The Light Bulb Finally Came on

At least once or twice a week, I try to scan as many financial blogs as I can stay current with what's happening out in the personal finance world. In the "Stupid Tax" section of Dave Ramsey's site, I ran across this little gem about bank programs that are supposedly designed to help you, but in reality are another way for the banks to nickel and dime us so that they get rich.

If we just pay attention and become better managers of our finances, we won't encounter the type of problem that Sharon got herself into. Enjoy the article.

You can also view the original article here.


The Lightbulb Finally Came On

By Sharon in Houston

A few years ago my credit union created an overdraft fund of $500 to cover me. Seemed like a great deal.

In less than a year, I was hooked and used it every payday. I paid $29 each time and soon became "clever" enough to make sure I only incurred one $29 charge every payday. Rarely did I not use the $500 overdraft feature.

One day a lightbulb came on in my head: "Wait a minute. I'm paying the bank to play with the same $500 over and over and over." I added it up. The bank's generous initial investment was $500. I used this feature at least 24 times a year, so it cost me $696. Plus, if I had to guesstimate all the other times I incurred the fee (about 20), that part adds up to $580. So, to play with the same $500 month after month, year after year, cost me about $1,300!

For 2008, I broke free of this crazy program. I did it! I gave the bank their $500 back, and the service was removed from my account. No more going up to the $500 mark and taking the chance of going over, thereby incurring more than one $29 fee. No more running to the bank to get that last $500 and having to pay everything else with cash. No more paying the bank $1,300 a year for the "privilege."

My STUPID TAX for the past 3 years is at an end. Blessed be.

Hey, You. Get a Second Job! (part 3)

In two previous posts, I discussed the issues surrounding my music arranging business as a second income stream. As the business grew and expanded, the income generation went up to help my family get out of debt faster.


One thing I forgot to mention in this discussion of additional income streams is that my wife also got a part-time job for a period of time (approx. 6 months) to help us get out of debt even faster. When my wife had our first child over 7 years ago, she stopped working outside the home, but when both our daughters were in the same school last year, she had blocks of time in her schedule when she could work a part-time job. My wife probably averaged $350-$400/month of income during this time, but hey, I'll take it to get out of debt even faster! So with my wife working, we had three income streams for a period of time to accelerate our debt reduction.

When you finally get gazelle intense (as Dave Ramsey would say) about getting out of debt, you need to have a serious game plan about generating additional income streams to get out of debt as quickly as possible. The longer you put it off or the longer it takes you, the less likely it's going to happen.

As Larry the Cable Guy says, "Get 'er done!"

Hey, You. Get a Second Job! (part 2)

Today, I continue with my story about my business as a second job.

Even though my music arranging business ended up as a second stream of income, I really did everything backwards.

This was the process I originally went through 5-6 years ago:

1. Had a little bit of debt.
2. Came up with a "great" business idea.
3. Started my business and realized I didn't have enough money to get it up and running in a "big," professional manner.
4. Refinanced our home to get more money out of our house. Went through $2,000-$3,000 rather quickly!
5. Took out a $25,000 personal loan to "pay off" 2 small car loans, a couple of credit cards, and used remaining money (approx. $4,000-$5,000) to attempt to grow my business. My big concern at the time was figuring out a way to lower my payments down to a "manageable" amount and still get some money out to grow the business.
6. After spending all of this money, the business was painfully slow in growing. Many months, I was funding business expenses through my regular income.
7. After many stressful months of this plan not working, my wife and I sold our house, used our equity to pay off half of the debt, and then the next 18 months to pay off the remaining $12,000.

This would have been a Smarter Financial course of action:

1. Had a little bit of debt.
2. Came up with a "great" business idea.
3. Started my business and realized I didn't have enough money to get it up and running in a "big," professional manner.
4. Decided to grow the business more slowly. Educated myself on growing a business through books, mentors, etc.
5. Went out and got a second job with a steady monthly part-time income.
6. Paid off our current debts as quickly as possible.
7. Once the debts were paid, we saved enough money to cash flow my business start-up in a smarter way. The business started to grow; attracted more clients; quit my initial part-time job.
8. We didn't have to sell our house! We still have equity in a home!

Even though hindsight is 20/20 and I wish I had done things the smarter way, I have no regrets in how things turned out. I feel like I learned a lot over the past 3-5 years. I learned my lesson the hard way, and I'll never do "stupid" again when it comes to home purchases, debt, and starting a business.

Larry

Hey, You. Get a Second Job!

Here's a two-step, fool proof way to get out of debt really quickly:

1. Control your spending, by getting on a tight, no frills budget.
2. Go out and get yourself a part time job in order to clean up your mess!

Here's my own lengthy version of my 2nd job story.

Part of the reason my wife and I got into so much debt 4-5 years ago was that I came up with a "brilliant" idea for a business that I could build by leveraging myself with a whole bunch of debt, thinking I could grow myself out of the debt really quickly (kind of sounds like the government!).

You can see my music arranging and typesetting business site at www.mystaffarranger.com.

Anyway, This was a really STUPID mistake, and I don't think the Lord honored and blessed the business (at first) because I was being a horrible steward of His money. When we started doing right things with money (i.e. getting on a tight budget and paying down our debt), the Lord blessed us and I started picking up more and more clients. I started being more and more selective about how much money I was spending on advertising and where I was spending that money.

To make a long story shorter, my business expenses came down and my revenues went up! Any profit that I was making with MyStaffArranger.com went directly toward debt reduction and taxes. I was able to use my part-time business as a "2nd job" to generate additional income and get out of debt faster.

Tomorrow, I'll complete my thoughts about the 2nd part-time job and debt reduction.

Larry

What's holding you back?

I have a question for you today. What's holding you back from making a major change in your life, financially?

Is it the fear of having to sell some stuff that is out of control and totally out of line with your income? Major stuff like houses, cars, and toys, such as motorcycles, boats, waverunners, four wheelers, etc.?

I'll be totally up front with you, getting your financial house in order is difficult! When my wife and I sold our house over 2 years ago, my wife stood in the driveway and cried her eyes out as we finished moving out. For me personally, I rarely get attached to "stuff," so selling the house was a commodity that had equity we could use to pay down debt really fast. I'm also the guy that had to maintain the house, so I was somewhat glad to get rid of it. But my wife was sad because we had 3 years worth of memories of our daughters beginning their lives in that home. The only comforting words for my wife were, "Honey, someday we will have a bigger, better house than this." I still believe that to this day.

If we build wealth and become better managers of our finances, we will be able to afford a house in the next couple of years that is a blessing and not a curse.

So, again, we come back to the question at the top of the post, What's holding you back from making a major change in your life, financially? Change is hard. Making tough decisions is extremely difficult, but the end result is going to be awesome!

How I've been Stupid with Zeros...My Story (Part 2)

In yesterday's Part 1 of my story, I mentioned that three years ago, something major happened that caused my world to be rocked and helped me rethink the direction my family was headed. That event was a church split!

Since my primary vocation is music ministry (I'm the instrumental music director at a large church), I grew deeply concerned about how this church split was going to affect my primary source of income and even my position itself! I started listening to Dave Ramsey's radio program on a regular basis and taking a hard look at our finances, possessions, and debts.

Given the church's situation, I convinced my wife that selling our home would accomplish two purposes:

1. If my position was terminated at some point in the near future, we wouldn't have the added stress of selling a house while trying to transition to another ministry position.
2. We could get a lot of traction immediately on our debt load. With the small amount of equity in our house, we could still pay off half of our personal debt very quickly.

So, we sold our home back in October 2005, moved into a rental house, got on a lean budget, and begin paying off the remaining debt we had as quickly as we were able. My wife even got a part time job for 6 months that helped us get out more quickly. My part time music arranging and typesetting business (www.mystaffarranger.com) started doing better as well, so we had 3 income streams to knock this debt out really fast.

Fortunately, I never lost my position over the church split and the church is slowly healing over the devestation a lot of people caused. the Lord has been kind and gracious to me and my family. I feel that we have actualy prospered during this "lean time" in the life of our church. We went from a net worth of approximately negative $90,000 to a positive $70,000 in only 18 months. That folks, is an incredible turnaround!

So what did we learn through all of this:

1. No consumer debt is good debt. My wife and I would still like to be homeowners once again in the near future, but we plan on doing it the Dave Ramsey way with an emergency fund in place and a healthy down payment for a new home. Then do a 15 year mortgage, and pay that off as quickly as we can.
2. Be focused on the goal! Freedom from debt is definitely achievable. Have a plan in place, and work the plan!
3. Trust in the Lord through the tough times, and He will see you through it.
   

Larry

How I've been Stupid with Zeros...My Story (Part 1)

I'll tell you right up front that my story is nothing compared to Dave Ramsey or others that have done incredibly unintelligent things with money and paid the price. My guess is that my wife and I have been fairly normal, with a debt load that was somewhat manageable, but we never had any margin in our lives. Instead of having a good emergency fund in place, we would have to finance emergencies (through a personal loan or credit cards) and pay those off as quickly as possible. I disliked debt and didn't necessarily want to make payments, but I assumed it was a necessary evil in how we did American finances.

About five or six years ago, I was going through a bookstore and saw this book sitting on a shelf:



Being an avid reader in the areas of business and finance, the title intrigued me, so I purchased the book and read it from cover to cover in just a few short days. I loved the concepts in this book by Dave Ramsey, but I had a problem. I was still holding on to a few financial belief systems such as:

1. You absolutley need to own/finance a house for tax benefits. It's better to be house rich and cash poor.
2. You can grow yourself out of debt without tight controls on spending.
3. Even though you buy used cars at a good price and aren't getting clobbered by depreciation, you will probably still need to make small payments to a finance company in order to have vehicles to drive.
4. Going into debt for a business start-up (and continued growth) is an investment.

So, even after reading Financial Peace, these false beliefs were holding me captive. I continued being slightly house rich and cash poor, financing used vehicles, and trying to grow myself out of debt by going into debt even further by starting a business with a house refinance and personal loan.

Three years ago, though, something major happened that caused my world to be rocked and helped me rethink the direction my family was headed.

I'll fill you in on the details in Part 2 tomorrow!

Larry

What's up with the title of this blog?!

Welcome to my first post of my latest blog on personal finances!

OK, so I know you’re probably asking yourself, what in the world is up with the title of this weblog?! If you’re familiar with Dave Ramsey (www.daveramsey.com) at all, you have probably heard him make the statement, “I’ve done stupid with zeros on the end of it…” What he’s talking about is all the debt he and he’s wife entered into as a young couple. He amassed a 4 million real estate empire and then the banks called all the notes. After struggling for a number of years with bankruptcy, creditors, and a huge pile of debt, he and his wife were finally able to get out and become millionaires again, this time doing it the right way!

Anyway, I just love Dave’s saying and I think it is unique and will draw people to this blog!

Larry