Total Money Makeover

I just finished listening to Dave Ramsey's "The Total Money Makeover". I must say that, in spite of his brash and brazen way of presenting the information, I am quite enthusiastic about doing some of the things that he proposes. He seems very much in line with others I have read regarding what to not do but he also lays out the steps to take in order to get yourself out of debt, to build a security nest egg, to build wealth and then to maintain that process.

Despite my age I figure that I can do this and have some wealth to live on as well as to pass on to others. So I am developing a plan.

He talks about a show he watched where they were showing a herd of gazelle that are calmly grazing. But, as you already know, no one watches a heard of gazelle grazing. That is boring. Then the focus moves to a cheetah hiding in the tall grasses of Africa. Then the wind changes a little and one gazelle's head comes up. He is on alert. Then the other heads come up. They don't know where the danger is but they know it is out there. They don't dare run for for fear of running into the danger so they stand alert. The cheetah is the fastest animal on land accelerating to 45 mph in just four leaps. When he moves the gazelle yells "CHEETAH!" Not really, but they run with extreme intensity. They know that they cannot outrun the cheetah so they run to out maneuver the cheetah. Because he runs so fast he cannot make turns as fast as the gazelle can and statistically, Mr. Cheetah only takes a gazelle to lunch in 1 out of 19 attempts.

In our pursuit of removing debt we need to be "gazelle intense", as Dave Ramsey puts it. We have to run from debt as if our lives depended upon it. Once debt is under control then you focus on removing it. Finally it is time to refocus our monetary efforts on building weath that will allow us the freedom to enjoy life.

We often believe that having a home is the American dream, or that having lots of "stuff" is the American dream. But so often the true dream eludes us. The true American dream is freedom. And one of the freedoms is monetary freedom. The freedom to know that whatever happens that we will have no worries. It does not matter who is in office, how they "tax the wealthy", how the market is doing. If your car catches fire, your house needs a new roof or medical emergencies come up, these are minor inconveniences because you have an emergency fund, appropriate insurance and investments that allow all to be taken in stride.

So, here are the steps, according to Dave, to becoming wealthy:

• Make a budget

1. If you don't know where your money is going you won't know what things that you want to trim or need to trim to accomplish your goals.
2. If you don't control your money it will control you then vanish.
3. Your money should be a wash every month, paying agreed upon expenses and the remainer, down to the last penny, being funneled into your financial goals which follow.

• Build an emergency fund of $1000

1. This is the first step because if you do not have an emergency fund every minor inconvenience will be an interruption to your plan.
   
2. Immediately after you start to do this saving you will have a test to see how focused you are on your decision to do a total money make over. Without your fund you will put something on "the card" and become discouraged.
3. Stay gazelle intense - your life depends on changing your habits regarding money.

• Start the snowball rolling

1. Pay the minimum on all of your debts
2. On your debt with the fewest remaining payments, focus all of the money you can scrape together each month to to add to the minimum to get this paid off as fast as possible.
3. When you get the first debt paid off, focus the money you were paying on the first debt plus any money that you can possibly spare each month on paying off the next debt.
4. Continue this until everything but your mortgage is paid down to nothing.
5. Have a card-ectomy - now cut up all of the plastic because you are on your way to never needing them again.

• Next build your nest egg

1. It is important to grow beyond the $1000 emergency fund.
2. Depending upon the security of your job, save between three- and six-months of what it would take for you to survive without any income. Now that you have no bills except your mortgage you will be able to survive on much less.
3. This should be saved in a form that is easily converted to ready cash. Do not put it into stocks or long-term investments which may be at a low when you need it or may take time to get into a liquid format.
4. With gazelle intensity, put all of your resources toward doing this as quickly as possible.

• Start long-term investments

1. If you get matching dollars thorough your work, max that out.
2. Invest in long-term index funds as a secure place for long-term investing.
3. Invest remaining money in a Roth IRA.
4. You should invest NO LESS than 15% of your gross income each month at this point.

• Start paying ahead on your mortgage

1. Now that you have your investing started, no credit debt and your emergency funds in place, focus your total spare monies on paying ahead on your morgage. This is the biggest challenge so far but you are now practiced at being gazelle intense with your money.
2. Continue with this step until you have paid off the mortgage. This will take some time (on avarage, as little as $125 extra each month will bring your mortgage from 30 years down to 15 years and save you about $85,000) but this will bring you to a point of financial stability beyond 92% of people in this country.
3. More money brings it down faster and saves you more money.
4. When you pay off the final payment, have a mortgage burning party.

• Now that you have no debt, do not back off. How fast do you want to become free? When you have sufficient wealth in investments that you could live comfortably on 8% then you are there. Statistically, over the long haul, stocks and bonds make 12% per year. Considering times when the market will not do that well, 8% will allow you to live without the fear of the market dropping a bit.

1. All additional funds at this point should be placed into a Roth IRA so that you have no tax liability when you begin withdrawing from your investments.

That is the basics. I recommend that you read or listen to his book. There are more details that are worth gleaning from his writing.

My Children (and Grand Children) Can be Millionaires

As I reach an age where our children have moved out on their own I have begun to think of retirement and doing things that were not possible with children at home. One area of thought that has consumed much of m time over the past several months has been money. Not the lack of sufficient income because we live comfortably, but the lack of my understanding of the rules of becoming rich.

I have to admit that, even as a child, my lifestyle was to spend more than I earned. During high school, my brother Stan and I both worked for the same fast food business. I probably made more money per hour than he did but each payday, I noticed that I was always out of money a few days before the next paycheck while Stan still had his previous paycheck pinned to his bulletin board.

To overcome this "disability" of mine I got a college degree in a field that was well paid and worked hard. But the propensity to spend what I earned never seemed to be topped by earning more. Finally, in order to keep me from being mad about finances all of the time, my wife took over the books and bill paying. That solved one of the problems (my anger whenever I had bills to pay) but it did not resolve the other problem, the lack of financial wisdom and discipline.

A few months ago, while searching for some gardening information on the internet, I came across a blog about a family who was tracking their costs of running a garden to see if they could save money by growing some of their own food. It was a blog called Get Rich Slowly and I found a lot more than just savvy gardening information. J.D. posts a couple of times each day about his financial life from having been broke and $35,000 in debt three years ago to having paid off all of his debt except his house. He talks about saving and investing what he used to spend. He talks about what he is saving for now (he recently paid cash for a used Mini Cooper, his dream car) and the habits and tendencies that he has had to deal with, and still deals with, so as not to return to the debt-ridden person that he used to be.

J.D. also has from time to time provided information regarding finance books that he believes are worth reading as well as reviews of these books he has read. One such list had "The Millionaire Next Door" on it and I found it at the local library. Amazingly, none of the other books on his list were there so I may need to check my favorite used book store next.

The point of all of this gibberish is that I have started reading "The Millionaire Next Door" and I am finding it fascinating. The old adage that the way to wealth is to save more than you spend is true but it is not the whole story. The questions that I have also had regarding wealth are, "How do you save more than you earn?" and "What do you do with the money you save?" This book addresses the first question. It is a study of those people in America who have assets valued at over one million dollars compared to those with similar incomes who do are not millionaires.

Get Rich Slowly has motivated me to get started looking more closely at where my money goes and what to do with what I save. It has reminded me to grow that emergency fund. It inspires me to buy quality for less and to do well with less stuff. And mostly, it inspires me to help my children to learn these lessons while they are young so that they will all be millionaires, not just look like ones.

Bird Condo Established

I have finished another gourd project, the first of potentially several bird condos. This one was a typical project meaning that it was mostly experiment. I like trying out new things and learning how far I can take some skill be it a technique, a color or whatever. You see, nothing really does what you expect, although it is much closer to the expected the more you are patient and the more you learn from previous experiments that went . . . different.

As an example, there are a myriad of options for coloring your gourds including leaving them their natural color, varnishes (including polyurethanes), paints, stains and dyes. I have been working with leather dyes. So I chose a color that I thought would look just the way I wanted it to. But then the tone becomes lighter as it soaks into the wood or it gets darker as it drys. It bleeds into areas where you didn't really want it to go and it changes once again when you put a coat of poly on it. So the result is always a bit of a surprise. The idea is to get enough experience and be patient enough to achieve a result that is pleasing if not exactly what you had in mind when you began. And, occasionally, you get a piece that exceeds your expectations.

My Birthday Tradition

Over the past few years I have watched as my children have struggled a bit financially. They were doing well enough to cover the bills but often had to sacrifice in order to make those ends meet. But then came the holidays or birthdays and they had concerns of how to get something for family members and still not kill their finances.

Then, about a year ago I got this brilliant idea - at least I thought it was brilliant (it nearly blinded me.) I thought, what if we could celebrate my birthday in a way that wouldn't cost them any money. And what if that method still allowed them to give something? Finally, my brain being close to exhaustion, I concluded that I could host a work breakfast.

A work breakfast is where everyone shows up early in the morning before the heat of the day sets in and we work on a yard project of my choosing for a couple of hours and then we have a great breakfast. The spouses and the grand kids also come but they just enjoy the breakfast.

When the task and the breakfast are done then people can leave or just hang out - whatever they want to do is fine.

Last year was the first annual Dad's Work Birthday. Last year I ordered a few tons of gravel for the front and back yards and the kids helped me haul it and spread it as well as clearing an area in the side yard for a place to construct a jungle gym for the grand kids. Then we had a marshmallow fight with marshmallow guns that we built. There were marshmallows all over the yard and trees and everywhere. The breakfast was barely less exciting. It went so well that we opted to to try the experiment again this year.

This year was also a grand success and so I think that it has become a tradition. There was one hitch, however. My daughter Jennie somehow determined that her husband, Kyle, should be the personally involved party in the work project rather than she, herself. Hmmmm...

The project this year involved the removal of the terracing blocks which surrounded the lawn and trenching around the lawn so that a liner could be put in to contain the lawn. The blocks were moved to the west side of the yard so that they can be used in another project. Here are the pictures.


This is the before picture of the southeast corner of the yard featuring a garden hidden by much stone.











This is the southeast side of the yard before the inquisition began. Notice the stones bordering the lawn and the area beyond just begging for a project to be done there.










Check out this motley crew ready to do the work of two or even three good men. From left to right:
Ben (oldest son), Kyle (Jennie's husband), Quentin (youngest son), me and Paul (second son). Drew (third son) is absent because he lives in Montana. I guess that just living where the weather hovers below zero for weeks at a time is excuse enough for not being there. He has mostly likely not thawed out yet.





The work of prying up the stones and hauling them to the west begins.












Everyone does their part and the work progresses fast and smooth.












"Use your entrenching tool," he says.


















The blocks accumulate, somehow, right where we want them.












Digging those trenches isn't as much fun as it seemed at first but Ben and Kyle make the best of it.











Look! our own version of Stone Henge!


















The girls enjoy the morning weather without getting all sticky and dirty - Jessica with Hero in her lap and Jennie.












Enjoying the shade now that the work is all done.
























































And now time for the family photos.

Towel Day - May 25th

May 25th is officially "Towel Day" and I observed it quite fashionably I think, and color coordinated as well. It shared a more recognizable holiday this year since Memorial Day also fell on the 25th of the month this year.

You may ask yourself what would cause such a reserved and sane person to wear a towel such as this out in public. Let me quote the handbook, better known as "The Hitchhiker's Guide to the Galaxy".

"A towel", it says, "is about the most massively useful thing an interstellar hitch hiker can have. Partly it has great practical value - you can wrap it around you for warmth as you bound across the cold moons of Jaglan Beta; you can lie on it on the brilliant marble-sanded beaches of Santraginus V, inhaling the heady sea vapours; you can sleep under it beneath the stars which shine so redly on the desert world of Kakrafoon; use it to sail a mini raft down the slow heavy river Moth; wet it for use in hand-to-hand-combat; wrap it round your head to ward off noxious fumes or to avoid the gaze of the Ravenous Bugblatter Beast of Traal (a mindboggingly stupid animal, it assumes that if you can't see it, it can't see you - daft as a bush, but very ravenous); you can wave your towel in emergencies as a distress signal, and of course dry yourself off with it if it still seems to be clean enough.
"More importantly, a towel has immense psychological value. For some reason, if a strag (strag: non-hitch hiker) discovers that a hitch hiker has his towel with him, he will automatically assume that he is also in possession of a toothbrush, face flannel, soap, tin of biscuits, flask, compass, map, ball of string, gnat spray, wet weather gear, space suit etc., etc. Furthermore, the strag will then happily lend the hitch hiker any of these or a dozen other items that the hitch hiker might accidentally have "lost". What the strag will think is that any man who can hitch the length and breadth of the galaxy, rough it, slum it, struggle against terrible odds, win through, and still knows where his towel is is clearly a man to be reckoned with."

So, there you have it. Oh, yes. It is also to remember that hoopy Douglas Adams who was possibly the first to hitch the galaxy. Now there's a frood who knew where his towel was. So, on the 25th day of May each year, we join our fellow hitchhikers in mourning the loss of the man who really knows what "42" is all about.

Bicycling - the Unannounced Adventure in Exercise

I am working with the Varsity Scouts now and a couple of weeks ago it was announced that we (the boys and leaders) would be going on a 20 mile ride in South Mountain park to get in shape for an up-coming activity, a ride from the Flagstaff area to the Grand Canyon. I don't (didn't) own a bike but one of the boys had offered to let me borrow his brother's bike. Teenagers tend to loan out other people's stuff, often without their knowledge or permission. Therefore, I was hesitant and was suggesting that perhaps I shouldn't go since I was not going on the activity but Tyler, one of the other leaders, was saying, "Come on. It will be fun." He's 28 and in good shape, not that round isn't a good shape but 54 is not a good age for such a shape. This guy should be in sales because he finally talked me into it.

The following Wednesday everyone showed up with their bikes to be checked out. The "brother's bike" did not arrive but the boy showed up with his bike and it was reasonably nice. I began to have some hope that this would not be the end of life as I know it. Then his father, who is also participating in the activity, showed up with another brother's bike.

This bike had wheels out of alignment and a wobbly crank with bad bearings and all of the signs of a well used, teenager-owned bike. Now I was really concerned. That evening I mentioned to my wife that I was going to be dead meat. She must have had the same vision that I had - that I would be humiliated in front of all these kids. She stated in a very matter-of-fact manner, "We have to get you a bike." These are words that I thought I would never hear. This is the lady who makes me wear a T-shirt to Home Depot that reads, "Needs Supervision" so I won't spend too much. Okay, she saw half of her income going away because I would be lying in the trail having a heart attack. Be it as it may, the result was the same.

I had been shopping around for a bicycle for excercise already. I spoke to my neighbor, who rides much more extensively than I do and had gotten some advice from him. "Don't get a WalMart bike," was about the first thing out of his moth when I asked his advice. He suggested a place to make the purchase and "free maintenance for life" stuck in my brain.

I also questioned a couple who are about my age that also ride quite a bit but more for fun and exercise than for competition. They consider a nice before work ride something along the line of 25 miles. They also said something similar to the WalMart advice, suggested a couple of brand names, gave me some price ranges, told me where they had bought their bikes, etc.

The end result was that I went to Bikes Direct on Power and SR60. The gentleman there spent about 45 minutes with me and my wife showing us differnet bikes, finding out the type of riding that I was planning on doing and generally explaining the difference between the various quality levels on the same brand; in essence, why one bike was better than another and which one would probably fit me and my riding style the best.

The result is that a few days later I returned to Bikes Direct and bought a bike (Giant) and, with some subsequent trips, also purchased some needed equipment. I managed to survive the bike trip (it was only 10 miles) and have ridden several other trips with the boys and leaders for practice for the upcoming activity. I am beginning to enjoy having a bike to hop on to run over to my parents' house or somewhere close. I am beginning to also ride a few days just for fun and exercise. I believe that I may have found a way to curb my bordom with exercise (the walking kind) and found a way to have some fun while in the pusuit of where my belt buckle went.

Rent a Room for Free

I have been thinking that there may be a benefit to renting a room to someone for free. Well, not exactly free but for no money. The room (and maybe some meals) would be in exchange for work around the house and yard, in theory, leaving more time for doing the things that you want to do.

The questions are, what are the disadvantages, what are the advantages, and if you decide to be so adventuresome, how should you proceed in setting up such an arrangement?

What are the disadvantages?
Obviously you lose some privacy. No longer can you run to the laundry room in your skivies to freshen a load of clothing before getting dressed or let the dog out one last time before hopping into bed. It means jams and robes or whatever.

You could get a bad renter. It is possible to get a renter who either does not do the work or does poor quality work.

You could get a party person who invites "undesirables" into your home or has other bad habits that are unexpected.

You don't know the person. You could be renting to the next Jack the Ripper.

What are the advantages?
You have someone to assist with the work around the home. The value of this advantage is mostly determined by how much you detest doing house and/or yard work.

Someone is there when you are out of town, both to watch the house and to feed and water the pets. Since we have an ancient dog and two cats with our children all grown and (mostly) out of the house, this is becoming a more important advantage to us.

There is someone who can help with those "it takes more than one person to do this" jobs such as moving a dresser or pulling a stump out of the yard, building projects, etc.

You gain a new friend. Hopefully, if things go reasonably well, this will be the result of having someone in your home under these conditions.

How should I proceed in making such an arrangement to maximize the advantages and minimize the disadvantages?

Take care in advertising and selecting a candidate for such an offer. Be very selective in both your choice of advertising for such an offer. There are too many individuals who would look at this as an opportunity to take advantage of the situation without doing the work. Family may be an option if you know and trust the person and their work ethic but still get everything in writing (see below). Advertise at your church or synagogue. Advertise at the local university for a "grad student" - someone who will spend more time working and studying than partying.

Agree ahead of time on the house rules. What hours can be more noisy is one that could become very annoying if not brought up early in the relationship. Also the use of shared areas of the house such as family room, kitchen, piano playing should be worked out ahead of time. The use of the refrigerator and/or freezer and the rules about private foods and how to mark them as well as where to put them should be on the list of things to discuss early on in the agreement portion of the discussion. Bedroom visitors and times, if any, should also be determined early on and in writing.

Put everything in writing. This applies two-fold if the renter is a friend or family. You don't want to ruin friendships or relationships and so when things are not working out people are reluctant to do anything while their frustration and resentment grows. With the agreement in writing it is easier to remind a friend that the agreement was to do such and such. Having the agreement in writing also resolves disagreements because you both can always return to the agreement to determine whether the resolution was already one that was agreed upon.

Set up the agreement as a month-to-month arrangement. This is probably the most important part of all. Should anything go south in anyone's point of view all that needs to be said is, "Things don't seem to be working out so we are going to end our agreement at the end of the next month. Be sure to give sufficient notice for your renter to find a replacement abode.

Agree on the use of the house before hand. Indicate whether the television is allowed to be used along with the DVR and the hours of use if allowed. Also, agree on laundry days and use of soap as well as the equipment. Also, kitchen use and permissions as well as clean up expectaions should be noted.

Determine the number of hours to be exchanged. Five hours per week sounds about right to me.

Have the renter submit a weekly log. There needs to be a system for the renter being able to account for the work that they have done. A log seems to be a simple way to let the land lord know how the time was spent. If there are specific things that you would like to have done then a priority list may be appropriate in order to let the renter know what the time priorities are. It is usually best to allow a fair amount of flexibility in when the work gets done. Some people prefer to doa little across several days while others will want to do most of it in one day. Be flexible.

Now to sell it to the wife.

What do you think about renting for no money and the steps suggested here?

The beginning

I am beginning my blog all over again. Although it served it's purpose it is definitely time for a change in direction and thought. I wish to move from a focus of what I have been doing to one of what I have been thinking about - what is amusing, what raises an eyebrow, what makes one think, what questions arise. This does not mean that I will not include what I have been doing since doing is often the catalyst for new ways of thinking. The door is wide open for discussion although I will steer clear of politics because it gets way too emotional, and although I may discuss religious topics on occasion, the discussions will not evolve around right or wrong but perhaps more about a thought regarding my understanding of some verse or concept with discussion open within those parameters. At the present time this may revolve around more financial matters, considering the economy, some gardening, and whatever takes my fancy from my reading or other activities I may be involved in. I will try to write about once each week and we will see how that goes for awhile since I don't want this to take over my life.