A Review: The Richest Man in Babylon

This is a short book; I was able to read it in one night – partially because it is short, but also because I couldn’t stop reading.  It uses stories from ancient Babylon to illustrate simple but important lessons about personal finance.  I’m not sure that the stories are based on anything except imagination, but the book was written in the 1920s.  It is refreshing to know that the principles that were used nearly 100 years ago (and according to the book thousands of years ago) are still valid today.

Several characters from ancient Babylon are introduced, most of whom I could relate to in one way or another.  There were some common sense, “of course” kind of lessons in the stories, but there were also some unexpected lessons that hit home for me.  One in particular had to do with procrastination, and why it can be costly to put off important decisions.

It is very creative and timely – I intend to give this book to kids in my family as they graduate from high school.

Amazon:  The Richest Man in Babylon

Inspiration at 33%

Hey I found a new podcast today, and I’ve listened to almost all of the new, 2008 podcasts.  It is called “No Credit Needed, or NCN for short.  I liked the name so much I just had to listen.  It’s basically an informal, humorous podcast by a normal guy who has worked his way out of debt and likes to talk about personal finance.  I’m not sure what his name is – online he seems to go by “NCN.”

The No Credit Needed website:  www.ncnblog.com

I like that he uses the same principles that Dave Ramsey teaches, so it’s nice to get another perspective to help balance things out.  It also helps that he’s willing and able to laugh at himself; in fact, even though he offers much of the same advice that Dave Ramsey teaches, the light hearted nature of his podcast is a welcome change.

Something he provides at his website is that you can sign up for a chart to show how much you’ve paid off, or towards a goal.  It inspired me to take a look at where I’m at – actually how far I’ve come would be more accurate.  I added up all the debt I had in 2007, in order to see what percentage I’ve paid off so far.  I had thought I had paid off more – but in fact, I have only paid off 33% of the total so far.  At first I was a little disappointed – I mean, only 33%?  But considering the time goals I’ve set for myself – it is right on target.  And hey, that 33% represents a considerable chunk of change.  I know in my heart that I’ve done everything I could to pay as much as I could since I started – so aside from a serious windfall, it’s the best I could do.  I have plenty of reason to feel good about where I’m at – and more importantly, that I’m still on-track and well on my way.

Opportunity vs. Loyalty

I’m faced with a very difficult decision. I can’t provide too many details, except that I was approached by another company with the possibility of employment.

Jumping ship.

Okay so normally that’s not such a bad thing, but as with most drama, there’s more to it. I’m a web developer, and I started right out of college about 10 years ago. As you can imagine, I’ve witnessed my share of layoffs. So job stability has not been something I’ve counted on, although I’ve managed to survive all but one layoff throughout my career. I’m either doing something right – or extremely lucky.

I started working for the company I now work for, almost 2 years ago. This was one of the first companies I really wanted to work for. The product they provide is something I really believe in, and feel that they’re not just trying to make as much money from the consumer as possible. The product is well worth what they charge, and probably more important – I and my friends, and my family all use it on a regular basis.

In the past 2 years we’ve had a few layoffs though. I hate layoffs for obvious reasons, but with this company it really scares me because I really want to work there. I told a coworker a few weeks ago that I can get a paycheck anywhere -I don’t need to work there – but I want to because I believe in what I’m doing. I also like the people I work with.

So. The dilemma? I’m not confident that my job is stable – and another company has approached me and wants me to interview with them.

I agreed to the interviews, and scheduled a vacation day with my current employer for that day. The new company is doing some really neat things – I would certainly be challenged intellectually, but I’m not yet sure how much I can believe in their product – it’s not that I don’t – I just don’t yet know enough about them. I’m doing my homework though – and paired with the interviews, I ought to know enough this week.

I can’t help but feel guilty. At work today I had a hard time looking people in their eyes – I felt like I was betraying them. My sense of loyalty is probably one-sided. I’m sure they would lay me off in a heartbeat if it was right for the company. They’ve done it to others.

Welcome to 21st Century Corporate America.

The thing is, if I can increase my income – even if only a little bit, it will help me financially. I have no way of knowing whether this job has more stability – probably not – layoffs seem to be a way of life for developers. I don’t yet know whether I can believe in this product more than I do with my current job – which may be a moot point the next time layoffs happen.

I’m a little torn, undecided, and maybe a little afraid.

I suppose I don’t have to make any decisions until I’m actually offered a job. It’s interesting that I can actually relax – I don’t need to get this job, so the interview process is a lot less stressful. Without a job, I’m more inclined to take the 1st offer I get. Now, I am counting my blessings that I can – at least right now – really evaluate how I feel about this company, and whether it’s what I really want to do. It feels good.

What do snowballs and behavior have to do with each other?

I just re-read my last post, and decided that I hadn’t explained why Baby Step 2 “…has everything to do with behavior.”  It makes mathematical sense to pay down the debt with the highest interest first, right?  I mean you’ll pay less in the long run.  Well, based on what I’ve learned from Dave Ramsey’s books and radio show, the snowball method helps to gain psychological momentum.  In other words, it feels great to have a few relatively easy wins at the start.  As those smaller debts get paid off, you gain a feeling of accomplishment that helps you to stay with it, and possibly even become more “gazelle intense.”

Each Friday (I believe), Dave opens up his radio show to let people call in to do the “I’M DEBT FREE!” yell.  It’s amazing – if you haven’t heard it, and need a little inspiration this is an easy way to find it.  The first few times I heard this, I was surprised to find myself tearing up.  In those 3 simple little words you can hear the hurdles overcome – the struggles, the victory, and ultimately the hope in those people’s lives.  It’s amazing.  I want so badly to call and do that scream.  Even if I can’t manage to get onto his program I might just do the scream at home – recorded, and post it here. 

Everyone has a story, and while you don’t get the details – every time I hear people call Dave’s show and yell, I get a glimpse of their story.  You get the important stuff.

So it’s obvious – we’re all human.  We need inspiration.  We need more than raw math to win.

Every $12.99 counts!

So I decided that I didn’t need high definition cable TV service from Comcast while doing baby step 2, so I called and attempted to terminate my account. I have both cable Internet and cable TV service through Comcast, and truth be known, I only watch a couple of shows on a regular basis – “LOST” and “The Office” to be specific. If you go to http://www.abc.com, you can watch “LOST” on the Internet for free. You can also go to http://www.nbc.com and watch full episodes of “The Office” for free. Why do I need cable TV again?

So nothing else holding me back, I called Comcast to terminate my cable TV service. In good salesmanship fashion, Comcast convinced me to stay with “limited cable TV” because if I went down to only a single service (Internet) they would increase the cost of Internet access by about $13, and “limited cable TV” is also about $13. In other words, it’s a wash. It stinks of a game that I don’t want to play, but I fell for it. I suppose I was a little upset that by selecting only one of their services, they would charge me an additional $13/month. Still, I had more than cut my bill in half, and I need Internet access. This seemed to be reasonable, although I mentioned to the Comcast representative that I would be looking for less expensive Internet access in the coming months. (She mentioned that I would certainly find less expensive Internet access, but that she wanted me to know that Comcast is superior.)

Okay so sales pitch aside, I proceeded to return my cable box the following day. As I was returning the cable box, the representative behind the desk mentioned that I would be charged $12.99 for the technician to install a filter on their line. At first I didn’t pay much attention, but when I got back into my car and started driving I got to thinking about it. I’m not actually getting anything for that $12.99. What exactly IS it I’m paying for again?

So I called Comcast. They said that they charge their customers for installing a filter of some sort, which prevents me from getting channels I’m not paying for. It smelled fishy, and considering I felt a little upset at being told my Internet cost would increase if that was the only service I had with Comcast, I told them to just forget the whole thing – to just cancel my entire account, Internet and cable TV, and I would look for Internet access elsewhere.

Well, the customer service representative immediately waived the $12.99 fee, and reduced the cost of my Internet access to half what it would be – for 6 months.

It was enough to convince me to stay with them, but I’m going to use the next 6 months to find another Internet service provider – one that doesn’t play games like this with me.

Now Comcast has been good to me – I’m not aware of any billing problems I’ve had with them in the past, and their service has always been at least decent. I have had no complaints about them as a company in the past.

At this point, I do wish they would compete for customers on the basis of service, rather than this stupid game of charging more, the fewer services a customer decides to sign up for. It’s a game – period. If their service is a good value, they shouldn’t have to play such a game. Mobile phone carriers do the same thing – and it hurts consumers. First, it locks consumers into 2+ year contracts, and second it creates an environment that does not require companies to compete on the basis of service. If consumers weren’t stuck with a company, and had more ability to move between companies for competing services, then those companies would have more incentive to provide a better service for the cost.

So I’m now looking for Internet access – with a company that won’t play games, and who will provide me with a quality service that is worth the cost. No games, no hidden fees, just a fair trade of money for a service.

Where oh where should I put my emergency fund?

So baby step 1 is to establish $1000 for an emergency fund and put it into a savings or money market account. Eventually, in baby step 3, the idea is to build the emergency fund up to 3-6 months of expenses, but while getting out of debt, doing baby step 2, $1000 is enough for minor emergencies.

Last year I put my $1000 into my savings account, which is attached to my checking account. Being the person I am, it was too easy to dip into it for non-emergency spending. I needed to make it difficult enough to access that it takes effort to get to it. So I put my $1000 into an Internet savings account – not a money market, but with similar interest rates. I realized quickly that it takes nearly a week to transfer money into, and out of this account. Unfortunately emergencies normally require a little quicker access to money.

So the bank, where I started my emergency fund savings account also offers free checking with a MasterCard ATM card. I decided to open a checking account with them in order to have easier access to my emergency fund when necessary.

I don’t carry my emergency fund debit card with me – instead, I’ve tucked it away in a safe in my home. This way if/when I need it, I have access to it within a reasonable amount of time. It is still inconvenient enough to get to it that I won’t be inclined to use it carelessly.

I’ve also been thinking about baby step 3 a little bit. I once visited a financial advisor, who recommended a kind of tiered approach to saving. Basically if memory serves me, she wanted me to keep 1 month of expenses in my checking account. The next tier was to keep 2-3 months of expenses in the attached savings account. She then recommended keeping 6+ months of expenses in rotating CDs. So each month for several months, open a new CD – and keep renewing it at the end of each term. This way you have 4 months of expenses/emergency fund always immediately available, and new monthly CDs coming to the end of a term each month. It seemed overly complicated to me – and CDs don’t offer rates that are really all that great, considering you have to keep them tied up for a set amount of time.

I do kind of like the tiered idea – and I have to be honest I’m not sure that 6 months is enough in our economy, and especially for a web developer who watches layoffs happen as often as I do. I’m thinking about keeping 1 month of expenses in my checking account as padding. Maybe another 3 months of expenses in my attached savings account, and then my fully-funded emergency fund of 6 months of expenses in my Internet savings account – which pays like a money market. That’s 10 months total, and well, I might even decide to make it a full year and put an extra 2 months of expenses somewhere.

Anyway I’m not yet in baby step 3 – and for now I’m very much inclined to keep it simple and just follow Dave’s advice. After all, his advice seems to work well.

If it’s 2008 this must be Baby Step 2

Well, right in-line with my obsessive personality I’ve gone and budgeted myself right into boredom. Well, it’s not really THAT bad – but I’ve used up my discretionary money and I still have a week yet to go. It’s not bad really – it just means I won’t get to indulge in my favorite mocha this week. And I’m going to have to be careful over the weekend, too. No eating out. No movies. No more gas for my car. I feel like I’m working minimum wage again.

Last year at about the beginning of the year I started doing the Dave Ramsey baby steps and crashed. When I get into something I tend to go overboard – I kind of become obsessed with it until I decide it’s no longer interesting and then I stop – or until I become overwhelmed. It’s been good for my career – I think employers have appreciated the intensity I bring to my endeavors. The problem is when those things take long-term intensity. Whether weight loss or financial plans, long-term is just difficult for me. I want results immediately, and I’m willing to put in almost superhuman efforts to attain those goals – it’s the daily grind that’s so darned difficult. My best friend thinks I have ADD. I think I’m just American.

So last year I started the baby steps with more than gazelle intensity – it was more like I got on the Space Shuttle and tried to reach the moon – but instead of a rocket I was pedaling – with all my might. I was working a full-time 9-6 job during the day, doing freelance web design projects on the side, and even doing magic shows for children’s birthday parties on the weekends. As if that wasn’t enough, I had decided to take on a 2nd job at Safeway, stocking shelves from 9:00pm – 2:00am. I was able to keep this up for a couple of months before I really just crashed. Two people in my life showed concern over my well-being – my best friend, and my Mom. Together they convinced me to quit my part-time evening job so I could get some sleep and regain my health.

And to add insult to injury I had turned something I love (magic) into something I hated – every time a new request came in for another birthday party I started to hate it. The last show I performed, I realized something was wrong – I snapped at one of the children. Now I started doing magic because I love children – I love seeing their wonder and amazement, and enjoyment. Until I started the baby steps last year I used to perform for Birthday parties – not for the money, but because I loved doing it. When I started losing my passion for it, things started going downhill.

So even though I knew to watch out for it, I allowed myself to go too far again this year. It isn’t even half as bad as it was last year – not by a long shot. But I’m probably not giving myself enough blow money between paychecks. It’s not serious – and certainly not detrimental to my health. In fact, that I noticed and am able to admit this to myself is pretty big actually.

It’s this daily grind that is so difficult! And it’s kind of a downward spiral – when I’m trying so hard not to spend money, I have tended lately to stay home – but staying home is boring. So I either start browsing the web and find cool new gadgets I want, or I start looking at my spreadsheets trying to maximize efficiency – trying to find ways of reducing the amount of time to complete baby step 2 as much as possible. Boredom sucks.

My friend warned me last week, that she thought I was obsessing over this again. That was probably when I started paying attention. It was also right before I ran out of money.

And it’s not like I don’t have hobbies! I love photography, and want to get out and start doing that again. In fact I’ve been thinking a lot about trying to do this new technique – called HDR, or High Dynamic Range. It doesn’t require any new equipment at all – I can basically do it for free with everything I already own.

I also play poker. Yes I know it’s gambling and that’s not good for somebody trying to get out of debt. It’s pretty social. A small group of friends and I play twice monthly, and the buy-in is $10. It’s one of the few scheduled “adult-only” times I get to spend with friends. We’ve talked about the possibility of playing only for chips – in other words no money at all, but that idea wasn’t met with a lot of enthusiasm. It seems harmless enough anyway. I figure it amounts to about the cost of a movie, and I get to spend it with my favorite people. Oh, and it helps that I win occasionally.

Let’s see – aside from various hobbies, I also have several friends.

So it’s not that I have nothing to do. I have plenty to do. But so often I find myself bored to tears – and that’s when I start thinking about shopping or obsessing over my budget.

This time is going to be different. I’m not going to tighten my budget so tight that I have no room. I can still be gazelle intense – and still stay on target!

What’s the biggest threat to my carefully laid plans?

Well, I’m not sure it’s the number 1 threat, but it ranks pretty high: boredom. When I’m bored I tend to take trips to the mall and window shop, or eat out, or browse great sites like engadget or gizmodo to see what the latest and greatest technology has to offer. (I’m a gadget geek at heart.)

So Friday night and Saturday morning I came down with a 24 hour flu which kept me from going anywhere or doing anything. But Saturday evening, and today, Sunday, I was bored. Aside from preparing for tonight’s budget committee meeting, I decided that I would go wash my car and get the oil changed.

It’s interesting to me that I really like my car so much better when I’m washing it or taking care of it. This is the only thing that is probably not on Dave Ramsey’s plan – it’s a 2007 Ford Mustang Convertible. I LOVE my car. I know that Dave Ramsey would probably suggest selling it and purchasing a used, dependable car. I’m open to the possibility, but for the time being I’m enjoying paying it off and washing it and of course, driving it. Especially as the weather gets nice enough that I can take the top down.

So why would Dave suggest selling the car? It’s not upside down – I owe less on it than it is currently worth, and I am making great progress towards paying it off. He suggests purchasing a reliable used car from a private seller because cars drop in value FAST. It is losing value so quickly that the cost of owning a new car is tremendously more than the cost of owning a used car – even with the more frequent maintenance demands.

I really like my Mustang. A lot. I’ve given up credit cards, and am well on track to be debt free in about a year from now. Sooner if I can sell more stuff. So while I understand that I’m paying a high price to own this car, I’m willing to absorb the cost. For now. My mind could be changed, and honestly it wouldn’t take much. I took it to the car wash today and spent some time on it, cleaning it inside and out – and just that act alone makes me appreciate it so much more.

BUT just for sake of running some numbers, what would happen if I did sell the car? First, with the extra money (equity) in the car, I could easily buy a dependable used car – which would be absolutely fine for the next few years. Without this payment, I could eliminate the car payments, and focus on the last of my debt – my student loan. I could easily have it paid off before 2009. So I would probably be cutting baby step 2 down to about 6-8 months.

I’m ALMOST convinced. I bought the car before I started doing the Dave Ramsey baby steps.

So today is the budget committee meeting with my accountability partners. I’m excited about the progress I’ve made – and am excited to relay that to them. A couple of other things I’ve discovered, which will help to reduce expenses are:

• I can get reimbursed for Internet access at home by the company I work for.
• I’m going to cancel Comcast cable TV, as I don’t really watch it very much, if at all.
• My rent is being reduced with the introduction of a new roommate. yeaa!
• I’m setting aside things for the upcoming spring garage sale.

So things are going well. It helps so much to hear from others doing Dave Ramsey’s plans! Thank you to those who left encouraging comments!

You never know…

So I discovered something interesting yesterday. One of my coworkers returned from lunch with a small group talking about the FICO score, and saying something along the lines of, “if you don’t use debt, you simply don’t care what your FICO score is.”

As I am right in the middle of working through Dave Ramsey’s baby steps, I piped up with “Yea! The FICO score is an ‘I love debt’ score.” My coworker responds, “That souns like Dave Ramsey.” It is. I have heard him say that so many times on his radio show. So my coworker revealed to me that he and his wife are working through Financial Peace University.  We talked and shared and compared notes – and gosh it felt great!

Wow. You just never know who in your life is working through stuff like this. Another coworker mentioned in the elevator that he wanted to find out more, because he had heard us talking during the day about FPU.

Money – and personal finance is such a private thing. We all want to put our best image out there – that we have no worries, that things are going well financially, but statistics say that most Americans are up to their eyeballs in debt. And more important, being in FPU does not necessarily mean that things aren’t going well financially – in fact, I would argue that somebody in an FPU class is showing incentive and a desire to do better in life, and with their money.

It was actually a big deal for me to start a blog to talk about my personal finances. I resisted at first – but wanted to share because this is such an important thing. About the only thing I regret about my education is that I never learned anything about personal finance – except how to take out a student loan. I feel strongly that a class like FPU should be made available in high school. Nobody should graduate from college not knowing what a 401(k) is.

We need to share this stuff – to tell our stories and share what works and what doesn’t.

Progress – and a new accountability partner

So, March is right around the corner. Some really good friends of mine are taking Dave Ramsey’s Financial Peace University classes, and I promised to babysit for them for the 13 weeks of the class. Each time they come home to relieve me of my babysitting duties, we talk about what they learned. The topic they brought back to me one week had to do with accountability partners. For marriages, two people really have to work together and “be on the same page” so to speak, but when somebody is single, they don’t have to report to anybody really.

But Dave Ramsey recommends having a friend or friends as accountability partners – somebody you do your monthly cash flow planning with. Naturally, I have two people I can do this with, so I prepared for my first budget committee meeting with them. It’s going to be fun. We couldn’t do it before the end of February, so we’re going to do it on Sunday, March 2.

I have some good news – at least for myself anyway. I was able to put $2000 towards the principal on my car in February. I’m really happy about that; although I plan to put $2550 towards the principal – not including the normal monthly payment. At this rate, along with the raise I received and a reduction in rent due to another roommate who is moving in before April, I’m able to get my car paid off by the end of August, 2008. That’s really only a few months away – and I’m really looking forward to it!

My student loan is on track for being paid off by the end of April 2009. Just a little over a year from now. I’ve reduced the time to do Baby Step 2 from a couple of years to just about 14 months, and that doesn’t take into account future raises and/or bonuses we might get in 2009.

I’m pretty happy with where I’m at – I still have a long ways to go, but I’m on-track and that feels pretty darned good.