My Revitalizing Work

This week was the kickoff for the 2^nd Financial Peace University class that I am facilitating. And I have to say that I am again thoroughly impressed and happily taken back by the power and influence of this personal finance course. The free flowing discussion and stories of each individual truly stirs my soul and solidifies to me that this is a program that needs to reach as many households as possible.

While I believe that Dave’s principles in building wealth are the way to go, I believe an even stronger benefit of FPU is that this course breaks down the walls and taboos about discussing personal finance in an open setting. I grew up in a household where my parents kept all of their finances separate and we never talked about money. As a result when I came into being adult I was saddled with over $20,000 in debt, looking into a future of trying to afford a wedding and buy a house, and being overcome with fear and desperation.

But there is hope and a way to fruition. It takes a lot of hard work and discipline but it is definitely worth it. The start of a new FPU class has so far taken me directly back to my first days when being introduced to the world of Ramsey. The remarkable thing to me is that I went through learning the material with my wife. And now we get to introduce this material to people with our home church as the setting with a community of people that are in essence family. I certainly think there’s potential for our FPU’ers to latch onto the material even stronger and faster than I did.

It is so inspiring to me to have the amazing blessing to be a part of this process. Even after a long day of work on shortened sleep, come FPU time I perk up and could literally facilitate the class for HOURS UPON HOURS if they let me. It energizes and revitalizes my soul seeing the taboo of talking about personal finance become broken before my very eyes.  

My Magical Emergency Room Adventure

I’ve talked about the importance of insurance in previous posts but this week I received an upfront and personal lesson that I wanted to share today. A few months back I checked myself into my local emergency room as I began feeling excruciating pain in my lower back. I mean it was so bad I literally could not stand motionless in place for more than thirty seconds without feeling a blinding pain.

Up to this point my wife and I are debt free. We have 6 months worth of expenses in an emergency fund. Through my employer I am on a high deductible medical plan with low monthly premiums. Now back to my personal case study.

Needless to say with a high deductible plan, outside of regular check-ups, I only go to the hospital if I am in seriously dire pain. That day I was. Following a few blood tests, an examination with a doctor and a body scan I was able to rule out any damage to organs and the presence of kidney stones. In fact to this day I still am not 100% positive what caused my pain which has since subsided. The physician that treated me gave me a low dosage of pain killers and sought for me to follow up with my primary physician for further evaluation.

Fast forward to yesterday. I finally received a bill in the mail from my magical emergency room adventure. The total bill for services was over $4,000. Through my medical insurance the amount I owed was knocked down to just under $700. To pay for this I will be moving the amount due from our emergency fund to our H.S.A. (health savings account) to pay the bill. I love the H.S.A. because come tax time the amount of money deposited into the account throughout the year is tax deductible. So that’s nearly $700 in income that I get to keep from reporting to Uncle Sam.

The pain and mystery of my medical event was stressful enough to deal with. But having a strong foundation in our finances kept this from becoming a disaster and it lowered my tax bill for the year. And yes we will refill our emergency fund to its full amount through current month income. Five years ago if this had happened to me I would be in complete and total panic mode. Today it was essentially a stress test that proved my practices in personal finance are working like a charm!

My Growth as a Human Being

Today I want to spend some time talking about one of my biggest goals and dreams in my life: becoming a parent. Having a child is something that I expect to grow and stretch everything about me as a person. I can rattle off the list of attributes that I expect being a parent will grow and instill in me: patience, compassion, empathy, the ability to teach, unconditional love, courage, trust and countless others. In truth I’m not looking to start a family to directly complete my life. I look more towards it to grow me as a human being. Sure, along the way our family will value and honor sound financial independence, but that’s really more of a side benefit.

I find it interesting that the thought and idea of having kids makes me eager yet terrified at the same time. I love looking forward to the day of raising a child but am also scared of all the unknowns that come along with parenthood. Even more so I think that I am growing an anxiety to change.

Among my 2 brothers and 1 sister I am the youngest. My oldest nephew is just a few years younger than I so I have spent an overwhelming amount of my life not having to formally care for anyone. Yes my wife and I work together on bridging our goals and plans, but one of the things I love most about her is her independence and tough as nails attitude. Needless to say I am not used to having someone rely on me for their physical well being and care.

I also think about the life I have now. My wife and I enjoy nice dinners out once a week, grocery shop with super awesome efficiency on the weekends and thoroughly enjoy the time we get to spend with one another. I really have gotten used to how our daily lives function. Between the complete revamping of my daily life and having a life depend on me for whether it lives or dies, I am certainly well aware of the responsibility of being a parent.

Financially we are there though. My wife and I carry great health insurance, we are debt free and once a baby were to arrive my wife easily has the option of whether to go back to work or be a stay at home mom for those first few years. So technically, yes if a child were to drop into our laps today we could handle it and continue with our future financial goals and dreams. That’s not what worries me.

What worries me is being a parent that’s good enough. I am at the point that I am today through a plethora of trial and error experiences. Being a husband, an employee and in my personal finances. There’s a lifetime of experiences, do’s and do not’s that I can point to that have helped shape me to get where I am today. I feel like I have nothing to draw on or point to when it comes to being a parent. Will I be good at it? Will I suck at it? Can I handle the reshaping of my life? Can I handle the stress?

Ultimately it comes down to one question: Am I good enough?

To help explore this my wife and I are planning to go to marriage counseling together to work through this decision together. I certainly want to unpack the baggage I carry in my life that leads to my self-doubt before I take on the role of being a parent. And for that matter I want our marriage to be in the strongest place possible as we begin the steps towards a new chapter in our lives. I want to be intentional about continuing to grow in my marriage, as a husband and ultimately as a human being. I certainly do not want the fear of change to keep me from becoming the person I want to grow into.

My Debate Night

I did not spend last night watching the Presidential debate. Instead I opted to spend some quality time with my wife by cooking us dinner and catching up on our work day, doing some prep work for another round of facilitating Dave Ramsey’s Financial Peace University and adding my two cents for an upcoming church cleaning project that my wife has in the pipeline. One of my favorite aspects of the evening was that we went out for a free cup of coffee. Seriously, even when I splurge I still manage to find ways to frugal it up.

I am excited about another round of hosting FPU. In the spring small group we hosted, each household had an average change in financial position of $7,700 during the duration of the course. For me the entire experience was rejuvenating and inspiring. During that session my wife and I were witnesses to seeing a marriage strengthen and singles become empowered. This fall FPU has great potential as well since we will have about twice as many households going through.

I find the timing of this fall session to be quite intriguing. I am definitely in a different place and state of mind than the 1^st FPU we facilitated. Then, we were in the final months of paying off our last debt (my wife’s student loan) and were at the end of a three year battle that saw us strengthen our financial footing. Now, we are in the midst of celebrating our debt free marriage with planning and saving for a missions trip, a trip back to Hawaii and a trip to Europe.

To me the interesting aspect is that for the next few months our monthly savings will be restricted to retirement (15% of my gross income and 12% of my wife’s) and our future kids’ college savings. The bulk of it is planning to be spent for travel. So I am anticipating a below average growth in net worth over the current quarter. This puts me in an uncomfortable space and my wife into an ecstatic one. Being gazelle intense for so long imbedded into me the lifestyle of continual savings. Now I think twice about saving for travel. But the flip side of me says it is time to celebrate and take my foot off the gas pedal for just a short time.

So it is almost like two sides are about to collide. One side being our new FPU group that will be where my wife and I were almost 4 years ago: introduced to everything Dave Ramsey and seeing who gets gazelle intense and takes hold of their personal finances. And the other side being my wife and I on the latter end of the quote, “live like no one else so that later you can live and give like no one else.” This should be an exciting and soul stirring fall!

My Quarter End: 3Q 2012

Now that was an unbelievable quarter. Typical summers include outdoor barbecues and patios, lots of trip to the beach, good suntans and little to no market movement. Historically speaking, summer trading sessions are usually thin with a trend of generating marginally negative returns. But not this past one! In just our taxable brokerage investment account alone we saw growth of nearly 10%  in this 3^rd quarter alone.

Now while I advocate buy and hold investing over a long period of time, I sincerely hope you guys and gals out there got to be a part of this unexpected lift this past quarter. What is even better is that there is still the 4^th quarter of this year to look forward to. The US President will be elected, Thanksgiving will occur followed by black Friday and the Santa Claus rally all give me cause to sound my bull horn to close out 2012. I firmly believe, given how returns have been so far this year, that 2012 will go down as one of the best years in stock market history. I mean as of the end of this quarter the Dow Jones is up over 11% from January 1!

But beware because glancing into my crystal ball I do see an ugly bear on the horizon for the 1^st quarter of 2013. I can summarize with this one statement. The US Government is stupid. Yes we are heading towards a fiscal cliff and I do not think anyone in the Senate nor Congress is smart enough to keep it from happening. Partisan lines are drawn too thick and the grandiose ineptness of government is going to show its true colors through this debacle.

Which leads me back to my general investing philosophy: buy and hold for at least five years in old and historically proven mutual funds. Yes in the short term once we are all pushed off the fiscal cliff the market will drop, but in the long run market returns will come back and be right in line with historical averages.

So I’ll end the 3^rd quarter of 2012 with this PSA: Do not count on the government. Romney can’t help you. Obama can’t help you. Only you can change your fiscal picture by getting out of debt and saving for your future. Because frankly I’m with Dave Ramsey on this one (surprise): If we can all band together to create a total money makeover movement, where we all get out of debt, build wealth and give on a level unseen before in our world, TOGETHER we can all put the government out of business! And that’s a crusade I am happy to lead on the front lines. Happy 4^th quarter out there to everyone!

My Big 3

As an aficionado of learning I am generally not one to pass up a free opportunity to attend a workshop/seminar relating to personal finance. I feel that if I can learn one new thing that the event was worth my time. I also use it as an opportunity to compare and contrast my personal finance practices against the industry standards, which just about every time only reinforces that what I am doing will enable me to continue to grow my nest egg and to avoid standard practices like the plague.

In a recent workshop the presenter named three of the biggest expenses that we incur during our lifetimes that “most people” need credit for and a rare few pay cash for: Cars, kids’ College and Real Estate. I’d like to expand on each of the three.

Cars

Nothing drops in value quite like a car. A car is not an appreciating asset and is best described as a long term cost. So why on Earth do people finance new cars that, according to Consumer Reports, lose 70% of their value in the first four years of ownership? I have not owned a car for 9 years and rely on public transportation to get around. But when I do buy a car I will only buy used vehicles that are at least 10 years old and I will pay cash for the whole deal. No payments, no lease contract, no 0% APR while the car is losing 70% of its value, just peace of mind. And yes, whether the car is new or used it will eventually break down and need routine maintenance, so I will counter that by adding car maintenance/repair line items to my monthly budget. And when the time comes to buy another car, I’ll simply use a sinking fund to replace the cost of the vehicle that died. Car payments will not be a part of my life.

Kids’ College

I elaborated on this topic before on my kids’ college savings plan. But I’ll reiterate with a reader’s digest version. I currently do not have children but have began saving for their college expenses. I plan to use an ESA and will max out the current $2,000 contribution limit every year from the kids’ age from 0 to 18. Since I can’t open an ESA because I have no children, I have started to set money aside every month to get ahead start on what will be cash contributions to the ESA. We plan to cut costs by having our kids attend community college and transfer as many credits as they can to a state college.

For those with little to no time left before college starts there’s a solution I have called work. In my current state of Illinois minimum wage is $8.25 an hour. If your child works 30 hours a week that will equate to $12,870 a year. The estimated annual cost for attending a local community college in my area, with the kid living with their parents is $6,112.  In earning an Associate’s degree the kid would earn $25,740 over two years and pay $12,224 in tuition, netting $13,516. By the way as of 2012 the federal tax rate on this income earner is 15% so you’re working college student could cover tuition and taxes all by his or her self!

Now if the kid plans to earn a B.A. I would advise going to an in state public college. In my corner of the world, in tuition and fees that comes out to about $14,000 a year if the kid goes full-time. I recommend the kid goes to class part-time, work full-time and cash flow their own way to a B.A. degree. At the end of it your kid will graduate debt free along with years of working experience. College debt is not a way of life.

Real Estate

Here it is, the big enchilada. My wife and I plan to pay cash for our first home. To accomplish this we plan to move to a small market area (i.e. Nashville, Charleston, etc.) and buy a distressed property at a fraction of the appraised value. Yes it will likely need some TLC but without a rent or mortgage payment this task should be more than feasible J! Plus by buying at the bottom of the market range we expect to get great appreciation over the long term.

Consequently I believe that the mortgage interest deduction is one of the biggest scams that exists in our country. For example, if my wife and I paid $10,000 in interest on a home mortgage we would be able to deduct $10,000 from our gross income. We are currently in the 25% tax bracket. If the same home were paid for with no mortgage than instead of sending $10,000 in interest to a bank we would be taxed on that 10k at 25%. Between the two I would prefer to pay $2,500 to the government than $10,000 to a bank.

In summarization I will not use debt for the big 3 purchases in life: real estate, cars and college.

My Two Heartfelt Stories

Two stories from two of my favorite speakers have been in my head over the last few days and I wanted to share these with you today. The first is from my favorite spiritual guru Terry Hershey. The story goes something like this (loosely paraphrased):

A businessman is on his way home following a lengthy trip. While on these trips he has several traditions. For himself he reads self-help books on how to hone his craft and ferociously jots notes down while in flight and during downtime. It has also become somewhat of a tradition that he buys a keepsake for his six year-old daughter. Deep down the man wants his daughter to know that he was thinking of her on his trip. This time the gift is a T-shirt with a cartoon picture of an armadillo. Rushing home and up the driveway the man walks through the door, embraces his wife and is told their daughter is waiting for him upstairs in her bedroom as bedtime has come and gone. The man rushes up the stairs and slowly enters his daughter’s bedroom with gift in hand. As he enters the room, before he can say a word, his daughter says, “Mom let us wait up!” as both the daughter and her teddy bear have their eyes fixated on her father. “We made space, come sit here with us.” As the man sits down he lifts the bagged present onto the bed, but again, before he can say a word his daughter says, “Tonight, teddy and I don’t need anything. We just want you to sit here with us and tell us a story. All we want, is one good story.” The man hugged his daughter and kissed her on the head. He was quiet for a good deal of time enjoying the warmth of his daughter as she leaned against his chest.

He forgot about the books he read on the plane.

He forgot about the notes he made.

He forgot about the goals reached on the business trip.

He rested.

And he knew this moment matters.

This moment. This sacred moment.

The other story comes from Jon Acuff. It talks about Jon helping his daughter transition from training wheels to a two wheel bike. After several weeks of effort the daughter finally takes off on her own, albeit wobbly down a straight path. Ten feet, then twenty, now thirty feet she pedals on her own. Jon is so proud of her and in this moment is in full embrace of the moment having helped his daughter, giving himself a ton of attaboys and feeling like he’s got this parenting thing down. He is smiling and is just about as happy as his daughter is, when he hears her shout with unbelievable glee. “Daddy, daddy, I’m doing it! I’m doing it! I don’t need you anymore! I’m doing it!”

That line just about crushed me. “I don’t need you anymore.” Even now it brings tears to my eyes just thinking about it. I guess I’m in a state of mind where I want to be more intentional about enjoying and embracing moments. I mean, life moves really fast. I am a few years away from turning 30 and in the last few years have just started to understand what it means to enjoy the here and now. As life moves forward I want to look back on it knowing that I fully embraced and loved exactly where I was, with my loved ones every step of the way.