The Most Dangerous Baby Step

For those following the Dave Ramsey program let me tell you about what I believe is the most dangerous step in the plan.

Baby Step 3 aka BS3.

BS3 is like that gangly stage between being a child and an adolescent. It just isn't pretty and easy for most people to do.

There is so much focus in Dave's program to get debt free and experience the freedom that allows. And yes, that is a huge part of it. But so many think when you finish BS2 the money suddenly starts becoming available again and a return to an earlier life.

IT DOESN'T.

And to a point, Dave does not strongly address this stage of the program. And while I'm not in Dave's head, I think it's rooted in him being so thrilled you've made it this far.

And intuitively, you'll know the score.

I disagree with him on that. I've read too many times on his forum and others from so many expressing that they've experienced a let down, a loss of intensity and the loss of a focal point. And honestly, I experienced it too.

Again, BS3 is a very dangerous step for many people.

For it is also during this step that you realize that the snowball you've been sending to creditors now will be sent to savings or sinking funds or retirement or extra house payments or college funding. In other words, most people will find that money used to pay off the snakes will be used for other purposes other than fun type freedom.

Even though you're paying you and your family now, they aren't this evil being that needs eradicated from your life like the credit cards and car loans were. That represents a huge paradigm shift that many need to be aware of and need to learn how to address so they can shift their focus.

So it's not time for freedom yet, because at this point, you've only laid a foundation for freedom to be built upon.

But your mind begins saying, I made it, I'm debt free, so why not go back to the old ways. The old temptation virus.

But let's face facts. Budgeting and sticking with it is just as if not more important than when you were in BS1 and BS2. Because as the intensity on getting BS2 debt free abates, the temptation sirens begin to show up and start singing their songs.

I so agree with others who have developed a thermometer or some other chart to keep track of BS3 progress. And to have mini celebrations when you make it to a milestone. Intensity, goals, milestones and celebrations. All very critical and import.

One note of caution. If you were in BS2 for any period of time and were very intense, BS3 is where Murphy shows up to be paid for all those things you put off while being intense. So it may be two steps forward, one step back for a while.

Stay the course and find creative ways to stay intense. And win!

Getting to the Starting Line

It's been too long since I've added anything to this blog.

As I sat in church this morning, I was thumbing through one of the weekly magazines found at our welcome desk. An article, while not related to money, got me to thinking about why some people never seem to get ahead or really begin working on their financial journey.

Writer Mark Atteberry tells the story in the 1/18/09 issue of "Christian Standard" about going to a professional football game. Four young guys were seated in front of him. One struck up a conversation and related he had never been to a professional football game in person.

Atteberry writes that the young man still hasn't.

Why?

Throughout the game the gentleman was caught up in everything around him but the game. The concessions, the beer, the women, the wave and numerous trips to the restroom to part with the previous session with the beer. So caught up in all the things going on around him he missed what happened during an important and exciting play. Simply put, while in attendance, he missed the game.

How many people have you met working on a financial plan that are the same way?

Caught up in the details of living on an envelope system and how many and what categories need created. Caught up in the details of couponing and making sure you double, triple or even get a refund on every purchase. Caught up in the details of reading the latest guru and their spin on the age old process of living wisely, on less than what you make, on not getting caught up in debt and trying to impress people you don't even know or may not even like.

Sometimes the best plan of action is to get to the starting line. In one simple word...........start.

Sure, it won't be perfect. It may not even be pretty. But it's a start. A beginning.

Instead of worrying about all the stuff going on around you, like envelopes, coupons, spending plans and debt payments, get to the starting line and being to take control. Control of the situation begins the process of hope. And hope can make great things happen.

Let that start reveal where the changes and tweaks need made and what to leave alone since it is working like a well oiled machine.

Don't be like that young man who may have gone to his only professional football game in his lifetime......and missed it by watching and being concerned with everything going on around the game but the game.

Don't worry about all the peripheral details. Get to the starting line. And start.

Experience and wisdom will take care of the details.

Relentless

re⋅lent⋅less /rɪˈlent lis/ [ri-lent-lis]

–adjective
that does not relent; unyieldingly severe, strict, or harsh; unrelenting: a relentless enemy.

adj.

1. Unyielding in severity or strictness; unrelenting: relentless persecution.
2. Steady and persistent; unremitting: the relentless beat of the drums.

I heard an interesting word during a conversation this weekend. The word used was relentless.

In that discussion, we were discussing the traits that separate the more entrepreneurial among us from the rest of the population.

The conversation shifted to that topic because we were trying to distill and determine the key characteristic that leaves so many who attempt to do their own thing in the dust.

Hard work? A lot of people work hard and long hours. And still don't cut the mustard in the world of self employment. If employed by others, they often receive a modest return on the hours invested.

Risk? Lot's of people take risk. Some more educated than others, but even educated risk does not always bring desired results.

Knowledge? A lot of smart people fail.

Meeting a need? Again it depends.

Add hard work, risk, meeting a need and knowledge? No, it still doesn't equal success. Even by the percentages.

What we all agreed on was one word. When someone mentioned the word relentless, we all quickly and without hesitation agreed that was the key word. That was the word needed to be successful.

Those successful who are entrepreneurs are relentless in the pursuit of what they want or need to obtain. They have a goal. They fix on the goal and don't let anything or anyone get in the way of the goal. They are relentless to get to the goal and many times never stop.

Sadly, my first thought of being relentless was something not positive. And I felt very bad about that.

Some of this goes back to an email exchange I had with another person last week that I greatly admire. He had a comment on his blog that he saw another notable person at a conference stating he bailed the hate mail he gets and that from an inference a lot of it comes from Christians.

In my email exchange, I told him I once asked that same person who spoke at the event he attended about how he dealt with unsolicited advice.

The response was he didn't; unless it came from a selected core group of people. The people in his accountability group. Anyone else must be someone who that person (the event speaker)has solicited feedback or guidance. He has cut off other external feedback because they are on a mission and don't see those who are unsolicited as understanding the various complexities of that mission.

My impression is the speaker at the event is relentless in obtaining his mission. And no one unsolicited was going to question the process in obtaining that mission. Thus possibly the hate mail label. Those unsolicited pieces of mail may or may not have contained pieces of constructive comments, even though presented in a critical manner. But whether constructive or not, they could have also contained information that could have derailed the mission. And that couldn't be risked. Relentless.

That email exchange was one of the thoughts in the back of my mind as that entrepreneur conversation that took place over the weekend.

When the word relentless was brought up, it matched this mission obtaining process.

But I concluded that my view of relentless was not positive and that's what bothered me. I thought I had been conditioned by outside sources to think the worst of this word. Sort of a JR Ewing mental picture came to mind when the word was used.

So when I got home, I looked the word up.

As you can see from the top of this entry, it's not a very complimentary word.

Do entrepreneurs need to be relentless in their pursuit of their mission and to carry it out does it need to be negative?

Are You "Normal" or "Weird" in the Current Economic Times

Someone reminded me that Dave Ramsey has recently said that the largest amount of Millionaire's were created during the Great Depression. I didn't hear it, and whether that is what Dave actually said or even if factual it is true there were a number or people who got wealthy during that time.

And one thing I do know for sure is Dave often focuses on the differences between "Normal" people and "Weird" people when it comes to finances.

The "Weird" people found the Achilles heel of the problem and turned it into profit.

How did they do that? They focused on what could be. "Normal people" focused on what happened, who did what to who and who is to blame.

What I am finding is that too many of us are doing what "normal people" do in the current crisis. "Normal people" have spent their time over the past few weeks getting angry with Wall Street execs, blaming politicians and bureaucrats, complaining about the lack of regulation, oversight or imposed laws and counted their losses. "Normal people" are blaming the poor. Both the financial poor and the people who have done what poor people do. Many have become proficient and done all the above.

"Weird people" have spent their time looking for that Achilles heel of opportunity. They aren't consumed that someone did something stupid, or some politician from either party profited or imposed a stupid law or predators preyed upon the weak.

They do believe that none of that should have happened.

But it did. As it has happened throughout history.

Some people will pay for what they did. Others will get a get of jail card. Again, that too has happened throughout history.

"Weird people" want the right things to happen and for someone to pay for their crime if one was committed. But they don't get mad, angry or let it stop them from getting ahead. They haven't spent the last few weeks in that mode. They aren't interested that someone has to pay or getting that pound of flesh. They don't have time.

They will look for the opportunities. They will devise a plan. They will execute that plan and reap the rewards.

"Normal people" will fall into the trap of emotion and anger. They'll be agitated and egged on by Rush and Sean, Big Eddy and Olberman. At the end of the day they still be "normal people". But just a little more angry.

So what is it. Are you going to be "normal" or "weird"?

I'm looking for that weirdo so and I learn to profit just like him.

Getting Together With Money

Power..........
Control.........
Trust........

Three very big words that few couples factor into the marriage equation before the vows and exchanged and the words "I do" have echoed into the air.

Yet each has the chance to tarnish even the most golden of relationships. Especially in the area of money. It is so critically important that couples go into a marriage understanding each partners expectations of money and it's uses.

So many couples expect to continue and smoothly transition to living in their parents lifestyle by living in similar homes, decorated in a similar manner while driving the same vehicles and taking the same vacations. In many cases, it took their parents a decade or more to build up to that lifestyle. Today's newly weds believe it's possible to recreate that same life all within a few months or a year. For most, it simply is the beginning of financial problems that can lead to financial ruin.

Also, so many couples planning a marriage haven't really discussed the roles each will play in terms of income. The family dynamic has chanced once again, and many soon to be mothers are now staying home to raise a family instead of returning to the workplace as their mothers and grandmothers often did. While certainly a wise choice, most new young couples have already designed their footprint of living conditions without factoring the loss of income from the now staying at home partner.

Finally, consider the big three mentioned above. Power, Control and Trust. It is very easy for the remaining breadwinner to transition into a person who begins to consolidate power and control of the budget as they are the person now earning it. What was once an easy alliance between the couple, trust begins to erode in equal measure to the financial stability beginning to erode as the lifestyle begins to strain the relationship. What was once a strong relationship now has become fragile.

It is key for any couple planning to spend their lives together to truly understand the motives, needs and temperament of each other as they move toward the wedding day.

Opportunity Cost

Yesterday I wrote about the chance of having two car payments if you trade in a car that still has payments remaining. I noted that as long as you had a paid off car and paid cash for your new purchase you were ok.

I was reminded by my friend Living Almost Large that just because you have cash in hand doesn't always mean you can afford or should be making a car purchase. Or any purchase for that matter.

It all boils down to opportunity costs.

Opportunity costs you say. What exactly is an opportunity cost and why is it so important?

Opportunity cost is generally a business or economics term. Technically, opportunity costs are choices that yield often completely different results. It's the use of scarce resources wisely. And it's not always cash as it could include time, enjoyment and pleasure. A company for example may have to decide to build a plant addition or invest that money in the marketing of existing products. They may need to decide whether to expand overseas or further develop here in the states.

For us regular folks, LAL was pointing out that there may be a more enjoyable, pleasurable or simply better use of the cash other than spending it on an automobile.

And frankly, LAL is correct. Is it best to spend the money on a vehicle or would it be better to invest it for a long period of time and enjoy the fruits of it's earnings at a later date?

It becomes often a matter of understanding the need for gratification and when it's best to delay it.

As Dave Ramsey tells us, a spoiled child cannot wait for gratification and must have their gratification need immediately fulfilled. A mature adult knows when it's time for gratification and when it's time to delay gratification for the greater good.

In many ways, using cash instead of other means of monetary exchange often helps us decide the opportunity cost of a decision. It's always harder to part with dollar bills versus using a credit or debit card. We realize the stack of money bills in our hand or wallet will be less, much less, if we spend them on something in the present. That's another prime example of opportunity cost.

Enjoyment and pleasure also are an opportunity cost offset often by work and the earnings the work can bring.

As with all things, balance and moderation must come into play.

If we choose to work as much as possible, the opportunity cost is lost relationships and often poor health. In this situation, we need to balance the need for income and the largest wealth building tool most of us will ever have with the relationships we have with friends, nieghbors, spouses and children. All suffer if we work too much.

We will also suffer if we spend to much time with them and don't work at our career and nourish it through continuing education. We no longer can afford to do things and care for those important to us if we allow ourselves to become work obsolete as well as not being accountable to an employer if employed or customers if self employed.

Understanding the opportunity cost of life choices will be a challenge as long as we live.

How Would You Like to Make Two Car Payments at the Same Time?

I get a variety of emails from a variety of places. One that I get that I always look forward to is the one I get from talk show host Clark Howard. Clark is one of talk radio's premiere financial gurus, and certainly unrivaled in the geek division.

I say that lovingly. Clark is one of the nicest people you'd ever want to meet or work with.

Clark is bringing to his listeners attention something that I had never thought of. The latest thing to watch for when purchasing a new car from a dealership is not the purchase itself, although that is a critical element. It's happening with the car that's being traded.

Seems that in these tough times, many auto dealers are on the brink of closing their doors on an almost daily basis. Some survive to come back another day. Others turn the lock on the door and never reopen.

So what does this have to do with anything?

When the door locks on the dealership for the final time, it's possible that the loan you may have presumed was paid off when you bought the new car and left the old one as a trade wasn't. Remember, the dealership may be.....well.....broke!

So you still assume you're off the hook? Dealer has the car so it's their problem. Think again.

The lending institution still has a lien on a car that is no longer in your possession. You can't drive it. But you'll still have to pay for it because they still expect payment. And the law is on their side.

So now you've just drove a new car off the lot with a fresh payment book and the old payment book still has coupons in it......that still need your check to accompany it to the payment address. Because you have a car locked somewhere on a lot that you are still responsible to make payment but no longer own.

Boy, doesn't that new car smell become less sweet with that news?

And how do you avoid such a situation?

Well first, stop buying new cars when your old car isn't paid for. And when selling an old car, sell it outright. You'll likely have larger net proceeds by selling to a private party. And finally, buy that new or new to you car with cash.

Remember, if you can't pay cash for it, you really can't afford it.

To learn more, click here to go there.