I finished listening to the 2nd of 3 CDs in the audio-book Total Money Makeover today. On this CD Dave Ramsey gives an overview of the first couple steps in his “Baby Steps” program which is designed to getting your finances under control. He begins by emphasizing the necessity of creating and living by a written budget.

The problem I have is that he really gives no details on how to set up a budget or how to follow one. He definitely tells you that you must have one, he just forgets to tell you how to do it - or at least in this book. I suppose he has another book that teaches this pre-step.

Once the budget is put into action, Ramsey says we need to start taking the “Baby Steps” required to get our finances in order.

The first (or was the budget the first?) step to getting financially fit is to start building an emergency fund of at least $1,000 as quickly as you can. This means paying minimum payments on credit cards and nothing into your retirement plan until this first $1,000 has been set aside. The primary reason this is so important is that otherwise any emergency that comes while paying off your accumulated debt would force you to break stride and most probably put the emergency expense on a credit card.

The second step is to pay off all debt (except the home) as quickly as possible using a process he calls the “debt snowball.” Rather than paying off high interest rate debts first, Ramsey suggests paying debts with the smallest balance first. You pay the minimums on all the other debts and keep them current. Every other dollar you can possibly scrounge is used to pay off your smallest-balance debt. When that debt is gone, you move to the next debt on your list, so that the amount you are able to pay “snowballs” as debts disappear.

“All the money from old debts and all the money you can find anywhere goes on the smallest debt until it is gone,” advises Ramsey. “Every time the Snowball rolls over, it picks up more snow and gets larger, until by the time you get to the bottom, you have an avalanche.”

Ramsey then began discussing step #3, building your emergency fund up to at least three months of living expenses. Paying off your credit cards and loans is about getting yourself out of debt now, building your emergency fund is about staying out of debt forever.

“You start the emergency fund with $1,000, but a fully-funded emergency fund will usually range from $5,000 to $25,000. The typical family that can make it on $3,000 per month might have a $10,000 emergency fund as a minimum. What would it feel like to have no payments but the house, and $10,000 in savings for when it rains?

And it will rain… The emergency fund, Ramsey says, is not to be used to pay for things like Christmas (“Christmas is NOT an emergency!”) and clothing. You should have budgeted for these predictable items in advance. (He just doesn’t go into how this might be done.)

Well, I have one more CD to listen to on this audio-book. So far it seems that the information given is from the 10,000 foot level - great view but no detail. I want to have someone answer the nuts and bolt questions. Hopefully this product is not simply an infomercial for his other products.

According to LifeSiteNews.com an Allstate employee has settled out of court after being fired from his job for comments that appeared in a men’s journal denouncing same-sex “marriage” in December 2004.

J. Matt Barber was fired last February after his commentary on same-sex “marriage” appeared in the on line journal MensNewsDaily.com, even though the statement was penned in his own spare time and from home. A homosexual activist group had complained to Allstate after reading the article and noticing that Barber’s bio mentioned that he was an employee there. Barber said the magazine added the bio information without his knowledge.

Lawyers for both sides told U.S. District Judge Amy St. Eve Thursday that they had resolved the case out of court. In his suit filed in May, Barber contended that his article, Intolerance Will Not Be Tolerated! The Gay Agenda vs. Family Values was penned on his own time. Allstate claimed they have never fired someone for their personal views, but that Barber had used company time and computers for his editorial.

So, did Allstate back down because they knew they would loose the case? Probably. Were they afraid of negative publicity? I seriously doubt it would have made headlines, but maybe it would. It is just wrong that they felt they had to fire the guy for his personal views in the first place due to pressure from an outside group, any outside group, left, right, or bi.

My shared del.icio.us bookmarks from 03-02-2006

• Taking Control: How to Write a Household Budget
  Why Do I Need A Budget? Because if you’re like most of us, you’re not an intuitively brilliant financial genius! Like most of us, you need a guide — a plan — to help you tell your money where to go, and how to work for you! The good — no, GREAT — news
  (tags: budget)
• FPU Envelope System DIY
  Create your own envelopes
  (tags: budget, dave-ramsey)
• Budget - COE Inc
  # What is a budget? # Where can I get budget materials? # What is the difference between a "budget" and a "spending record"? # How can I make a budget work? # How does a zero based budget work? # Is it important to make budgeting a joint effort (if marrie
  (tags: budget)

My shared del.icio.us bookmarks from 03-04-2006

• A Zero Based Budget: Boring & Effective
  zero based budget is about the most boring, uneventful thing you can possibly imagine with your money. It’s so simple, anyone can do it (possibly even the government, although they’re hard-pressed to actually implement it). As boring as a zero based b
  (tags: budget)

I finished listening to the 3nd of the 3 CDs in the audio-book Total Money Makeover a week ago and have not had a chance to write it up. Ramsey provides the details for the last 4 “Baby Steps” to getting control of your finances.

Step 4 has you beginning to fund your retirement. This step has you set aside 15 percent of household income to invest into Roth IRAs and pre-tax retirement accounts. If your employer has a retirement program set up that matches your contribution you should put in at least as much as they will match. The matching is a 100% return on your money. Then you need to fund your Roth IRA and your spouse’s Roth IRA if you are married. I do not remember if he gave any suggestions on what to do if you max out your Roth IRAs and have no other tax-advantaged savings plans available. It is something I have to look into for myself.

Now that you have no debt, have an emergency fund of at least 3 months salary set aside, and are putting away 15% of your income towards retirement, you can begin step 5, saving for your kids’ college education. If you don’t have kids, you can skip this step and go straight to step 6. From his comments it is obvious that Ramsey feels that Americans have gone overboard on college spending. He makes a point that a college degree only proves you have successfully passed certain tests. It will not ensure a job, ensure success, nor ensure wealth. As a matter of fact he calls student loans a ‘cancer’ and makes some valid points that where you went to school matters very little for most professions.

He discusses setting up Educational Savings Accounts. I looked into different tax-advantaged options available for putting money aside for kids college expenses. My hesitation with these plans is that they put control of a large sum of money into very young hands who can do with the money anything they want - with severe tax penalties. I don’t remember any discussion about how much ‘college money’ is enough but If you find out what tuition, room, and board cost for 4 years at the state college would cost now, that gives you a good starting place.

Once you have college money set aside you can work on paying off your home mortgage early. I understand that Ramsey does not like debt of any kind and many people have extended themselves too far by buying larger homes than they should, but I am not yet sold that paying off a modest, low APR home loan should even be on the list. He dispels some myths, especially the idea that a tax write-off in any form would make an investment worthwhile.

But it does not make sense to me that a person should keep paying rent until they can set aside enough money to pay cash for a home. I would rather save up for the downpayment and then leveridge my rent payments into equity.

Ramsey says that it will take most people 2+ years to complete steps 1 & 2 then another 5 years to complete step 6. This will bring you to the final “Baby Step”, Step 7, which is to build wealth and be generous with it. You will be investing in mutual funds and real estate. He says you have reached that ‘pinnacle point’ when your money makes more money than you do. You are officially wealthy when the income from your investments brings in more money each month than you can earn.

What I liked from what I heard is that unlike most self-help books this one is not designed for those hoping to “get rich quick” instead it will help you to get financially healthy. Ramsey talks a lot about what he calls “gazelle intensity,” which is about getting motivated and excited to get out of debt. The gazelle reference comes from Proverbs 6:5, where the intensity of getting out of debt is compared to a gazelle escaping from a hunter.

As soon as my reserve of the books comes is available I will fill in any details I missed from the audio book.

Many people have never heard about Broadform Named Operator policies. One reason is that Washington is one of the few states that allow this kind of policy. So, what’s different about Broadform Named Operator Coverage?

Unlike most auto insurance, where you buy insurance on your specific car(s), Broadform Named Operator Coverage provides insurance on a specific driver.

You pay the same amount whether you own one car, four cars, or even more cars. You don’t even have to call your agent when you buy, sell, or trade cars, because no cars are listed on your policy.

Broadform Named Operator Coverage satisfies the state insurance requirement by covering bodily injury or property damage you cause to others while YOU are driving a car, whether you own the car or not.

Underinsured Motorist Bodily Injury and Personal Injury Protection may also be purchased.

You cannot buy coverage for physical damage to your own vehicles.

An SR-22 filing (for those who need to prove they have insurance to the state) can also be added to the Broadform Named Operator policy.

Some important things to understand before purchasing:

• You, and only you, are covered while driving a car you own or have permission to use.
• You are not covered if you let someone else drive a car you own. (But you will be held legally responsible)
• You are not covered while driving a motorcycle, motor home, or while driving for business use.
• You are not covered for any physical damage that happens to a car you own or drive.
• If another policy provides coverage on the car you are driving, Broadform Named Operator Coverage will be excess (secondary) of that coverage.

This information is a summary only. Please refer to the actual policy for complete detail of all policy terms, conditions, coverages, and exclusions.

The cheapest way to get a book is to borrow it from the library. Even if your library does not have the book they may be willing to either buy it or get it on intra-library loan.

My favorite strategy to get a good deal on books I want to buy is a little convoluted but fun. I have filled out my library of classics, bought business and finance books, fiction, and books for my kids using this method.

First you need to buy used books you don’t want for about a quarter a piece at garage sales, Goodwill, or the library’s ‘for sale’ rack.

Next you will need to take the books you just bought to your favorite used books store and trade them for credit at 1/4 their original price.

Lastly you buy the books you want from the used book store using the credit. The nice thing is that they will hold the credit if you cannot find what you want this visit.

Example: Buy 4 books that were originally $7.95 for $0.25 each at a garage sale. Cost: $1.00

Trade them to the used book store for $2.00 credit each. Value: $8.00

Buy books at the used book store at 1/2 the cover price using your credit: Value: $16.00

So you end up getting a 16 to 1 return on your investment.

Caveat: Sometimes the bookstore will not take your books, they already may have too many of that title or they may think it is worthless - I keep these in a grocery sack in my trunk and next time I trade I bring them back in for another try.

You can also donate any ‘untradeable’ books to the library or other charity and take an appropriate tax deduction.

Paul Merriman at FundAdvice.com has been telling investors to “just say no” to buying mutual funds with a sales load for a long time. In his article “Loading up” on Poor Performance Merriman responds to an unhappy financial planner who tries to take him to task for steering people away from loaded mutual funds.

In Merriman’s response to the financial planner there were two quotes that explain the disadvantage loaded funds must overcome to meet or beat the no-load funds.

Imagine for a moment that you and I are portfolio managers – you at the load fund and I at the no-load fund. Suppose you know I will achieve a 10 percent return that first year and you’re trying to compete with me. To do that, your performance will you’ll have to be sufficient to turn $9,425 ($10,000 minus the load) into $11,000 in one year. That means you need a portfolio return of 16.7 percent. The only way you can hope to achieve that is by taking significantly more risk than if you were targeting a return of 10 percent.

This puts you in a pretty awkward position. Because of the load, you as portfolio manager must either settle for a much lower real-life return to your shareholders or you must take higher risks with your shareholders’ money.

But this short quote graphically demonstrates the handicap a load places on a mutual fund:

Load funds stack the odds against investors — like betting on a horse that must start far back in the pack.

Speaking of betting, I hope to write a post shortly about the common practice of always betting on the lead horse in the mutual fund race.

Just saw that the February Housing Statistics Report for the Kennewick-Richland-Pasco area was released. It is put out by the Tri-City Association of Realtors.

I put together two tables from the data. The first table has the February statistics going back to 1995. The second table contains the statistics for the past 13 months.

Looks like things have slowed down a bit, both over last months numbers and compared to February last year.

February Residential Housing Statistics

My shared del.icio.us bookmarks from 03-16-2006

• IE Tab - open IE in a Firefox Tab
  This extension is derived from the famous extension IE View, but they are quite different. While IE View always open IE-only pages in newly launched windows of Internet Explorer, IE Tab can open them in tabs of Mozilla/Firefox.
  (tags: extension, firefox)
• Foxit PDF Reader
  Foxit Reader is a free reader for PDF (Portable Document Format) documents. You can view and print PDF documents with it.
  (tags: PDF, Windows)
• Tab Mix Plus - Firefox Extension
  Tab Mix Plus enhances Firefox’s tab browsing capabilities. It includes such features as duplicating tabs, controlling tab focus, tab clicking options, undo closed tabs and windows, plus much more. It also includes a full-featured session manager with cras
  (tags: Firefox, extension)

Ever wonder how easy identity theft is? This story is truly incredible. A credit card application from Chase Mastercard was ripped into pieces (see photo) then taped back together. He then filled out the application and even put his parents address and his cell phone on the application instead of the correct info and mailed it in.

You would expect Chase to decline an application that had been torn into tiny pieces then taped together. You would be wrong. You would think that Chase would question an application with a different address and phone number than they have on file. Again you would be wrong.

What did I learn from this? I am going to buy a crosscut shredder for home. I have just been tearing up the personal info on mail I receive. Obviously this is not enough.

The original blog about this is divided into 4 parts but the links are almost hidden by the site design but they are there if you look.

This Sunday morning the call to worship was Question 126 from the Heidelberg Catechism, What does the fifth request of the Lord’s prayer, “Forgive us our debts, as we also have forgiven our debtors,” mean? As the catechism answer was explained I began to think along another tangent (always a problem for me).

I have always read this verse to say, “I must forgive those who have sinned against me IF they ask for forgiveness.” Along with this I also have as part of the definition of “asking for forgiveness” that the person must have true repentance, in other words they must be sincere.

Isn’t this how God’s forgiveness works?

1. We recognize we are sinners.
2. We ask for forgiveness.
3. God forgives us.

Nope, sorry. That may be the popular misconception but God loved his church before the foundation of the world. My forgiveness was secured by Christ’s sacrifice over 2000 years ago - long before my first sin.

So what does that have to do with me forgiving others? Well, nowhere does it say that I only have to forgive those who are truly sorry they wronged me. But how unrepentant would someone be who wronged me 490 times?

Then Peter came up and said to him, “Lord, how often will my brother sin against me, and I forgive him? As many as seven times?” Jesus said to him, “I do not say to you seven times, but seventy times seven.
Matthew 18:21-22 ESV

As a matter of fact Jesus tells us in Matthew 5:44 to

“Love your enemies and pray for those who persecute you”

How much more forgiving can one be be than to love an enemy?

Saturday Night Live announced a unique new program for managing your debt - “Don’t Buy Stuff You Cannot Afford”.

The free, 1 page book answers a lot of those tough questions like:

• What if I want something but I don’t have any money?
• If I don’t have enough money to buy something, should I buy it anyway?
• Where do you find “Saved Money”
• Can I buy stuff I want and then hope that I can pay for it?
• Shouldn’t you buy stuff before you have the money?

JLP at All Things Financial blog has recently started a series of 24 posts discussing the basics of personal finance. In each post he introduces the topic with a short discussion and then links to related posts by other bloggers.

This is a great place to start your investigation into a broad range of personal finance topics. I am sure I will be posting my thoughts as I read through each of the topics in more detail.

Here are the posts that have been published so far:

Inside Line from Edmunds.com reports that a hybrid version of the Honda Fit may go on sale in the U.S. as soon as next year. This hybrid is supposed to get 80 mpg and costs under $12,000.

Honda already has Accord and Civic hybrids and the groundbreaking Insight, the first gas-electric hybrid car on the U.S. market. If the Fit hybrid does go on sale at under $12,000, that price would sharply undercut the hybrid offerings of Honda’s rival Toyota. The standard gasoline-engined Fit is set to go on sale in the United States later this year.

An 80 mpg car for under $12,000 sounds pretty tempting. I can almost start putting the money aside now and be able to pay cash!