Financial Peace? You will need to fight for it!

Needs vs. Wants

2012-06-18T21:45:00.000-07:00

According to the Merriam-Webster Dictionary, a " want " is defined as having a strong desire for something. The word " need " is defined as lack of the means of subsistence. In every arena of our life, the two concepts are opposing elements (Merriam-Webster Online).

Tanya and I find it very helpful to have a"Need" and a"Want" (or a "Wish") lists in order to stay within the budget and keep our finances in order. Both lists consist of items that are over $200 and do not fit percentage wise in any of the categories in our monthly budget, so we are saving money to purchase such things with time.
This strategy will help you avoid compulsive spending, emotional purchases and out of control petty purchases. We recommend keeping your need list very short and sweet - the most essential things you really need for your family's basic needs. To cross STUFF off our lists we are following two rules;

A. BUDGETING and B. SAVING

Need List - Not constant - Things can be added, scratched off, demoted to a "WISH LIST" and moved up in the importance latter.

Vacuum cleaner. We have one now, but it broke number of times, old (at least 7 years) and does a very poor job vacuuming. So, we are saving money for Dyson.
Bar Stools. We have moved into our house in February, 2012, however we are still in the process of saving money for our Bar Stools so we can eat by the kitchen counter. Meanwhile we are having our meals at the dinner table instead, or at the island standing :), no big deal. Although I should say that Isaac is the only family member who always has a place to sit - in his high chair!
Entertainment Center. We wanted to purchase one for a long time. Nevertheless, more important items have always superseded importance and now, since we got rid of the cable - Truly Directing our TV, we are actually reconsidering and thinking of moving this item down to our Want List.

Want List - is similar to our Needs list, but it is not crucial for us to have these items to have a quality life. The following STUFF can wait until after our Needs List is done with.

Couches. Our current couches have served us well and we intend on keeping them for a long, long time. However we WANT to buy a newer set for our family room and move the set we have into the play room for kids to enjoy.
Hardwood floor. Our house was built in 2005 and the previous owner took good care of the floors, however, we would like to some day (my prediction in 7 years or so) to have hardwood floor installed in the house.
Pool. I always wished to have a pool in the backyard. I will not even speculate on when this want will be moved on to our "NEED" list. Perhaps we should create a "Dream" list. Keep Dreaming!

As we are saving money, we are also constantly watching the prices and looking for bargains. What are your needs and wants? Don't let your emotions break your wallet and your budget! Budget, Save, Buy at the bargain prices!

Pareto Principle - 80/20 rule

2012-06-13T22:57:00.000-07:00

In 1906 Italian economist Pareto, observed that 80% of the country's accumulated wealth was owned by 20% of the people. Later he detected that the same rule applied to other various environments and eventually this principle became Pareto Principle or 80 - 20 Rule. Here are some of the examples where this rule is applied.

80% of the profit comes from 20% of your customers
80% of the sales comes from 20% of your products
80% of the sales made by 20% of the staff
20% of the patients use 80% of the health care resources
80% of the crime is committed by 20% of the criminals
80% of your phone calls are from/to 20% of your contacts
80% of the decisions made in the meeting come from 20% of the meeting time
80% of the headaches comes from 20% of the employees, etc.

How does this rule applies to fighting debt?

Ability to get out of debt is 80% about the attitude and 20% about the hole you are in. Henry Ford once said - If you think you can, or if you think you can't - you are right. Stop neglecting your debt - it's not going away, Start fighting - don't let your debt paralyze you, Keep fighting - knowing that you will win.
Identify and address top 20% of your financial issues and it will fix 80% of your problems. Things will start looking brighter once you know what your major problems are. Create the plan of attack and intensely work on resolving the biggest issues.

What makes getting out of debt a real battle?

2012-06-11T21:11:00.000-07:00

I think that getting out of debt is hard because:

You do not see the benefits of getting out debt. When was the last time you dreamed about not having monthly payments to your lenders? Can you imagine falling asleep and waking up in the house that has no payments? Can you think of any other reasons to go to work besides earning more money to be able to afford your monthly payments? Can you imagine not paying “monthly alimony to your girlfriend whose name is Sallie Mae” or your boyfriend whose name is “Nelnet”? Can you imagine giving money freely to people who ask you for help and support?

You have to completely change your lifestyle. We have changed our preferences on the stores we shop at, how often we shop, and taking lunches to work is a must. It’s like losing weight. You can’t hope to lose weight while consuming 3,000 calories a day. You can’t all of the sudden change your deeply rooted spending habits; it takes effort, desire and perseverance. If before our average moving speed at COSTCO was $300 an hour, now we have a shopping list. If before we would “Shop at will”, now we have a list of “WANTS” and “NEEDS” (I’ll blog about them in the near future).

You have to sacrifice a lot of things you love or would love to have. Sacrifices have to be constant and you have to be consistent. Stick to the budget and act like a grown up and not a little kid who is sitting in the shopping cart screaming his head off demanding the candy from his mother who is trying to check out at the registrar; I want it!!!! But I deserve it!!! But I need it!!! But I can’t live with out it!!! Sell the STUFF you love and dump the cash on your debt.

Everyone else seems to be OK with debt, why should we be abnormal? Since when is what’s normal in society – a norm for your family? Normal – SUCKS! Delay pleasure now! Live like no one else, so you can live and give like no one else in the near future! AAAAAAAAAH I get fired up just by writing and reminding myself about it!

It can take a LOOOOOOONG time! Look, the truth is – you did not get into this mess overnight, you are really not going to get out of it overnight either. If you are serious about getting out of debt – you better suit up for a long haul. On average, individuals who attack debt with gazelle intensity become debt free anywhere between 12 and 36 months. For you it might me a shorter or a longer period of time – depending on the depth of the whole, your focus, and passion for freedom.

No strategy or poor planning. Set up a plan and don’t be afraid to ask for help! If you tried on your own and failed, seek help from friends, professionals, someone who has gone through this process before, someone who will hold you accountable and be supportive of your decision.

Don’t let these excuses slow you down! Fight the fight! Win one battle at a time!

FOR SALE - 2008 BMW 535i

2012-06-10T23:45:00.000-07:00

Selling our family car is something I really did not want to agree to do for a long time and I truly still do not. Here are some things I like about this ultimate driving machine

The way it handles its self on the road – it’s as if it’s glued to the road.
How quiet it is inside the car regardless of the speed you are driving at.
How fast it accelerates with the help of a twin turbo and a 300 horse power engine. Passing cars is just a pure fun.
I love how the headlights turn with your steering wheel to increase the visibility angle.
The sound system is outstanding
The seat adjustability is just awesome
The comfort inside the car – wow!
The climate control for passengers in the back, for a front passenger and for the driver is individualized – how cool is that?
Electronics and the gadgets that communicate to you regarding vehicle’s performance is just – top of the line
And of course it looks - Mean, Lean and Extremely Elegant!

I can go on and on, instead – call me and I’ll let you test drive it

So why are we deciding to sell our paid off car we like so much? Because we are making sacrifices; Tanya and I came to an agreement that we need to sell this car regardless of how much we like it, how used we are to it or how comfortable we are in it. Yes, we are selling it and buying a much less expensive vehicle to dump a chunk of cash on our debt.

So spread the word and help us sell it - before we change our mind. :)

Click Here to view our Craigslist ad

Budget, Budget, Budget!!!

2012-06-07T13:05:00.003-07:00

So, now that you know we are changing our Financial Family Tree by

1. Me being honest and open with my spouse by taking her opinion and her women’s intuition into the account.

2. Accepting responsibilities. Waking up to a harsh reality and coming to my senses realizing that we have an elephant pet living with us called “Debt” and fiercely attacking it with a “snow ball” effect approach.

3. Changing destructive behavior. This is the fun part – and I’m not being sarcastic.

This is the part where I started feeling that there is actually a way out. I started getting my dignity and integrity back! This is the part that actually will enable you to make sense of your finances, finances that God had entrusted you with! For many, budget is most dreadful word. Not to our family! To me it has become an instrument that brings unity, eliminates chaos, erases blame game, empowers me and my wife to express our needs and wants, provides an incredible opportunity to plan for the future as well as a whip that makes our money behave. Below, I’ve included our June, 2012 budget for our family. Why for June only? Because in the beginning of July we will sit down, knee-to-knee with my wife and see where we have done well, what part of our budget we struggled with and what are some of the expenses we should plan for in the near future. However, I must mention that almost every part of our budget is adjustable on the monthly basis except for;

a. House payment – constant until we pay off the debt, then it will be increased to pay it off as quick as possible

b. Church – can only go up once the debt is paid off.

c. Paying off loans – will only go up as we settle with creditors, get raises at work and/or get an extra income from various side projects (I’ll talk about this in the future posts).

Budget	%
Paying off Loans	24.08%
House payment	19.84%
Bills and Utilities	11.74%
Church	10.00%
Daycare	9.24%
Groceries	8.94%
Gas	6.89%
Car Expense	1.70%
Gifts	1.51%
Personal Hygiene	1.21%
Entertainment	1.14%
Health and Fitness	1.06%
Home Improvements	0.76%
Clothes	0.76%
Life Insurance	0.68%
Blow Money	0.45%

The Tortoise and the Hare

2012-06-04T22:34:00.000-07:00


Original image can be found at http://tx.english-ch.com

If you ever read a fable called “The tortoise and the Hare”, or at least watched a cartoon, then you know that the Tortoise outpaced the Hare who got too comfortable and decided to take a nap in the middle of the race. Through the years, the morale of the story has been interpreted differently by different readers from various cultures. I too have my own interpretation and can clearly see a similarity or two to both the Tortoise and the Hare.

Just like the Hare

For too long I was moving too fast borrowing more and more hoping that right around the next corner I will hit the right deal, I will pay majority of the debt off, but here is the truth, even when I was earning good money and business ventures were profitable – I’ve always found ways to spend the money before any loans were paid off always placing them on the back burner with solid logic that they could be paid back later.

I took a nap. Although I was not racing anyone, however while running without a clear direction I just got burned out. Looking back, I realize that I was clearly paralyzed. In the middle of foreclosure, with already lost to foreclosure rental home, student loans defaulted on and creditors calling nonstop trying to collect various debt – I slowly drifted into a “deep sleep”

Awaken and now, racing against myself. I would love to get out of debt with the same speed I got into it, but I know that…

Just like the Tortoise

Fighting, staying focused, not giving up, delaying the pleasure I know that there are at least a few more laps before I can see the checkers flag.

“Living like no one else, so later we can live like no one else” – Dave Ramsey. Working on our “snow ball”, paying off the loans from smallest to largest, telling money how to behave and giving every dollar a name in the beginning of the month.

That’s accepting responsibility.

Slavery

2012-05-29T14:28:00.001-07:00

A borrower is slave to the lender - Proverbs 22:7

So where did my slavery start from? Hmmm… where do I start? Honesty, acceptance of responsibilities, and change of destructive behavior. In June 2011, (after losing another $30K in my “business investments” and on the brink of losing our house) my wife and I decided to attend Financial Peace University class, offered by Dave Ramsey, the class that changed our lives forever. The fact that we were in debt was not news to me nor was it to my wife, the news to my wife was how much debt we had and how enslaved we were…

If I remember correctly, our second homework assignment was to sit down with the spouse and make a list of all the debts we had – from smallest to largest. And let me just tell you, this was not the homework I was looking forward to completing. The biggest issue was that I never bothered disclosing to my wife the details of our financial situation. Don’t hear what I am not saying, I was not hiding from Tanya the mountain of debt we were living under – she knew we were in debt, however I did not want her to worry about how bad of a shape we were in. In my “ultimate wisdom”, I have always believed that since I’m already worried, losing my sleep and pulling my hair out about the debt I acquired, why have your wife go through the same thing? Just keep on paddling, keep on working, keep on digging yourself out of the mess you got into, and don’t bring Tanya into it, she has enough things to worry about – that was my logic and golden rule.

Honesty.

Although the first step to freedom is to be honest (The truth will set you free), it was one of the most emotionally difficult steps I had to make. I would love for Tanya to write an entry in my blog about how she felt when I told her that we have over $200,000 in loans not including our mortgage but as for me I felt;

· Ashamed – for failing as a husband and a father

· Imprudent – for making reckless “investments”

· Crushed – under the weight of the debt

· Disappointed – in my unsuccessful attempts to bring an order to our family finances

· Depressed – because I did not see the end of this vicious cycle

· Humbled – because finally, I was no longer in denial about our debt, instead, opening up to my lovely wife and sincerely admitting that I don’t have a plan, nor do I have any strength to fight on.

· Finally – relieved. Yes, relieved! As selfish as it might sound, but after breaking the news to Tanya, I no longer felt alone. The moment she embraced me in her arms and whispered “we are going to be Okay, we just need to take one step at a time… I love you”, it felt as if a breath of fresh air filled my lungs. It was as if I felt whole again, I was wounded, but not dead, down, but not out.

Yes, I know what you are thinking, how can a man of faith feel so hopeless? Yes, one can. And, to tell you the truth, I think I used and abused God’s grace and His love as I was taking my family down the disruptive path. The Grace of God sets you free from Slavery, but not if you continue borrowing… I’ll let you stew on this thought…

FPU graduate - TWICE!

2012-05-27T18:43:00.001-07:00

In 2001 I graduated from Fresno Pacific University (aka FPU) and ten years later, in 2011, I graduated from Financial Peace University (aka FPU). In my blog I will mostly be talking about Financial Peace University and the impact it had on my life and the lives of my loved ones, who I hope will take time to blog as well. If you are one of the hard working Americans, who found yourself running in the rat wheel as hard as you can to out earn your bad habit of borrowing money, only to dread that credit card bill - you are not alone! If you are a student who worked hard on earning your college degree in hopes in hopes of becoming more marketable in the work force found a ginormous pet living in your closet called "Student Debt" - you are not alone! If you are the homeowner who purchased a dream home only to find out a few years later that even though you live nowhere near the water, your house is now "Under Water" - you are not alone! If you ever dreamed big of becoming a business owner and refinanced your home to borrow the money for your guaranteed 100% investment return business venture only to "Kiss your money Good bye" - you are not alone! If you ever had an emergency and had to borrow money from the credit card company or a payday loan only to see your interest rate grow from 0 to 60 in less than a month - you are not alone! If you are sick and tiered of this vicious, never ending, tiresome and demoralizing cycle of borrowing money - then join my blog and lets get out of debt together!