strategies For Getting Out Of Debt

Posted by The Happy Rock on August 12, 2007

Being debt free has been more amazing than I thought, and I want others to be able to share in a similar joy. For those who are trying to get out of debt or entertaining the thought, here is some ammunition. As my wife and I and slowly hacked our way out of $70,000 in debt, there were a few key strategies that were extremely helpful:

1. Find Your Passion – Finding your passion is my number tip for anything that requires a large amount of energy and commitment. I started thinking about being debt free, because I realized that I wanted more in life. I wanted freedom to change careers, financial freedom for my family and children(and for their children), security for my family, freedom to pursue my dreams, and to be able to give abundantly. Those are the types of things that get my juices flowing, and the real goals that propelled me to being debt free. What are the things that resonate with you and how does being debt free help you achieve them? Figure that out, and you will be able to harness a powerful motivating force and a set yourself up for some strong endurance.

2. Change Your Behavior – If you are like me, you were in debt because your beliefs and actions towards money got you there. Becoming debt free will require you to change those behaviors and belief structures. Cut up or cancel those credit cards, change how you handle stress or depression, cancel the cable, cut down on your golf, change your ideas on how many toys your kids need. These are the types of things that will heal the financial bleeding. I mention this mainly because people can get caught up in the math of getting out of debt and lose sight of actually changing their behavior. Debt is a behavior problem, not a math problem. We need to stop spending money we don’t have; you won’t get out of debt unless you do.

3. Simplify and Focus – This one is paramount for changing you behavior. Just like multi-tasking isn’t the most efficient way to get things done, spreading yourself/money thin doesn’t work for getting out of debt either. Use your passion to develop a plan that divides your debt up into small steps, and conquer them one at a time. We had $70,000 in debt, so this step was extremely important. $70,000 in debt is a mountain, but we chose to focus on climbing several mole hills.

We focused all of our extra money on debt. And when I say ALL, I mean all. We stopped our monthly savings, 401K, everything. We usually focused the extra money on the smallest debt, unless a higher interest debt made more sense. The reason we started with the smallest debt, was for focus. Each debt you eliminate helps you focus more on the next. Just as the focus on small conquerable pieces gives you more energy and encourages the ever elusive change in behavior.

4. Believe You Can Do It – If you can believe that you will be debt free, you will probably make it. But for those of us who lack self-confidence or have a mountain of debt, dividing the overwhelming task into small manageable tasks helps to breed confidence. With each victory, you can begin to picture yourself debt free. Picturing yourself debt free gets you closer to passion and breeds more energy which creates better focus. Creating such a positive cycle will only help to increase your results.

5. Have An Emergency Fund – Before you start paying down your debt, save a small cushion that shields you from the ups and downs of everyday life. One financial expert, Dave Ramsey, suggests $1,000, and this is a reasonable number. I know that we dipped into the emergency fund a couple times over the three and a half years it took to get out of debt. Things like unexpected car repairs that might have gone on your credit card can come from the emergency fund. The emergency serves as your shield so that you can stay focused.

For those of you in debt, I hope that these tips are helpful. I know they helped me. For those of you feeling beat down: step back, regroup, and come out with your guns blazing. If you need some support, feel free to drop me an email.

If you liked this post, I highly recommend our benefits of getting out of debt and our personal debt story.

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If you haven’t found a solution to your credit card debt, maybe its time you did some research. Consider looking into debt consolidation. Even if you have tax debt, we may be able to help.

» Filed Under Debt Elimination, Favorites, Motivation, Positive Thinking, Psychology of Debt

Do Cable and TV Cost More Than We Think?

Posted by The Happy Rock on July 17, 2007

Here are the highlights of some research to add some discussion to the cable canceling experiment.

I found a great website called Trash Your TV. It is your one stop shopping experience for anyone thinking of canceling cable or getting rid of their TV. TV viewing stats, success stories, effects of TV articles, and much more.

Let’s start with some eye opening stats about the about some real costs of watching TV:

Nielsen Media Research Inc. reports that the ‘average person’ watches TV for 4 hours and 35 minutes every day. Furthermore, the average household has a TV playing for 8 hours 14 minutes every day.
That 5 1/2 days a month watching TV, 69 days a year, and about 13 or so years for an average life span. Even if I watch half that amount in a week, WOW!
Exposing children to all that TV can affect the wallet by the Nag Factor. Marketers seek to brand your children and make them discontented. All that TV time could result in viewing as much as 30,000 commercials a year, which in turn influenced an estimated $300 billion in sales or $4,000 per pestering child a year in 2001.
Number of hours of TV watched yearly by Americans: ~250 billion
Assuming an average US wage of $7/hour that equates to S1.75 trillion dollars
Average US cable bill in 2005 was $43.04. $783 for the primary TV in their home, and $176 on accessories. $22 billion total on TVs in 2006. Source
A multitude of studies that link TV watching to obesity and weight gain. Cut out some TV and lose weight.
Television viewing has been linked to ADHD.
The American parent spends 38 minutes per week in meaningful conversation with their children.
Children view on average 16,000 television murders before age 18.

These facts don’t even include other factors like opportunity cost, decreased energy, decreased brain activity, and peer pressure. Some of those time and money statistics are staggering.

Mike @ Prosperous Land left a good comment in the cancel cable and save post that linked to a recent article on The Street : How to Earn $1 Million by Not Watching TV.

One thing I found interesting was a recent study found that it would take $1,000,000 for white people to not watch TV for the rest of their lives. Second, although I am not sure I can vouch for the reality of his numbers, he argues that if you ditch the TV at age 25 and “instead invested this money and received a return of 8% compounded annually over 45 years until you’re 70 years old, you would have more than $3.7 million in your account.”

I think that little fact sheet may be just the tip of the iceberg when it comes to the drawbacks of cable and TV. Sure those numbers look a little high, but even if they are half or a quarter that much, isn’t that a lot? I’m not saying that there aren’t any benefits, but I am becoming hard pressed to find them at this point in my life. The more I think about it, the truth is I really don’t want to look back in 20 years and realize how much TV and cable really cost me. How much is it costing you?

» Filed Under Living with Purpose, Motivation, Productivity

Take A Break And Give Yourself Credit

Posted by The Happy Rock on June 25, 2007

As The Rockette, The Pebble, and myself traveled down to the New Jersey shore for a weekend of camping at the Frontier Campground, I was thinking about a few articles I had planned. I didn’t bring the laptop, but I was all set to outline a few articles. I made an off-hand comment to my wife about how I haven’t been able to get to anything done on my ‘in between MBA classes to-do list”. At Drexel University I get about a 1.5 – 2 weeks off in between quarters. Since two classes takes about 9-15 hours a week for classes, assignments, and reading, there are a lot of tasks that get prioritized out. Class starts again tomorrow(only 6 classes left), and I haven’t been able to get anything off of my list. To that, my wife replied with this gem, “sometimes you just need a break”.

Simple, direct, and to the point. Sometimes I get so wrapped up in plugging away and just dealing, that I needed my wife to remind me that I could give myself permission to take a break. Without that little exchange, I would have potentially ruined a beautiful weekend by carrying my to-do list baggage around. From that point on, I decided to leave ‘life’ at home, and enjoy the moment of the vacation. The simplicity of tent camping provided a nice get away. Without the to-do list encroaching on my personal space I was able to find space for reflection. Here are a few take away insights :

Take a Break – For those of us who put constant pressure on ourselves to perform and grow, take some time to refresh yourself. Even though it is tough to pull ourselves away, it is important. We can even hinder our growth and performance, because of sub-par energy and our to-do list baggage.

Give Yourself Credit - I am constantly looking forward, so much so that I don’t take the time to look back. I was able to find some time to reflect over the weekend. These past two years have been amazing. New father, amazing son, nearing the end of an MBA, finished getting out of 70k in debt, changed my energy and productivity habits, and gave some tangible shape to my life’s dream. That kind of perspective can’t be beat. Seeing what the last two years has brought, I am even more energized for the future.

This is part of the reason the Dave Ramsey method works well. The baby steps method provides built in moments to reflect and see how far you have come. Each time a debt get crossed off, we are forced to deal with the positive changes. The process happens more often in the early stages of debt reduction, which is generally the time we need the most encouragement. This reflection gives us passion for the future and our bigger debts.

Reevaluate - Take some time to think about your routine and your tasks…how does it align with your goals? Often stepping back to view your life from a distance, can help see new areas for improvement. Being stuck in the trenches allows only a limited view of the landscape. For example, people trying to get out of debt often get focused on small value tasks like selling clutter on eBay, when they need to focus on dumping the 20,000$ car or changing jobs for more income.

Plan Some Space For Reflection – The time was so needed and useful, that I need to consciously plan space for reflection on a regular basis. The idea of taking a few hours alone once a month with the sole purpose of reflection will be a good place to start. A reflection day.

» Filed Under About Me, Motivation, Productivity, Psychology of Debt

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