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Monthly Archives: March 2009

Follow Up to Dave Ramsey Post

I am grateful for all the insightful comments and good discussion that was generated by my last post. I thought I would respond to them all in a new post.

First, let me clarify that Dave Ramsey encourages people to do Baby Step 4 (save for retirement), Baby Step 5 (save for children’s education) and Baby Step 6 (pay down your mortgage) simultaneously. He doesn’t necessarily advocate that one is more important than the other. I do believe that saving for retirement is a higher priority than saving for your children’s education since, you can’t borrow for retirement like you can for education. I think Dave believes that saving money in a conservative mutual fund will end up benefiting you more than paying off your mortgage early. Mortgage interest is generally 6% or so, while a good mutual fund historically can earn an average of 8-12%. Obviously the market has been hammered recently so we’re all somewhat leery into putting our money there. However, it has performed very well over the long term, despite the bubbles and busts.

Once you have no high-interest consumer debt (credit cards, cars, etc.), you can start on the path to wealth building and saving for the future. But Dave believes  that if you’re paying 18% on a credit card and, instead of paying that off, you put it towards your mortgage or into a 529 for children’s education, you’re making a mistake. Free yourself from the bondage of debt FIRST before you start down the path to wealth building. Of course, if your company offers a 401(k) match, I believe you should try to contribute at least up to the company match, otherwise you’re foolishly leaving money on the table. But before you contribute more, pay off those high interest rate loans. Believe me, debtors are slaves to their lending masters.

As for the emergency fund, it is really important to have that money saved up for a rainy day. Unemployment, health problems, car issues and other unforeseen events WILL happen. The cushion needs to be there. If you’ve sunk all your money into paying down your mortgage, you can’t take part of your house to the bank to get cash. Sure, you can get a home equity loan (assuming you still qualify), but that’s debt and you’ll be paying interest on it. So I agree that an emergency fund of 3-6 months of cash is really important. All the financial advice I’ve been hearing lately supports this position. It provides peace of mind in difficult times.

Dave advocates not buying too much house. The payment should be 25% of your take-home pay. And he thinks no one should have more than a 15 year mortgage, since a 30-year mortgage will cost so much more in interest. Now that’s tough. Most people can’t or won’t do that. But ultimately, it’s better to buy less and have more in cash if at all possible.

As for giving (tithes, offerings, help to friends and relatives), Dave Ramsey believes that tithing is essential to pay all along, not as a final step. I agree with him. Tithing means 10% of income and I know I’ve been blessed for paying it faithfully, even when I was unemployed and not making much money. The Bible says the Lord will “rebuke the devourer for you sakes” if we pay an honest tithing. Dave believes that offerings are also important, but that it is essential to take care of your own household first. Once you have the necessities of life covered, find opportunities to give. I believe  that an important element in giving is sacrifice. C.S. Lewis put it bluntly and powerfully in his book Mere Christianity when he said:

“I am afraid the only safe rule is to give more than we can spare. If our charities do not at all pinch or hamper us, they are too small. There ought to be things we should like to do and cannot do because our charitable expenditures excludes them.”

That quote from a person I highly respect (and who is quoted frequently in general conference), really makes me think. Once I have properly fed and clothed my family and have provided them with shelter and medical care, then I need to give to those less fortunate. Perhaps that means not going out to eat as often, or spending less on discretionary things. It’s hard though. But I guess that’s the way it’s supposed to be.

So what are your thoughts on giving? How do you determine how and to whom to give?

 
5 Comments

Posted by on March 27, 2009 in Finances

 

Dave Ramsey and Financial Peace

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Yesterday, I finished listening to the 13 lessons of Dave Ramsey’s Financial Peace University. Our church is hosting his class, but my schedule wouldn’t allow me to participate, so a friend of mine let me borrow CDs with the 13 recorded lessons. I have to admit, Dave’s lessons are kind of addicting;  he’s funny and entertaining, which makes it fun to listen. His advice on creating financial peace isn’t groundbreaking by any means — he’ll be the first to admit that. It’s simple. It uses common sense. And yet in today’s world, it’s unusual. We have become a culture of consumers, a culture of borrowers. We want stuff and many of us have the ability to get that stuff, regardless of whether or not we have the money! Dave breaks his plan down into some fairly simple “baby steps” that make it so people can get their financial lives in order. So where am I on the baby steps?

1. Get a $1,000 emergency fund for, you guessed it, emergencies! Thankfully, I have this one done; it’s in the bank.

2. Pay off all non-mortgage debts using the “debt snowball” — systematically eradicating debts from littlest to biggest. I started this process a few years ago and within about 12 months I was debt free. I had paid off my cars and all consumer debt. It felt great to be debt free! Then I decided to go back to school to get my MBA. It wasn’t cheap. It was $25,000 for tuition, fees and books. My former company paid for about $4,000  and I paid for about $4,000 out of my pocket, leaving me with about $17,000 in subsidized stafford student loans. I’ve been paying on it now for about a year and I have about $15,000 left. The combined interest rate on the two loans is about 4%, so it’s cheap money, but my goal is to pay it off MUCH sooner than 2018. With extra principal payments, I hope to pay this off within two years. Thankfully, that’s my only non-mortgage debt.

3. Complete the emergency fund with 3-6 months of expenses. I have about two months worth of expenses in my reserves right now, so I still have some work to do on this one. I’m hoping to have three months of expenses in this emergency account by July. It’s going to take some discipline and self control, but its doable.

4. Invest 15% of household income into retirement. I’m currently contributing 4% to my 401(K) and am taking advantage of my company’s 4% match. It’s not 15%, but I hope to work up to that amount as I pay off debt and expand my emergency fund. I want to be sure to have sufficient in my retirement account so that Robin and I can do the things we want to do like traveling, church missions and giving to our children and others. It’s sometimes hard to contribute to my retirement when it’s at least 30 years away, but compound interest is very powerful and it makes retirement savings we put away today so much more valuable. (Some may argue that investing in the stock market is stupid with the recent challenges it’s had. However, historically, the market has been a great place grow money over the long-term, assuming you have a diversified portfolio. I could just stick money in a mattress somewhere, but 3% annual inflation would make that money much less valuable. So I still believe conservative mutual fund investments are the way to go!)

5. College savings for children. I hate to admit this, but we haven’t saved a dime specifically for our kids’ college education. I know I should set up a 529 savings plan for them. However, right now, I’m more interested in funding pre-school tuition, dance lessons, sports teams and other activities for the kids. Robin and I both assume that our kids will get scholarships and will subsidize their education by working while in college to get them through. That’s how we did it. We both got very little help from our parents in this area. However, college is getting more and more expensive (about a 7% increase annually) and so I intend to get going on this baby step as soon as I can. It’s an investment in my children’s future. And that’s much more important than that extra pizza each month!

6. Pay off the house early. This is a great goal. Imagine what you could do without a mortgage payment?! A friend of mine just paid off his house by switching his mortgage to a 15-year plan a few years ago and then paying quite a bit extra on principal each month. I just refinanced my house through my company, US Bank, and got a lower interest rate resulting in a lower monthly payment. I SHOULD take those savings and pay the difference to principal to accelerate the payoff of my home. It could save me thousands in interest over the life of the loan. But all of the above mentioned “baby steps” are calling for that money, so it’s hard to do it right now.

7. Build wealth and give. I don’t own any real estate besides my home. Many people think it’s a great investment, and I suppose it is. But I’m just not that interested in being a landlord. I’m not a handyman and I have enough to worry about with my own house. Plus I really don’t like it when people owe me money. I think I would be a basket case if I had renters who were late with their payments, especially if it put a cash flow crunch on me. So I don’t have plans to invest in real estate right now. But I am exploring ways to build long-term wealth so I can leave a lot of it to my children and to different worthy causes. I’d love to be very wealthy so I could give more.

Dave Ramsey believes in 10% tithing and so do I. I’ve received many blessings from paying an honest tithe and from giving generous offerings to help the poor. I have a testimony that God blesses us when we cultivate the attitude that all that we have comes from him. God doesn’t NEED our money. He asks for tithes and offerings to help us overcome our selfish tendencies. It is a true principle that “givers gain.”

Dave’s common sense approach to money outlined above has given me a lot to think about. I share these somewhat personal thoughts on my financial life because I want to encourage more people to get their financial house in order. I’ve got a decent start, but I have a long way to go still. But as Dave says, you need to “live like no one else so later you can LIVE like no one else.”

daveDave Ramsey

 
12 Comments

Posted by on March 20, 2009 in Finances

 

Roadshow Heaven or Hell?

Over the past ten days, I have spent just about 25 hours in rehearsals and performances. No, I’m not getting ready to open some amazing show at a local theater, nor am I shooting a feature film. I have been working on our church roadshow event! Yes, I was roped into helping out with our stake’s presentation of mini-plays where members of each ward work together to write scripts and music, create choreography, build sets, design costumes and perform their masterpieces for each other!

Since I have some theater experience, I have been helping with the sound and lighting. Last weekend I got to attend all the dress rehearsals and saw each of the eight roadshows three times. During that rehearsal marathon, I had to smile at the off-key singing, cheesy lyrics, silly choreography, stiff acting — you know, the stuff that roadshows are made of! I recalled the old “Far Side” cartoon that shows a maestro’s version of hell as having to conduct a junior high school band for eternity. Perhaps endless roadshow rehearsals is how wicked actors / directors will be punished in the next life! 🙂

All joking aside, despite the shows’ flaws, they turned out to be a lot of fun. At the performances last night, the kids and adults in each cast really put their heart into it. Cast and audience members alike were having fun. I was impressed.

Our stake cultural arts director arranged for six experienced individuals who came from outside our city to provide impartial judging. The shows were judged on specific criteria and certificates were awarded to the top wards. I thought it was kind of silly to make it a competition, but the organizers insisted that the competition would help bring out the best in each ward. I suppose there may be some truth to that…

Our own roadshow turned out to be quite good.  We didn’t take home the top prizes as judges seem to favor wards who provide live music (not pre-recorded), as well as full production numbers with lots of singing and dancing. Our roadshow was more plot driven and had one main “production” number. We were thrilled, however, when our ward won the award for best script, especially since my wife Robin and I collaborated with individuals in our ward to write it. (If you’ve read Robin’s blog, you know she’s a talented writer.) We also won for best set design. And I was really excited when a member of my deacons quorum, who I had helped direct, won for best actor for the whole stake! Tyler is a naturally talented actor and he was awesome as our main character. The other kids were really good too.

The best part was watching these young people come together to accomplish something great as a team. I enjoyed watching many of them come out of their shells as most of them had never had an experience like it. The euphoria of giving a good performance in front of an enthusiastic crowd was evident on their faces. Their hard work over the past several weeks paid off. I think a few lifelong performers were born last night. And that’s pretty cool.

 
2 Comments

Posted by on March 14, 2009 in Random Thoughts

 

Baby James on the Swing

Here’s a cute video of baby James on the swing at East Canyon.

Here’s another video of my daughters Brianna and Lily, along with their cousin Mary, swinging on a tire swing.

 
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Posted by on March 3, 2009 in Family

 

East Canyon Fun

This past weekend, my brother Matt and I took our kids up to our parents’ timeshare condo in East Canyon. Robin and Elizabeth stayed at home to enjoy some rest and relaxation while Matt and each took four kids. Eight kids and two adults — we were outnumbered four to one. But we had a great time! We watched movies, played board games, went sledding, hiked, played on the playground, played video games and bought treats at the Country Store. We also took the kids down to reservoir and let them walk on the frozen lake (the ice was at least 12 inches thick, so it was safe.) I even got a chance to sneak away on Saturday afternoon to soak in the hot tub for half an hour. The kids enjoyed two nights of sleeping over with their cousins and Matt and I enjoyed some fun conversations and a couple of “guy movies” — Cloverfield and The Cave. No Jane Austen films for us! (The kids were in a separate part of the condo watching Spongebob Squarpants, Season One.)

Here are a few pictures for our time in East Canyon.

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3 Comments

Posted by on March 2, 2009 in Trips