Pamela Otten | Financial Advisor for Women | Financial Education | Investment Advice | Investment Management | Passive Investing | Low Cost Investing

Dave Ramsey’s Financial Peace University (Winter Wake-up)

financialmom — Tue, 24 Jan 2012 18:17:34 +0000

Do your finances need a wake-up? My church (Bethany Reformed Church) in Sheboygan, Wisconsin, is again sponsoring Dave Ramsey’s Financial Peace University this winter. Financial Peace University was developed by Dave Ramsey, to teach you how to beat down debt, save money, build wealth, and give more than you ever thought you could.

You are invited to join us starting Monday, January 30, 6:30 pm, at our downtown Remedy location, 806 N. 8th Street, Sheboygan, WI. Cost for the 13 week course is $100/individual or couple. No nursery is provided for young children, so please make arrangements for their care at home.

As a Financial Peace coordinator, I have personally witnessed and experienced the exciting transformations this course can bring to families. Please contact me for further information or to sign up!

Pamela Otten is CEO of Pamela Otten LLC, a Registered Investment Advisor. She loves to work with women business owners and entrepreneurs, and women in transition due to job change, death, or divorce. Pamela will help you set and reach your financial goals, educate you to understand your investments, and teach you how to do more charitable giving. Pamela is a Qualified Kingdom Advisor (www.kingdomadvisors.org), trained and committed to integrating biblical principles with her investment advice.

Photo Credit – DaveRamsey

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

Dave Ramsey and Financial Peace University are not associated with Pamela Otten LLC.

None of Us is as Smart as All of Us* – Market Efficiency

financialmom — Tue, 04 Oct 2011 21:00:29 +0000

(Being a diehard Packer fan, I couldn’t resist using Lambeau Field for a crowd photo! The content of this article is written by Symmetry Partners LLC. Our firm utilizes Symmetry Partners LLC for investment management services.)

From breaking ground to completion, it took a mere 410 days to construct one of the seven wonders of the modern world. The Empire State Building stands as perhaps the greatest example of what can be achieved when a group of diverse individuals combine their knowledge to maximize efficiency.

Over 3,000 architects, masons, steelworkers, electricians, skilled laborers, and more all worked in conjunction to construct the mammoth building. Independently, they were incapable of completing such a monumental task, but collectively they forged an amplified wisdom that made a remarkable feat possible.

What Makes Markets Efficient

The functionality of financial markets, like any market, is similarly predicated on a meeting of the minds which creates an environment where judgments are made based upon the perception of value. For centuries, market efficiency has been the fundamental principle at the heart of human tendencies for exchange. It is a concept that has been vindicated, challenged and vindicated again. So what makes markets efficient?

At any given time, it’s possible that a single individual acting independently can display naive judgment. It’s not to say that a group can’t, but we would suggest that the likelihood is reduced, considering the broad collection of knowledge.

Capital markets work much the same way. Millions of participants make judgments through the active buying and selling of companies based upon information that freely flows from sources too numerous to mention. What this signifies is that, at any moment, the current price at which a security is trading is likely a pretty good estimate of what that company is worth.

More is Better

If the best answer to a question is more likely to come from within a crowded room, than theoretically, the bigger the room – the better the answer. When it comes to information, the rule of thumb is usually: more is better. The wisdom of many supersedes the wisdom of a few.

Consider the scenario of shopping for a new computer – a purchase that would typically require some due diligence. Like most individuals, you would probably begin by collecting information, asking your friends and family for input, and scouring the internet for consumer reports and product ratings.

When a satisfactory level of information had been gathered, a selection would be made. Hundreds, perhaps thousands of varying viewpoints may have been taken into consideration. Ultimately, significant amounts of supporting evidence were required to make the most efficient decision on which computer to purchase. Information is the key ingredient, and these days it moves at a staggering pace.

Tomorrow’s Perceived Value

With respect to the financial markets, they don’t trade in yesterday’s information, or even today’s. They are forever looking toward the future, trading based on what they believe is tomorrow’s perceived value. Collectively, the judgment of the masses is hard to beat. However, let’s say an investor was feeling confident enough to attempt to identify a random mispricing.

First, what are the chances that the investor knows something that millions of other people don’t? Second, if they thought that they did know something, what are the chances that the information isn’t outdated and hasn’t already been incorporated into the current price of the stock? If reasonable doubt exists, then it is logical to suggest that the information may be insufficient.

None-the-less, there have likely been occasions when an individual did know something that everyone else didn’t. Generally, what happens on these occasions is the person with the information acts upon it. Word spreads, others act, and the impact of the information becomes less and less relevant.

In the 24 hour news cycle that we live in, it’s hard to keep much of anything a secret. Once upon a time, people relied solely on word of mouth commentary and newspapers to gather information. Today we have access to breaking news in the palm of our hand.

Information has never been so abundant and readily available. Collectively, our interpretation of that information empowers us to freely judge the value of the things we invest in, consume and utilize. The beauty that is market efficiency is the reflection of those interpretations.

Photo Credit – Aff1737

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

The opinions voiced in this material are for general information only, and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult your financial advisor prior to investing.

*Source: “High Five! None of Us Is as Smart as All of Us” by Ken Blanchard, Shannon Bowles, Sheldon M. Bowles

Content written by Symmetry Partners, LLC. Our firm utilizes Symmetry Partners, LLC for investment management services. Symmetry Partners, LLC, is an investment adviser registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, or excluded or exempted from registration requirements.

All data is from sources believed to be reliable, but cannot be guaranteed or warranted. No current or prospective client should assume that future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article will be profitable. As with any investment strategy, there is a possibility of profitability as well as loss.

Symmetry follows a passive investment strategy that involves limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance. Passively managed portfolios are designed to closely track their respective benchmark index rather than seek out performance.

As a result, the portfolio may hold securities regardless of the current or projected performance of a specific security or particular industry or market sector. Maintaining investments in securities regardless of market conditions or the performance of a specific could cause the portfolio to lose value if the market as a whole falls. Please note that you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Symmetry Partners or your advisor.

Money Smart Week: October 8-15

financialmom — Mon, 03 Oct 2011 21:00:00 +0000

October 8-15 is Wisconsin’s Money Smart Week. Money Smart Week in Wisconsin is sponsored by the Chicago Federal Reserve and the Wisconsin Department of Financial Institutions. This year we have an abbreviated calendar of events, a transition used to introduce the move to a nationwide week of free financial literacy, starting in April of 2012.

Money Smart Week classes in Sheboygan County this year are being held in two locations: Sheboygan LTC (Job Center building), and the new Plymouth Intergenerational Center building, in Plymouth.

Did I mention classes are free? Presenters volunteer their time to teach the classes, and every presenter signs an agreement stating they will not sell anything during their classes. I’ll say it again – no obligation, free financial education!

Study after study shows the majority of women still feel they are not educated enough about their family finances and investments, and as a result are uncomfortable making financial decisions. Here’s a great opportunity to get some free education, and change your financial future.

What follows is a shameless promotion of the classes I am teaching this year for Money Smart Week:

Basics of Investing

You asked for it – here it is! If you don’t know what a stock or bond or mutual fund is, this class is for you. Basics of Investing will cover different types of investments and what they are used for, and different types of investment accounts to put them in. Also covered will be important investing concepts, including risk, time horizon, and investor behavior.

Here’s the schedule for Basics of Investing:

Plymouth Intergenerational Center (1500 Douglas Drive, Plymouth) Monday October 11, 7:30 – 8:30 pm, Multipurpose Room B

How To Be An Intelligent Investor

How are you making your financial decisions? How do you know you are choosing the right financial decisions for you, even in your 401k? How do you know if your investments are doing well? This class will teach you how to be a more intelligent investor.

Here’s the schedule for How To Be An Intelligent Investor:

Sheboygan LTC Campus (3620 Wilgus Avenue, Sheboygan) Tuesday October 12, 7:30 – 8:30 pm, Room S109/111

For More Information

For more information on the classes I am teaching, please call or email me. For a full calendar of events for Money Smart Week classes all over Wisconsin, check out Wisconsin’s Money Smart Week website. If you do not have Money Smart Week in your state, contact your area’s Federal Reserve Bank to request this program in your area.

Photo Credit – moneysmartwi

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

Dave Ramsey’s Financial Peace University – Week 5 Credit Sharks in Suits

financialmom — Wed, 28 Sep 2011 13:33:06 +0000

All of the lessons in Dave Ramsey’s Financial Peace University are full of practical advice, but the Week 5 lesson, Credit Sharks in Suits, comes straight from Dave’s personal experience with debt collectors.

Dave also debunks the ideas of what most people think the FICO score is. And even includes some great advice on what to do if you are a victim of identity theft. It’s a great lesson.

How many credit offers do you receive in a week, or a month? You know credit is a big business, by all the advertising money spent on mailings to try and entice you into accepting more credit.

FICO Score

A common myth about the FICO credit score is that you need to take out a credit card or car loan to build your credit score. Banks have become very good at drawing young people in with this false assumption. Having a large FICO score does not make you financially successful – read on to find out why!

Do you know what a FICO score is? Dave says the FICO score is nothing but a measure of how much you love debt. Did you know that every component of the FICO score relates to debt – your debt payment history, your debt level, the length of your debt, the type of debt, and how much new debt you have?

It is very important to check your credit report at least once a year, if only to make sure you are not a victim of identity theft. Each of the three credit bureaus (Transunion, Experian, and Equifax) will give you one free report a year, so you can spread this out and get one every four months if you like. You can request a free credit report at AnnualCreditReport.com .

Here’s a shocking statement – make it your goal to have no FICO score at all, meaning you have no debt!

Identity Theft

If you find out you are a victim of Identity Theft, it’s very important to do these three things right away: 1) File a Fraud Victim Report with all three credit bureaus; 2) Call the police, file a report, and send it to all three credit bureaus, to make your Fraud Victim Alert permanent on your files; and 3) Contact the fraud victim division of all the creditors involved.

Be persistent! If you don’t want to hire a company to clean this all up for you, understand you now have a new hobby. This will take a lot of your time, and a lot of patience and persistence to fix. Understand this is theft, you are not liable, and owe nothing!

Debt Collectors

This lesson is not about dodging bills you legitimately owe. If you have debt, you need a get a plan to pay it off. Unfortunately, debt collectors are not your friends. They have one purpose – to get your money! Dave gives lots of great ideas on how to deal with debt collectors.

Always, always take care of your family necessities first. These include food, shelter (mortgage, rent, and utilities), and transportation, and clothing. Never pay for luxuries at the expense of necessities. It makes no sense to pay credit card payments, and then lose your home as a result.

If you are deep in debt, and can not make even the minimums on your credit card bills, then use a Pro Rata plan. Add all your minimum payments due to get a total minimum payments due. Divide each minimum payment by the total due to get a percentage for each payment.

Take the percentage for each bill of the total amount you can afford to pay, and pay that amount for the bill. At least you will be paying something on each bill, which is better than ignoring a bill altogether. Remember, people who live in denial of their debt are more likely to get sued or garnished for payment. Do the honorable thing and put together a plan to work it out.

Imagine how great it would feel to have no FICO score at all. Now that would be a great indication of financial success – having no debt!

Dave Ramsey’s Financial Peace University has several versions – for church, business, and home use. Check it out right here.

Photo Credit – USFWS Pacific

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

The Biggest Mistakes Investors Make (Part 2 of a Series)

financialmom — Fri, 23 Sep 2011 13:43:29 +0000

I’m sure all of you have heard the old saying, “Don’t put all your eggs in one basket.” This applies to many areas in life, including investing. Today I am continuing the series on The Biggest Mistakes Investors Make (see Part 1 here), because I see investors making these same mistakes over and over again.

Here’s some more of the Biggest Mistakes Investors Make:

1) Thinking “I have no money to invest.” People routinely tell me the reasons they can’t invest right now. They say things like: “I’ll come see you to invest when . . . .” The common theme is they think they don’t have enough disposable income to invest.

The problem here is thinking investing will only happen if there is money left over at the end of the month. Putting investing last means it will never happen. Make it a priority. I challenge you to show me your checkbook, and I’ll find money you could be using to invest.

2) Investing before having an Emergency Fund. It makes no sense to invest before you have an emergency fund in place. You will just end up selling your investments, or using credit cards to pay for your emergencies. Get the emergency fund in place first!

3) Investing when you have Debt. Here’s a shocking statement – if you have any debt besides your mortgage, you have no business investing. Get rid of the debt, and then get very serious about your retirement.

4) Not Considering your Time Horizon. One of the most important factors in choosing your investment’s asset mix is your time horizon to hold the investment. If you are not going to use this money for many years, you can take more risk with it, since you have the time to ride out the volatility of the markets.

5) Watching and Believing the Media Hype. Get yourself an investment philosophy you can believe and stick with, and forget what the media is saying. Don’t forget – the media exists to get readership, viewers, and market share. The media does not exist to do what is in your best interests.

6) Thinking the Government is your Retirement Plan. If you are still thinking the government is going to fund your retirement, plan on living at or below poverty level. Social Security may not be there in its current form when you retire. You need to take responsibility for how you will live in retirement.

7) Thinking “I’m Too Young/Too Old to Invest.” If you think you are too young to invest, plan on doing things the hard way later, like many boomers are experiencing right now because they didn’t bother to save when they were young.

Talk to a financial advisor, and find out just how little it takes on a monthly basis to build a great retirement fund, if you start early enough. If you think you are too old to invest, think about all the great charitable causes you can leave a legacy to after you are gone. It’s about you something much bigger than you.

8) Putting your Retirement in One Basket. If you have all of your retirement, or a large percentage of it, invested in your company stock, you are taking way too much risk. If your company goes bankrupt, you may be left with nothing. If you think this could not happen to you, talk to past employees of Worldcom, Enron, and Kmart, just to name a few.

9) Not Understanding your Investments. You need to know the what, why, when, and how of your investments – all the reasons you did it in the first place. If you don’t know these answers, how do you decide whether it’s doing what you want it to in the future? Especially important in this discussion is all the costs of your investments, which directly impacts your returns.

10) Not Checking Out your Financial Advisor. Do yourself a big favor, and make sure your financial advisor has a clean record. If your advisor is a broker, you can do a broker check on the FINRA website. If your advisor is a Registered Investment Advisor, you can check them out either with your state agency, or the SEC website. An easy thing to do – save yourself from being the victim of a Ponzi scheme.

None of this is rocket science. It’s all very common sense stuff. I want you to have a very successful financial future, and not have to do things the hard way when you are close to retirement and panicking. If any of this is confusing to you, it’s time to find yourself a trusted financial advisor who will educate you. I am committed to doing exactly that!

Photo Credit – woodleywonderworks

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

You’ve Got a Friend in Me

financialmom — Wed, 31 Aug 2011 20:09:10 +0000

I know I’m aging myself here, but I’ll go there and admit I grew up listening to James Taylor, and loving his song “You’ve Got a Friend.” There is just something about that song that makes you feel so loved.

I have been very visibly reminded of what’s really important in life in the last month. A good friend of mine ( in her 40’s) had a massive stroke. She should have died, but God had another plan. God showed up, showed off, and is giving her an amazing testimony to His love and faithfulness as she recovers.

From time to time we all have struggles – some more serious than others. I want to encourage you today if you are struggling, especially with your finances. Money, especially the lack of it, affects all areas of our life.

We all make mistakes. I like to tell people I am uniquely qualified to be a financial advisor, since I have made almost every money mistake in the book. I know how you feel when you do something you regret.

Understand you are not alone. There is help out there for you! Give yourself some grace. Draw a line in the sand, and say I won’t live like this anymore!

I want you to know I will be there for you when you need me. I will help you through your financial difficulties, and set you on the road to being successful with money.

It is possible to feel joy and peace in your financial life. Let me be your friend, and inspire you to manage your money God’s way.

I’m sending you grace and joy today. Receive it, and let me know how you have inspired or encouraged someone else today. Please comment below – I’d love to hear your stories!

Photo Credit – Krystal T

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

The Biggest Mistakes Investors Make (Part 1 of a Series)

financialmom — Tue, 30 Aug 2011 22:48:21 +0000

In order to win the Monopoly game, you have to have a strategy. You need to have a plan, and stick to it, to be successful at Monopoly. Today I am starting a series on The Biggest Mistakes Investors Make, because I see investors making these mistakes over and over again, which feeds into the fear during volatile markets.

In volatile markets, we are very tempted to make investing mistakes. We somehow forget everything we have learned, and our desire to “do something” takes over. Giving in to our short-term temptations can be very damaging to our long-term financial goals.

Here’s a reminder of some of the Biggest Mistakes Investors Make:

1) Not having a financial plan. You don’t know what you are invested in, why you invested in it, and what your goal is with this investment. Or maybe you knew once, and now you are not sure. If you don’t know the answers to these questions, it’s very easy to question your investment choices, and make poor decisions about changing them.

2) Waiting too long to invest. This leads to all kinds of problems. If you think you have no money to invest now, you will not have money to invest later either. We need to make our savings a priority, and pay ourselves first, after we give our tithe. The longer you wait, the more risk you will need to take to get to your financial goals.

3) Not taking advantage of “free money.” If your employer offers a match on your company plan investment, and you are not investing at least the amount to get the full match, you are making a big mistake. Think of it as a bonus for being a good saver. Tell your children this, so they don’t make this mistake while they are young!

4) Listening to the media for investment advice. If you buy in to the media, especially during volatile markets, you will sabotage your long-term goals. All the doom and gloom of the media is designed to get readers and viewers. You know this, so ignore it.

5) Market timing. Market timing is jumping in and out of the market, to try to decrease your losses, and increase your returns. Markets are random! No one knows where the markets are going tomorrow! Many of us have made the mistake of taking our money out, and putting it into cash in volatile markets. All this does is lock in your losses, and stop you from participating in any future market gains.

6) No diversification. I see this way too much – in fact, over 90% of the time when I look at portfolios. Investors are putting all their eggs in one basket. And it’s usually the Large Cap Growth basket, only one asset class. This happens because investors are more comfortable investing in company names they know, and want to invest in the United States. We do live in a global economy however, and you are taking way more risk than you need to by owning only one asset class.

7) Stock picking. This is believing some investment money manager guru, or your financial advisor, knows which stocks to pick for best future performance. No one knows the best stocks to pick for the future. I don’t care what crazy technical analysis they are using. No one knows.

8) Track record investing. Goes right along with stock picking – choosing investments based on their past performance. “Past performance is not an indication of future returns,” is stated in the very fine print of every investment prospectus. This gets countless investors into trouble, because they choose investments based on what was hot in the recent past.

9) Not understanding the risk/return relationship. Investors want big returns, but don’t want to take any risk. It doesn’t work that way. Define your financial goals, find out what it will take to get there, and understand there will be a certain amount of risk involved in reaching your goals. Know what your risk number is, so you don’t have to be fearful in volatile markets. Ask your financial advisor, and if they don’t know what your risk number is, it’s time to get another advisor.

There are many more big mistakes investors make, but these are some of the biggest mistakes I see (and have experienced myself). Ignore the temptation to “do something” during volatile markets, which may do serious long-term damage to your financial goals.

Photo Credit – EvelynGiggles

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

Dave Ramsey’s Financial Peace University (Fall Cleanup)

financialmom — Sat, 27 Aug 2011 14:06:55 +0000

Do your finances need some cleanup? My church (Bethany Reformed Church) in Sheboygan, Wisconsin, is again sponsoring Dave Ramsey’s Financial Peace University this fall. Financial Peace University was developed by Dave Ramsey to teach you how to beat down debt, save money, build wealth, and give more than you ever thought you could.

You are invited to a free preview of Dave Ramsey’s teaching on Thursday, September 1, 6:30 pm, at Bethany Reformed Church, 1315 Washington Avenue, Sheboygan, WI.

Deadline to register for Financial Peace University is Monday, September 5. Cost for the 13 week course is approximately $100/individual or couple. Weekly classes begin on Thursday, September 15, at 6:30 pm, and will run through December 15.

As a Financial Peace coordinator, I have personally witnessed and experienced the exciting transformations this course can bring to families. Please contact me to for further information or to sign up!

Photo Credit – DaveRamsey

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

Dave Ramsey and Financial Peace University are not associated with Pamela Otten LLC.

So You Think You Are a Long Term Investor

financialmom — Tue, 16 Aug 2011 13:52:55 +0000

In volatile markets, such as we experienced last week, it’s easy to see who really is a long-term investor, because they act like a long-term investor. I did a whole radio show on this topic last week – What Investors Should and Should Not Do in Volatile Markets, which I highly encourage you to listen to.

Are you a long-term investor, or are you really a short-term investor, speculator, or gambler in disguise? If you are investing for retirement, and retirement is a number of years away, stop acting in volatile markets like you are a short-term gambler or speculator!

Gamblers worry about how the markets are doing in the short term, as in every day. They are looking for fast returns as quickly as possible, and market drops are a disaster. Short-term gamblers bought fads like tech stocks in the 90′s, and buy gold right now.

In volatile markets, I routinely hear “this time it’s different.” What people are really saying is this: “This time is different; the markets are going to drop more than they ever did before; the global economy is worse than it’s ever been before in the history of the world; and I don’t see how we are ever going to come out of this.”

If this is the way you are feeling right now, please take the time to educate yourself on the history of the markets. Talk to your financial advisor. It may save your sanity.

Long-term investors understand short-term volatility in the markets is normal, market corrections will occur, and it is not any different now than before. The event that started the slide downward may be different, but the results are the same.

Here’s what long-term investors do in volatile markets:

1) Sit on their investments. If you have a well-diversified, properly allocated portfolio, sit on it!

2) Call your financial advisor if you have questions about your investments.

3) Rebalance your portfolio. Rebalancing sells some of the profits from your top performing asset classes in your portfolio, and invests them in the poorest performing asset classes. It is necessary to do this, to maintain your portfolio’s original asset allocation. It may make sense to rebalance your portfolio more often in volatile markets.

4) Check your diversification, if you are not sure what it is. Well-diversified portfolios really shine in volatile markets.

5) Keep investing! This is exactly what an intelligent investors does – buys on the lows of the market.

Here’s what long-term investors do not do in volatile markets (or ever, actually):

1) Listen to the doom and gloom media, coworkers, friends, and family, unless they are a licensed financial advisor, and already successfully helping investors. Know your investment philosophy, and stick to it!

2) Panic. Panic is a by-product of fear. Fear and panic are results of not being educated in how financial markets work. If you are panicking, is it because you are taking too much risk with your investments? Of course, everyone is a risk-taker when the markets are going up!

3) Call your financial advisor and tell them to “do something!” Advisors who make changes in your portfolio, purely for the sake of doing something, are simply buying into your fear, namely the fear of losing you as a client.

4) Sell anything, unless there is a compelling reason to do so. There are not too many compelling reasons. One would be to cut your losses, and get yourself into a much better investment. For most situations, selling on a market drop because you are scared, just equals locking in your losses. Once you sell an investment, it’s a loss forever.

5) Market Time. Market timing is what some advisors may try and do for you, and what many investors seem to think they can do for themselves. They will get out of the markets, to “keep their money safe,” and keep it on the sidelines “until the market goes up again.” Unfortunately, investors usually don’t even think about getting back in the markets until the markets are completely back to where they were before. They lose out on all the gains to get there.

6) Get greedy. Do not ever buy investments, and especially during volatile markets, with the promise of a quick, spectacular return. This usually happens after investors experience losses. Investors feel they need to do something to get back all the money they lost as quickly as possible.

For more information on this topic, please listen to my Intelligent Investing radio show from Wednesday August 10, What Investors Should and Should Not Do in Volatile Markets.

Photo Credit – higetiger

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

Dave Ramsey’s Financial Peace University – Week 4 Dumping Debt

financialmom — Thu, 04 Aug 2011 17:06:36 +0000

Dave Ramsey’s Financial Peace University Week 4 lesson on Dumping Debt is the longest lesson by far. For good reason. We are drowning in debt. We have allowed debt to become a normal way of life.

We wonder how our great country could be so deeply in debt, to the tune of trillions of dollars. It’s very simple. It’s easy to keep borrowing money and borrowing money when no one puts the brakes on, and no one is held accountable. It’s only when debt becomes a crisis that we are willing to consider change.

Debt is crushing us. Debt is crushing our country. And change has to start with us, and our families. So we need a plan to get out of debt, and to stay out of debt forever.

Dave’s plan for dumping debt is not complicated. Not everyone may agree with the method he recommends. He calls it the Debt Snowball. Here’s the thing – it works. I have seen it in action in many families, and if applied diligently, you will become debt free.

Debt Snowball

Here’s how the Debt Snowball works. First of all, you make a list of all your debts – including the total amount, the minimum monthly payments, the monthly payment amount you actually make, and the remaining balance after a payment is made.

Do this with your smallest debt first, ending with the largest debt. Pay no attention the interest rate on each debt. Pay the minimum payment on each debt, but focus any extra money on getting the smallest debt paid off quickly.

Some financial advisors will tell you to pay down the debt with the largest interest rate first. The problem with this is it usually gives you no fast satisfaction. Paying off your smallest debt quickly will give you a fast feeling of victory. It will help keep you motivated to pay more debts off.

Once you pay your smallest debt off, take what you have been paying on that debt, and add it to the minimum payment of the next debt on your list. This starts the snowball effect. As you pay your debts off, you will have more and more money to pay on the next debt.

Stop Being Normal

You will become debt free much faster than you ever thought you could. And to stay debt free, you must change your lifestyle. Are you willing to be different than the average person, who thinks it’s normal to be in debt?

Stop thinking about your purchases in terms of what the monthly payments will be (think cars). Think about them in terms of how much they cost, and save for them to pay cash. Your grandparents did it, and it’s time for us to go back to their kind of lifestyle.

Debt is destroying our peace. And it is preventing us from giving to causes that really need our support. Are you willing to commit to being different? Stop being a slave to debt, and find out what amazing things God has in store for you!

Photo Credit – KAZVorpal

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.