Naturally, I assumed you would want to know more of their story, so I asked if they would agree to an interview. Good sports that they are, they agreed. Thank you John and Lisa! Here is their story:

When did you get serious about getting your finances under control?

Our finances have never really been out of control, but after listening to the Financial Peace seminar it became obvious we needed to get out of debt.   We found paying interest for “stuff” to financial institutions was making us have to work harder and enjoy our family less.

How did the car purchase itself go?

Quickly. haha The oddest part was writing a check out of our personal account and driving away with only a receipt.

Did you struggle with the decision to pay cash?

Not at all.

How do you feel about it now?

Great and in control.

How have your lives changed since you decided to get rid of your debt?

We feel more secure and stable. We know that no matter what happens, we will have our basic necessities protected. It makes not following the Jones’ much easier. We are no longer enslaved by the atmosphere of consumerism.

How much debt have you paid off in the past few years?

We have paid off $130K (including the home) since starting. We also have paid cash for all needs since deciding to not take on debt. It has been 3 or 4 years.

What has been the most difficult part of this journey?

Weekly budgeting and controlling daily spending. We still haven’t mastered this yet.

Have the two of you been on the same page throughout the process?

Yes, both of our families discouraged borrowing. So we were raised with the same similar mindset toward family finances.

How have you differed?

Not much. We have had to redirect each other at times, but it wasn’t a struggle.

What has been the key in working together?

Having the same goal and desired outcome. We want to play with our kids more. We work so we can live, not live so we can work.

I know you have one daughter who has graduated from college and two preteen daughters at home. How has this focus on your finances affected them?

We are fortunate to have healthy incomes, so the burden has not been too great for them. But they are getting an education along the way. They are also not kids that place a lot of value on “stuff”.

Do you think your journey has been a good influence on them?

Absolutely and for Kathe too. She had to struggle through college and manage her finances well. She did not take on school loans or credit card debt for her bachelors degree. She worked throughout college and finished in 4 years. She drove the same car she had in high school. She lived on campus and worked campus jobs. She aggressively pursued opportunities for stipends, grants or other positive financial assistance programs.

What is your biggest financial challenge going forward?

Staying comfortable in the stock market with investment strategies. Lost $7200 over the last 3 months in my 401k. Wisest investment for us to date has been property.

Do you believe you will stay debt free for the rest of your lives?

ABSOLUTELY!! We are even looking to downsize our housing to a more modest and realistic size.

Anything else you would like to add?

We think the work you are doing is very helpful for people and we are thankful for our experience with you.

Concluding thoughts

You have just read a real life story of a family who is debt free (having paid off $130,000 in debt) and committed to staying that way. John and Lisa are passing this legacy on to their children; their daughter worked and sacrificed to make it through college with no credit card or student loan debt. My hunch is that their two younger daughters will do the same.  My congratulations to John and Lisa: you are doing it right!

How about you?  Do you pay cash for your cars? Are you debt free?  Are you working toward becoming debt free?  How are you progressing?

photo credit: quaziefoto

Don't tie the knot without financial counseling

You are probably not surprised to read that the divorce rate in the United States has been 50% for the past  25 years.  However, you might not realize that premarital counseling reduces that number by 30%.  And since money issues are one of the top reasons for divorce, every couple considering marriage should get some solid financial premarital counseling.

Our pastor requires premarital counseling for every couple he marries.  Because he has asked me to help with the financial portion, I have developed a very simple quiz that I ask couples to take before we meet.  My goal with this quiz is simply to get each of them to learn more about how their future spouse handles money.   By the time they have done their “homework”, my part is really just a review.

Do you know ANYONE who is planning marriage? Are they getting good pre-marital counseling, which includes financial counseling? If not (or perhaps even if they are), send them to this post.  This Three Step approach should help.

Step One: Take The Premarital Finance Quiz

Print out two copies of the following questions, then each of you answer them in writing. Do this in separate rooms or separate houses; just be sure to take your time and think through each answer.

• How would you prioritize the following choices: getting out of debt, paying off house, investing for retirement, establishing an emergency fund?

• Do you currently balance your check book?

• Upon marriage, which of you should balance your check book?

• Do you currently live on a written budget?

• How much money would it be OK to spend without discussing it with my spouse?

• Do you think, upon marriage, you two should have separate checking accounts or joint accounts?

• How would you feel about borrowing money from parents?

• How much debt do you currently have? What kind of debt?

• How much debt and what kind of debt would be OK in your marriage?

• Are you in favor of a pre-nuptial agreement? If you answered “Yes”, explain your answer.

• What is your credit score?

• Have you ever NOT paid your bills?

• Have you ever co-signed a loan? Had a loan co-signed?

• Upon marriage, what would your short term financial goals be?

• Upon marriage, what would your long term financial goals be?

• What is the stupidest thing you have ever done with money?

• What financial secrets does your fiancé not know about?

• Which of these three best describes you: tightwad, average or spendthrift?

• Which of these three best describes your fiancé: tightwad, average, or spendthrift?

Step Two: Communicate

You knew when you were taking the quiz that you would be discussing your answers with your fiancé. Right? So now set aside time (at least two hours) to discuss these answers together. Each of you need a pad and paper so you can make notes on areas that will need further discussion. Now is the time to be very upfront with your thoughts and expectations. For example, if your future spouse thinks it is OK to spend $1,000 without checking first, and if you don’t agree, say so. What surprises did you discover? In what ways are you compatible? Make sure you talk in depth about your short term and long term marital goals.

Step Three: Take Action

While you should not combine your finances before marriage, there are some things you could be doing. Consider the following your premarital homework:

• Clarify your short term and long term goals.

Put them in writing. These goals will be your financial compass once you get married.

• Start working on those goals.

If one marital goal is to get out of debt, then each of you should start a plan to get rid of your personal debt. If one of you has debt and the other doesn’t, DO NOT pay off your future spouse’s debt at this time. However, the one with no debt should start building up a savings account that will go toward that debt AFTER the two of you are married.

• Create budgets.

At this point, because your finances are separate, you each need your own budget. Creating those budgets and living on them is a great preparation for the time when both of you will be living on the same budget.

• Track your budgets.

You will both learn much as you see which of you does a better job of actually living on the budget you created.

• Create a joint budget.

When you are close to the big day, go ahead and work up a hypothetical joint budget. Ask yourselves how soon you can meet your short term goals by using this budget. Talk about sacrifices you can make to reach those goals sooner. You want to be ready to hit the ground running, so having a plan now will be huge.

• Plan and agree to have a debt free wedding and honeymoon.

This is your chance to work together with a common goal. You don’t want your first financial decision to put you in a hole, so work together now to start the habit of reaching your goals.

I wish you a long, happy and debt free marriage.

Did you have premarital counseling? Did the counseling include financial counseling? If yes, how did it help? If not, how would it have helped?  What other questions do you think should be added to this quiz?

Note: I have previously written a very similar version of this post for Christian PF. 

photo credit: timsamoff

“I wish I had know this when I was younger.”

As our church has hosted Dave Ramsey’s Financial Peace University (FPU) over the years,  the most oft repeated comment from the participants has been, “I just wish I had known this stuff when I was younger.” Our leadership team has been empathetic – we all wish we had developed better financial foundations when we were younger. But one night, after hearing this lament once again, a light bulb came on for team member Lisa, “Maybe we can’t turn back time, but surely there is something that we can do to help our current generation of young people learn these principles.”

A lively discussion ensued, resulting in assignments. Mine was to learn if such an agenda existed. Lisa and Tami were charged with learning what was currently being taught at our community high school.

Getting our foot in the door

I learned that Dave Ramsey does indeed have a program designed specifically for high school students. Lisa and Tami learned that economic theory (not personal finance) was being currently taught. So Lisa and I (with the support of our team) forged ahead, making an appointment with the principal to solicit interest in the Dave Ramsey high school version of FPU. Although the principal was open to the idea, he needed to figure out how to integrate it into their curriculum and also get his business teacher on board. Red tape? Yes. Unfortunately, the business teacher, who was close to retirement, was less than enthusiastic about starting something new. The principal respected the teacher’s wishes and FPU for students went on hold.

A break through

We bided our time. The next school year, the business teacher had retired, the principal had become superintendent, and a new principal was appointed. Lisa and Joe tried again, with much better results. We met first with the superintendent – former principal – who encouraged us to meet with the current principal. More appointments, scheduling and meetings were required. We gave Principal Detering a copy of the Dave Ramsey syllabus, along with an introductory DVD about the class, “Foundations in Personal Finance.” We also offered to pay for all class materials. It was Spring, 2008. Principal Detering and class teacher Linda Wood enthusiastically endorsed the Dave Ramsey curriculum and agreed to integrate it into the Fall, 2008 agenda. The best news? Foundations in Personal Finance became a part of the class “Resource Management”, a requirement for all seniors.

The cost

“How much,” some of you are asking, “did this cost?”

Hey. I would be disappointed if you didn’t ask. After all, we are talking finances here. We had two basic choices: both involved purchasing the training DVDs featuring Dave Ramsey, but one option was to purchase individual student books while the other was to purchase a CD containing the book information in printable format. Option one cost less for the first year, but, because the student books would need to be replaced every year, would become more expensive the second year and each succeeding year. Because the second option would require the school to run copies for each student for each lesson, I discussed this option with Principal Detering, who readily agreed. Our total cost, therefore, for multiple years of great financial lessons for all high school seniors, came to $700.

How has it gone?

While I wish I could say that this class has revolutionized personal finance for every graduate, this is not the case. However, I am not surprised. No one at any age will “get” personal finance unless and until they are ready to learn. And while Dave Ramsey appeals to some high school students, he comes across as corny to others. Still, several have given me cause for hope. When I visited the class toward the end of last school year, I asked, “OK.  What is Baby Step One?”  I was pleasantly surprised to see  numerous hands shoot upward. One senior asked me the best way to start her own Roth IRA. Several told me they want to make it through college debt free. And one upcoming entrepreneur, as a way to earn extra money, baked home made cookies to sell to fellow students while they dined on school lunches. Although Principal Detering had to curtail this endeavor, he nevertheless admired her initiative.

Concluding thoughts

I have zero regrets about getting this program into our local high school. Yes, it took some perseverance (and expense) to get it done. Some students roll their eyes and figuratively put their fingers into their ears. But…some are getting it.

These make the effort and expense all worthwhile…many times over.

What are the high school students in your community learning about personal finance?  Have you been involved?  How did it go?

• Jim had never been able to say no to anyone, especially his supervisors at work. He had moved up to the position of operations manager in a large firm. His dependability had earned him the reputation of “Mr. Can Do”.  But his kids had another name for him: “the Phantom”. Jim was never home. Being “Mr. Can Do” meant late nights at the office, business dinners several nights a week and weekends on the road even after he had promised the kids fishing trips and trips to the zoo.

Saying "no" can establish healthy boundaries. The inability to say "no" removes those boundaries.

In their classic book “Boundaries”, Doctors Henry Cloud and John Townsend explain various boundary problems people experience. One such problem is that of “Compliants”, who say yes to bad things because they haven’t learned how to say no or even that it’s OK to say no. Marti and Jim are examples of compliants. Because they don’t know how to say no, they do not establish healthy relational boundaries.

Why can’t they say no?

I suggest you read the book to get the more profound answers to this question, but basically, Marti and Jim and other compliants act from fear:

• Fear of rejection

• Fear of hurting another person’s feelings

• Fear of someone else’s anger

• Fear of being seen as unspiritual

• Fear of being seen as bad or selfish

You get the idea. Many people who are overly helpful have motives other than simply wanting to help; they may be afraid not to help. Where am I going with this? Most of us know compliants. Some are married to compliants. Many are compliants. Not being able to say no will cause problems with marriages, parenting, work and personal finances. Let’s touch briefly on each of these areas of life.

Marriage

A compliant spouse will not stand up for herself. She is vulnerable to abuse and will never have a true voice in her marriage. Financially, she will agree to “whatever you want honey”. Her spouse will never really know his wife and the two, therefore, will never truly become one.

Parenting

The parent who doesn’t know how to say no is teaching children that life has no limits, that there is no right and wrong and that wrong actions have no consequences. What kind of adult will this child become? My hunch is one that has little respect for the law, for his employer or for God.

Work

The compliant person is the one who always accepts everything the boss piles on. A controlling boss will take advantage of the compliant employee without batting an eye. She may be heralded as a super worker, but sacrifices other relationships in the process. This is “Jim” in the opening illustration.

Financial

The person who does not know how to say no will say yes way too many times. This is the person who will succumb to the telemarketer, pay list price at the car lot and send grocery money to the threatening credit card collector. Remember: the compliant hasn’t learned to say no or even that it’s OK to say no. As already mentioned, a family budget is an impossibility because the compliant spouse won’t speak up, sending a message to the partner that anything is OK when both know everything really isn’t OK. Obviously, for the compliant, the lack of boundaries can be an expensive problem.

Concluding thoughts

In life and in our finances, the actions we take are often determined by deeper issues. Financial gurus commonly give great tips for getting one’s finances under control, but real life often requires more than learning a new technique;  it may require peering deeply into the mirror to learn what makes us tick.

Is a compliant person hopelessly stuck in that role? Of course not. Lack of boundaries is a learned behavior, so establishing boundaries is also something that can be learned.

photo credit: eridesign

Readers: Do you know compliant people? Are you married to a compliant? Are you one? How does not knowing how to say no affect your life and your finances?

Inheritance is a topic very few folks talk about. This is pretty normal since most of us are concerned about reducing debt, worried about our mortgage etc. It seems that only the truly wealthy folks spend time debating this topic. But I feel that we should (when we have the time) try to think about this because I feel this will affect how you view money and how you raise your kids and even your political views on money! Joe has written a couple of post here before about inheritance and entitlement. I would like to share my views on these and hopefully expand on the topic.

The biggest issue the ultra wealthy face is how much to give their kids when they leave this world. Most have set up philanthropic foundations. But the questions of how much to give your kids is the hardest thing for most. On the one hand, you want to leave them something. Yet, leaving them too much will mostly likely result in them getting soft and lazy and losing their drive to succeed in life. Folks who have attained great wealth have done so with lots of hard work and sacrifice. They were more driven than the average person. They also know that if everything comes too easy, then you will lose motivation to work hard.

I think there are three choices you face with regards to inheritance.

Leave every thing to your kids

The first point of view is that you leave everything to your kids. All your wealth. And keep it for future generations. There are obviously many ways you can do so to have some checks and balances. The key idea to this thought is that you should endow your future generations so that they never have to worry about money. And if they do not have to worry about money, they are free to pursue their dreams and ambitions and perhaps focus their efforts on charity.

There is a downside to leaving all your inheritance to your future generations. Firstly, they lose their motivation for work. After all, if you know there is always money in the bank, you will never push that extra mile. In fact, I’ve witnessed countless times folks with inherited wealth who are just “not hungry” enough. And to be honest, you cannot blame them because they are simply reacting to their situation. The more wealth you have, the more risk adverse you will be. Look at the British aristocrats today (the dukes and earls). Have any one started a really innovative company? Has anyone of them been a successful sports person? Hardly any!

Donate most of your wealth to charity and leave enough so that your kids will never starve but will still have to work

Warren Buffet and Bill Gates belong to this camp. In fact, Bill Gates has set up his foundation (the Gates Foundation) and is heavily involved in all sorts of charity work. He said he will leave some money for his kids (enough that they will never be on the streets) but not enough such that they can goof off for the rest of their lives.

I personally would subscribe to this view as I think you kids deserve something from your efforts and at the same time, you want them to be hungry and achieve things in life.

Leave your kids with nothing

Obviously, you can choose to leave them with nothing. In fact, many folks leave their kids with nothing not out of choice, but simply because they died poor! It is not the end of the world if you kids inherit nothing from you. If you have brought them up well, they should be able to make a living for themselves.

Money shouldn’t be the only inheritance you leave

Amidst all the talk about inheritance, I think it is important to ask ourselves if money is everything when we think about inheritance. If you leave nothing for your kids, they could still be very successful. So instead of pounding our heads about how much to give, we should also focus on the following:

Teaching your kids to fish

Leaving an inheritance for your kids such that they do not have to work another day is tantamount to catching the fish for your kids and cooking it for them! They would enjoy the fish, but they would never learn how to catch or cook it. I think this is where the concept of spending time with your kids and developing a relationship with them becomes so important. Being a strong mentor to your kids perhaps is the most important thing you could teach them.

Teaching kids the value of hard work

Having three kids myself, I think teaching your kids the importance of working hard (and obviously smart) is so important.

Teaching your kids how to handle wealth

How many of us teach our kids about handling money? Not many. But I think that teaching them this skill is one of the most important legacy you can leave your kids. It means teaching them about the importance of spending less than they earn, of paying themselves first, and teaching them about the dangers of debt. That is so important because when they get to college, you can’t really stop them from applying for a college student credit card. Financial education is best taught before a child earns his money or can apply for a loan!

Once you have taught your kids to fish and cook it, then what?

Well, you have to face the three choices. You can choose not to leave them anything and leave everything to charity. Or perhaps you will not die wealthy. But if you have brought up your kids well, then they should be able to fend for themselves. Personally, if I were really wealthy, I would go with the second choice, which is to leave them enough so they would not starve but not enough that they do not have to work for the rest of their lives. I would reject the first choice of leaving everything to them (even in a trust where they cannot squander everything) because I think once we get things too easy, we lose our drive to strive for perfection. We get careless and lose our sharpness.

Things never turn out well when life gets too cushy

Just look at the welfare states in Europe. Look at Greece and their generous pension plans. Or the Spanish taking siestas in the afternoon! The Greeks are now not competitive. Have you bought anything recently “made in Greece”? Or closer to home, look at what cheap monetary policy and printing money resulted. Instead of letting recessions truly cleanse the bad business decisions, the Fed always lowers rates. Extended cheap monetary policy lulled us into a false sense of complacency. As a result, we all think that the Fed will always bail out the economy, and leverage and debt increased. Lenders make bad decisions. Even households and consumers like us made bad decisions, because there always seem to have that “safety net”. And you can’t really blame them when housing prices keep going up, when you can get zero down mortgages, cheap home equity lines of credit, 0% financing for cars and even furniture, and even do balance transfers with credit cards! Even subprime borrowers could get access to credit!

On a personal level, I’ve seen folks who have inherited lots of money not having the drive and hunger that I see in some folks. Somehow, they seem not to care so much, not willing to put in extra hours, not as concerned if things do not work out. Perhaps it’s just me, but I’ve come across too many instances to think it’s just a coincidence.

Final Thoughts

I think it is OK to leave some inheritance to your kids as a safety net (but perhaps no more). Once someone gets down the path of entitlement and having enough money to goof off, it will rub off on the future generations. And the last thing you want is to have your future generations get lazy and unproductive because of some inheritance you have left. They key term here is “safety net”. What constitute a safety net? When is enough enough? I do not know the answers. Perhaps we can leave this discussion for another day.

photo credit: quinn.anya

Please share your thoughts here.

Some background

The year before I turned 60, I started researching Long Term Care Insurance. I read brochures; I asked questions; I solicited quotes and I asked questions about those quotes. Long Term Care Insurance, in case you don’t know, has many nuances and is quite complicated. Because I assumed that Janice would agree that we need this insurance, I wanted to make sure I clearly understood how it worked.

Did you get that word, “assumed”? With all of the grace of a bulldozer I laid my bulging LTCI file on the dining room table and commenced explaining how it worked and why we needed it and how much it would cost. Janice listened thoughtfully and then said, “No one in either of our families has ever needed nursing home care. I think it is a waste of money.”

“But…but…”, I stammered. “A prolonged nursing home stay will wipe out whatever nest egg we have. Is that OK with you?” As I listened to myself talk I realized that I sounded strangely like an insurance representative.

“Well, no.” Jan replied. “That is not OK. But it is worth the risk to me. I would rather hang on to that premium money than spend it year in and year out for the rest of our lives.”

Janice and I have an agreement: we don’t spend money on anything over $100 without both of us agreeing. In this case, we both didn’t agree so we didn’t spend the money.

Still, I was plotting to not give up easily.  I remember thinking,  “We don’t have to buy the long term care insurance right now. I will wait until before my 61st birthday and bring it up again.”

The Years Pass

I kept my word to myself. I brought up the issue before my 61st birthday, before my 62nd birthday and before my 63rd birthday. Each time Janice politely explained her views. Finally, in our most recent discussion, Janice’s voice had an edge to it, “I thought we had already settled this discussion. I understand our decision. I am willing to take the risk. I just don’t think we need to be spending that premium money for insurance that I don’t think we will ever use.”

We Negotiate

“OK Jan.” I countered, “I respect  your judgment, so let’s discuss a compromise. Would you agree to increase our investments? Realistically, we will never create a big enough nest egg to be self insured, but we could earmark the nest egg for Long Term Care and it would surely help if we need it. If not, then we still have our money.”

“Sure. We could do that.” she said.

So we agreed, once and for all, that we will not buy Long Term Care Insurance and that we will beef up our investments instead.

What is the Point?

You might not agree with our decision. That is OK. But even though I didn’t get what I wanted, I harbor no ill will about it. The point is that with this issue, as with any issue, we have a process: we talk it out and respect each other enough to listen and negotiate and come to an agreement. My wife is a wise woman, one I have great respect for. Someday, I suppose, we will learn which one of us was right. But there will be no “I told you so’s” – no matter what. WE talked and WE made a decision and WE are both on board.

In my mind, that is what a great marriage is all about. The best long term marriage insurance I can think of is a healthy process of talking things through, coming to an agreement and living with that agreement.

Even if things don’t work out the way we want, we will manage. We are a team. We do things together. We will figure it out. Together. That is the point.

Readers: How do you resolve money issues in your family setting? Which ones have been particularly difficult? What have you done right?

photo credit: Candida.Performa

photo credit: HowardLake

I have a friend who told me, “Joe, I just don’t want to be a millionaire. I am happy like I am. Having lots of money just doesn’t appeal to me.” Although I don’t share my friend’s belief, I understand where he is coming from. Therefore, in respect for my friend and anyone who views wealth as something to avoid, I want to offer tips to help them stay vigilant in their quest for un-wealth. My logic is that this crowd should strive to develop an “Anti-millionaire Mind”. Therefore, using Thomas Stanley’s classic “The Millionaire Mind” as my resource, I offer the following suggestions on how to avoid great wealth.

1. Choose a vocation you hate.

This one alone should do the trick. It is very difficult to achieve monetary success doing something you despise. You really don’t have to pick and choose here; just allow yourself to drift toward a job that happens to be available or that offers a good starting salary. You don’t want to be like the average millionaire, who loves his chosen vocation. One such millionaire stated, “It is not work; it is a labor of love.”

2. Never plan your investments or consult with tax experts.

Follow the latest trend with your investments, especially get rich quick ones. And always, always do your own taxes, even if you find yourself in tax situations you don’t understand. You don’t want to be like those millionaires who spend time planning their investments and don’t mind seeking advice from a tax expert.

3. Never marry.

Believe that you can be a self made man or woman without having to share anything with a spouse. Forget that rubbish about “behind every great man is a great woman.” After all, 81 percent of millionaires believe that “having a supportive spouse” is an important factor in their financial success.  Only 2% of millionaires have never been married.

4. Become OCB over your GPA

This one only applies to students, but developing that un-wealth mindset early is important. Make sure that you obsess over your Grade Point Average. This is a wonderful strategy because once you receive that piece of paper called a diploma, the real world will reward you based, not on that GPA, but on how well you are able to help your employer succeed. The average GPA of the millionaires that Stanley interviewed was a less than stellar 2.92. It seems that those who focus on grades can regurgitate information without needing to create common sense answers. Millionaires rated “graduating at or near the top of my class” as dead last in factors most important to their success.

5. Socialize extravagantly.

Make sure you eat at the most expensive restaurants, stay at five star hotels and take lots of European vacations. While real millionaires will also enjoy traveling, they generally live by the adage, “the best things in life are free, or at least reasonably priced.” They love to do inexpensive socializing such as attending son or daughter’s sporting events, visiting a museum or playing bridge with friends.

6. Don’t try to get along.

If your co-worker needs a hand, look the other way. If you don’t like the way she does her work, make sure you point it out to others behind her back. Undermining your boss’s decisions with lack of support, lack of cooperation and lack of enthusiasm will also work in your favor. Even not speaking to your neighbor will help.  After all, 94% of the millionaires Stanley surveyed rated “getting along with others” as important or very important in their success.

7. Play the lottery

Millionaires do believe in risk, but only when their involvement is a factor in determining the outcome. In general, they don’t believe in gambling when winning is left to chance. Only 14 percent of decamillionaires play in a lottery during any given 30 day period compared to 38 percent of non millionaires. I realize that this advice is counterintuitive to those who want to avoid wealth (why else would you be buying Lotto tickets?), but trust the statistics: playing the lottery is not part of the millionaire mindset.

8. Be unscrupulous

I realize there are many fine upstanding people who are not millionaires. But if you want to proactively develop this un-wealth mindset, lying, cheating and breaking promises will cinch the deal for you. Simple things such as missing appointments or talking behind people’s backs are huge factors. If you are in sales, make sure you do everything you can to get THIS sale, with no thought of cultivating return customers. Integrity should not be on your radar, because of the 30 most important factors for success, Stanley’s millionaires rate “integrity” as the very top quality to strive for.

Conclusion

If building wealth is not important to you, you are already far on the path of developing a non-millionaire mindset. However, if you want to make sure that wealth doesn’t somehow sneak up on you, following these tips will cinch the deal.

Readers: Surely there are other tips that I haven’t thought of.  Help us out here.

200,000 miles! Just don't take picture while driving 70 MPH!

photo credit: gwdexter

I grew up in an era when a car was considered junk if it ever made it to 100,000 miles. Even the manufacturers weren’t optimistic about their cars achieving the 100,000 mile plateau – the odometers maxed out at 99,999.

My 1966 Plymouth Sport Fury, despite tune ups and carburetor rebuilds, refused to run in cold weather. I sold it at the 85,000 mile mark. We purchased our 1971 Volkswagen bus new and babied it for 70,000 miles before we dumped it (the air cooled engine would not stop sending exhaust smells through the ductwork). These were not isolated instances; my parents seldom owned a vehicle which made it past the 100,000 mile barrier.

The 100,000 mile mindset

Because automobiles just didn’t hold up so well in the fifties, sixties, and seventies, buyers rightfully developed what I call the 100,000 mile mindset. Owners planned to get rid of their cars before that odometer rolled over, knowing that even if it still ran well, the mileage would frighten buyers away. The “smart” thing was to buy a new car every seven years, because, at 15,000 miles a year for seven years, the car would be worn out.

Changing to a 200,000 mile mindset

Even though today’s automobiles are better made and last much longer, old mindsets die hard. We are still afraid of that 100,000 mile mark. Yes, one can realistically expect more maintenance issues as the mileage increases, but more maintenance is far different than the breakdowns and unreliability of those clunkers of yesteryear. Today’s vehicles, properly maintained, should last 200,000 miles. My 1986 Ford Ranger was an eye-opener for me. It had 36,000 miles on it when I bought it in 1989 for $7,500, and had 220,000 miles when I sold it for $2,000. Admittedly, it was needing work at that stage in its life, but my point is that if 200,000 miles was realistic on a vehicle 20 years ago, it is more realistic today. If you still subscribe to the 100,000 mindset, it is time to change it to 200,000 miles.

Thinking it through

Think through this philosophy with me. If we base the life of a car at 200,000 miles, then think in terms of what you are paying for the remaining life of the car. I will use my sweet 1999 Cadillac DeVille as an example. The new price in 1999 was about $40,000. When I purchased it three years ago for $7,200 it had 64,000 miles on it. If we go by the old 100,000 mile mindset, we would say that I got the car for 18% of its original price while it has 36% of its life left…not bad. However, we know that this Caddy will go way more than 100,000 miles, so applying the new 200,000 mile mindset indicates that I paid 18% of the original price for a vehicle that still has 68% of its life left. I like the way this sounds!

Money in your pocket

Continuing with the Cadillac numbers, the ownership cost for the first 64,000 miles was $32,800 ($40,000 – $7,200), making the cost per mile to be $0.5125. Assuming that I drive my baby for 200,000 miles and I can sell it at that point for $3,500 (KBB private party value for my model at 200,000 miles), my ownership cost will be only $3,700 ($7,200 – $3,500) for 136,000 miles, or only $0.027 per mile.

Now…at this point things get a bit dicey because I realize that a higher mileage car will have more repairs. So, assuming worse case scenario, if I had to replace both the engine and the transmission (rebuilt with 100,000 mile warrantees) I would spend around $10,000 in repairs, bumping my cost per mile from $0.027 to $0.10.

Lifetime savings

It is not unrealistic to assume that you will drive 15,000 miles a year for 50 years, or 750,000 miles in your lifetime. Owner A (who buys new and trades at 64,000 miles) will spend $384,375 while Owner B (who buys at 64,000 miles and drives to the 200,000 mile mark) will spend only $75,000…a savings of over $300,000 in a lifetime. A married couple who does the same with both cars would save over a half million dollars! These numbers, while huge, are not unreasonable. Liz Pulliam Weston, in her book “Deal With Your Debt,” estimates that the typical person could save $250,000 over a lifetime by driving a car 10 years instead of 5 years.

Why not?

Why don’t people keep their cars longer? Why do they trade or sell a car that is perfectly dependable? I don’t know. My guess is they get bored with the same car, or they want to impress someone, or get the newest and fanciest. I believe that many are still hanging on to the outdated 100,000 mile mindset.

Summary

Drivers used to push a car to get that magic 100,000 miles out of it, knowing it would be junk at that point. But I assert that the typical car today is more trustworthy at 200,000 miles than the yesteryear clunkers were at 100,000.

Therefore, 200,000 miles is the new 100,000. Change your mindset to 200,000 miles and you will save a fortune over your lifetime.

How many miles do you try to put on your cars?   If the car is still dependable, why do you get rid of it?   Do you succumb to the 100,000 mile mindset?

This post has been included in the following Carnivals:

Festival of Frugality hosted by Live Real Now Editor’s Choice!!

Best of Money Carnival hosted by Canadian Finance Blog

Does one size really fit all?

photo credit: rejon

Before you jump to the wrong conclusion, let me state that the purpose of this post is not to trash Dave Ramsey. Just check my “About” page to read how Dave, his teachings and his books have turned my life around. You will also read that I am a Dave Ramsey certified counselor. I drank the kool-aid and followed Dave’s Baby Steps to dig myself out of debt, build my emergency fund and pay off my house. I will readily attest that Dave’s teachings work.

However, months of exposure to the personal finance blogging community have helped me realize that Dave’s “one size fit’s all” message doesn’t apply in every case to every person. My point is not to fault Dave; it is to encourage people to think beyond the Dave Ramsey formula and clearly understand why they are doing what they are doing.

Some examples:

Debt snowball

This is one I have seen debated ad nauseam in the blog sphere. Nearly everyone agrees that a debt snowball is a good idea; but disagrees on how to structure it. Dave says lowest debt to highest debt, stressing the importance of those early victories that fuel the debt free fire. Dave is famous for his observation that personal finance is 80% behavior and 20% math. Others say highest interest rate to lowest interest rate. Still others have a hybrid plan…I recommend reading Matt Jabs’ post “Pay Off Debt – The Hybrid Debt Snowball Fight” for a great explanation of his hybrid plan and (more importantly) the thinking behind it.

My point is this: debt needs to be attacked with a vengeance, but not everyone is motivated in the same way. Some people (usually the math nerds) are MORE motivated by getting that high interest debt paid off first, even if they don’t get that quick victory that Dave’s method achieves. Others, like Matt Jabs, will be highly motivated by devising a plan that works for his family. My thought: attack your debt in a way that will keep you motivated and on track for however long it takes.

Credit cards

Here we go. Dave, of course, is adamant about the many evils of credit cards. Yes, credit cards get lots of people into lots of trouble, but the debate reminds me of the gun ownership debate: do guns kill people or do people kill people? My wife and I have not owned credit cards for years and have not missed them one iota. But I have met too people who use credit cards responsibly (and who do extremely well financially) to believe that Dave’s “No Credit Card” rule should apply to everyone.

Don’t worry about your FICO score

Dave is absolutely correct in challenging people not to “worship at the FICO altar”. Too many people get way too freaked out about their credit scores, and Dave is on target teaching people not to go into debt in order to build their credit scores. In fairness to Dave, I have never heard him tell people to trash their FICO scores, but he is quite proud to proclaim that his is zero because he hasn’t borrowed money in many years. The inference is that FICO scores are irrelevant, but they aren’t. Insurance companies regularly use credit scores to determine insurance premiums and a good score helps with a home loan if manual underwriting is not available. A recommended read on the topic is FICO Scores Matter: Sorry, Dave Ramsey at Money Help for Christians.

Always get a 15 year fixed rate home mortgage

Fixed rate? Definitely. 15 year? Hmmmm. Are there times when stretching the loan farther makes sense or should all home buyers in all circumstances always get 15 year mortgages? Dave’s criteria are to be out of debt, have a 3-6 month emergency fund in place and set your price range by buying a home on a 15 year note that will keep your payments at 25% or less of your take home pay. Great guidelines, but what if there are no safe neighborhoods in your price range within driving distance of work? Or what if one of the incomes in a two income family is fragile? Or if one spouse is contemplating becoming a stay at home parent? Would there not be some wisdom in giving some cushion by stretching the loan to a 20 or even a 30 year time. To dig a little deeper in how the interest rate itself affects the comparison of loan terms, read Joe Taxpayer’s A Thought on 15 vs 30 Year Mortgages.

Reverse mortgages

I know. Reverse mortgages are more debt and a terrible financial product. I agree. My point is to push the envelope enough to ask, “Are they always wrong?” I recently wrote a four part series on reverse mortgages, arriving at the conclusion that no one should get one without trying every other conceivable option. But I could see that if a senior was emotionally attached to the family home, leaving an inheritance was a non issue and he could use some extra cash flow, a reverse mortgage could be a positive option.

Summary

Dave Ramsey is a financial guru. He has probably helped more people escape financial bondage than any individual alive. His books are full of clear and well articulated advice. I don’t think anyone would go wrong by simply doing what he says. It works. But my challenge in this post is to make people understand why they do what they do. By doing so, they will usually discover that what Dave teaches is what they should do. But, because one size doesn’t always fit all, they may be able to streamline their finances to better meet their individual circumstances.

After all, isn’t that what makes personal finance personal?

Readers: What other exceptions can you think of for Dave Ramsey “one size fits all” advice?

This post was included in the following Carnivals:

Yakezie Challenge Carnival #7 hosted by Money Reasons

Best of Money Carnival hosted by Credit Card Offers IQ

Carnival of Financial Planning hosted by The Skilled Investor

Winston Churchill, "It is our battle – not just ours to win or to lose – but to take. Surrender is not an option.”

photo credit: dierk schaefer

1 Cor 16:8,9 “But I will stay in Ephesus until Pentecost, for a wide door for effective work has opened to me, and there are many adversaries.”

How do you handle conflict? I realize that many smart people tell us that conflict is a positive thing: it pushes issues to the forefront that would otherwise remain stewing in our internal crock pots. Yes, I understand…but I still don’t like conflict. I am embarrassed to confess that I will often remain silent or even acquiesce in order to avoid conflict. Not good. So this post is an attempt at kicking myself in the appropriate spot in order to grow a backbone. “Joe…listen up!”

Apostle Paul

When Paul wrote the above verses, he was planning a trip to Corinth, but decided to stay in Ephesus because of the two polarities he was confronting: opportunity and adversaries. For Paul, they were one in the same; the gospel not only produces conflict but flourishes because of adversaries. Paul’s message created quite a stir in Ephesus; because the new believers could not in good conscience continue to support the purchase of silver idols, the silversmiths saw their profits nosedive and therefore organized an angry mob set on doing Paul in. (Acts 19:23-41)

Paul loved it. Was he a masochist? Of course not. He was literally a man on a mission…a mission which produced conflict.

How about you? Do you believe so strongly in anything that you will continue to stand even when standing alone? I am not talking about some martyr complex nor am I suggesting hard headedness for the sake of being hard headed. The opposition is not the issue; the belief is. I would assert that such conviction must be rooted in your very core values, and I would hope that those core values are for good and not evil.

Winston Churchill

Biographer William Manchester writes about Winston Churchill at a time during WW II when England was weak and ready to collapse, “If anyone is going to rally England, it must be someone who is ruthless for the good. If England is to survive, indeed if civilization is to survive, there must be a man who would rise to face Hitler with a voracity for freedom greater than Hitler’s voracity for evil.” Manchester pauses, then proceeds again with this single sentence, “In London there was such a man.”

Churchill himself said, “No other generation had the opportunity to fight for a foe quite like this. This is not a burden on us. It is a privilege if we understand it. It is our battle – not just ours to win or to lose – but to take. Surrender is not an option.”

Us

I ask again, “How about you? Are you, like Churchill, ruthless for good? Do you have a voracity for good? Is conflict a privilege? Is surrender an option?”

I stated previously that this post is an intended self therapy. How did it go? Very well. I am inspired to be more like Paul and Churchill. These two men were so focused on their respective missions that their adversaries, no matter how powerful, were never deterrents. I am hereby resolving to focus on the mission God has given me, to stand for my convictions and to stay on task when conflicts arise. I want to be ruthless for good.

Don’t you?

This post was included in the following carnivals:

Christian Carnival hosted by Fish and Cans