DAVE RAMSEY – Instant Coffee Wisdom

Help Yourself!

Are self-help books all they’re cracked up to be?

selfhelp

If you walk into any decent bookstore, you’ll notice that a large section of the store is devoted to self-help books. Self help books usually fit very nicely into three inter-related categories:

Wealth
Health
Relationships

Depending on one’s personal situations, one of these three categories may be more important to you than another, but from my personal view point wealth (or financial stability) is the lynch pin that holds the other two components in place. The stress and worry associated with poor financial decisions will ruin both your health and your relationships. Fighting about money is the number one relationship killer. With such a huge selection of self-help books and authors to choose from, you might wonder if self-help books really work at all.

A mind not to be changed by place or time. The mind is its own place, and in itself can make a heav’n of hell, a hell of heav’n. – John Milton

John Milton was a 17th century English poet. His most famous work was Paradise Lost, a long narrative poem which basically expands upon the biblical story of Adam and Eve from the book of Genesis.

In the 1997 movie The Devil’s Advocate, Al Pacino plays a character named John Milton, a lawyer who is actually Satan in disguise. At one point during the film, Pacino utters this quotable dialog : “The worst vice is advice”. It’s a statement that’s a little confusing, but I found it to be both funny and profound. Some people are in the habit of advising other people about anything and everything, even when they have no worthwhile advice to offer. So it’s very important to be able to discern if the advice given is of any value. I cannot tell you how many times people (who didn’t know what they were talking about) gave me bad advice which had I been foolish enough to act upon would have had disastrous consequences.

If you’re considering seeking out a self-help book, then you’ve already made the first step in problem solving, admitting to yourself that there’s a problem. The second step is gathering information so you can formulate a solution. The third step is putting that information into practice, but the forth and final step is the real key to success. That forth step is maintaining the third step while improving upon and refining it as new and better information comes along. Practice makes perfect, quitters never win, and winners never quit.

All the good advice in the world is worthless if you fail to apply it. Therein lies the problem. Most people looking for self-help books are ACTUALLY seeking quick fix solutions to their problems that require little or no effort on their part. They are NOT expecting to discover PERMANENT life changes.

Take diet books for example. (At the risk of insulting any actual dietitian or fitness expert who may have written a really sound book, I’m NOT going to mention any specific book title, or author.)

Average Joe is 100 lbs overweight and hears about a fabulous new diet book by a well respected author, and he immediately orders a copy. The book arrives and after a month of making all the tasty meals, Joe loses 25 lbs. He pats himself on the back uses his new diet book to prop up the short leg of the table, and goes to the all-you-can-eat buffet to reward himself. A month later, he has gained back the weight he lost, and blames the author and the stupid book. Then he hears about another new diet book and repeats the process over and over. The problem isn’t the advice he received, it is that he stopped following it the moment he saw positive change, and resumed all the bad habits that caused the problem in the first place.

If you want to stop a problem, you MUST stop going all the things at caused the problem, PERMANENTLY! You don’t go back, ever. Occam’s razor, dictates that “the simplest explanation is usually the correct one “. If you keep wondering why all your problems keep happening to you, it’s because the problem isn’t the problem, the problem IS you. To quote Shakespeare “The fault, dear Brutus, is not in our stars, but in ourselves” You’re not a victim of your circumstances, you’re a volunteer and it’s up to you to break the vicious cycle that you’ve trapped yourself in.

As I’ve said many times, I grew up poor because my father died when I was young, and my mother didn’t have the intelligence to handle money. If you gave her one dollar, she’s spend two. I broke the vicious cycle of poverty that had trapped most of my family by seeking wise council on money and financial matters. I put these practices into place years ago and never stopped working my way towards financial freedom. This is why I’m successful today. I realized that my way of thinking was what caused the problem, and I actively sort out better information from someone smarter than myself. This is because a greater intelligence is always needed to fix a problem than the intellect that caused it.

So as your trying to figure out which of the near infinite self-help books will provide the answer to your problem, let me give you a ‘short cut’. The best self-help books all offer the simplest answers, and often quote the Bible. If you read enough of them, they all eventually seem to offer the exact advice.

For wealth– Spend less then you earn, live within your means, and save and invest.
For health– Eat proper nutritious meals and exercise regularly.
For relationships – Be good.

It’s just common sense, not tricks or gimmicks.

Those who trust in themselves are fools, but those who walk in wisdom are kept safe. (Proverbs 28:26)

You may have heard it said ‘God helps those who help themselves’. This is NOT biblical. You will not find that phrase anywhere in the Holy Bible. Benjamin Franklin popularized it. The Bible tells us that we can do all things through Christ who strengthens us, and also encourages us to seek wise council. It is the first and the greatest ‘self-help’ book, timeless and perfect.

Here are a few helpful proverbs form the Bible:

Proverbs 12:15

The way of a fool is right in his own eyes, But a wise man is he who listens to counsel.

Proverbs 11:14

Where there is no guidance the people fall, But in abundance of counselors there is victory.

Proverbs 13:10

Through insolence comes nothing but strife, But wisdom is with those who receive counsel.

Proverbs 19:20

Listen to counsel and accept discipline, That you may be wise the rest of your days.

So if you’re seeking the ultimate self-help book why not try reading the time tested original first. As always I wish you happiness and success!

Other People’s Money

Making reward cards, introductory rates and points work for you.

“A penny saved is a penny earned.” – attributed to Benjamin Franklin

I walk a lot outside during the day. It’s rare that a day goes by where I don’t find at least a penny on the ground. On average, I find about a dollar in coins a week, and I still stop to pick them up. When I was younger, there used to be a joke circulating about Bill Gates, (who is still one of the three richest men in the world). It ran along the lines of this: “If you average out all the money Bill Gates makes in a single year, he earns over $500 a second. If he was walking down the street and found a $100 bill lying on the ground, it would cost him money to stop and pick it up.” The most amount of money I’ve ever found lying on the ground at one time was a loose $50 bill half-buried in the snow on Liberty Ave. That was a long time ago, and I was amazed and shocked at my good fortune, but also I felt a little bad for whomever had carelessly lost that much money.

At a certain point, picking up discarded coins in the street becomes more trouble than it’s worth to some people, but I’m still of the mind-set that every penny saved adds up. To that end, I still use coupons and reward cards when I shop. These are great ways to save a few cents or even a few dollars each time you used them, and over the course of a year that can add up to hundreds of dollars.

The Store Loyalty Reward Card

Using a store loyalty reward card is easy enough, you just have to swipe or scan the card each time you shop. My local grocery store also sells gasoline (petro). At least 3 to 4 times a year, I accumulate enough points to earn a 100% discount on fuel. Gas in the USA isn’t as expensive as it is in other countries, but it’s still a fantastic savings in my book. Just always make sure when collecting point to check if and when they expire, or you may lose them with noting to show.

card savings

gas

Reward Credit Cards

Some credit cards have a point reward system as well. These can be as simple as 1% cash back on all purchases, to a range of categories which each have a special point rating. Reward credit cards ONLY work for people with perfect credit and who pay their entire balance in full each month. The reason for this is twofold.

You usually only receive these special offers if you have good credit. The better your FICO score, the better the offers you receive from credit card companies.
Failing to pay the balance in full each month will cost you interest fees which will negate any savings earned by rewards.

I once read a post online where a woman was complaining about how her reward credit card was worthless because she was being charged all these fees each month for interest, exceeding her limit, and late fees. Usually the problem is not with the card, it’s user error indicative of a much greater personal problem. Never give a loaded gun to a baby, or a credit card to a fool.

card savings2

Special Rates or Introductory Offers

card savings4

Another offer reserved for those with stellar credit are cards that offer 0% interest, fees, and balance transfers. There are great during the introductory period, BUT you must exercise extreme caution with these cards. In essence, you are playing with other people’s money. The issuing bank is allowing you to ‘play with their money’ with no fees, in the hopes that you will ring up a huge balance and not be able to pay the balance in full at the end of the promotional offer. People who lack self-control fall victim to this all the time. Interest is calculated from the time of the purchase. If at the end of the promotional period, a balance is remaining, you will incur the full interest charge of the purchase, even if you have a relatively small portion remaining. For instance: Every October, I take my car in for its annual maintenance inspection. I get all the little issues resolved, buy new tires, replace worn parts etc. Till it’s all said and done, the bill for keeping my car running another year can range from $500 to $2000. I usually pay with my Firestone Store Credit Card. It has a six months same-as-cash special promotion rate for all purchases over $299. Although the minimum monthly payment is about $20, you’ll never be able to pay the balance off in time if you only pay the minimum. The key to these cards is to divide the balance into five equal amounts, and pay that amount each month for 5 months. This allows you ONE extra month in case you need it. In the image shown below, the six-month promotion ends April 5th. Even though I’ve paid almost the full balance except for a measly $200, if I fail to send the full balance in by the due date, I will incur $54.46 in retro-active interest fees! No thanks! I (almost) never pay interest.

card savings3

If you are able to take advantage of special offers like the ones I covered, enjoy yourself but always remember:

Pay your balances in full each month.
Pay your bill early.
Never skip a payment, or pay the bill late.
Never spend more money than you can afford to pay back.

As always, I wish you happiness and success!

A Snowball’s Chance!

Eliminating debt is just that simple!

snowball

It never ceases to amaze me how people seem to just amass mountains of debt, and the ‘creative reasons’ they list for having done so. From the instant gratification of “gotta have it now!”, to keeping up with the Joneses, or just the insidious swipe of the credit card to pay for our morning coffee on the way to work. Americans seem to have every excuse in the book for why they are in debt, and it’s always ‘not their fault’. Now don’t get me wrong, emergencies do happen, and tragedies do occur, always at the worst possible time and in the most expensive manner. Grabbing breakfast and a coffee on the way to work is NOT an emergency. A new bigger HDTV is NOT an emergency. A new outfit when you have a wardrobe bursting with unworn clothes is NOT an emergency. These are bad habits that you’ve fallen into and the credit card which has allowed you to charge up this mountain of debt was your responsibility.

NO NEW DEBT!

When I found myself in $50,000 worth of debt in 2001, I thought I’d never crawl out of the hole I had dug myself into. It took years of hard work and discipline to become debt free, and I was ridiculed by several know-it-alls who could not comprehend why I just didn’t file for bankruptcy and make it ‘easy’ on myself. Often times, the ‘easy way’ is the wrong way. Bankruptcy is FOREVER. And if you refuse to change your behavior, you’ll find yourself back in the same situation as before. I’ve witnessed friends making the same mistakes after filing bankruptcy. Because THEY refused to alter their behavior, their chances of ever becoming debt free are the same as a snowball’s chance in a blast furnace. The first step towards recovery is NO NEW DEBT! You can’t spend one cent on ANYTHING that isn’t essential. Don’t even charge a stick of gum. NOTHING! If you lack the willpower to stop using your credit cards, you MUST cut them up. I remember as a boy watching an old TV show from the late 70’s called WHAT’S HAPPENING!! A character named ReRun (played by Fred Berry) gets his first credit card, and quickly gets into trouble. One credit card quickly turns to a dozen, and soon he needs to finance his credit cards with a loan. In quick order, everything he owns including the Monopoly game and even his red beret gets repossessed. In the penultimate scene of the episode, ReRun and friends sell EVERYTHING in the apartment except his food processor, which he fills with his credit cards to make ‘credit card coleslaw’.

The Debt Snowball

The level of intelligence which created a problem is never sufficient to solve the problem, and that’s why there are walls of self-help books in bookstores. It’s so that you have the ability to consult someone wiser than yourself and find a solution to your problem. For me, that wise counsel came from reading books by Dave Ramsey. While in a discount remainder store, I found a thin book titled Pricele$$ marked down to $2.99. What drew me to the book was the cover depicting credit cards in a blender which reminded me of the What’s Happening!! episode.

While reading his book Pricele$$, I first learned about his debt-destroying weapon, The Debt Snowball. It is the opposite of the more convention debt stacking, or debt avalanche payment method. In the traditional debt stacking method, you pay the bill with the highest interest rate off first. You dump all your extra cash into this bill while maintaining the minimum payments on all other bills. Like an avalanche of money just wiping that debt off the face of the Earth. Dave Ramsey instead advocates the opposite approach, which he dubs ‘The Debt Snowball’. Picture a small snowball rolling downhill increasing in size and speed as it gains momentum. With this method, you list all of your debts in order from smallest to largest regardless of interest rate, and their minimum monthly payment. You then use every extra penny you have to pay off that smallest of your bills first. As soon as you wipe it out, you apply its minimum payment and add it to the minimum payment of the next bill on the list. You repeat this process until all debts are paid. This method worked for me, and it will work for anyone as long as you follow three simple rules.

No new debt. You can’t charge anything.
All ‘extra’ money from cutting non-essentials must be used for paying down the smallest debt.
You MUST keep making the minimum payments on all your bills.

The last one is a real no-brainer. You can’t stop paying one existing bill to finance another. I tell myself that no one could be this stupid, but just this week, a friend-of-a-friend had her car repossessed for non-payment because she needed the car money to save for a down payment on a new apartment. I can’t fathom how she convinced herself that this was a great idea. Like I wrote last week, few (if any) of my friends take my financial advice seriously, often choosing their own disastrous schemes over wise council. Like the old saying goes, “a fool and his money are soon parted.” As always, I wish you happiness and success!