...Summer Daze...

I’ve been watching a lot of baseball lately, due no doubt to the impressive pitching performance of the Rangers this season. Skeeter has been watching a lot with me and learning a bit about the game. And it can be a confusing game. Recently, after a Ranger scored from third, she asked “Was that a Death Run?” I was stunned for a few seconds before remembering a previous conversation. “No, it’s called a suicide squeeze.”

We took a five day vacation to San Antonio and traveled with two other couples. We had much fun, but I was outvoted on two significant issues. We didn’t have a single Mexican meal there and we didn’t go see the Alamo. It reminded me again why we normally vacation alone.

I signed up for extra classes this summer. The result was that I taught classes all summer and thus reduced my days off to about two weeks over the summer break. Part of the reason I got into teaching was to get summers off. Of course that was before kids’ college funds.

Scooter has had a time consuming job this summer and it’s wearing on her. She baby sat one of Squealer’s friends for eight hours every day all summer long and is worn out from chasing them all around. I’m secretly (and not so secretly) amused every time the Girl or Squealer says to her “I’m bored.”

Pecan Grove continues with Transition Team meetings on a weekly basis. It’s going well, I think, but slowly. Many conversations, many different points of view. We continue to pray for breakthroughs in some of these unresolved issues.

FPU is going well at Pecan Grove. Recently one guy (who’s in financial difficulty) roared out of the church parking lot in his 08 fire engine red Mustang. One of the coordinators for the class said in his slow southern drawl. “Dave’ll tell him to sell the car.” Indeed.

A triple wammy next week as Scooter starts High School, Skeeter Middle School, and Squealer begins the first grade. I took Scooter to her high school orientation (at my own alma mater) this week and found the rising nostalgia a bit overwhelming. I can’t believe my daughter is entering her freshman year of high school.

Facebook has taken over more of my life and crowding out a bit of blog time. Perhaps that will change as we start school on the 24th. We’ll see.

FPU Explosion

We’ve had a bit of an explosion at Pecan Grove, and I couldn’t be happier.

In one of our listening groups from a couple of months ago, A church member mentioned a quote often associated with Dave Ramsey. (As you may recall, our family has benefitted from following his financial program). This church member indicated that Ramsey’s Financial Peace University (FPU) had greatly blessed their family and he had been interested in getting it started at the church. In fact, he had received a bonus recently and would be happy to purchase the Leader’s Kit and donate it to the church.

I asked him if he would like to teach it and he replied that he’d never taught anything in the church before. But after a few weeks of thought and prayer, he consented. In the overall scheme of things, I thought that this would be another Bible study that might reach a dozen people or so. I brought it up with the church council and suggested that the church pay a scholarship of $50 to help defray the $100 charge for those who wished to participate in the study. They quickly agreed and we set a day for Financial Peace University to start.

And then it exploded.

We moved the study to Sunday evening because not many could participate on Wednesday nights. First 10 couples signed up, then 20, then 30. And now we’re ordering more kits to get us up to 40. Each kit represents a family unit; that is, either a couple or a single. So we have about 70 people in the church going through it. In addition, we’ve had a half dozen families from the community choose to participate. Almost three fourths of our Sunday School attendance will be taking the class. We were going to run it concurrent to our evening worship service, but only 2 people who normally attend were NOT going to be taking FPU. So were are running it during the evening service and the two agreed to help with child care.

The credit crisis and general anxiety about the economy are no doubt factors in its popularity. We’ve had a couple of business plants in our community shut down and several church members are jobless. The chance to pay off debt and to establish an emergency fund looks pretty attractive right now. All in all, the church is excited about this opportunity to be engaged in a common task, and to offer something for the community.

Our transition team discussed the FPU class this past Sunday and think that it could be an important opportunity for the church to work together on a focused financial goal without conflict. That would be an important accomplishment and something that the church has struggled with achieving before.

(photo above was taken last night during FPU)

FPU Revisited

This last Sunday evening we finished off our Financial Peace University class. Over the course of the last thirteen weeks, I had a front row seat to see some exciting things happen. The class of about 15 “family units” (FPU’s term that includes both couples and singles) paid off $15,690.00 in debt. Because of Dave Ramsey’s emphasis on tithing, I was interested in how the class might affect the class in the area of stewardship. So I asked our business administrator to track the tithing patterns from three months before the class started to the three months of the class. Aggregate tithing (the first time that phrase has been used on the internet) went up from an average of around $7,000.00 to around $9,000.000 during the course of the class. And there were other success stories.

In one couple, the husband went out and got a new job and they also yanked their Direct TV (A major sacrifice for them). Another couple decided to completely pay off their home mortgage (like this person). One lady decided that she could have substantial amount in savings and still retire by a certain age is she got aggressive in her savings. Another class member saved over $1,000.00 a year when one of the lessons led him to shop around his homeowner’s insurance with some other companies. One retired couple said that they were communicating more in general now as a result of working together on a budget. We even had one non-church member take the class after she read about it on Dave Ramsey’s website.

Overall it was a positive experience. I will mention two obstacles:

First, the course is expensive. The main teaching materials (DVD’s, facilitator’s book, etc) is $300.00, a sizeable chunk for our church. Additionally each student’s book is $90.00, another sizeable chunk for people who need financial assistance anyway. We did have some folks in our church who provided partial scholarships for families who needed one. Overall, there wasn’t anyone I’m aware of who didn’t take the class because they couldn’t afford it.

Second, the course is long. It is 13 weeks, two hours a week. That length of time knocks off a fourth of the calendar. It also makes scheduling other events in the life of the church difficult. We ran it on Sunday evenings after our worship service and it made for long evenings for the facilitators.

But despite these two obstacles, Financial Peace is well worth it. Ramsey’s last lesson may be his best. He puts financial peace in a larger context of proper stewardship of all things. I’d recommend it for any church interested in training people how to handle money according to Biblical principles and common sense.

Financial Peace University

FPU here we come.

About a year and a half ago, I asked our pastor if we could offer Financial Peace University. He said he’d think about it and never got back to me. After I finally asked him his decision, he said nope, “It’s not time.” It apparently never was time, as he left a few months later.

Our current youth/education/interim minister (and the only minister on our staff) was called to the gospel ministry out of the world of financial services and is passionate about this course. He has encouraged me to offer the class. This program was developed by Dave Ramsey (long time masochists readers of this blog remember a series about Ramsey’s financial plan from some time ago.

Financial Peace University is a 13 week study (2 hours a week) that explores the Bible’s teachings on finances by someone who has gone broke and bounced back from it. It is a great program for all of course, but we have a several single parents in our church and it should be very helpful for them as well. In addition, a local marriage counselor (who isn’t even a Christian) is going to send us several referrals for it. Kadie and I will be coordinating the class.

One bonus is its use as an outreach tool. By offering the class, our church will go up on Ramsey’s web site for those looking for a class in our area. If you are interested in a class in your area, check it out here. If you want to offer it at your church (and I highly recommend it) check out Ramsey's site and connect with their church coordinators.

So starting August 19th we will roll with it.

Final Thoughts on Ramsey

I've thought more about finances in the last two years than I have in my previous thirty-five. Some final thoughts:

1) I am amazed at how pervasive debt is today. School debt, car debt, and a thirty year mortgage (or fifty????!!!!) is the norm. That is a lot of money flying out the door each month. A colleague of mine leased a new car recently. We're close and he knew of our plan. He said "I don't consider a car payment an option. You have to have one and I'll have one the rest of my life." We've decided to get off this debt merry-go-round.

2)The greatest feeling about sloughing off our debt like so much dead skin is the flexibility it has given us. We can now respond to impending crises by rechanneling our money from investments to stockpiling cash when the demands of life appear. We can respond to immediate crises by using our emergency fund. That flexibility feels very liberating.

3) We also have more money to give. Ramsey is big on tithing and while we've been on his plan we've given money to the work of our church like we've never been in a position to give before.

4) My profession is infested with debt. Student debt is rising astronomically, with the average undergrad completing their degree with $19,000.00 in debt. Life is no better for graduate students either. I am concerned about students who go heavily in debt to get into a profession that won't allow them to pay it off in a reasonable length of time.

5) Ramsey's plan isn't perfect. My main criticism is that it is pretty cookie-cutter in its approach. He is a lot stronger on getting out of debt than he is on investing. Probably because so many more people need to get out of debt than they need to invest.

6) Finally, I think one great appeal about Ramsey is the power of his personal narrative. He was a millionaire before the age of thirty, lost it all, and was a millionaire again before forty. The experience of going bankrupt seared into his personality an aversion to debt. Being anti-debt is now a crusade for him.

His plan is simple, but not easy. It is also is not instant wealth or get-rich quick. It is methodical, and takes decades to achieve financial goals. It is simple, but not easy.

As he says "I sell crock-pots, not microwaves."

Why not give it a shot? I would recommend starting by reading The Total Money Makeover.

Baby Steps Four, Five, and Six (VII)

These three steps are carried out simultaneously.

Step Four is 15% of gross income into retirement. We've been putting only 8% of my income into retirement, so we really need to kick this up. We are in the process of setting up an automatic draft into some Roth IRA's for this. Ramsey recommends Roth because it grows tax free. I'd rather pay the taxes now rather than later because I know that I have the money now. Who knows how things will look in thirty years??

Step Five is saving for kid's college. Regrettably, the school system I work for does not pay for tuition for dependants. (I literally do not know of another system or school that does NOT provide tuition assistence for faculty kiddos). We are on our own. Our goal, starting next year, is to save up $2000.00 per kid, per year into an Educational Savings Account. That won't pay for Harvard, but it will get them started. Scooter (at age 11) is the one I'm mostly concerned about paying for. Our goal is to pay off the house by the time she begins so that we can work to cash flow her first year. Which brings us to...

Step Six is to pay off the house early. Ramsey recommends no more than a 15 year fixed rate mortgage, which was the only thing we were doing correctly when we began his program. At this stage, he advises you to pay what extra amount that you can on the balance. We have about 12 years left on the note now and will really work to pay it off in seven years. We are starting off this year by paying an extra $80.00 a month which will pay a bit more than an extra payment per year. Obviously we will need to increase that to meet our goal.

Final thoughts tomorrow...

Baby Step Three (VI)

The third baby step is to build up your emergency fund to 3-6 months of expenses. This is a general rule of thumb that I've seen recommended in some other places as well. Since Kadie (the nurse) and I have reasonably (ummm...mostly) secure jobs, we opted for the three month expenses emergency fund.

For us, that equates to about $12,000. In some ways, this step was the hardest. It took almost as long as Baby Step two, but without the gratification of seeing our debts evaporate. Plus, I must confess that we were not as diligent and focused as we were on Step Two. One gets lax when the wolf is no longer at the door.

It took us until September to save up the money. But now we've done it. We've put $2,000.00 in our local credit union (earning nothing) and the other $10,000.00 into a Capitol One Money Market account (earning 4.8% interest). We figured it would be nice to earn some interest off them for once.

We celebrated tonight at the same Japanese Steak House. Squealer enjoys the open flames. He's got some pyromania in him!

Baby Steps One and Two (V)

So Kadie and I made some plans. First, we decided not to get the minivan fixed right away. We waited for a month to save up the money to repair it. My parents graciously loaned us a car for that month. Kadie then signed onto a contract and began to work extra shifts to generate the $3,300.00 for the new car engine.

We then turned our attention to Ramsey’s plan.

Baby step one was the easiest. Dave suggests $1,000.00 in your baby emergency fund. We had around $1,200.00 in the bank, so this was the easiest of our goals to meet. We pulled out $200.00 to throw at our debts and turned our attention to paying off debt.

Baby step two was the hardest. Ramsey says to lay out your debts, from smallest to largest, (except for your mortgage) and then begin to pay them off. Our debt snowball looked something like this:

$200.00 Bank of America Credit Card
$380.00 Discover Card
$1,100.00 Best Buy computer payment (at a lovely 0% interest)
$17,520.00 Our 2005 Saturn VUE

In March of 2005 we began to pay off these debts. We started with the lowest and worked our way through them. Ramsey reccomends starting with the lowest total amount (as opposed to highest interest rate) in order to make some quick progress.

The toughest debt (obviously) was the car. We purchased the car in November and then took charge of our debt the following spring. Dave recommends keeping the car if you can pay off all your debts within 18 months of starting his plan. We figured that we could meet those guidelines.

And we did it. Kadie worked a few contracts and we cut our expenditures down substantially. We stretched our paychecks and tightened the screws on our budgets. Instead of taking an extended road trip for a vactaion (like to Colorado or Virginia, as we had in past summers) we stayed at a relatives home for a weekend. That was our "big" vacation. We spent more time at home and our riding bikes.

The last month, January of 2006, was the toughest. In that last month our microwave died (it was a wedding gift that had survived 14 years of culinary abuse); our dish-washer died; and our garbage disposal died (right after I had installed our new dish washer, Kadie was CERTAIN that I had screwed something up); and Kadie had her debit card stolen at work (amusingly, they went out and immediately began buying gas. It was when gas hovered in the $2.80’s).

So despite the challenges, we paid off all our debts by November, as well as the $3,300 for the rebuilt minivan engine. When we took our last payment check to the post office to put it in the mail we brought Skeeter, Scooter and Squealer all into the lobby to help us drop it in. And then to celebrate as a family we went out to eat at a really nice Japanese steak house.

And yes, we paid in cash.

Implementing the Plan (IV)

Kadie and I had to make several changes to how we approached our finances. But the first thing we had to do was simply to pay attention. Due to our exceptional fiscal laziness, we had not kept good track of our finances. Here’s one example: When I started my current job, I was given the choice of receiving my pay over the course of twelve months or over the course of nine. We chose twelve months…or at least we thought we did. Actually we were being paid over nine months but didn’t even realize it. So when February rolled around I suddenly realized that my pay would end in another two months. I grew concerned that our kids would start getting hungry after that last paycheck.

Fortunately, due to summer school and Kadie picking up some extra shifts, we survived. That story is but one account of our inattention to our finances. Miraculously we survived, but have never felt any sense of financial stability. We realized that we initially needed to follow two suggestions of Ramsey.

First: the dreaded budget. We sat down and worked out a budget. Actually, Kadie wrote out the budget and then we went over it. Ramsey suggests that one spouse is usually more detail oriented than the other…he refers to them as the nerd. Kadie was a math major before she transferred to nursing school, so we each felt comfortable with her crunching the numbers.

As noted earlier, I am what Ramsey refers to as the free spirit, not often bound by details. But the free spirit has to make a change in the budget. That gives us ownership in the budget too. So I made a small change and we had our first budget.

Our second choice was to go with the envelope system. This is a collection of envelopes into which you divide up things that you normally pay cash for. In our case we established envelopes for entertainment, grocery, clothes, allowance for the kids, and gifts. We then placed a certain amount of cash in each envelope after every paycheck. When the envelope is empty…well, that’s it until you get paid again. The kids (and our friends!) have gotten used to us declining dining invitations with “Sorry, we’d love to but the envelope is empty!” I particularly found this helpful as a visual reminder that money is limited. It hurts more to pay with cash than it does to pay with a credit or debit card. More than anything else, this has forced us to live within our means.

Next: Our debts!!

Outlining The Plan (III)

Dave Ramsey’s plan consists of seven steps, which he calls baby steps to illustrate their simplicity (he stole the term from this film).

Baby Step One: Save $1,000.00 in the bank as a baby emergency fund.

Baby Step Two: List all of your debts from smallest to largest. Begin paying the smallest debt off first, paying minimum payments on the rest of the debts. After you eliminate the smallest debt, you take that money and begin applying it to the next smallest debt. And so on. Each time you finish a debt, you get a little more money to take aim at the next debt. Over the weeks and months, your “debt snowball” grows bigger and bigger until by the end, you are paying down thousands of dollars a month on one debt.

Baby Step Three: Build up your baby emergency fund (From Baby Step One) into a fully funded emergency fund of 3 to 6 months of expenses into savings.

Baby Step Four: Invest 15% of your gross income into retirement savings.

Baby Step Five: Save Money for kid’s college (if applicable)

Baby Step Six: Pay extra on your home mortgage.

Baby Step Seven: Invest and gain wealth. Then start giving it away.


Ramsey's plan is simple, but not easy. By simple, I mean he says nothing here that is too complex for non-business majors. In fact, the chief criticism of his plan that I’ve read is that it isn’t nuanced enough. But we have found it helpful to have things spelled out so clearly.

But it isn’t easy. It required us to change our outlook on money (or, more accurately, to develop an outlook on personal finance).

Next, tackling the snowball!

Up the Baby Steps (II)

(For Entry I, click here)

“I’ve been listening to this guy on the radio named Dave Ramsey and he has a really cool book out” was PT Girl’s response. “We’ve used his plan to pay off thousands of dollars in debt this year” she continued. “It’s called the Total Money Makeover”

It would be an understatement to say that I listened with a skeptical ear. Graduate school beat into me (or nurtured what was already there) more than my fair share of cynicism. I am awfully critical of someone if I detect even a whiff of promotion from their program or plan. And talk radio jocks are the worst. To top it all off, I couldn’t imagine a cheesier name for a book.

But I agreed to read the book and see what he had to say. I certainly didn’t have any answers. I then read the book over the course of two evenings. And in it Ramsey laid out a plan to gain control of your finances that struck me as doable.

Essentially, Ramsey argues the following:

**Debt robs you of your income, which is really your only wealth building power, so you should work to eliminate debt as fast as you can. Once you have no more debt you can invest in retirement and education for your kids.

Well, that kinda makes sense. We had hundreds of dollars a month going out to service our debt. I could see that we would have some money to invest if we eliminated those loans.

**Putting down a written budget is the key toward meeting your financial goals.

Kadie and I ran a budget the first year or so of our marriage. We were given one of Larry Burkett's books as a wedding gift. Neither of us can figure out why we stopped running one. Probably due to laziness.

Two things Ramsey said resonated with me:

1) Try the plan for two or three months. If you don’t like it, then you can go back into debt as quickly as you want.

2) Getting out of debt, sticking to a budget and investing for the future is hard. (I knew that!!). But then Ramsey pointed out that being broke is hard too. So if they are both hard, why not pick the hard that will provide more money for your family?

Kadie and I had no budget and were pretty much running our household finances with a wet finger in the air, never sure which way our money was blowing. This led to occasional bouts of frustration as we would get notification that a check had bounced or that we needed to get a short term loan to cover our yearly income tax. The worst feeling was checking our account online, just a few days after payday and wondering where all the money had gone.

So we figured that we would give Ramsey’s plan a shot, if only for a few months…

(Tomorrow: The plan…)

Up the Baby Steps (I)

Kadie and I are accomplishing some significant (for us) financial goals. I wanted to spend a few days blogging about them because they have impacted our lives so tremendously. Most of you who read this will slowly shake your heads and think “What poor, miserable financial slobs.” I have no doubt that most of you learned these lessons long ago.

But I blog our experiences for two reasons: to have a written record, and also to encourage others who may be in financial binds that they can get out of them.

Two years ago, in March of 2004, we received some devastating financial news. Our Ford Windstar’s engine had imploded and it would cost 3,500 to install a new engine. Given the important fact that we had nowhere near that much money in our bank account, we were stunned by how to respond. In particular, we were resigned to the fact that we were going to have to borrow the money to pay for the repairs.

The fact that we were in such a position infuriated me. At that time we had been married for a dozen years and had seen our income rise from living off the tips I could pry from unwilling customers to a good, fulltime job for me and part time nursing work for Kadie. In short, our income had never been higher...but we were not living within our means. We had purchased a home and and our expenses exceeded our income as much now as they ever had. In fact, we had really never had more in the bank than we did that fateful day in March when we got the news on the car.

While talking with PT Girl about the engine a few days later, she asked if she could offer me some financial advice. I recall my response was something along the lines of “Whatever we’ve been doing has not been working out for us at all. Tell me what you’ve got…”